[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


                                                                      ?
 
   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                    JACK KINGSTON, Georgia, Chairman
 TOM LATHAM, Iowa                   SAM FARR, California
 JO ANN EMERSON, Missouri           ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama        SANFORD D. BISHOP, Jr., Georgia
 CYNTHIA M. LUMMIS, Wyoming         MARCY KAPTUR, Ohio              
 ALAN NUNNELEE, Mississippi         
 TOM GRAVES, Georgia                

 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
       Martin Delgado, Tom O'Brien, Betsy Bina, and Andrew Cooper,
                            Staff Assistants
                                ________
                                 PART 3
                                                                   Page
 Food and Drug Administration.....................................    1
 Department of Agriculture: Office of Inspector General Oversight.  325

                                ________
         Printed for the use of the Committee on Appropriations
 PART 3--AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION,

              AND RELATED AGENCIES APPROPRIATIONS FOR 2012
                                                                      ?

   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

_______________________________________________________________________

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS
                              FIRST SESSION
                                ________
     SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG 
                  ADMINISTRATION, AND RELATED AGENCIES
                    JACK KINGSTON, Georgia, Chairman
 TOM LATHAM, Iowa                   SAM FARR, California
 JO ANN EMERSON, Missouri           ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama        SANFORD D. BISHOP, Jr., Georgia
 CYNTHIA M. LUMMIS, Wyoming         MARCY KAPTUR, Ohio              
 ALAN NUNNELEE, Mississippi         
 TOM GRAVES, Georgia                
                                    
 NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full 
Committee, and Mr. Dicks, as Ranking Minority Member of the Full 
Committee, are authorized to sit as Members of all Subcommittees.
       Martin Delgado, Tom O'Brien, Betsy Bina, and Andrew Cooper,
                            Staff Assistants
                                ________
                                 PART 3
                                                                   Page
 Food and Drug Administration.....................................    1
 Department of Agriculture: Office of Inspector General Oversight.  325

                                ________

         Printed for the use of the Committee on Appropriations

                     U.S. GOVERNMENT PRINTING OFFICE
 66-581                     WASHINGTON : 2011

                                  COMMITTEE ON APPROPRIATIONS

                    HAROLD ROGERS, Kentucky, Chairman

 C. W. BILL YOUNG, Florida \1\      NORMAN D. DICKS, Washington
 JERRY LEWIS, California \1\        MARCY KAPTUR, Ohio
 FRANK R. WOLF, Virginia            PETER J. VISCLOSKY, Indiana
 JACK KINGSTON, Georgia             NITA M. LOWEY, New York
 RODNEY P. FRELINGHUYSEN, New JerseyJOSE E. SERRANO, New York
 TOM LATHAM, Iowa                   ROSA L. DeLAURO, Connecticut
 ROBERT B. ADERHOLT, Alabama        JAMES P. MORAN, Virginia
 JO ANN EMERSON, Missouri           JOHN W. OLVER, Massachusetts
 KAY GRANGER, Texas                 ED PASTOR, Arizona
 MICHAEL K. SIMPSON, Idaho          DAVID E. PRICE, North Carolina
 JOHN ABNEY CULBERSON, Texas        MAURICE D. HINCHEY, New York
 ANDER CRENSHAW, Florida            LUCILLE ROYBAL-ALLARD, California
 DENNY REHBERG, Montana             SAM FARR, California
 JOHN R. CARTER, Texas              JESSE L. JACKSON, Jr., Illinois
 RODNEY ALEXANDER, Louisiana        CHAKA FATTAH, Pennsylvania
 KEN CALVERT, California            STEVEN R. ROTHMAN, New Jersey
 JO BONNER, Alabama                 SANFORD D. BISHOP, Jr., Georgia
 STEVEN C. LaTOURETTE, Ohio         BARBARA LEE, California
 TOM COLE, Oklahoma                 ADAM B. SCHIFF, California
 JEFF FLAKE, Arizona                MICHAEL M. HONDA, California
 MARIO DIAZ-BALART, Florida         BETTY McCOLLUM, Minnesota         
 CHARLES W. DENT, Pennsylvania      
 STEVE AUSTRIA, Ohio                
 CYNTHIA M. LUMMIS, Wyoming         
 TOM GRAVES, Georgia                
 KEVIN YODER, Kansas                
 STEVE WOMACK, Arkansas             
 ALAN NUNNELEE, Mississippi         
   
 ----------
 1}}Chairman Emeritus    

               William B. Inglee, Clerk and Staff Director

                                  (ii)


   AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND 
                RELATED AGENCIES APPROPRIATIONS FOR 2012

                              ----------                              

                                            Friday, March 11, 2011.

                      FOOD AND DRUG ADMINISTRATION

                               WITNESSES

MARGARET HAMBURG, M.D., COMMISSIONER, FOOD AND DRUGS, FOOD AND DRUG 
    ADMINISTRATION
PATRICK McGAREY, ASSISTANT COMMISSIONER FOR BUDGET, FOOD AND DRUG 
    ADMINISTRATION
    Mr. Kingston. The subcommittee will come to order. We are 
happy today and pleased to have the FDA Commissioner, Dr. 
Margaret Hamburg and Patrick McGarey, the Assistant 
Commissioner for Budget for FDA. And you have a whole team 
behind you. I know that. And we are looking forward to your 
testimony, although we have read it, you have submitted it. So 
you are welcome to just summarize it.
    I wanted to make a few notes. Of paramount concern right 
now, of course, are the budget constraints, and I know that you 
guys were exempted from the President's freeze. But you still 
have a 16 percent increase and in some of the areas where you 
do have cuts, they are politically popular programs that will 
probably be put back in there by our friends in the other body, 
like the Natural Products Center, which is a $3\1/2\ million 
cut. We certainly would work with you on the House, at least 
this member would. But I don't know that the Senate is going to 
go along with that. And I am not sure that you have targeted it 
that way or not, but that was a concern of mine.
    I also wanted to comment on a couple of other things that 
you have in your budget. You have pointed out that the FDA 
approves more drugs each year than all the other countries in 
the world, combined, and that you approve them faster than 
Europe does, and I think that is great. We are glad to hear it. 
This committee has heard so many times over the years about 
slow FDA drug approval. On medical device approval, you are 
still up there and moving along, which is good and positive. So 
we are glad to see that.
    I am interested in the FDA track that allows the 
stakeholders and witnesses to work with you and get quarterly 
progress reports on items of interest. And I think that is 
something very good.
    You have also saved Americans $140 billion a year in 
generic drugs, which I think is of interest. As you know, I 
have some real questions on food safety in terms of what you 
actually could accomplish in terms of the model that was rushed 
through in December, even though it was a lot of hearings--
there were some hearings, but the last 2 years were marred by 
the lack of bipartisan inclusion, and I would say that piece of 
legislation fell in that category as much as anything else; for 
example, the health care bill. So I think this Congress is 
going to really keep a very close eye on that. What is your 
number on that? Yeah, $382 million for that.
    Dr. Hamburg. Some of it from----
    Mr. Kingston. Two hundred eighteen million in 
discretionary. And keep in mind, the money we are talking about 
for your entire budget in many respects is 100 percent 
borrowed. For every dollar we spend right now in America, 40 
cents of it is borrowed. And if you look at the money that we 
spend, interest on the national debt, over $200 billion a year, 
and then put in retirement, health care, and national security, 
that is about all the budget that is paid for, which would be 
about 60 percent.
    And spending is a bipartisan problem. It is something that 
both parties have their fingerprints all over, and we need to 
come to reckon about it. I was glad the President appointed a 
commission on it. We want to work with the President throughout 
this process. So much of the context right now as we look at 
various programs and the way you or any other agency spends its 
money is going to be in that prism of what is the best bang for 
the buck; what is our want; what is our need; what is a 
duplication? The GAO report was pretty significant and it came 
out and underscored a lot of duplication. So those are some of 
the things that are on my mind. And I want to yield to the 
ranking member, Mr. Farr.
    Mr. Farr. Thank you very much, Mr. Chairman. And thank you 
very much, Dr. Hamburg, for being here.
    I also want to thank you for meeting with the Leafy Green 
Marketing folks from my district. They were very impressed with 
the opportunity to talk to you. You have in your testimony one 
phrase that really struck me.
    What you say is the FDA must do its job well, because there 
is simply no other agency to fall back on, no one to backstop 
us. Our role is unique and FDA must fulfill this unique role 
completely and responsibly. And I hope as we go through your 
budget that we can really help you do that role responsibly. 
There is too much at risk by doing it in a mediocre way.
    So I don't have a lot of comments to make other than we are 
at a new turning point in American food safety history with the 
enactment of the bill and the implementation of the bill. A lot 
of agriculture out there has their eyes on you because they 
don't know whether the people in your Department know anything 
about agriculture. They know you know a lot about safeguarding 
drugs, prescription drugs, and other kinds of programs at FDA, 
but I think FDA is more known now on the medical side than on 
the food safety side. So it is a new era, but it is one that is 
critically important.
    For example, Mr. Chairman, that I saw it firsthand. There 
was an E. Coli contamination of spinach that came from my 
district. The recall effort was voluntary, so anyone who had 
anything to do with spinach, whether driving in the trucks, 
planting in fields, on shelves, or in refrigerators at home, to 
get rid of it, no matter where it was grown, because nobody 
knew where the contamination started. Today Americans don't 
consume as much spinach as they did before that recall. The 
contamination episode had a devastating effect. Growers lost 
hundreds of millions of dollars, and they didn't get covered by 
any kind of insurance.
    So it is extremely important that we and your agency be the 
good cop. But it also has to be a smart one so that we don't 
wipe out industries. I appreciate you coming today and I look 
forward to talking further with you.
    Mr. Kingston. Thank you, Mr. Farr. We have been joined by 
Chairwoman Emerson. And I am going to recognize her after Dr. 
Hamburg summarizes her testimony, if that is okay with you, Mr. 
Farr. She has got another subcommittee she is chairing. So the 
floor is yours.

                           Opening Statement

    Dr. Hamburg. Well, thank you, Chairman Kingston, Ranking 
Member Farr, and Congresswoman Emerson. I appreciate this 
opportunity to present the President's fiscal year 2012 budget 
for the Food and Drug Administration and to discuss our 
priorities for the coming year.
    This hearing does come at a critical moment for our country 
and for our agency. We must be prepared to meet and capture the 
scientific challenges and global realities of our modern world. 
And the stakes for patients, consumers, our economy, and global 
economic competitiveness have never been higher.
    Our agency is charged with an extremely significant task, 
to promote and protect the health of the American people. This 
includes ensuring the safety, effectiveness, and wholesomeness 
of products that the American people rely on in fundamental, 
sometimes life-saving ways--drugs, vaccines, medical devices, 
our Nation's food supply and more. But it also includes working 
proactively to foster the scientific innovation that will lead 
to tomorrow's new breakthrough products.
    Both roles are essential to delivering progress to the 
American people and both roles impact our economy by 
encouraging consumer confidence, growing key industries and 
creating jobs. And thanks to the support of the subcommittee, 
we have been able to see tangible evidence of that impact over 
the past year.
    This year, we approved dozens of new drugs, vaccines for 
seasonal and pandemic flu and medical devices for hearing and 
vision loss, severe asthma, and to perform 3-D mammography 
screening. We applied cutting-edge genome sequencing to trace 
food-borne illness outbreaks. We launched a new system that 
identified 100 food safety problems in its first 7 months of 
operation. We collaborated with the National Oceanic and 
Atmospheric Administration to develop and perform screening 
tests to assure seafood safety and to reopen the Gulf Coast 
fisheries after the Deepwater Horizon oil spill. And that is 
just a snapshot of what the agency has done in the past year.
    As you can see, FDA is charged with an enormous and unique 
set of tasks and, as was just mentioned, if we do not do our 
job and do it completely, there is no other agency or entity 
out there to backstop us. That is why I am here to ask for your 
support of the fiscal year 2012 budget for the FDA.
    The proposed budget includes $4.4 billion and identifies 
four priority initiative areas: Transforming Food Safety and 
Nutrition; Advancing Medical Countermeasures; Protecting 
Patients; and fostering FDA Regulatory Science and innovations 
and regulatory science facilities.
    Compared to fiscal year 2010, the fiscal year 2012 budget 
represents an increase of almost $1.1 billion, $382 million in 
budget authority, and $694 million in user fees. And that 
amount for user fees includes $60 million for three new user 
fees that FDA is proposing.
    In addition, in an effort to contribute to deficit 
reduction, we will undertake nearly $30 million in contract and 
administrative savings across the agency. These four 
initiatives are critical to our mission of protecting the 
public health and they also represent important opportunities 
for our food and medical product industries to grow and 
strengthen our economy. In other words, they will provide great 
return on investment for products, for people, and most 
importantly, for the public health.
    And let me explain how. First, Transforming Food Safety and 
Nutrition Initiative, contains an increase of $326 million to 
build a stronger, more reliable food safety system that will 
protect American consumers. We will use these resources to 
aggressively implement the Food Safety Modernization Act that 
Congress passed in December. This landmark legislation provides 
FDA with the tools to establish a prevention-focused food 
safety system, placing the primary responsibility for 
prevention on the food producers and processors and leveraging 
the valuable work of FDA's State and local partners. FDA will 
also make sure that American families have the information they 
need to make more healthful food choices through menu and 
vending machine labeling.
    For the Advancing Medical Countermeasures Initiative, FDA 
proposes $70 million. Medical countermeasures include drugs, 
vaccines, diagnostic tests and medical equipment that are 
needed to detect and respond to deliberate, biological, 
chemical, radiological or nuclear threats, as well as emerging 
infectious disease threats. All of these threaten the lives and 
safety of the American people. This investment will help 
accelerate the development of countermeasures that we truly 
need to meet critical national security and public health 
needs.
    Third, Protecting Patients. This Initiative, for which we 
are proposing an increase of $123.6 million, will allow FDA to 
establish a pathway for approving life-saving biosimilar 
products. This could offer substantial savings to the Federal 
Government and private health care. This initiative also 
includes investments in scientific tools and partnerships to 
enhance the safety of increasingly complex drugs, medical 
devices, and biologics.
    Fourth, the FDA Regulatory Science and Facilities 
Initiative contains an increase of $48.7 million to strengthen 
the core regulatory scientific capacity that supports all 
elements of FDA's mission, and will enable us to truly 
streamline and modernize our regulatory work by applying the 
best possible science, especially as we address more advanced 
therapies, complex devices and emerging technologies. It will 
also allow FDA to outfit and occupy the Center for Biologics 
and the Center for Drugs Life Sciences Biodefense Laboratory 
complex, which will play a critical role in shaping our 
strategies in response to pandemics, emerging infectious 
diseases, and deliberate biological threats. Even in these 
difficult times, the FDA's 2012 budget is essential to our 
ability to take meaningful science-based action on behalf of 
the American people.
    With these investments and your support, I am confident 
that we can build on our past successes and better ensure our 
Nation's health. So thank you for the opportunity to testify, 
and I am happy to answer any questions that you may have.
    [The information follows:]

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                     REGULATING PRESCRIPTION DRUGS

    Mr. Kingston. Thank you very much, Dr. Hamburg.
    I also wanted to reiterate what Mr. Farr said about your 
accessibility. We on both sides of the aisle truly appreciate 
the time you have given us to answer lots of questions and we 
will have more today. But we do appreciate the ongoing 
dialogue. With that, I want to recognize the chairman of the 
full committee, Hal Rogers of Kentucky.
    Mr. Rogers. Thank you, Mr. Chairman. And by the way, 
congratulations on your elevation to this chair. We think you 
will do a wonderful job.
    Mr. Kingston. Thank you for your role in that, sir.
    Mr. Rogers. We think you will do a great job, and you 
already have.
    I would like to focus, Mr. Chairman, my comments and 
questions on FDA's role in regulating prescription drugs, 
particularly opioid narcotics. Undoubtedly these drugs can make 
a world of difference for patients suffering from cancer or 
other terminally ill diseases which cause chronic pain. But the 
abuse and diversion of these drugs is now our country's leading 
drug problem. In the last decade, there has been a 400 percent 
increase in those reporting abuse of pain pills.
    And in Kentucky, we are losing almost three people a day to 
prescription drug overdosing. My people and communities around 
the country are doing their part in recognizing that we will 
need a multifaceted approach to knock out abuse. Law 
enforcement, treatment programs, and education will all be 
crucial, but regulatory agencies need to do their part.
    FDA, of course, has an altogether important role in this. 
In 1995, FDA approved what you thought was the next miracle 
drug for cancer patients, a controlled-release pain reliever, 
Purdue Pharma's OxyContin. The active ingredient in Oxy is 
twice as potent as morphine. Purdue immediately undertook an 
aggressive marketing campaign to sell as much of their drug as 
possible. They chased primary care doctors and doctors in rural 
areas who may not have been as adequately trained in pain 
management as perhaps others. They underplayed the drug's 
addictive tendencies. And within 5 years, Oxy had become the 
most prescribed brand-name narcotic medication for treating 
moderate to severe pain. Purdue was raking in the dough, and 
that is about the time the people in my district started 
showing up in emergency rooms or in the morgue.
    In 2001, Frank Wolf and I testified--Chairman Wolf and I 
testified before the FDA asking that this powerful drug, twice 
as potent as morphine, only be made available for the treatment 
of severe pain where it can have the most positive impact on 
patient comfort and care. Our pleas fell on deaf ears. And the 
rule continued to be that OxyContin could be prescribed for 
moderate to severe pain. You got a sore toe? Here, have some 
OxyContin. Highly addictive. Terribly difficult to shake.
    Purdue was ultimately fined in criminal court $600 million 
for its unscrupulous marketing practices, and several 
executives even faced criminal charges. They had to reformulate 
OxyContin, and you have recently approved the new version. They 
still sold $3 billion worth of the drug last year and its 
generic spinoffs aren't far behind. I will let you decide if 
justice has been truly served.
    So what can be done? There is a thing called the ``Flamingo 
Road'' where there are more pill-mill crooks operating clinics 
in Broward County, Florida, than McDonald's drive-through. 
People from other parts of the country, especially in my 
district, my State, are hired by drug pushers to get on the 
bus, go to Florida with them. They all go through the pain 
clinics, come back with a barrel full of OxyContin and other 
prescription medicines where they are sold for 10, 15, 20 times 
what they pay for them. And people are dying because they are 
too easily obtained. FDA has to be a partner in this fight.
    Despite some positive FDA efforts in recent years through 
additional labeling requirements, collaboration with partner 
Federal agencies and increased communication with physicians, 
prescribers, dispensers and patients still are woefully 
underinformed about the risks associated with theseproducts. 
FDA has to be fully aware of the implications of these drugs before 
they go to market, which is why Congress instituted the REMS 
requirement for extended release pain drugs in 2007, and these potent 
drugs were carefully classified.
    We simply can't keep handing these responsibilities over to 
profit-driven drug companies. It is reckless, it is 
irresponsible, and it is why prescription drug overdoses are 
killing more Americans now than car wrecks. Think of that.
    And that is why Mary Bono Mack, the Congresswoman from 
California, and I have filed a bill called the Stop Oxy Abuse 
Act which would moderate and change the moderate to severe 
qualifications to be prescribed for OxyContin to just severe, 
severe pain only. I would like your reaction to that.
    [The information follows:]

                        Oxycontin Prescriptions

    Potent opioid analgesics have traditionally been indicated for 
moderate to severe pain. Some advocacy groups have called for the 
removal of moderate pain in the indications as a means to reduce the 
number of prescriptions for these products and thereby reduce the 
opportunities for their abuse. FDA has denied this request for a number 
of reasons. Pain is a subjective phenomenon and its intensity level is 
primarily determined by patient report. What one patient might consider 
``moderate'' pain, another patient may consider ``severe''. Health care 
practitioners have traditionally used the terms mild, moderate and 
severe to categorize a patient's pain intensity and to communicate with 
patients and other health care practitioners. The use of these terms in 
the indication section of the label along with the limitations of use 
statement are intended to guide prescribers to understand that 
OxyContin is not for mild, acute, or intermittent pain where other pain 
management products would be more appropriate. The label also instructs 
that it is not intended for use on an as-needed basis, nor is it 
indicated for pain management after the first 12-24 hours following 
surgery unless the patient had already been receiving the drug prior to 
surgery and the postoperative pain was expected to be moderate to 
severe and to persist for an extended period of time. The labeling is 
directed toward legitimate use of these medications. Chronic pain 
described by some as `moderate' can be very disruptive and extended 
release opioids can be an appropriate choice for these patients. 
Removing the term moderate from the indications for these drugs could 
result in considerable confusion, and would not likely impact the 
availability of the drugs or the amount of abuse and diversion 
associated with them.

    I am going to leave several questions for the record, Mr. 
Chairman, if that would be okay.
    Mr. Kingston. Without objection.
    Mr. Rogers. Vern Buchanan from Florida, a Congressman, has 
a bill that would reclassify all hydrocodone combination 
drugs--Vicodin, Lortab and others--as Schedule 2 drugs, which 
are more difficult to prescribe and obtain. Would this cut back 
on abuse? I wanted to leave that for the record.
    [The information follows:]

           Reclassification of Hydrocodone Combination Drugs

    Hydrocodone, when dispensed as a single drug--not in a combination 
product--and not exceeding 15 mg per dose, is currently a Schedule II 
drug. Today, all marketed hydrocodone drugs that are combination 
products--for example, hydrocodone combined with another pain reliever 
such as acetaminophen--are Schedule III drugs. Schedule II drugs 
require a new prescription each time they are dispensed, whereas 
Schedule III drugs can be refilled without a new prescription. 
Rescheduling all hydrocodone combination products from Schedule III to 
Schedule II would affect automatic refills for a prescription. Although 
this change might make it more difficult to obtain these medications 
frequently for non-medical use, this change would also create an 
impediment to legitimate use by patients being treated for acute pain.
    While it is true that drug usage data for hydrocodone products 
documents extensive use, there is a legitimate medical need for these 
drug products. To date, data on abuse potential of hydrocodone 
combination products support their continued placement in Schedule III. 
FDA has not seen rates increasing for visits to hospital emergency 
departments related to hydrocodone product use, when compared to 
oxycodone, a Schedule II product, according to data taken from the Drug 
Abuse Warning Network of the Substance Abuse Mental Health Services 
Administration, also known as SAMHSA. Nor does FDA see increased rates 
of addiction, as evidenced by the need for opioid treatment, for 
hydrocodone compared to oxycodone, according to data from the SAMHSA 
Treatment Episode Data Set. This type of data, however, is not 
sufficient for drawing conclusions about how to impact specific 
criminal activity such as cutting back on pill-mill operations.

    Mr. Rogers. Number two, Congress required REMS to ensure 
that the benefits of a drug outweigh the potential risk. I have 
heard some real concerns that FDA is allowing the drug 
companies producing extended release pain medication to develop 
a one-size-fits-all REMS. Considering that each medication is 
different and poses unique risks to patients and the public, 
how will this one-size-fits-all approach encourage innovation 
in risk management?
    [The information follows:]

                                  REMS

    Dr. Hamburg: FDA's Center for Drug Evaluation and Research, also 
known as CDER, is in the process of developing a Risk Evaluation and 
Mitigation Strategies, commonly known as a REMS for high potency long 
acting and extended release opioid products. This REMS, which will 
include measures intended to increase physician and patient knowledge 
about the appropriate use of opioid drugs in the treatment of pain.
    On July 22 and 23, 2010, FDA presented its proposal for a class 
REMS for long-acting and extended-release opioid drugs at a joint 
meeting of the Anesthetic and Life Support Drugs Advisory Committee and 
the Drug Safety and Risk Management Advisory Committee. The objective 
of the meeting was to gather additional feedback and comments from the 
Committees and the public on its proposal to require a REMS for the 
class of long-acting and extended-release opioid products.
    FDA is currently analyzing the advice received from the Committees 
and from public comments. Once these have been thoroughly analyzed, FDA 
may issue a REMS request letter to the sponsors of these drugs. The 
letter would describe the proposed REMS and provide a timetable for the 
submission of the REMS and its implementation. Affected sponsors would 
be required to implement the REMS, once it is approved.
    The REMS proposal presented at the July 2010 meeting focused on 
prescriber and patient education. Under this proposal, sponsors would 
be required to provide patients with Medication Guides conveying 
information on the safe use of all opioid medications as well as 
product specific information. Sponsors would also be required to 
develop prescriber education programs covering appropriate patient 
selection, dosing, and monitoring, and training for patient counseling 
in the safe use, storage, and disposal of opioids. The proposed REMS 
would foster innovation in patient and prescriber education, which are 
essential for improving prescribing practices and ensuring the safe use 
of of long-acting and extended-release opioid drugs.

    Mr. Rogers. And then finally, what is FDA doing to 
incentivize and speed up the development of more tamper-
resistant or abuse-resistant formulations of these drugs?
    [The information follows:]

                    Tamper- or Abuse-Resistant Drugs

    FDA classifies Investigational New Drug applications for 
purportedly tamper-resistant or abuse-resistant formulations of opioid 
analgesics as Fast Track drugs for review purposes. FDA reviews New 
Drug Applications for these products on a Priority Review schedule of 
six months. In certain circumstances, the labeling for these products 
could include data supporting the tamper-resistant or abuse-deterrent 
features--albeit with a disclaimer that the impact on actual abuse is 
unknown--which would allow the manufacturer or distributor to describe 
these features in their advertising and detailing.

    Mr. Rogers. Dr. Hamburg, I appreciate your being here today 
and answering these questions and presenting your budget 
request. And I am very focused on--in my own way, on the drug 
abuse problem that is afflicting the country and killing young 
people even as we speak.
    Today in Kentucky, three people will die from drug 
overdoses that could have been prevented. And I think the FDA 
needs to join the fight. Thank you, Mr. Chairman.
    Mr. Kingston. Thank you. Dr. Hamburg.
    Dr. Hamburg. Well, thank you very much, Congressman Rogers, 
for your very powerful statement about the serious problem our 
Nation faces with respect to the abuse of prescription drugs. 
And as you point out, it is one that takes a devastating toll 
on individuals, on families, on communities and our Nation, and 
its impact is very, very severe and far-reaching. And 
successful, meaningful, and enduring solutions to it, as you 
also point out, require true partnerships because there are 
many players that need to play a role.
    FDA has a critical role and we care deeply about it and I 
am personally very committed to helping lead the agency to 
engage more deeply on these issues with our counterparts in 
government and in other sectors and to look very carefully at 
where we have responsibilities and where our activities and 
policies can make a difference. We are, as you said, looking 
very carefully at how we can more effectively use the 
authorities and tools that we have in terms of warnings and 
indications for use.
    We also have mounted a major initiative around the safe use 
of prescription drugs, and it is critically important, and the 
area that you focused on in your comments is a key component of 
what we want to accomplish there. There also is an 
administration-wide effort focused on this. And that is very 
key, to engage law enforcement, to engage educators, to engage 
the DEA who would be involved in making decisions in terms of 
the reclassification.
    Mr. Rogers. Can I help you spell Broward County, Florida? 
Nine out of ten prescriptions for oxycodone in the country are 
coming from Broward County, Florida; 9 out of 10. It is an 
absolute pill-mill heaven. There are thousands of them there. 
And I have asked the Attorney General to send enforcement to 
Broward County to help us stamp out the problem. We have asked 
the Governor of the State for a drug prescription monitoring 
program, which he has refused, although some 40 States already 
have the system in place.
    Where do I turn? Can you change the rules by which these 
medicines are prescribed for just severe pain? Why not do that?
    Dr. Hamburg. Well, I think these are important issues and 
as you pointed out, they do involve many different agencies 
coming together. We approve--we review and approve medical 
products for a certain indicated use, and that can certainly be 
a part of our considerations. There are also very important 
activities that have to do with the oversight of the providers 
and how they are doing their prescriptions, the training of 
providers and enforcement activities. So I think----
    Mr. Rogers. It is very simple. It is really simple. This 
drug OxyContin was built, designed, constructed for severe 
pain, right? I mean, it is a 12-hour release pill. It is a 
wonderful drug for those in severe pain in terminal cancer 
cases and others, for example. But it is so easily dispensed 
and it is so easily taken and it is such a wonderful drug to be 
abused, but young people especially are crushing the 12-hour 
release into an instant release, and you can imagine the 
pleasure that gives. And it is irresistible. But it is killing 
people. Can't you change that formula by which they are 
prescribed, simply leave out ``moderate''?
    Dr. Hamburg. In how we are approaching the warning labels, 
the indications for use, we are very mindful of those concerns.
    You also raised another very important point that I want to 
underscore, which is how can we bring better science to bear to 
make products that are safer and less subject to abuse and the 
opportunities for innovation in this area. We need to go 
forward today to address the current problem. We also need to 
be making sure that we are pursuing those avenues as well. I am 
heartened to hear about your work in this area and the bill 
that you are proposing. We are eager to work with you. It 
sounds like maybe I should make a visit down to Broward County 
and learn more about it.
    Mr. Rogers. Absolutely. I will pay your way.
    Dr. Hamburg. I don't know that that would be allowed.
    Mrs. Emerson. Mr. Chairman, can I ask you to yield just for 
a second and make a comment? I agree with you. I am just 
getting off a broken arm. And the first drugs that they threw 
at me were an OxyContin-type drug. And while I was in pain, and 
probably a lot of pain, I wasn't in severe pain. And so I was 
afraid to take the drug because I didn't know--I know the 
effects are really pretty dramatic. But every single time I 
would go for a follow-up, Do you need some more OxyContin, do 
you need some more of this drug, do you need some more of this 
drug? And I took four Advil, which did the trick for me.
    But I understand. I mean, they were just throwing the stuff 
at me. And I am thinking it is just ridiculous. So I just flush 
it down the toilet, which I am not sure you are supposed to do 
that. I can't remember how you are supposed to get rid of it.
    Dr. Hamburg. You are.
    Mr. Kingston. We don't have to remove that from the record. 
We have unanimous consent.
    Mrs. Emerson. But anyway, it is troubling. It is very 
troubling to me who just recently, 6 weeks ago, dealt with this 
same problem.
    Dr. Hamburg. It is an incredibly important issue with huge 
ramifications. We are eager to work with you. We are involved 
in activities in this domain. There is more that we can do. I 
think the partnership in terms of this administration-wide 
effort is going to make a real contribution as well. But I 
would be eager, you know, to sit down with you, to visit the 
Flamingo Road--did you call it--and also really lay out in more 
detail where we as the FDA can make a targeted difference.
    Mr. Rogers. That is the reason I asked you today. That is 
why we are here. That is why I am here, is to have you answer 
the question. If you strike out the word ``moderate'' and they 
can only prescribe it for severe pain, we can then prosecute 
people who are unscrupulously making zillions of dollars under 
the guise they can prescribe it for moderate pain. This is done 
every second of the day. But if you only allow them to 
prescribe for severe pain, we could then prosecute and go after 
the unscrupulous doctors and pain clinics that are killing our 
people. It is pretty simple.
    Dr. Hamburg. I think as you point out, targeting for 
appropriate use is absolutely key, and we are trying to achieve 
that through what we are doing in the REMS arena and 
strengthening those. I think it is hard to--I don't think that 
you would be satisfied with the results by simply addressing 
that change in indication, because it is the broader abuse that 
is happening that is--you know, I think causing this serious 
national problem and it is--how you define ``moderate'' and 
``severe'', I think we need to have a concerted effort that is 
targeted at many levels to address a problem that is cross-
cutting, that involves both what are the kinds of drugs that 
are available, how are they prescribed, what are the oversight 
and restrictions on the use and abuse of those drugs and how 
that is enforced.
    Mr. Rogers. Mr. Chairman, I appreciate your indulgence with 
me for the time. That is exactly what we had to do in my 
district. The State newspaper came out with a story that ran 
for 6 weeks, front-page screaming headlines that my area was 
the pain prescription capital of America, which prompted me to 
start an organization we called UNITE, Unlawful Narcotics, 
Investigations, Treatment, and Education. It is an amazing 
organization. We have got 26 undercover agents now that do 
nothing but arrest people selling drugs. They have put in jail 
3,700 pushers selling these drugs from the Flamingo Road 
source.
    We have kids in hospitals every day. We have got kids dying 
every day in the emergency rooms. We have got drug courts in 
every county. We have built treatment centers. I go to drug 
court graduations for people who finally kicked the thing and 
hear these wonderful tales. It is a pervasive, deep, widespread 
problem, killing more people than the automobile wrecks in the 
country, and yet you sit there and say we will not really talk 
about changing the prescription rules for this killer drug. And 
I won't rest until we see an answer, ma'am.
    Dr. Hamburg. Well, I am happy to continue to examine these 
questions and go back with our expert team. My point, though, 
is that I think if we really want to make a meaningful and 
enduring difference, it is a different problem than simply 
changing the indication, because it is--whether it is an 
indication for severe or moderate, the prescriber ultimately is 
making the decision of whether it should be given to that 
patient for their pain. And I am not confident that a label 
with an indication only for severe pain is going to change the 
behavior of those on Flamingo Road.
    Mr. Rogers. It will give us a chance to prosecute those 
people that are prescribing that medicine for other than severe 
pain, and we can stop--make a big point in stopping the problem 
at the source. You are in charge of the steering wheel here. 
And I expect some movement on this issue. And if you don't do 
it, we will do it for you. I cannot be much plainer than that.
    I hate to be blunt, but this is beyond a minor issue. This 
is a killer in my district. It is killing my constituents and 
all around the country. And you could make a difference.
    Dr. Hamburg. Well, I am eager to make a difference. I 
appreciate the severity of this problem and its huge 
ramifications on the lives of people and the dislocations in 
communities that occur and the terrible pain that so many have 
experienced. I do feel that we have a critical role to play and 
we will engage fully. I think that to be successful, it needs 
to be a broader partnership, and I am also committed to 
engaging in those partnerships so that we can make real 
measurable progress in this domain.
    Mr. Rogers. We will be listening. Thank you, Mr. Chairman.
    Mr. Kingston. Thank you, Mr. Chairman. Mr. Farr.
    Mr. Farr. I share your concern, Mr. Chairman. And also I 
think you have to go upstream and also look at the 
manufacturers and the salespersons and the people that sell 
that to the end users.
    I know my cousin is a doctor and he says that most of the 
information they get about drugs comes from the drug 
salesperson who tells them you ought to use this for thisand 
that. If there is that much supply out there going to doctors' office, 
then there has also got to be something with the way the message is 
being given to doctors. And I hope we can look into that as well.

                        MEDICAL COUNTERMEASURES

    I think this conversation really goes to the point of how 
important your agency is, the Food and Drug Administration, and 
how difficult it is going to be to manage these critical issues 
in the United States if Congress indeed cuts and slashes your 
budget.
    So a couple of things that I would like to see is if we 
could get a better bang for the buck. One is in the area of 
countermeasures, medical countermeasures. As you know, the 
Medical Countermeasures Initiative was framed in the course of 
2000, it was based on the fact that we put a lot of money into 
preparing for the flu pandemic. I think Mr. Rogers played a 
major role in pointing out that that was real serious. And what 
happened last year is that the HHS shifted 170 million dollars 
from their accounts to FDA accounts, to cover the new Medical 
Countermeasures Initiative. But you need some, as I understand 
it, you need some language to expand the other types of 
countermeasures you can work on besides the flu. Essentially 
the idea is if we want to have an infrastructure to do that. We 
could look at countermeasures that would be made for other 
kinds of emergencies that might come from biological weapons or 
other things that could break out, contamination could break 
out, beyond influenza. We have kind of isolated this work to 
one countermeasure.
    I wonder if you could speak for just a second how important 
that is, how important it is to keep the money, how important 
it is to get the language you need to be able to have those 
other countermeasures.
    Dr. Hamburg. Thank you, Congressman Farr. This is a very 
important area for the health and security of our Nation. We do 
face a set of serious biological threats from the naturally 
occurring, such as pandemic flu or something like SARS, if you 
remember a few years ago, or as yet an emerging infectious 
disease threat. We also know that we are highly vulnerable, 
perhaps increasingly vulnerable to deliberately caused 
biological threats and biological terrorism, chemical 
terrorism, radiological and nuclear terrorism, and the impact 
in terms of the health of individuals would be enormous; also 
the huge dislocations to our society, the disruptions in life 
as we know it, the impact on the economy, the public's trust 
and confidence in government and critical institutions and our 
national security at its core.
    So we want to be able to provide the kinds of medical 
countermeasures necessary to fully prepare us both to rapidly 
detect and respond to an emerging threat and to treat and 
contain a threat should it occur. In a way, it is a form of 
deterrence to be better prepared and to limit the damage that 
can occur.
    Mr. Farr. As I understand it, you have the money to do the 
work. You just don't have the authority to look at these other 
countermeasures?
    Dr. Hamburg. Well, exactly right. The Secretary of Health 
and Human Services, Kathleen Sebelius, began a new initiative 
last summer in the medical countermeasures arena and FDA was 
given resources to begin important work from the monies that 
had originally been appropriated for pandemic response.
    Mr. Farr. And we put that language giving you that 
authority in our legislation, but it didn't get into the latest 
version.
    Dr. Hamburg. Right. In order for us to be able to expand 
these activities to address not just pandemic threat, but the 
continuum of biological threats before us, we do need 
additional language. It is a no-cost proposal. But that would 
allow for the use against this broader set of very important, 
potentially devastating biological threats.
    So we would be very appreciative if you could take a 
serious look at that. I think it would make a huge difference 
to our ability to move forward in critical ways. There are 
important gaps in key areas. We don't have a treatment for 
acute radiation sickness, such as would occur after a terrorist 
attack using a radiological device. We don't have antiviral 
drugs to treat a number of critical, potential microbial 
threats. We don't have the diagnostics that we need to rapidly 
detect an emerging problem so we can treat it appropriately.
    Mr. Farr. Yes or no? Can we assume that if these funds are 
not provided through the mechanism proposed in the budget 
amendment, that there is very little or no chance you can fund 
those activities within the appropriation in H.R. 1?
    Dr. Hamburg. That is the case. This is a program where we 
are building a new capacity. These targeted additional dollars 
are essential to fulfilling the mission of assuring that we 
have the medical countermeasures that we need. We also in the 
President's fiscal year 2012 budget are asking for monies to 
continue those programs that we are beginning to put in place 
now.
    So it is going to make a difference. And, interestingly, as 
this broader initiative around medical countermeasures was 
being developed, one of the things that emerged was that the 
role of FDA was absolutely crucial to success; that it involve 
other components of government, but that the FDA's role in 
actually being able to review and approve for safety and 
effectiveness these medical countermeasures was the linchpin of 
success.
    So we very much appreciate your taking a serious look 
atthis and helping to support efforts that will make such a difference 
to our Nation and our security.
    Mr. Farr. Thank you.
    Mr. Kingston. The gentleman's time has expired. Mrs. 
Emerson.

                           DRUG SUPPLY CHAIN

    Mrs. Emerson. Thank you, Mr. Chairman. Thank you so much 
for being here, Dr. Hamburg, and for the good job that you do. 
I know you share my concern about the possibility for 
counterfeit drugs to enter the United States supply chain, 
whether it is from within the United States or from abroad. Yet 
the potential for this corruption of the system and the 
potential rewards for doing so is growing. And it is really 
interesting and frightening to see how sophisticated some of 
the methods the counterfeiters are using.
    And I am thinking about one in Enfield, Connecticut, last 
year where $76 million worth of drugs were stolen; and in 
another year before, in Chesterfield, Virginia, in which about 
$5 million of drugs were stolen. But this illustrates the fact 
that this is a problem bigger than mere counterfeiting, and it 
extends to stolen drugs which are removed from the supply chain 
and simply lost before reappearing, and that can possibly be 
here and it can possibly appear as treatments for us.
    So last year, the committee included language asking FDA to 
examine methods and technologies by which these drugs can be 
tracked within the supply chain from the manufacturer to the 
patient with a minimum of cost to either party or anyone in 
between. And I wanted to follow up with you on that request for 
new standards just to gauge your opinion of the possible role 
for the FDA, as well as to ask you if you see a need for this 
kind of a national system to ensure the drugs that we Americans 
are taking are safe as well as affordable.
    Dr. Hamburg. You raise a critically important issue. And 
increasingly in our globalized world, we need to be thinking 
about drugs coming from many parts of the world and complex 
supply chains that drugs go through with webs of producers, 
manufacturers, suppliers, repackagers, exporters, importers. 
And all along the way, there are opportunities for the 
potential introduction of problems, sometimes unintentional, 
and, sadly, we know often deliberate. And we know that 
counterfeiting is increasingly a very significant criminal 
enterprise. And in fact because the penalties for trafficking 
in counterfeit drugs are much less than in illegal drugs, there 
is real concern that organized crime is increasingly entering 
this space as well. And we know that the impacts on people are 
huge.
    You mentioned drug diversion. There was a recent case where 
insulin was stolen, disappeared from the marketplace and then 
reappeared. But the only way we found out that it reappeared is 
that we started getting reports that diabetic patients were 
taking insulin. They were depending on this drug for a very 
serious medical problem and it was having no impact. And we 
determined that their lots of insulin in fact were from this 
stolen--so the ability to track and trace, as you pointed out, 
is absolutely essential.
    We would very much welcome the chance to work with Congress 
to look at the opportunities for new legislation. I know that 
there is a bill that Congressman Dingell has introduced that 
would give additional authorities to FDA to help us to secure 
the safety of the supply chain and address these global 
challenges.
    Mrs. Emerson. Let me ask you. California has a standard 
which it is set to--I think it is set to be implemented in 
2015. And even with the best possible State model, do you think 
a state-by-state approach is more effective; or is it more 
efficient to have one single national approach to the problem?
    Dr. Hamburg. I think that this is a problem that crosses 
State borders and crosses international borders, and I think 
the goal of standards that are harmonized is very, very 
important. It is important to our ability to really address the 
problem. I think it is important to industries as they think 
about how they would implement it, and the cost of 
implementation as well.
    Mrs. Emerson. Can you estimate the pervasiveness of the 
counterfeit problem?
    Dr. Hamburg. We need better data. It is actually a 
worldwide problem that we don't fully know the nature and scope 
of it. I think, startlingly, we do know that in some parts of 
the developing world, as much as between 30 and 50 percent of 
the drugs available in the marketplace for serious diseases are 
in fact counterfeit.
    In the United States, we have a much more closed system and 
the FDA is working every day to ensure that the drug supply is 
safe and that when you go to your pharmacy what you get is what 
it purports to be. But we know that the problem is a real one 
here as well, and that we need to be proactive and aggressive 
and we need to be very cognizant, as I said, of the fact that 
as the world becomes more globalized and more and more of our 
drugs are coming from being manufactured overseas----
    Mr. Kingston. The gentlewoman's time has expired.
    Mrs. Emerson. I will look forward to working with you, 
Doctor.
    Dr. Hamburg. You can tell this is a topic I care about.
    Mrs. Emerson. I look forward to working with you, Dr. 
Hamburg. And thank you, Mr. Chairman, for allowing me to go 
early.

                                AVASTIN

    Mr. Kingston. Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman. Thank you, 
Dr.Hamburg, for being here.
    I would like to focus for a little bit on the drug--I 
believe it is pronounced Avastin. As I understand it, FDA 
granted accelerated approval for Avastin for the treatment of 
breast cancer in 2008 and now FDA is looking at withdrawing 
that approval. Is my understanding correct?
    Dr. Hamburg. There is an expedited approval mechanism that 
is available that enables, on the basis of fairly early data on 
drug safety and effectiveness, to grant a modified form of 
approval, expedited approval, and then require additional 
studies to be done; and then a decision is made based on that 
accumulation of a broader set of data, whether the drug should 
get full formal approval. And in this case after additional 
studies were done and the advisory committee of experts was 
also brought in to review the data, a decision was made not to 
give Avastin full approval.
    We are, I should say, in the process of working within the 
legal framework of this approval regulatory mechanism to--we 
granted the company that makes Avastin a hearing. They are 
going to be coming to a public hearing with the FDA, making 
their case. And because we are in the middle of that process, I 
actually can't comment any more deeply about this drug.
    Mr. Nunnelee. So you can't tell me what--you approved it 
then, and you are putting it on hold now, and you can't tell me 
what is the problem?
    Dr. Hamburg. Well, the additional data that was collected 
and examined, both by FDA scientists and reviewed by this panel 
of outside experts, did not support the full approval for the 
indication. However, as I said, because we are in the middle of 
a legal process and I ultimately will be reviewing all of the 
data under this system of a public hearing and a subsequent 
decision, that I am really not at liberty to have a full 
discussion of the matter.
    Mr. Nunnelee. Sure. It is my understanding that this drug 
doesn't cure breast cancer, but it does prolong a woman's life. 
And the initial indications were it might prolong it as long as 
5 to 7 months, and now maybe it is only 3 to 5 months. And 
because it didn't do what it was originally thought----
    Dr. Hamburg. If I could, because I am in a difficult legal 
situation here, because there is--there is a legal process with 
a hearing, and ultimately I need to be the final decision-
maker, and so I need to be at a distance from this--if I could 
ask our center director, Center for Drug Evaluation and 
Research, to speak to these issues.
    Dr. Woodcock. Thank you. I am Janet Woodcock. I am the head 
of the drug center at FDA. Avastin's trials in breast cancer--
it is approved for multiple cancers, many of these are full 
approvals--showed--the original trial showed an effect on what 
is called progression-free survival, which does not have 
anything to do with living longer. It has to do with how long 
before your xrays show that the disease progresses. The 
subsequent trials did not show the same effect. It was a much 
smaller effect on how long it took the xrays to worsen, all 
right?
    There is not a claim that Avastin improves survival in this 
setting in breast cancer life. The dispute is over the length 
of time that it takes to progress once you have metastatic 
disease. Does that make sense?
    Mr. Nunnelee. I may have said it wrong. Initially you 
thought it would do it in 5 to 7 months, and since it is a 
little bit shorter, you are saying let us just pull it?
    Dr. Woodcock. The initial was a surrogate. That is why it 
is called accelerated approval. Progression-free survival is 
generally--and in this case was that your xrays don't get worse 
is considered a surrogate for having some actual benefit to the 
people, say, not developing pain or fractures or actually maybe 
living longer. The subsequent trial showed a small effect on 
your xrays not getting worse, which our advisors and our 
oncologists did not feel would translate into a clinical 
benefit that somebody would feel, either reduced pain, reduced 
progression, or longer life.
    Mr. Kingston. The gentleman's time has expired. Ms. Kaptur.

                                HEPARIN

    Ms. Kaptur. Thank you very much, Mr. Chairman. I would like 
to take a little bit of a different tack than some of the other 
members have and begin with the statement, the obvious 
assertion that America will experience economic recovery when 
people get jobs and they go back to work. And thus I follow 
with interest the continuing outsourcing of U.S. jobs, 
including by pharmaceutical companies making medicines and 
devices everyplace else in the world and moving jobs outside 
our country.
    Every day I ask myself, how can we make goods in America 
again so people can go back to work? There are some who believe 
that we can fix what is wrong with our economy not by creating 
jobs in our country, but by simply cutting back on public 
health and safety, as is evidenced in H.R. 1, the continuing 
resolution offered by the majority party that cuts FDA 
inspectors for pharmaceutical safety.
    It is a very interesting set of arguments we are getting 
involved in: how we help our country recover. And thus I want 
to return to questions I have asked in the past regarding 
heparin and tracking what is really going on with the 
manufacturer of heparin, the cost of that to the public sector 
through Medicare and Medicaid, and go back to March 2008 when 
the New York Times had an article, Dr. Hamburg, that said the 
Food and Drug Administration at that point had linked heparin 
to 19 deaths and hundreds of severe allergic reactions, though 
the agency was continuing to investigate. And those deaths and 
allergic reactions were due to components that ended up in 
heparin that came from China; I believe through Canada, though 
I am not sure.
    So I wanted, first of all, to ask you whether you have 
completed your investigations and how many people may have died 
from those imported components. That is question number one. 
Have you finished your report? Is there additional data?
    [The information follows:]

                                Heparin

    CDER's Office of Surveillance and Epidemiology, also known as OSE, 
completed a review of adverse event reports from the Office's Adverse 
Event Reporting System in June 2009. OSE's analysis considered as much 
data as possible on the adverse event reports with use of heparin. 
However, we are not able to definitively attribute deaths to heparin 
administration due to confounding factors or lack of detail in the 
reports submitted to FDA. We continue to monitor for adverse events 
that are reported with the use of heparin. FDA does not have the 
details of the reports from Germany that you refer to and therefore 
cannot confirm the number of lives lost in Germany.

    Then I want to ask you this. You kindly submitted for the 
record from previous questioning I had done, questions that I 
had asked regarding heparin. And for people in the audience who 
don't know, heparin is actually made from pig intestines. I 
represent a lot of hog farmers, so obviously they are 
interested in why we would go to China for the ingredients for 
heparin. And those intestines are ground up, proteins are 
extracted, and ultimately we get a liquid that people receive 
in hospitals when they go in for operations. I don't know 
whether it is a blood thinner.
    Dr. Hamburg. It is a blood thinner.
    Ms. Kaptur. A substitute for the--not the red blood cells 
but for the white blood cells.
    Dr. Hamburg. It keeps you from getting blood clots.
    Ms. Kaptur. Now, what is interesting about what you wrote 
in answer to my questions, you said, ``FDA approves 
applications to market Heparin''--market Heparin--but it 
doesn't say anything about manufacturing.
    So one of my questions to you is, it is unclear where or in 
which country ingredients are made. And I want to know, for the 
three or four companies that are listed that are supposedly 
marketing Heparin, how many of the ingredients actually come 
from the United States?
    I am going to push you a little bit on this, maybe not 
today but in further questions. We see where China and India 
may be places where all these ingredients are being made.
    I am also going to ask you about damages. And I know that 
my time is up here. But our government and the American people 
were not able to recover damages, is that my understanding, 
civil or criminal, from the Heparin deaths due to contaminated 
imports?
    And where would I get how much money is being made by these 
pharmaceutical firms in marketing these products versus what it 
actually costs them to manufacture? Can you get at that, or 
where do I have to go for those numbers?
    [The information follows:]

                         Drug Marketing Profits

    The information that you are requesting is not information that 
companies must report to FDA. In addition, FDA does not track this 
information because it is not meaningful for evaluating the safety and 
effectiveness of drugs. The financial information would likely be 
available from the pharmaceutical firms themselves or from other 
sources of industry financial information.

    Dr. Hamburg. Well, you have asked a string of questions 
embedded in the one important issue of Heparin. And some of it 
we may need to get back to you on, in terms of your deep 
interest in this.
    The experience with the contaminated Heparin was a very 
serious one. I think it was an eye-opener, not just to the FDA, 
but also to the pharmaceutical industry and to our Nation more 
broadly, about the fact that we really needed to be paying 
attention to the fact that the supply chain for many products 
in this Nation is complex and global.
    As you point out, the precursor for Heparin that is used in 
the United States and manufactured by United States 
manufacturers, but much of the precursor does come from China, 
which I think has more pigs than anyplace in the world. But----
    Ms. Kaptur. We have a lot in Ohio, too, and we would like 
to compete in this market.
    Dr. Hamburg. But, you know, it caused, you know, as you 
pointed out, serious allergic reactions and many deaths. In 
response to that----
    Ms. Kaptur. Do we know yet, ma'am, how many deaths yet?
    Dr. Hamburg. I think it was, in this country--it is 
impossible to know exactly how many. But in terms of the 
documented deaths, I think people do----
    Ms. Kaptur. Why is it impossible to know?
    Dr. Hamburg. Well, because sometimes the providers don't 
make the association between the death of a patient and the 
contaminated Heparin. Patients that get Heparin, you know, in 
the hospital often have very complex medical illnesses, and 
when a person expires, the connection wasn't necessarily made 
that it was because of the Heparin. As we saw a couple of cases 
and the investigation was done and we began to understand the 
link between the Heparin and a set of symptoms and fatalities--
but we know that it took a serious toll.
    In response, we have put into place a number of important 
protective measures, new screening tests, and safety systems, 
also working with the regulatory authorities in China on this 
and working with the private sector, so that we have safeguards 
that this kind of event with Heparin will not occur again. But 
it is a warning call about vulnerabilities in the system that 
we need to work on.
    I think my time is up in responding to you, but we are 
happy to follow up further with you.
    Ms. Kaptur. Thank you.
    And I want to thank the chairman for his generosity.
    Trying to get to the bottom of this has been 
extraordinarily difficult. And we are going to keep digging, we 
are going to keep drilling down into this one.
    And I would just say to the chairman, you know, we are all 
struggling to try to find the money to balance thebudget. And 
if you look at the amount of money that our government pays through the 
Medicare and Medicaid accounts for Heparin, for a drug that is off-
patent, for material that is off-patent, unbelievable. So this has many 
legs to it.
    And I thank you very much. And we will have many follow-up 
questions on Heparin. Thank you.
    Mr. Kingston. Well, I thank the gentlewoman.
    And, as you can see, Dr. Hamburg, members of this committee 
have a lot of passion about our issues and do appreciate your 
time.

                     FOOD SAFETY MODERNIZATION ACT

    I want to visit the discussions you and I have had about 
food safety and the Food Modernization Act. Using the CDC 
numbers which you have--and I agree with you, 3,000 deaths a 
year is horrible. We need to do something about it--48 million 
illnesses.
    But where I have an issue, taking the emotion out of it--
and I know we have talked about this, but that 3,000 people 
dying a year is down 40 percent from last year. Again, you 
know, it is too high; we need to keep working. But it is down 
40 percent from the CDC numbers. Forty-eight million foodborne 
illnesses a year, that is down 37 percent, a decrease of 28 
million from last year. Still too high, but in a country of 311 
million people eating three meals a day, 365 days a year, we 
are consuming 340 billion meals a year. And if you divide that 
into the 48 million, you still have a food supply that is 99.99 
percent safe.
    Where is my math flawed on that?
    Dr. Hamburg. Well, I think that the key numbers are that, 
you know, we know that about one in six people get sick every 
year from foodborne illness----
    Mr. Kingston. Well, let me interrupt you a minute. Key 
numbers come from the CDC, and those are the numbers I have 
used, so those are the numbers I want to stay with. Where is 
that math flawed?
    Dr. Hamburg. Yeah, well, I think that is consistent with 
their numbers. I mean, I think, as you point out, we are seeing 
preventable deaths. We are seeing even more preventable 
illness. That is associated with a set of other preventable 
costs--costs to the health-care system, costs to economic 
productivity.
    Mr. Kingston. But you agree with my math, that it is 99.999 
percent safe?
    Dr. Hamburg. I would have to sit down and follow your math. 
But we have one of the safest food supplies in the world, there 
is no doubt about it. And we should be proud of that, and we 
should make sure that it is maintained that way.
    Mr. Kingston. Well, the concern that I have is, are we 
targeting the 3,000 smartly and efficiently and effectively? 
Because if we move that number from 99.999 percent to 100 
percent, which you and I and I think everybody on this 
committee certainly would want to do, are we going to get 
there? Are we going to get that last percentage? Are we going 
to get it with this bill?
    And I will tell you why I have concerns about that. Sixty 
percent of the illnesses come from Norovirus. And there is 
nothing in there that attacks it. In your testimony, you 
mentioned that you have permitted a test for it last year, but 
that is the only mention of Norovirus.
    And the CDC, on March 4th, said that, ``Appropriate hand 
hygiene is likely the single most important method to prevent 
Norovirus infection and control transmission. Reducing any 
Norovirus presence on our hands is best accomplished through 
handwashing with water and plain antiseptic soap.'' And yet we 
are talking eventually 17,000 to 18,000 new FDA employees, and 
that is not addressed in here. Sixty percent of the illnesses.
    The second highest number of illness is from salmonella. Of 
course, I come from poultry country. Now, before the Food 
Modernization Act, FDA did finalize the salmonella egg rule, 
July of last year. And something like 79,000 illnesses or 30 
deaths, but that it could be avoided with this new food safety 
requirement which you put into effect July of last year.
    So, you know, I don't want to say that box is checked. I am 
going to let you respond to it.
    The third highest is Clostridium, and you don't mention 
that in your budget.
    And it would appear to me that those are the three things 
that we need to target in order to close that percentage. And, 
you know, in this tight budgetary time, I think that would be a 
lot smarter of an approach.
    Dr. Hamburg. You know, Mr. Chairman, I understand your 
concerns. And I think that we all recognize that we have a food 
supply that is generally very safe.
    I think no one can argue, though, that we are experiencing 
a set of preventable outbreaks due to a range of microbes, some 
which cause more severe disease, some which are more prevalent. 
But it is a range of concerns, and it is a changing panoply of 
concerns.

                               SALMONELLA

    Salmonella wasn't thought to be such a major concern in 
products like peanuts. Today we know that it is a very 
different situation. So----
    Mr. Kingston. But actually say today--this was only July 
that we had the new salmonella rule for eggs. And that wasn't--
--
    Dr. Hamburg. Well, that is for eggs.
    But if I can just--you know, I think what we need and 
what----
    Mr. Kingston. And I want to point out that the peanut 
problem, which occurred in Mr. Bishop's district--and he and I 
are all on the same page of it--but that was a criminal act and 
not so much food safety as much as it was a criminal act.
    Dr. Hamburg. But we are increasingly seeing salmonella in 
those kinds of products, is what I am saying, is that there is 
a--you know, we can't only have a food safety system that 
addresses problems that have happened. We need a system, as the 
Food Safety Modernization Act calls for, that really puts an 
emphasis on preventing the introduction of contamination of any 
kind.
    And that is what I think is the huge opportunity here, is 
to move toward a system that is really based on prevention so 
that we can prevent those unnecessary deaths, we can prevent 
the unnecessary costs to the health-care system, we can prevent 
the unnecessary costs to industry and to our economy more 
broadly.
    We also, in a globalized economy, have a whole set of 
additional threats to the safety of our food supply that we 
need to be very mindful of and prepare for.
    So we are trying to create a food safety system for the 
21st century and beyond, and I think that we have a 
responsibility to take that very seriously. Congress has given 
us the mandate to do so. And, you know, I am very excited about 
the opportunities to keep moving the dial so that our food 
supply is as safe as it possibly can be.
    Mr. Kingston. My time has expired.
    Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman.
    I wish we had a whole week of this panel. By the way, I 
don't think we have ever had a head of the agency that has such 
a tremendous academic and medical background as you have had. I 
am just truly appreciative that you took this job.
    You are the first responder to any problem that happens in 
illness in America, no matter where it comes from. And your 
agency is the one that has to stop it, find cures for it. I 
think that we sometimes, in this big budget slashing that we 
have to do here in Congress--and I wish it wasn't so much 
slashing as, to use a medical term, since you are a doctor, is 
that we could do, you know, just microscopic surgery, is what 
we really need. Just as surgery is done that way, it has to be 
very smart and very effective. But we don't do it that way.
    I am thinking that we ought to have a week up here 
discussing what would be a day without the FDA. If you didn't 
have the FDA, everything would come to a grinding halt in this 
country. Because, indeed, you are responsible for articles used 
in food or drink, for not only mankind but for animals, things 
that we don't think about that are regulated, like chewing 
gum--you put a lot of that in your mouth--dietary supplements 
and dietary ingredients, infant formula, beverages, even 
including alcoholic beverages, fruits and vegetables, fish and 
seafood, dairy products and shell eggs, raw agriculture 
commodities such as what we grow in our area, you know, like 
lettuce and carrots and things like that, the canned and frozen 
foods, live food animals, bakery goods, snack food, candy, 
chewing gum, animal feeds--I mean, just a whole list of things.

                     FOOD SAFETY MODERNIZATION ACT

    In our new law that we passed in Congress, the Food Safety 
Modernization Act, which did pass with broad bipartisan 
support, and for that--and the chairman has already pointed out 
the number of deaths that occur in this country due to 
foodborne illness--the President has requested $183 million for 
implementation of the new food safety law.
    My question that goes to you is, what would happen if that 
money was not appropriated, if Congress did not give you the 
President's request of $183 million to take these new 
responsibilities and tougher responsibilities that we have 
mandated upon you?
    Dr. Hamburg. Well, we are very committed to moving forward 
with the implementation of the Food Safety Modernization Act. 
And we are beginning to implement some of the very many new 
mandates and requirements contained in that bill. We will be 
able to make significant progress in key areas. We will 
continue to be able to put forward the----
    Mr. Farr. If you don't get the money is the question, 
though.
    Dr. Hamburg. Yeah. If we don't get the money, we will not 
be able to fulfill all of the requirements of the act, without 
a doubt. We will, importantly, not be able to fulfill the very 
ambitious inspection mandate, domestically and internationally, 
which will mean that we won't be able to get that hands-on look 
at----
    Mr. Farr. Let me follow up just on the inspections. A lot 
of the products that we eat, particularly if you think about 
the fresh vegetables we eat in the wintertime, a lot of those 
do come from Mexico, and have to be inspected coming across the 
border.
    We also send and sell around the world a lot of food grown 
in the United States. California grows 80 percent of all the 
almonds eaten in the entire world. And that is more almonds 
than all the people in the United States eat, so we have to 
export those. Those require inspections in order to be 
purchased by foreign countries.
    If our side of the inspection falls down, we don't live up 
to our regulations, what does that do to the movement of food 
supply, particularly with fresh fruits and vegetables that 
don't have any resale?
    Dr. Hamburg. Yeah, that is a very important question. About 
40 percent of the fresh fruit and produce that we do eat in 
this country comes from outside our borders. So FDA has a very 
serious responsibility to be able to assure the safety of those 
products. And it means not just inspections at the border, 
which are hard to do and very costly and time-intensive, but 
actually going out to where the products are coming from and 
trying to assure the safety of that supply chain.

                           FOOD SAFETY SYSTEM

    As you point out, you know, we also need to have confidence 
in a robust food safety system in order to support our exports 
of foods to other parts of the world. And when there is an 
outbreak, a preventable foodborne outbreak, it can have a very 
devastating impact on the health of that sector of the food 
industry, in terms of sales domestically, as you well know, and 
also the ability to do exports.
    And if we can't do the inspections that we need to do, we 
will not be able to assure the American people that the food 
that they are putting on their plates and serving their 
families is safe and wholesome.
    Mr. Farr. If you don't do the inspections, food doesn't 
move.
    Dr. Hamburg. Food doesn't move.
    Mr. Kingston. Thank you, Mr. Farr.
    Mr. Farr and members of the committee, we are expecting a 
vote maybe in the next 5 to 10 minutes. And it is going to be 2 
votes followed by a 10-minute recommit. And what I would like 
to do, if it is okay with the committee, is when the first bell 
goes, I would like to vote, come back, give the gavel to Mr. 
Nunnelee, then he can vote, and we can sort of rotate in and 
out. That way, we can maximize our time with Dr. Hamburg, if 
that is okay.
    Oh, okay, just one vote. And so, yeah, there will be plenty 
of time. We will be able to get this done. Aren't you glad?
    Mr. Nunnelee.
    Mr. Nunnelee. Thank you, Mr. Chairman.
    I want to continue the questions about the Food Safety 
Modernization Act. You may have already stated it, but let's 
look at it specifically. How much is requested in your 2012 
budget for implementation of the Food Safety Modernization Act?
    Dr. Hamburg. How much is requested?
    Mr. Nunnelee. Yes.
    Dr. Hamburg. It is $183 million.
    Mr. Nunnelee. $183 million. How will we know this time next 
year if that $183 million has achieved the results that were 
intended by the bill's passage? What specific methods of 
monitoring and tracking will we have this time next year?
    Dr. Hamburg. Well, we do intend, of course, to track very 
carefully our performance as we move toward implementation of 
the Food Safety Modernization Act. And I think we recognize 
that there are a number of key areas that we have to make 
significant progress on moving forward.
    We need to begin to put in place the preventive risk-based 
approach, working with the industry and with farmers and 
producers to make sure that we have identified and agreed on 
where the points of vulnerability are and what can be done to 
shore them up.
    We need to continue to expand our inspections. Of course, 
it takes a number of years before an inspector is trained and 
able to go out in the field and really perform at full 
capacity. So some of the impacts of dollars today won't be seen 
for a few years down the road.
    We will be strengthening our import safety activities to 
make sure that we both expand our inspections overseas but also 
work more closely with sister regulatory authorities and with 
industry to assure that foods are being produced, manufactured 
according to our standards.
    We will be working closely with State and local partners, 
and that is a very important additional component of the Food 
Safety Modernization Act that we haven't had a chance to talk 
about yet. Very much it is a partnership. We will be working 
with States and localities in terms of helping them to 
strengthen their capacities and the contribution that they make 
to monitoring the safety of the food supply and responding to 
outbreaks when they occur.
    So there will be very clear activities under way. We will 
be promulgating produce safety rules. We will be putting in 
place other guidances and taking other actions concretely in 
terms of what is required for implementation.
    But I do want to caution that much of the transformation 
that needs to happen and the building up of program will take 
time. It is not a 1-year activity. And it needs to be a 
sustained activity, as well.
    Mr. Kingston. Will the gentleman yield?
    Mr. Nunnelee. Sure. I always yield to the chairman.

                               NEW HIRES

    Mr. Kingston. You are talking about 17,000 new employees 
and about $1.4 billion in a 10-year period, correct? That is 
what the findings were. That is correct?
    Dr. Hamburg. Is it--that number of new employees seems 
awfully high.
    Mr. Kingston. In a 10-year period of time, that is what 
everyone was saying last year in Congress in the debate.
    Dr. Hamburg. That was--I don't know how many FTEs they 
were. Did they speak in FTEs?
    Mr. Kingston. All right. It was a CBO estimate. You are 
talking a massive bureaucracy in a time that, for every dollar 
we spend, 40 cents is borrowed, in the background of a 99.99 
percent safety rate in food.
    I yield back.
    Mr. Nunnelee. Your response was on activities. And I am new 
here, but my observation is that when government measures and 
monitors, it measures activities, not results. And so I guess 
the follow-up question is not how are we going to measure your 
activities, but how are we going to know in 2012 has this $183 
million achieved any results?
    Dr. Hamburg. Well, as we put in place this program, we are 
asking for this money in fiscal year 2012, and, as I said, you 
won't see the results that same fiscal year in all cases. But 
in terms of impacts on people--and that, of course, is what 
really matters--you know, we will see, if we do this right, 
fewer outbreaks of foodborne disease. We will see fewer people 
sickened by the foods they eat. We will see a system that can 
better assure that not just food produced in this country but 
food produced overseas coming into this country will--that that 
imported food will be produced according to our same standards 
and will, again, be as safe and wholesome as we can assure.
    Mr. Nunnelee. All right. I think my time has expired. I 
will get back and follow up on the next round.
    Mr. Kingston. The gentleman's time has expired.
    Ms. Kaptur.
    Ms. Kaptur. Thank you, Mr. Chairman.

                             MENTAL HEALTH

    I would just ask you to submit for the record, Dr. Hamburg, 
if you could, in the past year how many drugs have been 
approved in the arena of serious mental illness. Every year I 
ask for that. I am always interested. It is very slow in 
coming. I am wondering if you have been able to expedite the 
platform for these very, very debilitating illnesses that 
affect millions of people across our country.
    [The information follows:]

                          Mental Illness Drugs

    From February 28, 2008 to November 10, 2010, FDA has approved 11 
new drug applications, or NDAs, to treat mental illness. Four of these 
NDAs were new molecular entities. Additionally, 41 supplements for a 
new indication with labeling changes were approved for drugs to treat 
mental illness. During the same period, FDA approved 108 generic drug 
applications for products to treat mental disease.

                                HEPARIN

    But I want to go back to the Heparin issue. First, I want 
to ask your opinion as a doctor. How complex a medical product 
do you believe Heparin is versus other products that you 
regulate? Is it at the top level of complexity? Is it medium? 
Is it simple? How do you----
    Dr. Hamburg. It is a very complex molecule, there is no 
doubt about it.
    Ms. Kaptur. All right. Do you know, as FDA, at which sites 
all of the ingredients of Heparin are produced?
    Dr. Hamburg. Heparin is produced with one of these supply 
chains I was describing that has multiple inputs. And there is 
precursor materials that come from many different sites, and 
then it is consolidated----
    Ms. Kaptur. And are you at those sites? Is FDA at those 
sites?
    Dr. Hamburg. We don't have the resources to be at every 
site where every component of a product that is in an FDA-
approved drug is made. We try very hard to use our resources 
wisely, and we are at manufacturing sites to inspect them 
before we approve a new drug. But that is where the drug itself 
is manufactured.
    Ms. Kaptur. Made, not where the ingredients come from.
    Dr. Hamburg. You know, we work with companies to try to 
assure the safety----
    Ms. Kaptur. Ma'am, I will tell you, I am a little 
uncomfortable with what you are saying to me. If I bake a cake 
at home and I look at where the ingredients are from, for 
example, I know where they are from, or at least I think I do, 
by reading the label. But for these drugs and medical products 
like Heparin, it seems like there is a lot more that is being 
offshored and we don't really know--how do under what 
conditions those pigs actually live?
    Dr. Hamburg. Well, one of the reasons why we have really 
developed a much broader international program is so that we 
can get a better handle on these kinds of issues. We now have 
offices in China, for example, to enable us to be on the 
ground, working with manufacturers, working with regulatory 
authorities there.
    Ms. Kaptur. I really wish I could get you on the ground in 
Ohio so we could provide them with real competition. As I look 
at some of the answers that were provided to past questioning, 
it looks like Illinois has really got this thing wrapped up, 
and maybe there is not as much competition as we think. Because 
we are looking at three companies here, all in Illinois--
Schaumburg, Illinois; Deerfield, Illinois; Lake Forest, 
Illinois--three companies. I wonder if they have connecting 
doors. I don't know. I will have to take a ride over to 
Illinois and take a look.
    But according to information that you provide--you know, I 
am really asking--I am going to become an expert in Heparin. If 
Americans died, we ought to know why. And we ought to really go 
back and understand that production chain intimately, because 
it will instruct us on what is happening with other medical 
products as well.
    According to your answers to us in the record, one of my 
questions was, what percent of Heparin's ingredients are 
domestically produced versus foreign-produced? FDA could not 
give an exact answer on that. Here is what they said: ``The 
percent of Heparin components produced domestically versus 
abroad is determined by each manufacturer according to their 
specifications.'' And then it says, ``Manufacturers of the 
finished product, Heparin, to be marketed in the United States 
do disclose the source of the active pharmaceutical 
ingredient,'' but you are not necessarily on the ground where 
that source is being produced. And you say, ``FDA would need to 
review each application to determine the percentage of foreign-
made components in each finished Heparin product available on 
the U.S. market.'' So, basically, FDA doesn't know.
    And it also says, there is a note, ``Please note that the 
drug applications contain information that is a trade secret.'' 
Now, as I understand it, Heparin is off-patent. Am I correct? 
This has been around for a long time. It is a trade secret, 
commercially confidential or otherwise protected from 
disclosure to the public under the Freedom of Information Act, 
the Trade Secrets Act, the Privacy Act.
    If something is off-patent, I mean, tell me here, why don't 
the American people have a right to know where the ingredients 
of Heparin come from specifically? What is missing in the law?
    Dr. Hamburg. I think, you know, the problem is that Heparin 
and many other products are made in complex ways that have 
ingredients that come from many places. The companies take 
responsibility for making sure, to the degree that they can, 
that the supply chain is safe and intact. And we have a 
responsibility to oversee that process.
    But in terms of our resources to be in every place where a 
precursor material is made, it is not----
    Ms. Kaptur. Is it within your purview to impose user fees 
on those companies to ensure that that product that comes back 
here is safe? Or do you need more legislative authority to do 
that?
    Dr. Hamburg. You know, with respect to Heparin, after the 
problem arose, there were some fundamental things that needed 
to be done to shore up the safety of that product and, also, 
that could be applied more broadly, things that involve 
moreintensive screening of the precursor products, more intensive 
screening of the manufacturing procedures, more intensive screening of 
the final product----
    Ms. Kaptur. And who is paying for that, ma'am?
    Dr. Hamburg. It is a--you know, we are working with 
industry. They do provide user fees for components of the work 
that we do. Budget authority pays for many aspects of this 
program. And industry directly, through their work, takes 
responsibility for components of it, as well.
    Ms. Kaptur. Thank you. There will be more questions.
    Mr. Kingston. Thank you.
    Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman.
    And welcome. I apologize for not being here earlier. As you 
may be aware, there are a few other things going on this 
morning also. And I want to thank you for coming by and 
visiting. I appreciate that very, very much.

                         LIVESTOCK ANTIBIOTICS

    Last summer, the FDA released its final draft guidance 209 
on antibiotics used in livestock production to keep animals 
healthy and products safe. In the guidance, you laid out plans 
to phase out the use of growth promotion or production 
antibiotics, as the FDA refers to them, and increase veterinary 
oversight on the farms.
    The production antibiotics FDA proposes to eliminate serve 
two roles: to improve the overall health of growing the animal, 
and, thus, leads to improvement in feed efficiency and growth 
as a result of improved health and gut integrity.
    Given this final draft guidance will directly impact the 
health of animals and livelihood of a lot of pork producers--
and you may be aware, in Iowa, we have, like, six pigs for 
every human in the State of Iowa--I am really curious as to 
what sort of outreach has the FDA done with the producers 
themselves to get their input.
    These are farmers who, you know, care for these animals. 
They produce a bountiful and safe food supply. And I really 
think that that type of outreach is extremely important to 
really understand modern production agriculture.
    And if you could just talk about that, what kind of 
outreach, or is there communications going on at all.
    Dr. Hamburg. Well, very much so. And our Center for 
Veterinary Medicine has been deeply engaged in this issue and 
in those conversations.
    It is a very important concern. As you know, antibiotics 
are vital for treating illness and disease in humans and 
animals. It is a vital resource, but it is a limited resource 
in terms of the number of antibiotics available. And there are 
not many new antibiotics in the pipeline. We don't want to be 
in a position where antibiotic resistance develops and we no 
longer have tools to treat serious disease in people or 
animals.
    And that is why we are moving to try to define a framework 
for their use that is really as judicious and thoughtful as 
possible, never denying antibiotics for appropriate treatment 
when there is an indicated medical need, but reducing use that 
can contribute to antibiotic resistance and is not medically 
indicated, not for therapeutic purposes.
    We have been working closely with producers and with the 
industry, have had, you know, a lot of ongoing conversations 
and a lot of, you know, back and forth. We are trying to move 
in a voluntary way to accommodate many of these concerns, and 
working with the veterinary community so that we can make sure 
that antibiotics are administered as appropriate and with 
appropriate oversight.
    Mr. Latham. Just to clarify, are you saying it is better to 
wait until the animals get sick or to have healthy animals all 
the way along?
    Dr. Hamburg. Well, we want to have healthy animals, but we 
don't want to use our antibiotics in ways that can cause 
additional serious problems. And antibiotic resistance is a 
very real problem.
    When there is a therapeutic indication, antibiotics should 
be used. When it is for growth-promotion purposes, that can 
contribute to antibiotic resistance; it doesn't serve a 
therapeutic purpose. And in terms of the overall health and 
wellbeing of animal and human populations and our ability to 
have this vital resource of working, effective antibiotics, we 
need to move in some new directions.
    Mr. Latham. I still question whether you are saying, you 
are not--in my mind, it is better to have a healthy animal to 
begin with, just like healthy human beings, rather than to wait 
until you have--I would think it was more of a food risk with 
diseased animals, if you wait until after the fact.
    And the idea of growth promotion or whatever it is, is just 
because they are healthy; it is not because they have hormones 
or something being fed to them.
    Dr. Hamburg. But we know that you can reduce the use of 
antibiotics in those settings without compromising health of 
animals. And we need to be judicious in how we use these very 
vital resources.

                           ANIMAL ANTIBIOTICS

    Mr. Latham. But I think you should give some credit, and, 
certainly, I would hope that there is input from producers. I 
mean, they are facing record-high input costs. They are not 
going to be overusing anything, because their bottom line is 
very much affected. And also, it is to their economic advantage 
to have the healthiest animals possible out there to go into 
the food system.
    So, in my mind, it is a concern that you don't give the 
appreciation maybe of the producers and their position that 
should be, I think, well-deserved.
    So, anyway, thank you.
    Mr. Nunnelee [presiding]. The chair will recognize Ms. 
DeLauro.
    Ms. DeLauro. Thank you very much, Mr. Chairman.
    Good morning, Commissioner.
    Dr. Hamburg. Morning.

                                 H.R. 1

    Ms. DeLauro. To all, my apologies. Secretary Sebelius was 
testifying in HHS, but I wanted to make it to the hearing this 
morning. And thank you for the good work that you all do at the 
FDA.
    Three years ago, Commissioner, the Science Board reported 
that the FDA was so underfunded that it could not perform its 
public health mission. Congress responded by increasing funding 
in 2009 and 2010. That progress stalled with this year's 
continuing resolution. And the House passed H.R. 1, which would 
cut FDA funding by $241 million.
    I have a series of questions that I would like answers to, 
and specific. My view, as somebody who runs for office every 2 
years, that if you can't quantify what you have, if somebody 
can't tell you where it is all coming from and where your votes 
are coming from, you don't have any idea whether or not you are 
going to win. So it is about the numbers.
    How would FDA accommodate that kind of a cut? And what 
would it do to efforts to address problems identified by the 
Science Board in 2008?
    Specifically, if the cuts in H.R. 1 were implemented, would 
it lead to fewer food safety and medical product inspections? 
How many?
    Would the cuts impact the amount of imported foods and 
medical products that get inspected? How many?
    Given that cuts would have to be enacted in a short amount 
of time, would furloughs or reductions in the FDA inspection 
force be necessary?
    The President's budget closes some of the gap on needs 
identified by the Science Board. Where does it leave us if we 
lose ground in 2011 and then fail to fund adequately in fiscal 
year 2012?
    What would that do to the agency's ability to perform its 
mission? What are the risks to public health if FDA isn't able 
to perform its mission?
    Dr. Hamburg. Well, we do face, you know, a very worrisome 
situation in terms of the facts that, as you recognize, FDA's 
mandates and responsibilities far outstrip our resources. For 
many, many years, many decades, truly, we have been 
underfunded, under-resourced, as that Science Board report 
pointed out. And they called for very significant increases to 
our budget over a 5-year period.
    We have been very grateful for the resources that we have 
gotten over the last 3 years to help build our budget. And it 
has enabled us, I think, to put in place important programs in 
key areas to protect the health of the public.
    If we had to face cuts of the magnitude you are describing, 
you know, it would be devastating. The size of the cut is equal 
to the budget of, you know, one of our centers. Of course, we 
would absorb it across the agency----
    Ms. DeLauro. I am looking for some specific numbers, Madam 
Commissioner, because I think that the impact is lost if we do 
not have the numbers.
    And, again, you know, I was concerned about funding last 
year at this time when we spoke about what the Senate was going 
to do with the bill on food safety, et cetera, and in order to 
move on a piece of legislation which is so good and which is so 
much needed. But without the resources to do it, what are the 
consequences?
    Now, it is not a question of even the--it is a question of 
the resources for 2012. But we have looming here H.R. 1. I want 
to know very specifically, as I said, how many food and medical 
product inspections? What impact on imported food and imported 
medical products?
    [The information follows:]

              H.R. 1 Food and Medical Product Inspections

    FDA estimates that the reductions to the FDA budget in the House-
passed version of H.R. 1 will result in approximately 1,250 fewer FDA 
inspections of firms that provide or manufacture food and medical 
products. In addition, House-passed version of H.R. 1 will result in a 
significant decline in funding that we could provide to our state 
counterparts to support development of an integrated national food 
safety system as well as a decline in funding to provide employee 
training that would negatively affect the level of expertise within our 
workforce.

    And, you know, if you can't answer them today, I really 
want it laid out very specifically so that it is well-known 
what we are playing with here at our risk. And we need you to 
talk about the agency's ability to perform its mission and what 
the risks are to public health--above all, what the risks are 
to public health.
    [The information follows:]

                       H.R. 1 Public Health Risks

    FDA estimates that the reductions to the FDA budget in the House-
passed version of H.R. 1 will diminish the ability of FDA to perform 
its mission and protect the public health. FDA's ability to assure the 
safety of America's food supply and medical products will be 
substantially reduced. For example, the magnitude of the cuts may 
result in approximately 1,250 fewer FDA inspections of firms that 
provide or manufacture food and medical products. The reduced number of 
inspections can result in an increase in the number of manufacturing 
and safety incidents that threaten the health of patients and 
consumers.
    In addition, FDA also estimates that the reductions for FDA in the 
House-passed version of H.R. 1 would result in 7,500 fewer FDA import 
inspections to assure that imported foods and medical products meet 
safety standards. A lower inspection rate makes it difficult for FDA to 
monitor the safety of a growing volume of food and medical product 
imports. The result is that Americans could suffer increased foodborne 
illness and experience greater medical product safety problems 
resulting in more sickness and deaths.
    In addition, FDA also estimates that it must conduct analysis of 
3,300 fewer food and medical product samples to identify safety 
problems. This reduction in laboratory sample analysis may result in 
increased incidents where foodborne contamination and drug, device, and 
biologic safety problems would go undetected.
    Furthermore, FDA's ability to implement the new food safety 
legislation will be severely limited. The H.R. 1 reduction will likely 
increase the risk of recurring outbreaks of foodborne illness and lead 
to greater industry losses of revenue and market share.
    Overall, cuts of this magnitude may limit FDA's ability to 
stimulate and support industry innovation that offers promising new 
opportunities to diagnose, treat, cure, and prevent disease. These lost 
opportunities would diminish industry innovation and compromise the 
development of new products that would improve the lives of patients.

    I don't know if you have any of those numbers today----
    Dr. Hamburg. I can't give you exact numbers in terms of how 
many fewer inspections. I can tell you that it will be 
significant. We will be unable to do inspections, domestically 
and internationally, at the level that we need to be doing. We 
are already not at the level that we want to be and that we 
know really matters.
    We will be delayed in our ability to review and approve new 
medical products that come before us. That will have impacts on 
people who need and are counting on those products. It will 
have broader impacts on the economy and the health of the 
companies making those products, the jobs associated with that, 
our ability to maintain exports in key areas and our global 
economic competitiveness.
    Ms. DeLauro. Uh-huh.
    Dr. Hamburg. We will not be able to do the work that needs 
to be done to assure the safety of the blood supply--
fundamental things that matter to people every day.
    So we need to be, obviously, very thoughtful. We all 
recognize that we have to tighten budgets. And, you know, we 
will work with Congress going forward to examine how we can 
achieve important cost savings. And the President's proposed 
budget does contain some significant administrative and 
contract savings across the agency. But we have critical 
programs, unique programs that are vital to the health and 
safety of people.
    Ms. DeLauro. It is going to be important to this committee. 
And I just outlined some in the food safety area that I think 
we need to have a catalog of--and you mentioned the blood 
supply--of what that would that mean. I think it is critically 
important for this committee to know that, in terms of what its 
actions are going to be. And I also believe it is critically 
important for the public to know what is about to befall them 
if this piece of legislation sees the light of day.
    Thank you.
    Dr. Hamburg. Thank you.

                     FOOD SAFETY MODERNIZATION ACT

    Mr. Nunnelee. I will recognize myself for a follow-up on 
where I was at the last line of questioning, back on the Food 
Safety Modernization Act.
    We talked about how the budget request for this year is 
$183 million. I will acknowledge that I am new here and I am 
still learning. The approach that I have to take is the exact 
same approach that I took in my business before I got here, 
probably the same approach that American consumers have. It is, 
What are we asked to spend, and what are we going to get for 
what we spend?
    So, $183 million for this year. Do you have a 10-year 
estimate as to what the enforcement of the Food Safety 
Modernization Act would cost?
    Dr. Hamburg. We believe that, in order to fully implement 
the Food Safety Modernization Act and all of its many important 
mandates and requirements, that we would need the money that is 
outlined in the President's fiscal year 2012 budget and we 
would need likely comparable increases over the next couple of 
years to get us to the overall working budget for this program.
    As a businessman, though, I think you can appreciate that 
there are some investments that have a greater return on 
investment. And I think it is really important to underscore 
that this opportunity that we have to really transform the food 
safety system in our Nation is going to have much more profound 
impact than what you are paying up front in terms of those 
dollars.
    It is going to reduce costs to the health care system, 
preventable costs. It is going to reduce unnecessary lost work 
productivity, which is going to be important to our economy. It 
is going to support the health and growth of critical sectors 
of our economy, the food industry, enabling them to have 
broader markets here at home, more trust and confidence of 
consumers, as well as stronger export markets.
    So there is huge return on investment. And the costs of 
these outbreaks of foodborne disease that we know can be 
prevented are enormous, in the billions, you know, well over 
$100 billion.
    Mr. Nunnelee. All right. I want to continue to pursue it, 
but I think the chairman is back.

                 TRANSFORMING FOOD SAFETY AND NUTRITION

    Mr. Kingston [presiding]. I am only worried about your 
voting right now.
    See, Dr. Hamburg, we are trying to run this in a manner 
that is fastest on everybody.
    I want to talk to you about the dietary guidelines. And I 
know that you have been involved in this in New York City and 
so forth. And I know that salt is always on everybody's drop 
list. But there are so many articles that take the other side 
of salt. And I will submit these for the record, but there are 
five or six of them right here that kind of, on a fact-based 
discussion level, talk about the sodium intake and, you know, 
give a counter side to it.
    And I think, as somebody with FDA, while it is okay for an 
advocacy group to take a position, I don't think that FDA 
should take a position on that until they have looked at all 
the facts. And I am going to submit these to you. And I would 
like you to get back to me and let me know what your comments 
on that are for the record.

                        ENFORCEMENT OF TITLE XXI

    Mr. Kingston. I also want to switch gears right now and 
talk to you about a GAO report that came out about a year ago, 
and it was on the Office of Criminal Investigations. And the 
gist of it was that the FDA Office of Criminal Investigations 
operates almost autonomously, with the director deciding which 
cases he or she would report to FDA's senior management.
    Are you familiar with that report?
    Dr. Hamburg. I am.
    Mr. Kingston. Have you taken steps to rein that in? Because 
what the GAO said is that investigations really should come 
through you and be part of the FDA core mission and consistent 
with it and prioritize, rather than have an autonomous group 
over there doing it their own way.
    And the GAO report also pointed out that their budget had 
risen by 73 percent since 1999 and the number of employees has 
gone up 40 percent.
    So would you care to comment on that?
    Dr. Hamburg. Well, that component of FDA does serve a very 
important role, but----
    Mr. Kingston. Well, no, that is not my question. My 
question is, have you implemented the GAO recommendations? Or 
do you disagree with them?
    Dr. Hamburg. Well, we reviewed it very carefully, took it 
extremely seriously, and a group of individuals followed up in 
terms of developing a set of actions that should be taken based 
on that GAO report. We are moving forward with that. In 
addition, we have----
    Mr. Kingston. Well, where are you right now? I mean, can 
you give me a list of what they are investigating and why they 
are investigating it?
    Dr. Hamburg. You know, I am not sure that I would be 
allowed to give you a list of what they are investigating and 
why, since they are ongoing investigations. I would have to, 
you know--I would be happy to, if I could. But in terms of the 
kinds of work that they do, it relates to some of the important 
questions that Congresswoman Emerson was asking about, the 
control of counterfeit drugs----
    Mr. Kingston. So you feel like what they are doing is 
consistent with the core mission, even though FDA's senior 
management did not know what they were doing?
    Dr. Hamburg. You know, I think that the GAO raised a number 
of very important concerns that we are taking seriously. And, 
as I said, you know, we looked at it and have developed a set 
of action steps. We are also working closely with the 
department's IG because it is all part of a coordinated effort 
to address a set of enforcement and investigation activities.
    So we are currently in a period both of trying to examine 
systems and how it works; we have new leadership that is 
overseeing that component of FDA broadly. And we are recruiting 
for a new head of that office.
    Mr. Kingston. What is their budget?
    Dr. Hamburg. I don't know off the top of my head.
    Do you know?
    We would have to get that for you.
    [The information follows:]

                               OCI Budget

    For FY 2010, the Office of Criminal Investigation's budget was 
$47,095,762, which includes payroll and operating expenses. The Office 
of Criminal Investigations has 244 FTE.

    Mr. Kingston. Okay.
    Mr. McGarey, you are aware they have increased 73 percent? 
That was the GAO number.
    Mr. McGarey. Yes.

                   OFFICE OF CRIMINAL INVESTIGATIONS

    Mr. Kingston. All right. Here is one of my questions. And I 
am going to confess, it may be partly personal. There are two 
Members of Congress who ride bikes to work, and I am one of 
them. If I Google ``Novitzky''--do you know Jeff Novitzky? You 
do know him?
    Dr. Hamburg. I don't know him personally, but----
    Mr. Kingston. Does he answer to you? Who does he answer to?
    Dr. Hamburg. Well, he is an employee of that office.
    Mr. Kingston. And so, who would be his boss?
    Dr. Hamburg. Well, his boss would be the head of that 
office, reporting through our----
    Mr. Kingston. And that is the vacancy right now, the head 
of that?
    Dr. Hamburg. There is a vacancy, and we have an acting 
head, of course, in that office. And then----
    Mr. Kingston. So he would answer to the acting head?
    Dr. Hamburg. And to the ACRA, the Assistant Commissioner 
that oversees our inspectorate.
    Mr. Kingston. So he is four away from you, so to speak? Is 
that----
    Dr. Hamburg. I suppose that----
    Mr. Kingston. Here is my question. And, you know, all the 
very important issues in food safety and drug safety and 
everything. If I Google ``Novitzky''--and I invite you to do 
it, because I did it this morning; I just wanted to confirm. 
``Novitsky and Lance Armstrong,'' do you know how many hits 
come up?
    Dr. Hamburg. No, I don't.

                            LANCE ARMSTRONG

    Mr. Kingston. 116,000. And including going to France to 
investigate Lance Armstrong. Now, if he has broken the law, 
then that is a very serious matter. But it almost appears to me 
that there is a little adventurism going on here, that Mr. 
Novitzky is operating on his own.
    I would like to know how much has been spent on this 
investigation and why so much money has been spent. And is 
there anybody here who could give me the answers to that?
    Dr. Hamburg. I don't think we could give it to you now, but 
we would be happy to follow up with you. And this is also, you 
know, in conjunction with the Department of Justice.
    [The information follows:]

                   Lance Armstrong Investigation Cost

    The FDA Office of Criminal Investigations, known as OCI, estimates 
that it has expended $17,450 to cover investigative travel costs 
covering a timeframe from mid-2009 through February 2011. These are the 
only expenditures allocated to this case from OCI's operating budget 
thus far. This does not include estimates of agent salaries. OCI has 
one primary case agent assigned to this investigation.

    Mr. Kingston. But you are aware of this investigation?
    Dr. Hamburg. I am.
    Mr. Kingston. And you are aware that, I believe, millions 
have been spent, lots of time?
    Dr. Hamburg. I don't know----
    Mr. Kingston. And I would like to know what priority that 
is in the food chain, because what I am very concerned about--
and I hope that I am proven wrong--but that, because it is a 
celebrity, and one great way to make a name for yourself in 
this town and in politics is to bring down a celebrity--and, 
certainly, all people, whatever their status is, need to follow 
the law. But it appears that millions of dollars are being 
spent, lots of employees are involved in this. And I am not 
sure why so many resources would be put in front of the issues 
with Heparin that Ms. Kaptur raised or the issue with OxyContin 
that Mr. Rogers raised or the issues that Mrs. Emerson raised.
    So what I want to see from you on this priority list--and I 
understand you have to keep some of this quiet--but I would 
like to know where this is in the priority list and see how 
many dollars have been spent. Because I really believe this is 
one man's tear, maybe a personal issue, after somebody else. 
And I am not sure where the balance is.
    But, again, I want to know where it is on the priority 
list, why it is where it is on the priority list, how many 
people are in this investigation, and how much it has cost the 
taxpayers.
    Dr. Hamburg. Okay. I appreciate your concern and have 
raised some similar questions, myself, within the agency. And 
we will get back to you.
    [The information follows:]

                 Lance Armstrong Investigation Priority

    Under a long-standing policy established by the Department of 
Justice, FDA does not comment on open investigations.

    Mr. Kingston. And do you know the irony of it?
    And, Mr. Farr, I am going to shut up in a minute.
    But I just want say to you as a bike rider, it is one of 
the healthiest things Americans can do right now. And I know of 
your personal interest in health. But this is an icon who 
revolutionized bike riding and brought it home to so many 
Americans. And, again, if he is guilty, you know, that is a 
different matter. But I just sense that, you know, this is 
blown out of proportion, in terms of resources put into it. But 
in terms of public health, this is a huge icon that your agency 
is trying to take down. And maybe it should; I am not saying 
you are wrong on this. But what I am saying is you are really 
going after somebody whose name is synonymous with ``health.''
    Dr. Hamburg. I understand what you are saying. You know, it 
is an ongoing investigation in coordination with the Department 
of Justice. You know, I can't speak to the details, but we 
would be happy to provide you with some ofthe information that 
you asked for.
    I also hope you wear a helmet when you ride your bicycle.
    Mr. Kingston. I do. And I occasionally stop at red lights, 
as well.
    Mr. Farr.
    Mr. Farr. Well, Mr. Chairman, with this disclosure of how 
much you ride a bike, I want to invite to you the greatest 
bike-riding event in the entire world. It is called the Sea 
Otter Classic, out in Monterey. It features bike events of 
every single type, international. So I hope someday----
    Mr. Kingston. As long as they have a slow lane, I might be 
able to make it.
    Dr. Hamburg. Well, and I have to confess, I tried to do a 
bike ride of the 17 Mile Drive but turned around before we 
completed the whole circuit. I can sort of blame my kids for 
not wanting to go further, but----
    Mr. Farr. Well, we are a bike-friendly community. Thank 
you.
    A lot of this discussion has been around cuts and 
essentially new appropriations.

                             FSMA USER FEES

    Mr. Farr. I would like to focus for a minute on user fees. 
When we passed the Food Safety Act, we had some user fees in 
there in the House version. It got knocked out in the Senate 
version. There was a user fee and an annual registration fee, 
the Food Safety Enhancement Act annual registration fee of $500 
a year for food facilities. And I understand that the food 
facility or the industry supported it and consumer groups 
supported it and it was to provide FDA with needed additional 
funding. Where is that user fee proposal now?
    Dr. Hamburg. I think that at the present time, there is an 
interest in continuing discussions around fees that could help 
to support the Food Safety Modernization Act. As you know, 
industry had been supportive, or components of industry at 
least, of some kind of a registration fee. Clearly, when you 
think about food safety, it is an issue where both the public 
and industry have huge investments and concerns in terms of the 
outcomes, the benefits. So it makes sense for it to be a shared 
responsibility in terms of supporting the programs.
    We hope that there will be continuing discussions with 
industry and with Congress about user fees, and I think as the 
President indicated in his budget, we are hoping that in 2013 
there will be proposals that deal with that. But action before 
then would be most welcome as well.
    Mr. Farr. We need the authority to do that. Perhaps we 
ought to revisit that, Mr. Chairman. My district, when I was on 
the county board of supervisors--and I think in every county in 
California, the county environmental health offices have a 
restaurant inspection fee. Every kitchen is required to be 
inspected. Of course, nobody likes that. You know what? It has 
an incredible effect on making sure that the food preparation 
in all our restaurants and food for-profit institutions are 
done according to health standards, and I think there doesn't 
seem to be anybody wanting us to repeal that fee. I think you 
get--if people find a benefit for the fee, they will use.
    There is another fee that the President's budget 
anticipates is going to raise $61 million. It is a volunteer 
fee. It is called the Voluntary Qualified Importer Program. I 
wondered if you could just tell me how that is working. As we 
talked about earlier, I am very concerned about safe imports, 
because a lot of fresh product grown in Mexico comes into the 
United States and fresh product grown in the United States goes 
to Mexico and because Mexico is the number one trade partner 
with the State of California, and California is the largest ag 
State in the union, a lot of that trade with Mexico is 
agriculture.

                             IMPORTED FOODS

    If that agriculture trade is delayed because of inspection 
issues, either on the Mexican side or the U.S. side, it is just 
lost. Everyone is concerned about this. You want to do 
thorough--but quick--inspections. So you created this sort of 
fast-track program, to move food product expeditiously.
    I wondered if you think this qualified importer program is 
going to work and work so that those who are paying to be in 
the program will get fast tracked.
    Dr. Hamburg. I think as we have talked about already, the 
challenge of dealing with all of the imported foods is a huge 
one, and we need to find ways to extend our reach and we need 
to find ways to have a risk-based approach. And this is one way 
to help in that regard where we can reward people with good 
track records in terms of being able to recognize that they 
have demonstrated adherence to standards and quality. They 
don't need the level of inspection, et cetera that other 
purveyors may require. We need a risk-based strategy overall so 
that we can really target limitedresources. But we are 
developing a set of new tools and strategies, some that came with the 
Food Safety Modernization Act, in order to extend our reach 
internationally and to utilize third parties.
    Mr. Farr. Do you expect to meet that goal of $61 million in 
fee revenues this year?
    Dr. Hamburg. I think we don't yet have the foundation of a 
program in place and it will take a while to build up a 
program. But I think that we would anticipate that it will be a 
program that will be subscribed and successful. And I would 
hope we would be able to recover that amount of money. But 
again, this is a request for 2012. So we won't be seeing it 
immediately.

                              LEAFY GREENS

    Mr. Farr. Well, would you pass on my sincere thank you and 
appreciation for the work that Mike Taylor is doing in meeting 
with growers. I know. I know where you are. You are hiding back 
there; but, Mike, sincerely, the effort you have made to sit 
down and listen and show the concern and understanding for a 
very complex process of trying to ensure leafy green food 
safety. Mr. Chairman, almost everything we produce in the 
United States has some kind of process where you can sterilize 
it and sanitize it, except leafy greens like lettuce. You can't 
cook it. There is no heat process. So you really have to 
develop all of that food safety into the growing practices and 
to be able to have traceability in that.
    And the industry is--the California industry is way ahead 
of the world, and we are excited about it. And remember, they 
were the ones that came before this committee when Rosa was 
chair, and I think shocked us all by saying we need to be 
regulated. Well, they went out and set up a bunch of tough 
regulations and now they are asking the Nation to be regulated 
like they are. And I think it is a good program.
    Mr. Kingston. I agree with the gentleman, and I had an 
opportunity to be briefed on what the California program was, 
which is voluntary, and I thought it was a very positive step. 
Incidentally, for what it is worth, one of my first jobs was a 
cook, and the way we sanitized the lettuce was--I hate to say 
this in front of Dr. Hamburg--but we soaked it in salt in order 
to kill the bugs. And I am not sure if that would meet her 
standards or not. But it was so much better. Dr. Hamburg, I 
might have to give you some some time.
    Ms. DeLauro. Sounds good to me, Jack.
    Mr. Kingston. I knew I could count on you. The Italians 
would appreciate.
    Ms. DeLauro. Lots of salt, pepper, oil and garlic and 
parsley. That is all you need to make it happen. That is right.
    Mr. Kingston. The Southerners and the Italians merge on 
that.
    Ms. DeLauro. Thank you.

                          GENERIC DRUG FUNDING

    Commissioner, H.R. 1 dropped the language specifying the 
level of generic drug funding in the 2010 bill. There is no 
report accompanying that bill. So there is no idea of what 
level the bill would provide. Since H.R. 1 also cut funding for 
the drug-centered FDA by 10 percent below 2010, 14 percent 
below the 2011 request for the drug center, we can assume that 
a cut in generic drug would use at least these amounts and 
probably much more, given the lateness in the fiscal year.
    Let me ask you about your concern about the impact of the 
cuts to CDER on generic drug review work. And do you, of 
course, see a slowing of application reviews and a loss of 
savings to patients in the health care system as a result? And 
again, what I am trying to get some idea of so that we know 
what the consequences are, is a sense of how many fewer generic 
drugs would be approved under H.R. 1. What can you tell us?
    Dr. Hamburg. Well, we have been making progress in the 
generic drug area in terms of addressing the backlog and moving 
product review forward, and it is really quite impressive. We 
review about--we approve about two drugs per business day at 
the present time. And we know that generic drugs are making a 
huge difference in terms of access to critical medicines. And 
this cut would set us back. It would mean that our backlogs 
would increase, and we would have fewer drugs being reviewed 
and approved in a timely way.
    Ms. DeLauro. Do you have any idea how many?
    Dr. Hamburg. Again, I would prefer to get back to you with 
exact numbers. Again, it is one of those issues where we have 
to not be penny-wise and pound-foolish. A small cut to that 
program is going to have repercussions in terms of costs to the 
health care system. I think about 75 percent of prescriptions 
in this country today are generic drugs, and they are resulting 
in huge savings.
    Ms. DeLauro. Savings. That is the point I want to try to 
make, because we are taking a look at how we are trying to save 
money and cut back the cost in health care. Now, there is also 
something that--you don't have to comment on this--something 
that I wanted to go after, and that is this opportunity that 
the pharmaceutical companies have where they pay to delay, pay 
to delay a generic drug from coming to the market, so that they 
are in essence paying their competitors to do that. They have 
agreements in order to do it. If that were not allowed and if 
we could move generic drugs to the market sooner, on that one 
specific item I mentioned on the pay to delay, if the Federal 
Government is purchasing drugs for TriCare, for Medicare, for 
Medicaid, it is about a $3 billion savings. And when you think 
about the savings that can be made if we have generic drugs 
going to the market,that in fact we can begin to look at how 
health care costs get reduced, which is what we are trying to do.
    The other piece is what I mentioned in terms of the pay to 
delay, immediately--and that follows on the generic drug piece, 
because $3 billion we could apply to some other effort, 
including reducing the deficit rather than taking the money 
from food safety modernization or from inspectors or for 
dealing with some of the other areas that we do. And those are 
the places that we ought to start, rather than putting at risk 
the health and safety of people in this country.
    If I can quickly do a food modernization piece, because it 
is hard for me to stay away from this area, the legislation 
calls for the inspection of high-risk food facilities once 
every 5 years initially, and dropping to a frequency of once 
every 3 years. Low-risk plants would initially be inspected 
every 7 years and then dropped to one, once every 5 years.
    Based on the information you currently have, how many food 
facilities would fall into the high-risk category and how many 
would fall into the low-risk category? And in order to meet the 
mandate, how much more funding would FDA need to reach those 
inspection frequencies and how many more inspectors would you 
need to hire?
    Dr. Hamburg. Well, first I should have thanked you for your 
leadership on food safety over the years. It has been most 
appreciated. In terms of your question, let us see if Michael 
Taylor--he says 8,000 in the high-risk category in 2012.

                     HIGH- AND LOW-RISK ASSESSMENTS

    Mr. Taylor. Yes, the ongoing assessment of the bill. That 
is the current----
    Ms. DeLauro. Eight thousand in the high----
    Mr. Taylor. In 2012 we are shooting for about 8,800 high-
risk assessments. And that will play out as the bill is 
implemented.
    Ms. DeLauro. Low-risk category?
    Mr. Taylor. We do a total of 15,000 inspections, if you 
include the State inspections. And we mostly divide up--we do 
most of the high-risk, and States share in that, but also do 
some low-risk inspections.
    Ms. DeLauro. Which is why my prior comments about knowing 
what we are able to do or not able to do when you are looking 
at high risk, 8,000; not a small number for us to have--not the 
tools that you need in order to be able to get the job done.

                        STATE AND LOCAL PARTNERS

    Dr. Hamburg. And the mention of the inspections done by 
States gives me the chance to underscore a point that I did 
make earlier, but I think you were out of the room. But another 
casualty of cuts in H.R. 1 would potentially be our opportunity 
to help support the State and local partners and the ability to 
help strengthen those on-the-ground programs that are so 
important to an integrated food safety program.
    Ms. DeLauro. Thank you, Mr. Chairman.
    Mr. Kingston. Thank you, Ms. DeLauro.

                       FOOD MARKETED TO CHILDREN

    Dr. Hamburg, I wanted to talk to you about the Interagency 
Working Group on Food Marketed to Children, the tentative 
proposals that came out in December 2009; and we are having a 
comment period, and I know it is the Federal Trade Commission 
and the Center for Disease Control, USDA and you, and it really 
is something that concerns me, the potential overreach based on 
these guidelines that are sitting on the table right now, and I 
know we are having a comment period. But under these guidelines 
that are out there, the food that would not be allowed to be 
advertised on television shows in which 50 percent of the 
audience is children, could include peanut butter sandwiches, 
eggs, granola bars, noodles, chocolate milk, pretzels, 
Cheerios, bread, Graham crackers and cheese.
    Mr. Taylor, I can see you squirming. I will go on. Raisin 
bread, vegetable soup, yogurt, some salad dressing and, again, 
natural cheese. And what bothers me is that--oh, and the 
television shows that teenagers watch, basically college 
football, Fresh Prince of Bel-Air, Full House, Jane Goodall's 
Heroes, NASCAR--it is the only thing I can keep up with--Nick 
News, Comedy Central, Sports Center, USA soccer. So these items 
would not be allowed to advertise on there. Doesn't that strike 
you as an overreach, particularly since these items are allowed 
on WIC to be sold?
    Dr. Hamburg. I think that the effort is really geared at 
trying to make sure that there is an opportunity for 
information about health products to be as accurate and 
informative as possible, and that certain products that are 
targeted to youth audiences in particular often are targeted in 
ways that are misleading in terms of their nutritional value, 
and it is the appeal of the sugary--sweetened sugar, sugary 
cereal.
    Mr. Kingston. Let me ask you this. It seems the nanny state 
has a solution for everything. Good old Momma Government is 
here to tell you how to raise your kids. I might want to serve 
my kids baloney sandwiches. In fact, these peanuts, which this 
committee routinely enjoys eating, two packages would exceed 
your guidelines and they would not be allowed to advertise 
because of the salt.
    Mr. Taylor, I am going to invite you to come speak next 
time because--he is kind of like a referee in the background. 
You can't see him from here. But what does the nanny state 
want?

                              HEALTHY KIDS

    Mr. Farr. Healthy kids.
    Mr. Kingston. Let us talk about healthy kids. Are you 
familiar with the family-friendly MTV show called Skins?
    Dr. Hamburg. I am not.
    Mr. Kingston. Well, it is not exactly something you want 
your 14-year-old necessarily watching. And yet you could watch 
Skins, which is basically kind of a titillating-type show. I 
haven't watched it. I have channel-surfed through it. But you 
could watch that show, but you could not buy Cheerios--Cheerios 
would not be allowed to advertise on it. Doesn't that strike 
you as--even for momma government--a little bit inconsistent?
    Dr. Hamburg. Well, from the FDA perspective, our role is to 
try and provide accurate information to consumers so that they 
can make informed choices, hopefully informed choices that----
    Mr. Kingston. But isn't the labeling law going to do that?
    Dr. Hamburg. I think it is very, very important to provide 
that kind of information so that people can begin to see what 
is in their foods.
    Mr. Kingston. I know you want it so that when I take my 
wife out for a romantic Valentine's dinner, we have to read 
through the content of the food before we can order our fish 
and steak. And I am not going to let you steal my romantic 
evening from it, but I have got to say I don't know where the 
nanny state is planning to stop. It is just one thing after the 
other that you want to control.
    But think about it. I want to invite you to look at a 
review of the show Skins and think, We are saying, fine, you 
can watch it, freedom of speech, parental control, I am not 
here knocking Skins, but I am saying it is ironic that you can 
watch Skins but Cheerios can't be advertised on it because that 
might really hurt our teenagers, not the fact that they are all 
running around in skimpy little clothes.
    Ms. DeLauro. I have got to watch the show, Jack.
    Mr. Kingston. If I haven't drummed up a little advertising 
and interest in the show. Mr. Farr.
    Mr. Farr. Thank you, Mr. Chairman. I have to run because we 
got called for votes. But I think if we are going to go into 
what is advertised on television, let us go after all these 
prescription drugs that are just drowning the airwaves. By the 
time they give you the disclaimers, they tell you you are going 
to die. I don't know why anybody wants to buy it. But they seem 
to be very effective and I think it is abusive.

                            BORDER PRODUCTS

    Getting back to border issues, I wondered if you could get 
me some information to give to this committee on the number of 
tests conducted on microbials and pesticides for fresh produce 
at the border. You don't have to give me that right now, but if 
you could get it to the committee, and the time it has taken 
the agency to return the results of those tests. I am really 
looking for the number and the time.
    [The information follows:]

                Microbial and Pesticide Inspection Tests

    In FY 2010, ORA performed more than 2,200 microbiological analyses 
and more than 1,700 pesticide analyses on imported fresh produce 
samples. These numbers reflect multiple microbiological analyses 
performed on samples. For example, an imported produce commodity may be 
analyzed for the presence of Salmonella, E. Coli and Shigella. This 
would constitute a single product sample with three distinct analyses.

                  Microbial and Pesticide Test Results

    The time for reporting microbiological findings of products sampled 
during import exams will vary based on the product being analyzed, the 
type of analysis, such as foodborne pathogen, and the analytical 
finding. The minimum timeframe in which a negative analytical finding 
may be obtained from a rapid screening method for microbe testing 
typically ranges between three to five days. However, when analyzing 
more complex products and foodborne pathogens, this timeframe will 
range between 10 to14 days. In addition, when the initial screening 
results are not negative, an additional four to eight days is required 
to perform confirmatory testing. FDA continues to do research and 
collaborate with others to develop both more rapid and sensitive 
screening and confirmatory tests.

              Microbial and Pesticide Inspection Resources

    ORA continues to prioritize its available resources to maximize our 
public health protection impact. We continue to identify and implement 
new rapid screening methods in our field laboratories, providing FDA 
with the ability to rapidly screen imported commodities for the 
presence of microbiological contaminants. In addition, we continue to 
use our mobile laboratories at the borders to provide on-site 
microbiological screening of imported products. These laboratories 
allow ORA to screen a high volume of imported product in an expedited 
manner, providing FDA with greater assurance products do not contain 
microbiological contaminants.

    Mr. Farr. And then I want to know whether you have--and you 
can do that in writing to the committee--enough resources to 
carry out and analyze and quickly report the results for those 
tests. This is where speed is essential, and if there are any 
gaps in being able to provide that speed, I would like to know 
about it.

                              COCOA BEANS

    And lastly, I just want to read something and get that also 
on the record in writing, because I am not looking for the 
answer today. But I would like for you to be aware of an issue 
regarding import procedures for issuing release notices for 
cocoa beans. It has come to my attention that several of the 
cocoa processing industry are facing time delays and additional 
financial burden at U.S. ports because of the need to clean the 
product at the port, not at the processing facility. I don't 
even know all the facts, but I will submit it to you and you 
can get back to us.
    [The information follows:]

                           Cocoa Bean Imports

    Imported cocoa beans from Brazil, Indonesia, and Malaysia 
are subject to, detention without physical examination--or 
DWPE--due to a historical presence of live insect infestation. 
The product can be released into U.S. commerce if the importer 
shows the product complies with import standards or if the 
importer reconditions the product to successfully address the 
insect infestation problem. The surest way to accomplish the 
latter is to have the cocoa beans fumigated and then cleaned of 
any insect detritus.
    FDA does not require cocoa beans to be fumigated or cleaned 
at the Port of Entry. According to Chapter 9 of FDA's 
Regulatory Procedures Manual, the importer should provide to 
FDA details of the process the importer will follow for 
fumigating and cleaning the cocoa beans. Chapter 9 describes 
two acceptable methods of reconditioning shipments of cocoa 
beans. Either one of the options, if correctly implemented, 
will result in a release of the shipment into U.S. commerce. 
There is no requirement stating these activities be carried out 
in any particular location or at the Port of Entry, though 
certain activities should occur before the cocoa beans are 
delivered to the roasting plant.
    In 2010, FDA met with the National Confectioners 
Association--or NCA--regarding concerns over the fumigation and 
cleaning process. Some FDA Districts were requiring processors 
to hold `tailings', such as sticks, rocks, and dead insects, 
for FDA to examine after the fumigation and cleaning process. 
NCA explained it was not feasible for industry to comply with 
this requirement because of current industry practice. After 
reviewing the information provided, FDA determined that it 
generally would not need processors to hold tailings to obtain 
release. FDA provided this information to the affected District 
offices and is in the process of reviewing the entire guidance 
regarding reconditioning of imported cocoa beans subject to 
DWPE.

    Dr. Hamburg. Thank you. I have to confess I am not up to 
speed on cocoa bean imports, but we will get back to you with 
information on that. And on the other, it is very, very 
important.

                           ONSITE DIAGNOSTICS

    I would just add to what you said about time being 
essential with the testing of fresh produce coming into the 
country, it is an area where we have huge opportunities to 
apply better science so that we can have onsite diagnostics to 
give us answers quickly and to be able to move products more 
swiftly, which matters to companies, and it matters to the 
quality of the produce, and it matters to people who want those 
foods on their plates.
    Mr. Farr. When you think about it, as we move from a fast-
food society to this so-called slow food, fresh food, we are 
going to have to be extra fast at making sure the slow food is 
what we claim it to be. Thank you.
    Dr. Hamburg. Thank you.
    Mr. Kingston. Mr. Farr, I was just complaining to the very 
distinguished Democrat clerk that I think you guys took out our 
timekeeper back here on the television. So you might have 
another 2 minutes if you want.
    Mr. Farr. I am finished, Mr. Chairman. We have got to go.
    Mr. Kingston. Dr. Hamburg, we appreciate it. We are going 
to have to run on you. We will have a lot of questions for the 
record. But I do want to say you are an extremely important 
agency to every single household in America, And we all take a 
lot of pride in your work and we all have opinions of what you 
are doing right and what you are doing wrong. But we want to 
work through this process with you, and we appreciate what you 
are doing. And while the hearing is ending, our discussions 
won't.
    So thank you, and this committee stands adjourned.

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                                          Wednesday, March 2, 2011.

                       DEPARTMENT OF AGRICULTURE

                               WITNESSES

PHYLLIS K. FONG, INSPECTOR GENERAL, U.S. DEPARTMENT OF AGRICULTURE
ROBERT W. YOUNG, SPECIAL ASSISTANT TO THE INSPECTOR GENERAL ON RECOVERY 
    ACT
GIL H. HARDEN, ASSISTANT INSPECTOR GENERAL FOR AUDIT
KAREN L. ELLIS, ASSISTANT INSPECTOR GENERAL FOR INVESTIGATIONS
JOHN LEBO, DEPUTY ASSISTANT INSPECTOR GENERAL FOR MANAGEMENT
    Mr. Kingston. The committee will come to order. We 
certainly appreciate you being here, and wanted to welcome not 
just the inspector general, Phyllis Fong, but the deputy 
inspectors, Bob Young and Karen Ellis, and Suzanne Murinn.
    Okay. We appreciate your being here today and appreciate 
your testimony, because I think it is one of the most 
interesting hearings that we ever have on the hill, and 
particularly in this committee. It is always well received. We 
have found that the op tempo right now on Capitol Hill is 
pretty fast, and everybody has not just one hearing at a time, 
but often three.
    With that, let me yield to Mr. Farr, if you have any 
opening statement.
    Mr. Farr. I am interested in hearing the testimony, and 
then I have a couple questions. Thank you, Mr. Chairman.
    Mr. Kingston. So the floor is yours.
    Ms. Fong. Okay. Well, good morning, Mr. Chairman, and 
ranking member Farr. Thank you for the opportunity to come up 
today and talk about our work at USDA. And I want to start out 
by acknowledging the appreciation that we in the OIG have for 
your interest in our work and your longstanding support for us, 
and we want to congratulate you on your new role in the 
leadership of this committee, and we look forward to working 
with you as we move forward in the next few years. So let me go 
ahead and introduce some of my colleagues today.
    Mr. Kingston. I was hoping you would, because I sure 
dropped the ball on it.
    Ms. Fong. Yes. We had some last minute changes, so let me 
help.
    Sitting here at my far right is Jack Lebo, who is the 
Deputy Assistant IG for Management. Next to me is Karen Ellis, 
who is the Assistant IG for Investigations. On my left here is 
Gil Harden, who is the Assistant IG for Audit. And at the end 
of the table is Bob Young, who is the Special Assistant for 
Recovery Act, and the reason they're all here today is because 
they're going to answer all the tough questions. So just feel 
free to direct them to them.
    Well, you have my full written statement, so I just want to 
offer a few brief comments on three areas of Department 
activity where we have really been focusing our attention, and 
those three areas are, as you can imagine, oversight of the 
Recovery Act money; secondly, strengthening food safety; and, 
third, looking at improper payments within the Department, 
which is an issue of great interest to all of us. So let me 
start out with our work on the Recovery Act.
    As you know, the Department received $28 billion across a 
broad range of program areas, and with your support we received 
$22 million to provide oversight. So we are lookingat virtually 
every ``Recovery Act'' program to ascertain whether the recovery moneys 
have been spent efficiently and in accordance with the law. Currently, 
we are looking at program delivery. We are looking at whether the 
people who got the money should have gotten it, and we are looking at 
whether the funds went for the correct purpose.
    Next year we are going to be looking at performance results 
to see how the performance measures were met. So this year I 
just want to highlight a few audits that were significant. We 
issued an audit on single family housing guaranteed loans, 
where we found that 28 out of our sample of 100 loans were made 
to ineligible borrowers.
    We also issued a report on the single family housing direct 
loan program where we found that the agency did not ensure that 
calculations of borrower eligibility were current when they 
closed the loans. And then we did some work in the SNAP program 
where we found that the agency did not review state fraud 
detection units, which are a critical part of the management of 
that program.
    Let me just turn to food safety next, which remains a top 
priority for us. We focus in this area on making sure that USDA 
programs safeguard the food supply. We have issued two audits. 
Let me talk about two audits. We have issued one on beef trim 
and E. coli where we found that the agency could do a better 
job of taking samples of E. coli in ground beef to ensure that 
the product is free of contamination.
    We have also started work in the multi-state egg recall 
area. We are looking to see how effective USDA's system is for 
detecting salmonella; and, as you can imagine, this work is 
going to take us a little bit of time. We are in the middle of 
it, but we were very troubled to learn that of the 288,000 eggs 
that were recalled last fall, over 270,000 of them had the 
official USDA grade mark on them. And we are trying to 
understand how that could have happened and how the 
coordination between AMS, FDA, and others worked in that 
situation, so we are right in the middle of that work.
    In the area of improper payments we are spending a lot of 
time, because we believe it is important that USDA programs 
deliver the correct benefits in the right amounts to the right 
people; and so, we have done a number of audits in this area 
over the past year. We looked at USDA's suspension and 
debarment program, and we found that that program is not 
working as well as it should. The Department could better 
protect its programs by debarring individuals and entities that 
have been convicted of committing crimes against the 
government, and we found that the Department actually rarely 
suspends program violators in that sense.
    We also are in the middle of looking at the BCAP program, 
the Biomass Crop Assistance Program. Some of our initial 
assessments in this area are that the program suffered from 
hasty implementation, and so the management controls in that 
program are not as good as they should be; and, as a result, it 
appears that USDA may have inappropriately made matching 
payments to some landowners, so we are in the middle of looking 
at that as well.
    In the SNAP program, which is of course one of the 
Department's largest programs, we devote a lot of effort to 
looking at fraud committed by retailers. We have done a lot of 
investigations in the past year on benefits trafficking, which 
are situations where a recipient exchanges his or her SNAP 
benefits for less than face value with a retailer, and then the 
retailer redeems and claims full reimbursement from FNS. And we 
found that the amount of money involved in that kind of fraud 
can be very significant. It can be in the millions of dollars.
    For example, we had a case in Florida where two retailers 
were involved in about $6 Million in trafficking. They were 
successfully prosecuted as a result of our investigation. We 
are also doing audit work on improper payments in FNS. As you 
know, the SNAP and the school lunch programs are high risk 
programs, and so we are looking at how the Department is 
addressing, how it plans to address these rates of improper 
payments, how it plans to bring down those rates, and we 
anticipate issuing some audit reports this year with some 
recommendations on that.
    And so in conclusion, we look forward to answering your 
questions; but, before I end, I want to respectfully request 
your support for the President's request for us for Fiscal Year 
2012. I understand that we are in a very difficult budget 
situation, and I understand that government-wide, we are all 
trying to deal with this issue of the deficit.
    We do believe that our work provides value, and so we ask 
that you consider the request for our office as favorably as 
you can. So we look forward to answering your questions, and 
thank you.
    [The statement of Ms. Fong follows:]

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    Mr. Kingston. Well, thank you very much, and in response to 
your last request, often those numbers are actually set by 
another committee, and so we don't have as much control on it 
as we want to ourselves. But we certainly plan to work with 
you, and we do recognize the importance of your good work.
    One of the questions that I wanted to ask you about in 
terms of the error rate and improper payments, though, you have 
not mentioned farm payments, and I think that we should look 
very carefully at SNAP error rates and at farm payment error 
rates. And one of the reports that I have read, and it may have 
been last year's testimony, but it was one of your reports, it 
was just incredible to me the number of people who had broken 
the law fraudulently, and yet still were involved in the 
program.
    And your number of 3981 that says FNS did not debar 3,981 
SNAP retailers, I am just amazed. Why? Why is that so hard? Why 
is that even a thought process that if you break the law, you 
know, maybe we are not going to take you to jail? Maybe we are 
not the ones to prosecute you, but we are the ones who say you 
are not going to participate in the program anymore, and so 
that's it.

                        SUSPENSION AND DEBARMENT

    Ms. Fong. Well, I think we agree with you that the 
suspension and debarment process needs a lot of work within 
USDA, and we feel very strongly that if a person has been 
convicted of a crime, especially involving a federal program, 
it makes perfect sense to debar them from participating in USDA 
programs as well as all government programs, and we are working 
with the Department to implement that.
    I know that on our investigation side, whenever we have 
convictions and indictments, we provide a monthly report to the 
agencies within USDA and we make it known to them that here it 
is. Here is the list. Some agencies are more responsive than 
others; and, I think one of the issues that we are dealing with 
right now is working with the Department on its regulations, on 
suspension and debarment, to make sure that the exclusions that 
they have for certain program areas really make sense.
    We do not have a basis for evaluating whether their 
exclusions make sense, but we do question them. So we are 
working on that.
    Mr. Kingston. Who is responsive, and who is not?
    Ms. Fong. I believe RMA has been responsive.
    Mr. Harden. RMA is actually one of the agencies that is 
most responsive and uses suspension and debarment quite 
actively. FNS' explanation to us, which we are still working 
with them on, is that they put the retailers on it.
    Mr. Kingston. RMA is who?
    Mr. Harden. The Risk Management Agency.
    Mr. Kingston. Yeah. I was thinking Risk Management.
    Ms. Fong. Crop insurance?
    Mr. Kingston. No, Risk Management is involved in SNAP.
    Mr. Harden. No. You asked where in the department.
    Mr. Kingston. Oh, okay. All right. Yeah. Okay. So you are 
talking farm.
    Mr. Harden. It is outside of FNS.
    Mr. Kingston. Yeah. I got it. We were blending farm 
payments. Okay. Who is not responsive?
    Mr. Harden. One of the examples that you gave with FNS is 
they put their retailers on a list that takes them out of the 
program, but they don't share them with the actual list that 
debars them from all government programs. And that's where we 
are working at the department now on each one of the 
recommendations to work with the agencies as to their 
justification for excluding programs for suspension and 
debarment.
    Mr. Kingston. Why is that so hard, though? Because here we 
are working with it and I understand your role is working with 
them; but, it still seems to me that under the management of 
USDA it shouldn't be that much of a mystery. Either you are 
doing this or you are not doing it, so I am asking your opinion 
of it. I am not holding you responsible.
    Mr. Harden. I am kind of in the same boat you are. We don't 
understand why it is so hard. But when we start talking to the 
different agencies and counsel's office, and trying to see and 
provide us with evidence as to why something should be 
excluded, they have yet to provide that information, so we 
still have those recommendations open.
    Mr. Kingston. Well, you know, it is interesting. In this 
town, both parties always talk about waste, fraud and abuse as 
a way to cut spending, and we are all in agreement with that. 
You are the folks who always have these unbelievable stories of 
waste, fraud and abuse, and yet in my years on this committee 
in Democrat and Republican Administrations, it always seems to 
be that we are working to get this under control.
    I think right now we need to go ahead and get this under 
control, and any advice you can give us on, okay, here is how 
to do it, because these folks aren't going to do it on their 
own. You've got to go ahead and put a hammer on them and make 
sure it is done. So my time is up, but I want to continue that 
discussion.
    Mr. Farr.
    Mr. Farr. Well, thank you, Mr. Chairman. I will just follow 
up. I mean is the authority there for all the agencies to do 
it? Is the training, because it is sort of a legal role. You 
can appeal these, I imagine, so is it a lack of training among 
personnel? I mean what is it it takes to crack down? And it is 
universal in the department.
    I mean you didn't go into any of the farm paymentprograms, 
and you know, we just hear abuses of that all the time, usually, 
reading about it in the press; but, you audit those payments as well? 
And nothing in your report here about it.
    Ms. Fong. Let me address suspension-debarment at a more 
philosophical level.
    Mr. Farr. Okay. Yeah.
    Ms. Fong. This is an issue that it is very difficult, and 
we see it among many departments and agencies in the executive 
branch, because frequently IGs come in and say, ``you need to 
really pay attention to this, you need to act against the bad 
actors.'' What you will hear from the program side is ``Well, 
we understand that, we see where they made a mistake, but we 
depend on these entities to deliver the programs.'' And so if 
we were to debar them or suspend them, there would not be an 
adequate delivery.
    Mr. Farr. But a lot of those you are talking about programs 
that go to private sectaries, and aren't they bidding on those 
programs competitively? Isn't there some competition out there 
who could pick up that bid if they were disbarred? And aren't 
you in charge of the counsel of all the AGs to be looking at 
this?
    Ms. Fong. Exactly. Exactly. And the reason I am bringing 
this up is because a number of us as IGs have testified on this 
issue in the last year. There've been hearings in some of the 
other committees on the hill. We are all dealing with these 
issues. And so what we are trying to do as a group of IGs is to 
make sure that our internal processes work, that we are 
identifying parties that are appropriate for suspension or 
debarment, that we are providing notifications and lists of 
those parties to the departments, and that we are issuing 
reports that point out where the department really needs to do 
further work.
    Mr. Farr. Is the procedure for this different with each 
department?
    Ms. Fong. Well, each department has its own regulations.
    Mr. Farr. Okay.
    Ms. Fong. And I think USDA's are unusual.
    Mr. Farr. Do they have enough authority? I mean there is 
nothing missing in congressional enactment that you need. It is 
just trying to get a standardized process, somewhat 
standardized process here, if they each have their own 
regulations; but, it seems to me that this sort of--all the 
reporting of contract frauds I mean--you know. Bill Gates is 
next door and I will bet there is a lot of discussion going on 
right now about defense contractors.
    But, you know what? Your testimony is essentially the same 
as the testimony was made 20 years ago to this committee, and 
what is changing in this field? And I think the chairman is 
right about suspension and debarring of people.
    Mr. Kingston. Will the gentleman yield?
    Mr. Farr. Sure.
    Mr. Kingston. And I am going to emphasize that there is a 
high degree of frustration here, because I think Mr. Farr is 
absolutely right. Ten years ago, different administration, 
different people at the table, different people on this panel 
but same testimony, and I think we really would love to see, 
you know, the end of all this, whatever.
    Our constituents are crying for it, and I feel very 
strongly that whether it's ``Red'' state or ``Blue'' state 
politics, it should still be the same measurement. We have got 
to crack down on this. So we have a lot of unanimity, I guess, 
on that.
    Mr. Farr. Do you need more authority?
    Ms. Fong. I don't believe it is an issue of authority. And 
to add a little more nuance to this, we are engaged with the 
Department, the CFO's office, the chief financial officer's 
office is engaged with all of the agencies to move them forward 
on this and we are in consultation with them on their 
regulations.
    We believe that progress is being made, although it is 
slow, and so we are continuing to engage with them. We are not 
going to let this issue drop, because it's a government-wide 
issue and we need to prioritize.
    Mr. Farr. Do you prioritize? I mean there are some issues 
here about SNAP, and I am glad you are going after, sort of, 
the vendors, rather than just the individual, who may be poor 
and illiterate and may be misqualified; or, essentially, 
children who are in the wrong line in school, I mean, you are 
looking at the bigger cost issues.
    I have some follow-up questions, but my time is running 
out. But I really get a sense of, I mean, what I think is what 
we are surprised to see; that there is nothing in here about 
the farm payments that are being made, and that whole list of 
categories that I think we yesterday pointed out that there 
were--what--32 different programs of dealing with where 
individuals could qualify for federal assistance.
    Ms. Fong. Well, our testimony was developed, focused on 
sort of the highlights of what we have done in the last year. 
That's not to say that we are not looking at the farm programs. 
We have a lot of ongoing work in that area; and, in terms of 
improper payments, we have, as you know, responsibilities under 
the new improper payments law in the executive order to look at 
the Department's efforts across the board to make sure that 
each agency is identifying in where their improper payments lie 
and that they have good plans to remediate their improper 
payments. And so we are in the middle of doing all of that, and 
FSA, you know, is amongour list of entities to look at.
    We also have work going on in BCAP, which I think you might 
have noticed we highlighted in our testimony. We are very 
concerned about how that's all developing.
    Gil, would you like to add?
    Mr. Harden. Another area that we will be looking at 
improper payments for farm programs is the SURE program, which 
is a new program.
    Mr. Kingston. Did you say SURE or sugar?
    Mr. Harden. SURE, supplemental revenue. I am trying to 
remember what the acronym stands for.
    Mr. Kingston. Well, is it a disaster program?
    Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman.
    I guess somewhat to follow up on the topic here in your 
semi-annual report, the second half of 2010, your investigation 
disclosed two brothers who were able to defraud SNAP of about 
$800,000 over three years by exchanging SNAP benefits for cash. 
And a similar problem was found in the WIC program. What we 
have been told for years, that this wasn't going to be 
happening, to the extent that apparently it is, what is 
happening? Is there something new going on, or what?
    Ms. Ellis. Is this on?
    Mr. Latham. There is no button there or switch.
    Ms. Ellis. Okay. Good. It makes it easy for me. What we 
have found, I mean I think the idea being that going to the 
electronic benefit transfer would eliminate or reduce fraud. I 
think what we have found out in our work is that it has made it 
easier for us to build our investigations, because everything 
is done electronically, and there is a record now.
    We get to a point now when we do our investigations where 
we can literally sit in our office, and on a computer watch 
transactions occurring. So it may have had a deterrent effect, 
maybe, at first. But what we have found is that for us the 
crime has just become more sophisticated, more technologically 
advanced, making it much easier for us to build our cases more 
so on paper; whereas, before, our EBT cases, or at the time our 
food stamp cases, were more field work intensive. So it has 
just raised the level of technology.
    Mr. Latham. So it is easier for you to track, but we still 
have very innovative people out there trying to do.
    Ms. Ellis. Yes, and they do try to find different ways to 
circumvent the system.
    Mr. Latham. In your opinion, are there things that we could 
do legislatively or whatever to help you or to really crack 
down further?
    Ms. Ellis. I think for our purposes the tools are there for 
us with regard to legislation and laws. I think it is a matter 
of working closely with the agency and the agency working with 
the states, and where my audit counterpart can help out with 
finding where there are weaknesses or loopholes and make 
suggestions to the agency.
    I do have to say though that in my years of working at USDA 
and working with FNS, they are always very open to our side of 
the house to investigations. When we find problems, they will 
work with us to try to remedy them.

                     FRAUD IN RECOVERY ACT PROGRAMS

    Mr. Latham. In the same report, rural development and the 
``Recovery Act'' had $1.56 billion in loans that were meant for 
buyers of very low incomes for the single family housing direct 
loan program, if you look over here, where the answer is over 
here. Okay. And, apparently, there were some people getting 
loans that their incomes were not being verified or too high to 
qualify, or something, what is the reason for that or what 
needs to be done?
    Mr. Young. Well, in that particular case, the rural 
development or rural housing service wasn't getting the 
documentation they needed to review. They hadn't set up a 
second party review, so loans were being approved, but they 
didn't have that second party review to ensure that they had 
all the information ensuring that the people getting those 
loans were eligible for the loans. Their control process broke 
down and allowed some ineligible loans to be made.
    Mr. Latham. Were there guidelines in place to verify?
    Mr. Young. Yes. There were guidelines. I think the reason 
some of this happened, you had a lot of money that needed to 
get out very quickly. And some of the people were somewhat 
overwhelmed because of the number of loans they were making. 
And, as a result, some of the controls fell by the wayside, 
such as second party review.
    Mr. Latham. Who was rushing?
    Mr. Young. There seemed to be within the agency staff, a 
feeling that since this money was made available, they wanted 
to get that funding out or those loans out as quickly as 
possible to address the recession, to address the farmers that 
needed help in the housing area.
    Mr. Latham. Okay. So I mean was there a dictate from above, 
or something, that said no matter what, don't follow the rules. 
Get the money on a shovel and move it out the door?
    Mr. Young. No. I am fairly sure there was no one saying 
don't follow the rules. But I think just the sheer volume of 
the work they had to do, when you have so many people and so 
much work to do, sometimes some of those controls fall by the 
wayside because of the sheer volume of program participants.
    Mr. Latham. Okay. My time is expired. Thank you.
    Mr. Kingston. Ms. DeLauro.
    Ms. DeLauro. There are a couple on your side over here 
before I was, so let them.
    Mr. Kingston. Mr. Nunnelee.
    Mr. Nunnelee. No questions.
    Mr. Kingston. Mr. Grace.
    Mr. Grace. I am listening in awe.
    Mr. Kingston. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman. Just a couple of 
random observations.

                        SNAP PROGRAM ERROR RATE

    First of all, I don't know, and if we could get this 
information, how the SNAP error rate of approximately 4.4 ranks 
in comparison to other government programs, and that is such as 
direct payment to farmers, oil subsidies, or mineral subsidies. 
I also understand there were serious mistakes that were greater 
than anything that we are talking about here, and the 
guaranteed housing program, that in fact were the errors. And 
the people who were responsible were bankers, and that is in 
your testimony.
    So it would be interesting to note that 27,000 loans were 
ineligible for the program--33 percent of the portfolio with a 
projected total value of about $4 billion. So I think it would 
be useful to lay out, because there is always an abiding 
interest in what happens in the SNAP program. It is always 
interesting to me that that is the place where we direct our 
attention. But we have got some other serious offenders here, 
and quite frankly the error rate, I believe, since 2004 has 
gone from around 10 percent down to about now 4 percent.
    We have had a tremendous rise in the number of people 
participating in SNAP, and as I congratulated Secretary 
Vilsack, yesterday, I think that managing that increase with an 
error rate that is a low one by some standards, but I think for 
the benefit of the committee, it might be useful to look at 
this information so that we can have an accurate picture and 
not just kind of cherry pick, either from the side of a farm 
payment issue, or from the side of the SNAP issue. So let me 
ask you to provide me with that information, if you can.
    Ms. Fong. Okay.
    Ms. DeLauro. And SNAP is USDA's largest program in dollars 
spent, number of participants, so we are looking at what is 
ostensibly a low error rate. That doesn't say we shouldn't 
correct what we need to, but we ought to be equitable in our 
correcting and emphasize where the most egregious offenders 
might be.
    And I don't know if you know something about what the 
percentage of error rate with regard to the guaranteed loan 
program, with the mineral subsidies. I don't know if you have 
that off the top of your head, now.
    Ms. Fong. We can provide a chart, too, that the Department 
compiled in its Fiscal Year 2010 PAR----
    Ms. DeLauro. That would be great.
    Ms. Fong [continuing]. Which lists the improper payment 
rates for all of the agencies within USDA.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6581A.295
    
    [GRAPHIC] [TIFF OMITTED] T6581A.296
    
    [GRAPHIC] [TIFF OMITTED] T6581A.297
    
    Ms. DeLauro. One of the things I wanted to follow-up, 
something that Mr. Farr said. Well, we are going to get another 
round, I am sure. What would you need? In other words, you make 
recommendations to the agencies, and this is every inspector 
general. And it is nice to see you all again, anyway. Thank you 
very much for being here.
    You make the recommendations and then you rely on the 
agencies to carry out the recommendations. Correct?
    Ms. Fong. Correct.
    Ms. DeLauro. Is that right? Now I am also taken with, so 
then with your portfolio of the various audits, investigations, 
and what you have to do, and agency recommendations, and 
following up year in and year out, you need to have staff that 
deals with all of that for you to have accurate information and 
data to know what they have done and what they haven't done. 
Correct?
    So I have got a two-part piece here. One is what else could 
we do for you that would allow you to have a greater 
opportunity for follow-up with the agencies to see where they 
are going and to be able to monitor that more closely. And then 
I would like to ask you is given that the OIG's office is cut 
by $8.7 million under the budget that was passed last week, it 
is a reduction of about 10 percent.
    The USDA OIG's budget was cut more than any other IG office 
in other departments again, as I understand it. Treasury, 
Interior, a cut of one percent. The less, Defense IG, received 
an increase of 17 percent, because ACR would be enacted. So 
late in the fiscal year what would be the impact of the cut to 
your office? Would you have to furlough employees? If so, how 
many?
    How would this impact the work of the OIG? Would audits, 
investigations have to be delayed or suspended? Would the 
office miss statutory deadlines for audits? How would your 
office have to reassess its priorities? Would your office have 
to shift away from investigating improper payments in order to 
focus on public health and safety priorities?
    My time is up. I'll repeat them in a second go-round so 
that you can answer this for us, both from the point of view of 
what you need to continue to follow-up on these investigations 
and audits, and what would the majority's cuts to the OIG 
budget at USDA mean in terms of your workload and your 
personnel?
    You can answer it in the next round. Mr. Chairman. Thank 
you. Thank you for your indulgence.

                       FRAUD IN FEDERAL PROGRAMS

    Mr. Kingston. Thank you.
    Ms. Fong, what I don't understand is it appears that the 
fraud is common. Would you say that that's true or false?
    Ms. Fong. Fraud is common in any particular program?
    Mr. Kingston. In all of them. I mean from the housing to 
farm programs to SNAP. Those are the three we have talked 
about. It seems to be common.
    Ms. Fong. I think what I would say is that in general, if 
you have a federal program that has a lot of dollars and, in 
particular, in situations where dollars are going out quickly 
and people see an opportunity, it is human nature that there 
will be some element of the population who will look for a way 
to take advantage of a federal program. And so, I think, if you 
look government-wide, virtually every program will have some 
level of fraud. Now, that's not to say that while that's not 
surprising, that's why we are here.
    Mr. Kingston. But would you say the government is easier to 
steal from than other places?
    Ms. Fong. Well, I don't know if it is easier to steal from 
the government or other places.
    Mr. Kingston. That is why I voted against a bailout. 
[Laughter.]
    Ms. Fong. But I will say that I think the government has in 
place a structure to try and deal with those situations, and 
that structure is comprised of program managers on the very 
first level of defense who need to pay attention to make sure 
that their programs are run effectively and have the minimum 
potential for fraud. And then the next level of defense is the 
IG system, which, you know, is here to help the program 
managers get a third party objective look and advise on how 
they can tighten up. And, if in fact people get through and 
commit fraud, we are here to go after them so that there is a 
deterrent effect against future fraud.

                        LOAN GUARANTEE PROGRAMS

    Mr. Kingston. Well, let's talk about the $4 billion in the 
loan programs, the loan guarantee programs. It said that a lot 
of people got loans that weren't eligible. Did any employees of 
the USDA lose their job because of that incompetency? Ms. Fong.
    Ms. Fong. I would suggest--my sense is that the answer is 
no, but you might want to ask the undersecretary for RD that 
question.
    Mr. Kingston. Okay. You know that is an interesting 
response, because last year I had a similar question to you, 
and you had said, ``No. You need to ask them, because we only 
make the recommendations.'' Maybe there needs to be something 
that bridges your action with their action a little bit 
stronger, because it appears that if your recommendations are 
merely academic, and then from then on out somebody is not 
going to do anything about it, then we are going to continue to 
have these repetitive hearings.
    I had a friend of mine, many, many years ago, right out of 
college, real smart guy, was the treasurer of his church. I 
mean he was like 23 years old, just out of college, a really 
bright kid, and figured it out that the preacher was stealing 
money out of the collection plate. And he went to the adults on 
the vestry and he told them. This was a preacher. Everybody 
loved the guy. He was great. How could he be stealing? It can't 
be possible.
    So what they ended up doing is they planted $20 bills in 
the congregation and wrote down the serial numbers, and they 
did this several times. And the last person to get the 
collection plate was the preacher and those $20 were gone. So 
they went to the church, and the church said--their reaction, 
and this is my 23-year-old, idealistic friend who believes in 
everything good and great and the church says to him--the upper 
church says, ``Well, don't do anything rash. You have to be 
careful about these things.'' This is a preacher stealing! And 
the message to the 23-year-old was, you know, you don't always 
have to play by the rules. They're optional.
    And I wonder if we haven't sent that signal in the USDA 
that, you know, some fraud is going to happen, and maybe we are 
not going to be that tough about it. I mean $4 billion in the 
loan guarantees and nobody gets----
    Ms. Fong. Let me just clarify, a little bit. In that audit 
we found that it appeared that a number of borrowers who should 
not have gotten housing loans got them. Now, as it was pointed 
out, it was a guaranteed program, so the banks are the ones who 
bear the brunt of it.
    Mr. Kingston. Did they get eliminated from the program, 
from eligibility?
    Ms. Fong. I don't believe RD has taken action on that, and 
here we get into the whole issue of how the program agencies 
want to deliver their programs.
    Mr. Kingston. But, the banks, just like the grocery stores, 
should be responsible for their own employees and they should 
not be eligible anymore. And if we are sending a signal, that 
is the option.
    Ms. Fong. Well, I do not believe our office is sending that 
signal. We have gone up against the program.
    Mr. Kingston. Does it drive you crazy?
    Ms. Fong. Yes. We have continuing debates about this audit. 
We have briefed the Secretary and the Deputy Secretary, and 
they are committed to taking action.
    Mr. Kingston. Well, my time has expired, but I think what 
would be really good is you guys turning up the volume to us 
and saying, ``Okay, you people in Congress need to know we are 
giving the same testimony over and over again. And you are the 
bridge, and it is not getting through to the peoplewho should 
be taking role and kicking tail. And it's not happening. We can't do 
it, but you all can.'' And I don't think we are hearing that from you, 
because what I'd like to get, we will have another round, is some 
recommendations where do we go from here.
    [The information follows:]

    (Recommendations for what needs to be done to strengthen ``the 
bridge'' between OIG recommendations and implementation.)
    Agency leadership and staff have been very positive in responding 
to OIG's recommendations. OIG works closely with agency officials and 
staff to timely reach agreement (i.e., achieve management decision) 
and, in coordination with the Office of the Chief Financial Officer 
(OCFO), implement agreed to actions. However, issues do arise in 
reaching agreement and final action on some recommendations. When that 
happens, we follow established procedures to elevate our concerns.
    In USDA's Departmental Regulation on Audit Followup and Management 
Decision, DR 1720-1, Appendix A (which is currently being updated), 
there are specific steps in place that agencies are to follow in 
reaching agreement on OIG recommendations. Included are elevation 
milestones if agreement is not reached within a 6-month timeframe. The 
timetable and actions described below do not preclude elevation to the 
next level at any time. The timeline follows.
     Within 60 days of the audit release date, the agency must 
propose a preliminary management decision to OIG for each 
recommendation in the audit report for which there was no management 
decision made at the time of report issuance.
     If an agreement with the preliminary management decision 
has not been reached within 90 days, both OIG and the agency will alert 
their respective senior officials of the differences and potential 
problems in reaching agreement.
     If agreement has not been reached within 120 days, OIG 
will prepare an Audit Decision Paper summarizing disagreement with the 
preliminary management decision, and will discuss the Audit Decision 
Paper with the management officials.
     If agreement with the agency head has not been reached 
within 135 days, the Audit Decision Paper will be elevated by OIG to 
the applicable Under or Assistant Secretary.
     If, after 150 days, an agreement has not been reached, the 
Audit Decision Paper will be elevated by OIG to the Department's Audit 
Follow-up Official, the Deputy Secretary, who will render a management 
decision.
    If an agreement still has not been reached within 6 months (180 
days) after issuance of the final report, the audit is reported in 
OIG's Semiannual Report to Congress.
    In April 2010, the Secretary established an initiative to close out 
late OIG recommendations. The agencies have taken the Secretary's 
initiative very seriously. All agencies are working diligently with the 
Office of the Chief Financial Officer, who has been instrumental in 
this initiative, to reach final action in order to get old 
recommendations off the books. Agency staff have also been responding 
more timely to new recommendations reported by OIG.

    Mr. Farr.

                             IG AUTHORITIES

    Mr. Farr. To follow up on that, you don't take the legal 
action, you just point out the error or the misconduct, and 
then it's up to the agency's lawyer to prosecute? Or what is 
it, AG?
    Ms. Fong. Or take whatever action. In this case, I don't 
believe we found fraud in any of those situations. It was not 
fraud. It was more oversight or not following the regulations, 
so it's not criminally prosecutable. And so, then the question 
is what is the agency going to do about it. Is it going to 
comply with its regulations or is it going to change its 
regulations?
    I think that is a policy issue that they are struggling 
with right now. Let me just address, philosophically, the whole 
structure of what IGs do, and I think all of you are bringing 
this issue on the table out of a sense of frustration; and, 
certainly, we have that sense as well. As IGs under the law we 
report to you and we report to the Secretary, and we issue our 
reports directly to you and we testify before you.
    We bring to you issues that we think are significant, and I 
am very pleased that at these hearings you are so interested in 
what we are hearing and you want to see further action--I think 
you are going about it the exact right way--that you are having 
these oversight hearings, that you are talking to the 
Department officials, the policymakers, and you are putting it 
on the table with them: What are you all going to do about 
this; because that is exactly the right role for you and for 
us.
    Mr. Farr. But that goes to my question of the authorities. 
I mean you have authority to blow the whistle, but you don't 
have the authority to stop the game.
    Ms. Fong. Precisely. The Inspector General Act very clearly 
says we cannot run a program. We do not make decisions on 
funding. We cannot fire employees unless they are within our 
own office. And it's there for a reason.
    Mr. Farr. But you pointed out in your testimony what you 
are going to do with your additional money is you are going to 
increase the instruction on suspension and debarring. Is that 
the right word? To give the agency staffs the knowing how to do 
that properly, right, is that what it takes?
    Ms. Fong. We can. Part of our role is to inform, to 
educate, to persuade, and convince. A part of our role is to 
provide information so that the agencies can act on that 
information.
    Mr. Farr. But your responsibility then is to train people 
on how to use the authorities they have to take some legal 
action to stop the game, so to speak.
    Ms. Fong. I would hesitate to use the word 
``responsibility,'' but I will say a role that we can play is 
to educate and train.
    Mr. Farr. Well, I mean I think everybody on this committee 
is frustrated. And I am sure every committee and subcommittee 
of appropriations is frustrated in hearing this testimony, 
because yeah, we do like to hear the whistleblowers, but we are 
frustrated that once you hear it that the agencies aren't 
playing the role they're supposed to play to effectively remedy 
the situation.

                       STATE ENFORCEMENT OF SNAP

    I mean throughout your testimony, that's what I kept 
understanding, and some of your audit responsibilities are, 
because some of the cops in this are not federal cops. We deal 
with states. What are the states that have the worst reputation 
of not being able to do enforcement?
    Ms. Fong. You are talking about the nutrition programs?
    Mr. Farr. SNAP is the biggest program in the whole USDA.
    Ms. Fong. We may have to provide that information to you, 
because we don't know that.
    Mr. Farr. I think you said you had that.
    Ms. Fong. Well, we have the improper payment rates. We can 
provide you a chart on improper payment rates within programs.
    Mr. Harden. That's not the state.
    Ms. Fong. Right. Right.
    Mr. Farr. Pardon me?
    Mr. Harden. The listing of programs that have improper 
payment rates is not the same as the states that are the bad 
actors. That would be two different lists.
    Mr. Farr. What is the one--we have some information about 
Texas and Indiana.
    Ms. DeLauro. That is erroneous. The highest error rates, as 
I understand it, is Texas and Indiana.
    Ms. Fong. That may be. They are on the watch list, yes.
    Mr. Farr. So that is for error rates, but what we are 
talking about is weak enforcement. Right?
    Ms. Fong. Well, they may be related. The fact that there 
are high error rates may, if a state has a very high error 
rate, then the agency needs to be focused on that and to employ 
whatever tools they have to penalize, as it may.
    Mr. Farr. So walk us through the process. You have a SNAP 
program. It is the biggest program USDA has, the most money 
going out. You work for the states, because we don't administer 
it. It is state administered.
    Mr. Harden. Right.
    Mr. Farr. So what we do is monitor. So if you find an error 
rate, then what? Who slaps the hands of the state and how do 
you do it?
    Mr. Harden. Well, where it starts, initially, is the Food 
Nutrition Service provides the oversight through their regional 
offices to the states, and states have high error rates. They 
have ways, for like the SNAP program, of administering 
sanctions to the different states to encourage them to lower 
their error rates. And then they also have----
    Mr. Farr. Encourage them to lower their error rate.
    Mr. Harden [continuing]. Bonuses.
    Mr. Farr. They just defrauded the Federal Government a lot 
of money and you are going to get encouraged. ``Don't do this 
anymore.'' Is that all that happens?
    Mr. Harden. I am not going to be able to speak all of FNS's 
process, but they are the first line of oversight in terms of--
--
    Mr. Farr. But you are overseeing them.
    Mr. Harden. And we would go in and look at how they are 
running the program and are they following up and carrying out 
the roles and responsibilities that they have. And if we find 
that they aren't, then we would be making recommendations as to 
how to strengthen those weaknesses.
    Mr. Farr. My time has expired. Thank you.
    Mr. Kingston. I think we're seeing a theme here.
    Mr. Latham.
    Mr. Latham. Thank you, Mr. Chairman.
    In your testimony, there was a case in Massachusetts, a 
corporation that collected millions of dollars in government 
money for services they never provided. Apparently it was an IT 
training, or something like that. And it's just amazing to me 
that this is a prepaid voucher system, where they got the money 
ahead of time but never provided the service.
    How widespread is this system? Is there no control over 
this? Or how did this happen?
    Ms. Ellis. This is to kind of explain, when you buy a 
computer, sometimes you prepay on your personal computer 
training. And sometimes we take advantage of it, and we 
actually go to the store where you bought the computer, and we 
get that training, and sometimes we don't.
    And in this case, it was very similar. It was a large 
company that gave IT-type training, that the government had 
contracts with. And certain training aspects were not followed 
through.
    The people did not go to the training. But still the 
company charged.
    In answer to your question, we did work this case jointly 
with several other federal agencies. And within USDA, there 
were a number--I'm looking at my list, I'm going to say maybe 
about ten different USDA agencies, that also had contracts with 
this company.
    So it was pretty widespread.
    Mr. Latham. Ten different USDA?
    Ms. Ellis. USDA agencies that had contracts with this 
company for this training purpose. In addition to other federal 
agencies.
    Mr. Latham. With similar results with all of them?
    Ms. Ellis. Yes. What had happened was our agency worked 
with other federal law enforcement agencies as a team, and we 
investigated this company and the various contracts.
    So we were able to pull all of our information together.
    GSA was one of them, Department of Commerce, and DOJ worked 
jointly with us.
    Mr. Latham. Can you give me a list of the other agencies 
that were involved with this also?
    Ms. Ellis. Yes.
    Mr. Latham. Please, if you would.
    Ms. Ellis. I'll supply that for the record.
    [The information follows:]

    (Listing of other agencies involved in investigation of the 
contractors and the pre-paid voucher false billings.)
    Working with other Federal investigators, OIG determined that a 
corporation doing business in Massachusetts collected millions of 
dollars from the Government for services it never provided. The 
corporation offered training on computer software and other information 
technology. Using a pre-paid voucher system, agencies paid up front for 
training that the company never delivered. We found that several USDA 
agencies were victimized by this scheme. In April 2010, the corporation 
agreed in a civil settlement to return a total of $4.5 million to the 
Government.
    This was a joint investigation by USDA-OIG, General Services 
Administration (GSA)-OIG, the Department of Commerce-OIG, and the 
Department of Justice. The investigation involved USDA agencies 
affected by the corporation's scheme, including: Agricultural Marketing 
Service, Natural Resources Conservation Service, Animal and Plant 
Health Inspection Service, Food and Nutrition Service, and Economic 
Research Service.
    OIG was recently notified that GSA's Office of Acquisition Policy, 
Washington, D.C., determined it was not necessary to exclude the 
corporation or the president of the corporation from Federal 
contracting. The corporation is still providing services to GSA.

    Mr. Latham. And you've made recommendations, I assume, to 
the Department as far as how to correct or keep the integrity 
of this--I have real concerns about a voucher program where, 
it's after the fact, the money's out the door.
    Ms. Ellis. Yeah. We work closely with the Department. What 
we did is we issued our reportive investigation, which then 
showed the results through DOJ of the sanctions that were taken 
in the sentencing.
    We then send it to the Department, to ask them to take some 
sort of admin action. This one that I am not sure that they're 
in the process of debarring; because there are so many other 
agencies involved, especially GSA, who probably has the main 
contract.
    My guess is----
    Mr. Latham. Why would they have to wait for other agencies, 
other departments?
    Ms. Ellis. Well, we would work with them to make sure they 
are debarred. There is like a list that this company would go 
onto.
    And that's why--I personally don't know right now who is 
actually taking the action, whether it's us or----
    Mr. Latham. No. But I mean, you said that you were waiting 
for other agencies to act. If you knew the facts in this, why 
wouldn't you go ahead and respond?
    Ms. Ellis. Oh, because we can't enforce the actual 
suspension and debarment. We would have to wait for the USDA to 
take that action. And we would follow up with them. And my 
assumption is that they----
    Mr. Latham. Are they acting?
    Ms. Ellis. I don't know the answer to that, offhand.
    Mr. Latham. Okay.
    In Puerto Rico in the Nutrition Assistance Program, 
apparently they're allowed to cash in 25 percent. And this is 
U.S. taxpayer dollars going down to support the program.
    But you are able with your nutrition program to get 25 
percent of your benefit in cash. So potentially there's about 
250-some million dollars that could be used for other purposes, 
rather than nutrition.
    Is there any way of knowing where the money's going? And 
now they're talking about being able to use it in restaurants 
and fast food places, and--anybody?
    Ms. Fong. We did some work on that, the Puerto Rico 
program, a number of years ago. But I don't recall the results. 
And I hesitate to speculate.
    But my guess is that Puerto Rico's delivery system is 
unique. I think it's the only jurisdiction that allows a cash 
takeout.
    Mr. Latham. Right.
    Ms. Fong. And I'm not sure if that's a federal----
    Mr. Latham. I just hope this isn't a pilot program for the 
rest of the system. I mean.
    Ms. Fong. It doesn't appear to be.
    Mr. Latham. Okay.
    Ms. Fong. I don't know if that's because of local law or a 
federal law. I just don't know that.
    Mr. Latham. I think they have their own program that we pay 
for, yeah.
    Ms. Fong. Yes.
    Mr. Latham. Right. Thank you.
    Mr. Kingston. Ms. DeLauro.
    Ms. DeLauro. If I can, because I want to get in a question 
eventually about N60 testing, that you were engaged in. But let 
me just go back quickly to what I was asking about and 
answering the questions that I laid out.

                              BUDGET CUTS

    I think it's clear that everyone wants to provide you with 
what you need in order to deal in terms of the followup. And it 
would be useful if we can have conversations about that, that 
would allow you to do your job better, given the nature of the 
law with regard to IGs.
    But given the nature of the cut that is intended, 
particular to the OIG at USDA--and which is not the case for 
other IGs, the impact on your office.
    And as I said, if you could tell me now. If you can't, I 
would like to know this. But I want an answer to this. Would 
you have to furlough people?
    Ms. Fong. Okay.
    Ms. DeLauro. Yes? Or----
    Ms. Fong. Short answer, yes.
    Ms. DeLauro. Okay. How many? Do you know that now?
    Ms. Fong. We would be looking at our whole staff.
    Ms. DeLauro. Whole staff?
    Ms. Fong. Our whole staff for a period of time.
    Ms. DeLauro. Your entire staff for a period of time, given 
the cut that was passed last week in the House of 
Representatives. How long would you have to furlough for?
    Ms. Fong. Our preliminary numbers would show, I think we're 
looking at about six weeks.
    Ms. DeLauro. Okay.
    Ms. Fong. And I should say that, you know, we would do it 
on a rolling basis.
    Ms. DeLauro. Fine. I understand. I'm just trying to get a 
sense of what we're dealing with here.
    Obviously now maybe the next two questions are moot. How 
would it impact your work? Every audit, every investigation 
would, even if you rotated, it would have to scale back?
    Ms. Fong. Yes. There would be a tremendous impact. As you 
know, because of the nature of our work, we don't have a lot of 
money in our budget. It's all pretty much tied up in staff 
salary and benefits.
    Ms. DeLauro. Mm-hmm.
    Ms. Fong. And so any significant reduction would impact our 
staffing levels, which means that our priorities would have to 
greatly change. We would only be able to address the very 
highest priority work.
    Ms. DeLauro. Okay. And I really want this in writing. I 
want to hear from you about what this means. If we can't 
quantify this, then we're just dealing in speculation as to 
what this means.
    And I think it's important for the members of this 
committee, and I think it's important for the rest of the 
members of the House to understand what the nature of this cut, 
as a ten percent cut to the OIG, and particularly in your case 
what that means.
    And all of our discussion about improper payments, all the 
authorities, all that we would care about is really, it's gone. 
It's gone. We would not be able to follow up on any improper 
payment.
    Thank you. Let me move to N60 testing.
    Ms. Fong. I'll provide that, for the record.
    Ms. DeLauro. Please, I would like that, for the record.

                          N60 TESTING PROTOCOL

    I want to say a ``Thank you'' to you for completing that 
audit on the N60 testing protocol. Which is, for my colleagues, 
FSIS' samples beef trim for E. coli, taking 60 samples from 
large lots of beef trim to test.
    This was an audit that I requested in November. The OIG 
finding that this procedure does ``not yield a statistical 
precision that is reasonable for food safety'' is astounding to 
me.
    It confirms the concerns that have been expressed in that 
the sampling system is flawed. By recommending that FSIS 
redesign its sampling methodology to account for varying levels 
of contamination, it makes you wonder if it undercuts 
everything that they are working on now, since it seems like 
they have to start over.
    Questions: Is there an estimate of how much the E. coli 
0157 H7 levels in the FSIS regulatory sampling program have 
been understated by using the N60 sampling technique?
    What would be a better sample to capture a more accurate 
picture of the levels of E. coli, 0157 H7, in a bin of trim?
    FSIS adopted an industry-sampling technique, when it 
started to use N60. Industry has made claims that the levels of 
E. coli have been declining in beef. What would you advise the 
industry, based on your audit findings, for the FSIS sampling 
program?
    Was OIG able to provide more specific recommendations to 
FSIS, beyond placing its testing process on sounder statistical 
ground, by redesigning its sampling technology?
    Given that FSIS generally agreed with the recommendation, 
do you have a sense of how much time this process would take?
    Mr. Harden. In response to the first questions, in terms of 
the prevalence rate?
    Ms. DeLauro. Yes.
    Mr. Harden. I mean, that's part of the whole problem. They 
do not know what the prevalence rate is, and they had not 
completed the underlying study to know how prevalent E. coli is 
in beef. So that's where they have to go back and really finish 
that study that was started, or start over with that.
    And then they would have to decide for themselves what type 
of confidence level they would be willing to take, so that that 
would then drive the types of samples or the size of the 
samples they would need to take.
    We did talk to them about that; it would be very resource-
intensive, and we offered some alternatives that they could 
consider as they're going forward, such as maybe dedicating a 
specialized team to go in to do the sampling that is needed; 
and also to make themselves aware of what the industry is doing 
in terms of testing; because a lot of big beef plants and 
companies do their own testing.
    Ms. DeLauro. Mm-hmm.
    Mr. Harden. And we've encouraged FSIS through several----
    Ms. DeLauro. My time has expired.
    Mr. Kingston. Thank you.
    Ms. DeLauro. And the Chairman has been generous. So we'll 
come back on it, so I can get the answers to the other 
questions.
    Mr. Kingston. We will.
    Ms. Lummis.
    Ms. Lummis. Mr. Chairman, the committee can enjoy a rare 
reprieve from the sound of my voice today. Thank you. 
[Laughter.]
    Mr. Kingston. You can always submit questions for the 
record.
    Mr. Bishop.
    Mr. Bishop. Thank you very much.
    I was just looking at an analysis of the effects of the CR 
that was passed last week on your office, the potential 
effects. And I heard the discussion with Ms. DeLauro just now.

                           CIVIL RIGHTS CASES

    But last year, we also added some additional requirements 
for the Inspector General in connection with the Pigford case. 
And of course, there were several provisions that were put in 
there: Approval of neutrals, additional documentation, attorney 
certification, transparency of claims determinations, and 
distribution of funds and reports.
    And I don't think there is a member of this subcommittee, 
or even in the Congress, who has any interest in seeing the 
Federal Government make one single payment to anybody who 
doesn't have a legitimate and proven claim under the 
settlement.
    But I do have a couple of questions for you:
    There has been a significant amount of attention to the 
fraud issue. And I'd like for you, if you could, to briefly 
share with the subcommittee your office's experiences or your 
activities with respect to any fraud that was associated with 
the Pigford I claims.
    Then I'd like to know whether or not your office hasbeen a 
part of any ongoing discussions with the USDA or the Department of 
Justice with respect to executing the legislation, particularly the 
fraud provisions, and what were those discussions;
    Whether or not it's your office's intention to focus 
potentially on Pigford, or we focus on fraud in the other 
classes of cases that were included in that legislation, and 
the bill requires that your office conduct a performance report 
audit of the claims processing. And I'd like for you to tell me 
how that is going to be accomplished.
    And what methodology you're going to use in determining the 
processing in evaluating the validity of the allegations of 
fraud or fraudulent claims. How do you anticipate getting at 
that information?
    And overall, if you developed a plan of action to pursue 
examining fraud?
    And the final question: Do you have adequate staff and 
resources to carry out the responsibilities that were put on 
you by that legislation?
    Ms. Fong. Okay. Let me offer a few comments about how we're 
going to approach the Pigford situation, and I'll invite Gil 
and Karen to chime in.
    With respect to Pigford I claims and fraud, I believe our 
policy on that was to refer all potential fraud claims to the 
Department of Justice. And that mechanism has worked well. So 
we have not been involved in that.
    Now with respect----
    Mr. Bishop. Did you make any referrals?
    Ms. Fong. Yes, we did.
    Ms. Ellis. Yes, we received a number of hotline referrals 
throughout the years. And we just packaged them up and sent 
them over to the FBI.
    Mr. Bishop. Do you know how many of those were found to be 
meritorious, or valid?
    Ms. Ellis. We have that information, but I don't have that 
offhand. I could provide that for the record.
    Mr. Bishop. Thank you. Would you?
    Ms. Ellis. Yes.
    [The information follows:]

    (Provide information on the investigative results of the referrals 
you made to the FBI in Pigford I.)
    Since January 2000, OIG has referred a total of 2,083 complaints to 
the Federal Bureau of Investigation (FBI) involving allegations of 
fraud related to the class action suit filed against USDA known as 
Pigford I. The complaints were received via telephone, mail, fax, and 
e-mail. While we do not generally receive updates from the FBI, we have 
learned that of the 2,083 complaints referred, 3 individuals have been 
convicted and sentenced to date.

    Mr. Bishop. Thank you.
    Ms. Fong. With respect to Pigford II, as you point out, the 
claims Resolution Act of 2010 included a requirement that our 
office do a performance audit of all claims before the claims 
are paid out, in an effort to prevent improper payments.
    And we have been working very closely with the Department 
and with Justice to get the timing on all of that correct, 
because we can't actually start auditing until the settlement 
agreement has been approved by the judge. And I think that's 
still pending.
    But assuming that all happens at some point, and we get the 
access to information issues all ironed out, we will be keeping 
a close eye on how those claims are processed.
    And we are developing our audit plan to do a statistical 
and performance audit, which will be quite resource-intensive. 
And we believe this will hit our office some time by the end of 
this fiscal year into next fiscal year. So we will be quite 
busy in Fiscal Year 2012 doing this work.
    In terms of the other classes who have claims against the 
Department----
    Mr. Bishop. That was the Native Americans and----
    Ms. Fong. And the women?
    Mr. Bishop. The women.
    Ms. Fong. Exactly.
    Ms. Ellis. The Hispanic farmers.
    Ms. Fong. And the Hispanic farmers, yes. I think Secretary 
Vilsack announced recently that the Department has entered into 
an agreement with those classes. As part of that agreement, 
there is a provision, I believe, that says that the Secretary 
can make a request to our office to do a similar kind of audit, 
similar to the one that we are going to do for Pigford II, 
involving performance auditing, statistical sampling, to ensure 
that claims that are paid out are appropriate.
    And we anticipate that we could very well get that request. 
And if so, we would give that request very serious 
consideration. And that would involve quite a bit of our audit 
resources as well.
    Mr. Bishop. Do you have the resources?
    Ms. Fong. Well, you know, we haven't really answered that 
question for ourselves. We are committed to carrying out the 
requirements of the law. And we will do the audit. And what 
that will mean is that we will have to prioritize everything 
else.
    Mr. Kingston. The gentleman's time has expired.

                            SNAP ERROR RATES

    Ms. Fong, I want to make sure the committee has this for 
the record, in terms of error rates on the SNAP program, Texas 
and Indiana are high. Maryland is actually in the second slot. 
That would be for 2009. We don't know what it is for 2010.
    Now 2008 you had up there Connecticut had a very high rate.
    Ms. Fong. Five percent.
    Mr. Kingston. 8.16 for 2008. However, it improved 
remarkably. And also I want to say there were all kinds of 
other ones. I see a lot of fluctuation in these.
    Yeah, Iowa had a high one. Georgia's okay, though. I'm 
proud to say.
    But the one I was real interested about, though, was 
Delaware had a very high rate in '07 of nine percent, and now 
it's 0.7.
    Do you have any idea how they improved that much? I'll 
share this with--did you get involved in that?
    Ms. Fong. We have not done any audit work in Delaware on 
their improper payment rates. But----
    Mr. Kingston. Well, they certainly would win the most 
improved.
    Ms. Fong. You know, I think you have a good point there. 
Maybe----
    Mr. Kingston. And maybe we should get some Delaware folks 
to Texas. I don't know----
    [Laughter.]
    Mr. Kingston. We might put them on the road.

                 IMPLEMENTATION OF OIG RECOMMENDATIONS

    Mr. Young, I want to ask you some questions, because I'm 
just picking on you. You're a reemployed annuitant? Right?
    Mr. Young. That's correct.
    Mr. Kingston. And so you're probably the freest person in 
this room. You can say whatever you want to say. And you've 
seen a lot of things.
    So whether it is guaranteed loans, whether it is fee cap, 
whether it's foreign payments, whether it's in SNAP, you've got 
to have thoughts on what needs to be done, from a 
recommendation standpoint. And they might be different in each 
program, we understand that.
    Mr. Young. As far as--I guess it's sort of a mixed bag 
amongst the agencies.
    We make a lot of recommendations in the audits we do. I 
think some agencies are very receptive and move forth to try to 
address what we've asked them to do, and do a pretty good job.
    I think there are others--and there's a whole variety of 
reasons--it could be anything from staffing to they don't 
necessarily, they've said they agree, but they don't truly 
agree--in other words, ``I'm going to tell the IG that yes, 
we'll go forth and do it,'' but they're not really committed to 
doing that, for a variety of reasons.
    It could be staffing, it could be they simply don't agree 
with the concepts that we've come up with.
    But it's a very difficult thing, as far as getting action 
completed and getting it completed timely.
    As I said, some agencies are great, they move very quickly. 
Others drag there feet. And then that's where we work with the 
Department and try to push them, work with the Secretary, work 
the office of the chief financial officer, in trying to push 
those agencies to implement what we've recommended and to do it 
within a timely fashion.
    Mr. Kingston. Well, now Mr. Farr brought up, in terms of 
these programs, it's more the institution that is at fault. And 
it might just be incompetency. Maybe it's laziness. Maybe 
they're not doing their due diligence on applications.
    But that's where we're concerned, because I'm assuming 
that's where the big money is.
    You know, if a farmer participates, who isn't ineligible, 
shame on him. And he should be penalized for it. But there's 
also the other, you know, if there's a government employee who 
wasn't doing the paperwork right, and they're repeat offenders, 
we would be concerned about that.
    If there's a grocery store chain, who has the employees, 
who are bilking the SNAP system, then it should be the chain 
that's out of it.
    There should be a very high standard for that.
    And what I would like--as my time is almost over--is if you 
could submit to us, for the record, what would be your 
recommendations? Not broad at recommendations, but very 
specific recommendations, perhaps per agency, or whatever.
    Because we really, I think the tolerance level is very low 
at the moment. And there's a great opportunity for all of us to 
do something for the American taxpayers, and say, ``Look, we 
just are not going to put up with this anymore.''
    Year in, year out, it's either fraud, or it's incompetence. 
But money's going out the door that should not be going out the 
door. And that money could be spent elsewhere.
    And my time is up. And Mr. Farr?
    Mr. Farr. Thank you, Mr. Chairman.

                                 APHIS

    Let's go to one of the agencies.
    First of all, I want to thank you very much for doing the 
audit on APHIS, on the dog dealers. I've been interested in 
trying to eliminate these puppy mills, and I'm interested in 
APHIS doing a much better job.
    And you pointed out that the APHIS had major deficiency in 
their enforcement of the Animal Welfare Act. Why is that?
    Mr. Harden. It was basically the agency's approach or a 
lack of an effective approach for the inspectors' carrying out 
the program. They tended to want to try and educate the problem 
dealers into getting better, as opposed to issuing fines and 
penalties.
    Mr. Farr. Well, that's laudable. But I mean, we all try to 
do that.
    But that's not the way other agencies work. I mean, there's 
always some education in there. But some of these breeders are 
just awful. I mean, if they're going to try to make awful 
people get better, it's still awful.
    Mr. Harden. Which is the point that we were trying to make 
with the audit report. And you know, in response to the 
recommendation, they agreed to take stronger enforcement 
actions. It will take us going back to see how well they do it, 
to know if they really changed how----
    Mr. Farr. Well, you pointed out they didn't even accept all 
of your recommendations.
    Mr. Harden. They have, at this point.
    Mr. Farr. They have?
    Mr. Harden. They have.
    Mr. Farr. Including the ones that would confiscate animals 
that are dying, or seriously suffering?
    Mr. Harden. We have gotten agreement on those 
recommendations. I can't tell you exactly what they've done.
    Mr. Farr. And to count each animal as a separate violation 
in a case involving animal deaths and unlicensed wholesalers? 
Those were two that in the report that I got that they hadn't 
reached agreement on.
    Mr. Harden. We didn't reach them at the time of report 
issuance. But we continued to work with the agencies after we 
issue it, if there is not agreement, to get that agreement. And 
I know that we have reached that agreement now.
    Where they are in terms of implementing the corrective 
action, is what I don't have in front of me.
    Mr. Farr. I'm curious. When you go out and do these audits, 
do you actually visit sites? Or do you just look over their 
paperwork?
    Mr. Harden. No, we actually visited a number of sites, 
which is the pictures that were in that report, which were 
quite difficult, were from our people going on site, and what 
they saw.
    Mr. Farr. This is something that I think goes to the 
Chair's question also, about implement. You do your work and 
you make these recommendations. And then some of them take them 
seriously, and others don't.
    You know, an animal welfare committee I think is pretty 
interested in making sure that the laws that we've enacted get 
enforced.
    How can we make it better? Is it to take an audit? Does it 
take Congress asking to do an audit to get people's attention?
    I mean, we can't do that with everything----
    Ms. Fong. I understand.
    Mr. Farr. Where's your oversight rule?
    Ms. Fong. You know, I will say that in the enforcement in 
the Animal Welfare arena, we have done a number of audits over 
a number of years. And we've found major problems three or four 
years ago, which is why we went back in and did this audit.
    We wanted to make sure that APHIS actually corrected the 
problems we saw the last time, with respect to enforcing 
penalties and other issues.
    And you know, the sad story is that with this audit, it's 
clear that there were still problems. They have said that they 
are going to take very specific actions in terms of developing 
training and hiring specialists, and developing new information 
systems.
    We will probably need to go and look at this again. Maybe 
in a year or two, once we give APHIS a chance to actually take 
a look at this.
    And I will remark that we understand that you have 
introduced legislation to address some of the loopholes that 
exist in the current AWA that deal with internet dealers. And 
we think that that's actually a very useful piece of 
legislation to address an issue that we did find.
    Mr. Farr. Could I get a letter of endorsement from you? 
That would be terrific.
    Ms. Fong. You have my public statement. [Laughter.]
    Mr. Farr. Well, I appreciate that.
    I mean, I think it would help this committee a lot if we 
would know, you know. Also I think what you've also, Mr. 
Chairman, raises, there is some as we go through the rest of 
the agency and through their departments, some questions that 
we ought to be drilling down on in the subsequent hearings.
    Ms. Fong. Okay.
    Mr. Farr. The last one--oh, I'm running out of time. I 
wanted to go the California Organic investigation----
    Mr. Kingston. Can I ask unanimous consent that--go ahead.
    Mr. Farr. It will be my last question, Mr. Chairman.

                                ORGANICS

    If you could respond to the California Organic 
investigation of----
    Ms. Fong. The fertilizer?
    Mr. Farr. It was to deal with fertilizer dealer that was 
certified as organic, and then switched ingredients and didn't 
tell anybody. And so you ended up using improper protocols.
    Or I mean, they did.
    And you cracked down on the California--I mean, what 
happens is these people get certified by independent 
certifiers. And has this gotten cleaned up? Is it California's, 
CDF--what is it, Department of Food and? And Agriculture.
    Ms. Ellis. Yeah.
    I could tell you, that was our first investigation. We do 
have a few more involving that. But in working with California, 
they are very proactive in getting out front on top of this 
issue.
    And so I can't speak so much for state level as to what 
they are doing there with regard to legislation. But I do know 
that they are trying to make sure that they keep this from 
happening in the future.
    Mr. Farr. And your role was what?
    Ms. Ellis. We conducted the criminal investigation into 
this matter, and ended up getting an indictment of the 
individual, which I believe was sealed up until very recently, 
because he had left the country, and several months ago 
actually came back into the country. And we were able to catch 
him and serve him with the indictment.
    So it's still in the judicial process. We have not finished 
the investigation.
    Mr. Farr. Thank you.
    Ms. Fong. I would just like to mention that we do have a 
number of other audits planned in the organic program. We've 
got a couple ongoing, involving the dairy industry, and the 
list, the process for making the list----
    Mr. Harden. The substances that go on and off the National 
List of Prohibited Substances, we'll be looking at that later 
this year.
    And we also have work in the crop insurance area, because 
they have a pilot program, or a new program, for organic 
operators in insurance.
    Mr. Farr. I appreciate those audits. And it's a program 
where they're labeled as very highly respected in the 
community, in the consumer community. And I think that we have 
to make sure that--there's a lot of people trying to take 
advantage of it, because they get a better price. And so 
they'll try to sneak stuff in and label it organic. And it does 
injustice to every legitimate grower out there, who's 
struggling to make sure that they can get their product to 
market and be legitimate.
    So do those audits. Thank you.
    Ms. Fong. Okay.
    Mr. Kingston. Ms. DeLauro.
    Ms. DeLauro. Thank you, Mr. Chairman.

                              FOOD SAFETY

    Mr. Harden, let me come back to you.
    I think we were talking about what would be a better 
sample, for a more accurate picture on this. What would you 
advise industry on the audit findings here, because industry 
has made claims that where E. coli 0157 H7 is declining?
    And the specific recommendations to FSIS beyond, if you've 
made any beyond putting this on a sounder technical ground? And 
have they agreed? And if they have agreed, what's the timing 
this process is going to take, given that do not know what the 
level of contamination might be?
    Mr. Harden. I'd have to get back to you on the specific 
time frame.
    Ms. DeLauro. Okay.
    Mr. Harden. But in terms of FSIS working with the industry 
and a better way to know the number, we've recommended to them 
to have the inspectors that are in the plant to look at the 
results and know how well a plant is checking for itself;
    And if the test the plants are running to test for E. coli 
meet FSIS' standards, to maybe use those results as well in 
building how they know how prevalent E. coli is.
    Also, we've talked to them about, and recommended, that 
they look in evaluating their plants and knowing which ones are 
at greater risk for having E. coli contamination, so they know 
that they're putting their resources at testing those plants 
may be more frequently than the ones that have a better system.
    Ms. DeLauro. Mm-hmm. I just would make a quick comment on 
that. I think once again, we may be relying on an industry to 
share their data with inspectors, who are also talking about 
the potential for furloughing inspectors. That was done last 
week, as well, in the budget resolution.
    And your last point was? I'm sorry, because I had--the 
industry?
    Mr. Harden. Oh, having FSIS evaluate the----
    Ms. DeLauro. Risk-based----
    Mr. Harden. Risk-based----
    Ms. DeLauro. Risk-based. I must tell you, if they don't 
know what the level is on terms of estimates, it makes it very, 
very difficult. Except if you have repeat offenders.
    But it makes it very difficult if you don't have a way in 
which you're determining what the level of contamination is. 
Then it's to base your inspection on risk, because you don't 
know what the risk is.
    So we've got more to talk about in this area, and how we do 
get to safe and uncontaminated beef.
    Ms. Fong. I believe we have an audit going on, a second-
phase to the FSIS audit of the N60 testing.
    Ms. DeLauro. Okay.
    Ms. Fong. And we're going to be going out into the field 
this spring to look at plants and how they actually do the 
testing.
    And I think we'll have some more specific----
    Ms. DeLauro. Beautiful----
    Ms. Fong. Observations----
    Ms. DeLauro. Thank you----
    Ms. Fong. And we'll be happy to work with you.
    Ms. DeLauro. Yes, this is an area of very high interest to 
me, as you know. And I thank you for the study. I really 
appreciate it.
    Ms. Fong. Right.
    Ms. DeLauro. Let me ask again--I know you addressed 
Salmonella in eggs, and that you're auditing AMS in terms of 
what happened with the Wright County egg outbreak? Is that 
right? You're auditing AMS?
    Mr. Harden. Actually, we're looking at multiple agencies in 
the Department, AMS being one of them.
    Ms. DeLauro. Okay.
    Mr. Harden. The audit of eggs was generated out of one of 
the recalls, one of the big recalls. But we're looking at 
APHIS' role, FSIS' role, and AMS' role.
    Ms. DeLauro. Okay.
    Mr. Harden. The issue that we've recently brought to the 
table, that we talked about in the testimony, is one where AMS 
needed better coordination with other agencies. But we're 
working on that particular issue right now, but it will be 
broader----
    Ms. DeLauro. Mm-hmm. Well, but as you know, inspection of 
in-shell eggs is the responsibility of FDA. This is why we need 
a single food safety agency, in order to be able to deal with 
it. Otherwise, we've got varying people looking at what is 
involved in food safety.
    Just a word about the audit, how extensive is it? What are 
you doing?
    And then my final question would be: Are you going to 
examine the memorandum of understanding between FDA and AMS 
that sets out each agency's responsibility, that make the 
recommendations for improving the coordination between the two 
agencies on in-shell egg safety?
    Tell me about the scope of the----
    Mr. Harden. The answer to that is yes. The basic objective 
of this particular audit is to look at USDA's control over 
shell eggs, to detect and report the presence of Salmonella and 
other contaminants, and also to look at how they coordinate 
with FDA on this.
    Ms. DeLauro. Mm-hmm. And in each instance--in other words, 
we are going to get some idea of the level of overlap, or 
duplication, or lack of either, given that we have multiple 
agencies that are trying to deal with one function here, and 
what falls between the cracks?
    Quite frankly, what falls between the cracks is the public 
health of the people of this country.
    So thank you very much. Thank you, Mr. Chairman.
    Mr. Kingston. Thank you.
    Mr. Bishop.
    Mr. Bishop. Thank you very much, Mr. Chairman.

                         PEANUT PRICE REPORTING

    Madame IG, in March of 2009, I think you completed an audit 
of in-shell peanut prices that are paid to farmers and reported 
to the National Agricultural Statistics Service, which data the 
FSA uses to calculate program payments.
    Your office indicated that you believe that the price data 
supplied by the peanut buyers is unreliable, and that FSA 
should seek authority for mandatory price reporting for all in-
shell peanuts.
    And I look forward to the Department resolving this issue; 
but it would seem that any proposal to provide new FSA 
statutory authority on price reporting should be done in the 
context of the 2012 Farm Bill, as opposed to a stand-alone 
issue.
    And of course, we expect that there will be substantial 
changes and modifications in the programs, which should really 
be a part of that discussion, whenever it happens.
    But I did have some other questions I wanted to ask you: Is 
there any further activity on the part of the OIG's office on 
mandatory peanut pricing reporting? Or is it now just in the 
hands of the Secretary and FSA?
    And well, the '02 Farm Bill and the '08 Farm Bill both 
encouraged USDA to use the world market price in determining 
peanut prices.
    And I find it curious--and I don't know whether it came to 
your attention or you found it curious also--that the 
Department never followed through in exploring a world price 
option.
    Many people in the industry, both producers and sellers, 
believe that a mandatory pricing requirement is really just an 
effort on the Department's part to lower the price of peanuts.
    Last year, I asked you if you had any evidence that 
indicated that the information that the peanut shellers and 
others were providing to NESS was fraudulent. And you indicated 
that no, you answered no to that, that there wasn't any 
evidence of fraud.
    Is the Department, from your determination and your audit, 
really certain that a mandatory pricing reporting requirement 
would elicit factual information, as opposed to just creating 
the possibility of options payments to largefarmers, which are 
not included in the data? And do you think that the mandatory price 
reporting would ultimately result in the creation of a real futures 
market for peanuts, which would have the potential of destabilizing the 
prices for peanuts?
    And the final part of that is whether or not you have 
information of any other industries or any other commodities, 
where that reporting is required?
    Ms. Fong. That's a long question (laughing).
    Let me just offer a few comments. You're right, we did do 
that audit a few years ago on the pricing for shelled peanuts.
    And at that time, we felt very strongly--and we still do 
feel very strongly--that because of the way that reporting is 
structured, it's voluntary, there's no way to really verify 
that the prices that are reported are accurate; that it's not a 
good basis for the Department to set its prices.
    And so we made our recommendation.
    I think you're right that the Farm Bill is the right 
vehicle in which to address that issue from a policy basis. I 
don't believe that we have done any follow-up work since our 
audit was issued.
    And I think you also indicated that there may be an issue 
with respect to other commodities, whether other commodities 
have a mandatory requirement for reporting. And as far as I 
know, others do not.
    This is an issue actually that we took on for the first 
time with peanuts. And we understand that there may be 
implications for other commodities.
    And my sense is that if we were to look at it, that we 
would, in the interest of having hard, good, verifiable data, 
upon which to make a decision, that our philosophy would be 
``Why wouldn't the Department want good, certifiable data?'' 
from a philosophical standpoint.
    Now I understand there may be some economic issues and some 
other policy issues that we have not addressed.
    Mr. Bishop. So you basically have not gone any further than 
the report that was issued in 2009? And I guess you're waiting 
for us to deal with it, for Congress to deal with in the Farm 
Bill.
    Ms. Fong. That's correct. We believe it's basically a 
policy issue at this point.
    Mr. Bishop. Okay. Thank you very much.
    Mr. Kingston. Thank you, Mr. Bishop. And if there aren't 
any other questions, then I'm going to move to adjournment.
    And let me just say this, Ms. Fong. You have a lot of 
interests on this committee. We've always been very 
appreciative of your work. And I think we would like to get 
these follow-up questions answered. And there might be a few 
more that are submitted to you.
    But we truly appreciate everything that you do. And with 
that, the committee stands adjourned.

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                           W I T N E S S E S

                              ----------                              
                                                                   Page
Ellis, K. L......................................................   325
Fong, P. K.......................................................   325
Hamburg, Margaret................................................     1
Harden, G. H.....................................................   325
Lebo, John.......................................................   325
McGarey, Patrick.................................................     1
Young, R. W......................................................   325
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