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

                    EXAMINING THE INCREASE IN DRUG SHORTAGES

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

                                    HEARING

                                   BEFORE THE

                             SUBCOMMITTEE ON HEALTH

                                     OF THE

                        COMMITTEE ON ENERGY AND COMMERCE

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                               SEPTEMBER 23, 2011

                                   __________

                               Serial No. 112-88

          Printed for the use of the Committee on Energy and Commerce

                            energycommerce.house.gov

                      U.S. GOVERNMENT PRINTING OFFICE
    77-032                    WASHINGTON : 2013
    -----------------------------------------------------------------------
    For sale by the Superintendent of Documents, U.S. Government Printing
    Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
    area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
    20402-0001

                        COMMITTEE ON ENERGY AND COMMERCE

                              FRED UPTON, Michigan
                                     Chairman

    JOE BARTON, Texas                    HENRY A. WAXMAN, California
      Chairman Emeritus                    Ranking Member
    CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
    ED WHITFIELD, Kentucky                 Chairman Emeritus
    JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
    JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
    MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
    GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
    LEE TERRY, Nebraska                  ANNA G. ESHOO, California
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
      Vice Chairman                      DIANA DeGETTE, Colorado
    JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
    MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    BRIAN P. BILBRAY, California         JAY INSLEE, Washington
    CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
    PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
    STEVE SCALISE, Louisiana             JIM MATHESON, Utah
    ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
    CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
    GREGG HARPER, Mississippi            DORIS O. MATSUI, California
    LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin
    BILL CASSIDY, Louisiana              Islands
    BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
    PETE OLSON, Texas
    DAVID B. McKINLEY, West Virginia
    CORY GARDNER, Colorado
    MIKE POMPEO, Kansas
    ADAM KINZINGER, Illinois
    H. MORGAN GRIFFITH, Virginia

                                     7_____

                             Subcommittee on Health

                         JOSEPH R. PITTS, Pennsylvania
                                     Chairman
    MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
      Vice Chairman                        Ranking Member
    ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
    JOHN SHIMKUS, Illinois               EDOLPHUS TOWNS, New York
    MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
    SUE WILKINS MYRICK, North Carolina   LOIS CAPPS, California
    TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
    MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
    PHIL GINGREY, Georgia                TAMMY BALDWIN, Wisconsin
    ROBERT E. LATTA, Ohio                MIKE ROSS, Arkansas
    CATHY McMORRIS RODGERS, Washington   JIM MATHESON, Utah
    LEONARD LANCE, New Jersey            HENRY A. WAXMAN, California (ex
    BILL CASSIDY, Louisiana                  officio)
    BRETT GUTHRIE, Kentucky
    JOE BARTON, Texas
    FRED UPTON, Michigan (ex officio)

                                      (ii)

                                 C O N T E N T S

                                  ----------
                                                                       Page
    Hon. Joseph R. Pitts, a Representative in Congress from the
      Commonwealth of Pennsylvania, opening statement................     1
        Prepared statement...........................................     3
    Hon. John Shimkus, a Representative in Congress from the State of
      Illinois, opening statement....................................     5
    Hon. Frank Pallone, Jr., a Representative in Congress from the
      State of New Jersey, opening statement.........................     5
    Hon. Henry A. Waxman, a Representative in Congress from the State
      of California, opening statement...............................     6
    Hon. Fred Upton, a Representative in Congress from the State of
      Michigan, prepared statement...................................   158
    Hon. John D. Dingell, a Representative in Congress from the State
      of Michigan, prepared statement................................   160
    Hon. Edolphus Towns, a Representative in Congress from the State
      of New York, prepared statement................................   161

                                   Witnesses

    Howard K. Koh, Assistant Secretary of Health, Department of
      Health and Human Services......................................     7
        Prepared statement...........................................    11
    Jonathan M. Kafer, Vice President Sales and Marketing, Teva
      Health Systems.................................................    66
        Prepared statement...........................................    69
    John M. Gray, President and CEO, Healthcare Distribution
      Management Association.........................................    78
        Prepared statement...........................................    80
    Kevin J. Colgan, Corporate Director of Pharmacy, Rush University
      Medical Center, on behalf of the American Society of Health-
      System Pharmacists.............................................    87
        Prepared statement...........................................    89
    Mike Alkire, Chief Operating Officer, Premier, Inc...............   101
        Prepared statement...........................................   103
    W. Charles Penley, Chair, Government Relations Committee,
      American Society of Clinical Oncology..........................   117
        Prepared statement...........................................   120
    Richard Paoletti, Vice President, Operations: Pharmacy,
      Laboratory, and Radiology, Lancaster General Health............   131
        Prepared statement...........................................   133
    Robert S. DiPaola, Director, The Cancer Institute of New Jersey..   141
        Prepared statement...........................................   144

                               Submitted Material

    Statement, dated September 23, 2011, of the National Coalition
      for Cancer Research, submitted by Mr. Pallone..................    25
    Statement, dated September 23, 2011, of the National Community
      Pharmacists Association, submitted by Mr. Pitts................    32
    Letter, dated September 22, 2011, from J. Evan Sadler, President,
      American Society of Hematology, to subcommittee leadership,
      submitted by Mr. Pitts.........................................    35
    Statement, dated September 23, 2011, of the Generic
      Pharmaceutical Association, submitted by Mr. Pitts.............    39
    Statement, dated September 23, 2011, of Fight Colorectal Cancer,
      submitted by Mr. Pallone.......................................   151

                    EXAMINING THE INCREASE IN DRUG SHORTAGES

                                  ----------

                           FRIDAY, SEPTEMBER 23, 2011

                      House of Representatives,
                                Subcommittee on Health,
                              Committee on Energy and Commerce,
                                                        Washington, DC.
        The subcommittee met, pursuant to call, at 9:36 a.m., in
    room 2322 of the Rayburn House Office Building, Hon. Joseph
    Pitts (chairman of the subcommittee) presiding.
        Members present: Representatives Pitts, Burgess, Shimkus,
    Myrick, Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie,
    Walden, Pallone, Dingell, Schakowsky, Matheson, DeGette, and
    Waxman (ex officio).
        Staff present: Clay Alspach, Counsel, Health; Ray Baum,
    Senior Policy Advisory/Director of Coalitions; Marty
    Dannenfelser, Senior Advisor, Health Policy and Coalitions;
    Andy Duberstein, Special Assistant to Chairman Upton; Debbee
    Keller, Press Secretary; Jeff Mortier, Professional Staff
    Member; Katie Novaria, Legislative Clerk; John O'Shea,
    Professional Staff Member, Health; Chris Sarley, Policy
    Coordinator, Environment and Economy; Alan Slobodin, Deputy
    Chief Counsel, Oversight; Heidi Stirrup, Health Policy
    Coordinator; John Stone, Associate Counsel; Phil Barnett,
    Democratic Staff Director; Stephen Cha, Democratic Senior
    Professional Staff Member; Alli Corr, Democratic Policy
    Analyst; Eric Flamm, FDA Detailee; Ruth Katz, Democratic Chief
    Public Health Counsel; Elizabeth Letter, Democratic Assistant
    Press Secretary; and Karen Lightfoot, Democratic Communications
    Director and Senior Policy Advisor.
        Mr. Pitts. This subcommittee will come to order. The chair
    recognizes himself for 5 minutes for an opening statement.

    OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
             CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

        In 2005, 61 drug shortages were reported to FDA. By 2010,
    there were 178 reported drug shortages, 132 of which involved
    sterile injectable drugs. So far this year, FDA has continued
    to see an increasing number of shortages, especially those
    involving older sterile injectable drugs. These shortages have
    involved cancer drugs, anesthetics used for patients undergoing
    surgery, as well as drugs needed for emergency medicine, and
    electrolytes needed for patients on IV feeding.
        It appears that there are many potential causes of these
    drug shortages. In some cases, shortages have been caused by
    quality and manufacturing issues. Additionally, production
    delays at the manufacturer level, including limited production
    lines for certain older drugs, and difficulty in receiving raw
    materials and components from suppliers have caused drug
    shortages. Many raw material suppliers also experience capacity
    problems at their facilities, causing delays that ripple
    through the drug production process.
        Shortages can also result from a company discontinuing a
    particular drug. Certain drugs are susceptible to shortages,
    particularly those that are complex to manufacture, such as
    injectable drugs, or require longer lead times. FDA cannot
    compel a company to manufacture a particular drug, and, if
    there is a shortage of that drug, it cannot compel other firms
    to increase their capacity. Further, companies are not required
    to notify FDA in advance of a potential drug shortage, unless a
    company is discontinuing a sole source, medically necessary
    drug. In that case, a company must inform FDA 6 months in
    advance.
        Drug shortages have real effects on real patients. Due to
    shortages, patients have not received the appropriate drugs for
    their conditions, often getting a less effective drug or a more
    costly substitute as a result. According to a study done by
    Premier Healthcare Alliance of 228 hospitals, retail
    pharmacies, and other health care facilities, nearly 90 percent
    of hospitals reported a drug shortage in the last half of last
    year that may have caused a patient safety issue, resulted in a
    procedure's delay or cancellation, required a more expensive
    substitute, or resulted in a pharmacist compounding a drug.
        I look forward to hearing from our witnesses today about
    their experiences with drug shortages and learning what
    remedies they believe are necessary. I would like to say a
    special hello to Richard Paoletti, Vice President, Operations;
    Pharmacy, Laboratory, and Radiology at Lancaster General
    Hospital in my home district.
        Lancaster General is the largest employer in the 16th
    Congressional District, and, for 10 of the past 13 years, it
    has been named among the ``Top 100 Hospitals in America'' by
    Thomson Reuters, a leading source of healthcare business
    intelligence. The hospital is also helping to revitalize the
    northwestern part of Lancaster City through a partnership with
    Franklin and Marshall College.
        Again, thank you to our witnesses, and I will yield the
    balance of my time to Congressman Shimkus from Illinois.
        [The prepared statement of Mr. Pitts follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.001

        [GRAPHIC] [TIFF OMITTED] 77032.002

      OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
                  CONGRESS FROM THE STATE OF ILLINOIS

        Mr. Shimkus. Thank you, Mr. Chairman. And we want to
    welcome our folks at the 2 panels. Obviously, this is of
    concern. I am a market-based conservative capitalist, and
    whenever there is a lag in a commodity good or product, you
    have to really wonder about the demand and the supply and the
    available cost because when there is limited supply and a high
    demand, cost should go up.
        So that begs a question is, what is constraining the market
    signals from producing the product that the consumers need? Is
    that insurance companies? Is that government reimbursement
    rates? Is that the State Medicaid provisions? That is what I
    will be looking at because the bigger the government is, the
    more manipulative it gets in the market services, the less its
    ability to provide goods and services to consumers.
        So we appreciate that and look forward to it, and I yield
    back my time, Mr. Chairman. Thank you.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the ranking member of this subcommittee, Mr. Pallone, for 5
    minutes.

    OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
                IN CONGRESS FROM THE STATE OF NEW JERSEY

        Mr. Pallone. Thank you, Mr. Chairman. I want to thank you
    for holding today's hearing on this important issue. I am
    encouraged by the bipartisan nature of this effort and thank
    our witnesses for joining us.
        Today, we will discuss the recent increase in drug
    shortages that have been the subject of numerous reports. Drug
    shortages appear to be on the rise at an alarming rate and are
    threatening the supply of some of our most important
    medications from lifesaving oncology drugs to antibiotics that
    rid us of infection to antiseptics that get us through the most
    minor surgical procedures. These drugs have become an important
    part of our healthcare system.
        No patient must be told that their chemotherapy must be
    postponed because the only drug used to treat their type of
    cancer is unavailable. And likewise, no anesthesiologist wants
    to begin their workday with the realization that they will have
    to use subpar drugs on a patient because the one they normally
    rely on is out of stock indefinitely. So we can't let this
    become the new norm.
        We are dependent upon the medications on the FDA's drug
    shortage list for years and continue to look for them for our
    health and wellbeing. It is alarming that drugs that have been
    around for so long would suddenly be the most difficult to keep
    hospitals, pharmacies, and doctors' offices supplied with.
    Furthermore, these drugs tend to be low-cost generics, which
    are an essential component of healthcare for most Americans as
    they seek to keep their healthcare costs low.
        In this fiscal climate, having a readily accessible supply
    of generic medication is of profound importance, and to that
    end, it has been disheartening to learn that the so-called gray
    market would take advantage of such a dire situation to engage
    in price-gouging at the expense of those desperate enough to
    pay.
        So I am hoping that we can begin today to identify the
    cause of these shortages and discuss solutions for replenishing
    our drug supply. We must address this sudden increase so that
    Americans can continue to receive high-quality treatments at
    low cost and remain confident in both the pharmaceutical
    industry and the healthcare providers.
        Unfortunately, companies are not currently required to
    report to the FDA when a shortage will be occurring whether
    because of change in investment strategy or manufacturing
    difficulties, there is currently no policy for notification
    unless the company is the sole manufacturer.
        My colleague, Representative DeGette, has introduced
    bipartisan legislation, H.R. 2245, the Preserving Access to
    Life-Saving Medications Act of 2011, as the first step in
    addressing this issue. This legislation would require
    manufacturers to notify the FDA of any actual or prospective
    drug shortages. And I want to commend Representative DeGette on
    pioneering this effort and hope that as a result of hearing
    from our witnesses today, we can identify additional solutions
    to this growing problem.
        This hearing will allow us to learn more about why drug
    shortages are occurring, what the administration and industry
    are doing to address the problem, and what new authorities the
    FDA might need to prevent shortages from happening in the
    future. And I am encouraged that we are exploring this issue in
    our subcommittee today, look forward to working with you,
    Chairman Pitts, as you get to the bottom of this issue. And
    again, thank you for having the hearing.
        I yield back.
        Mr. Pitts. The chair recognizes the ranking member of the
    full committee, Mr. Waxman, for 5 minutes.

    OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF CALIFORNIA

        Mr. Waxman. Thank you, Chairman Pitts, for recognizing me
    and for holding this hearing.
        Recent media and other reports indicate that drug shortages
    are now at an unprecedented level. Indeed, according to FDA,
    the number of drugs in short supply in 2010 was almost triple
    that of 2005. The shortages affect a broad spectrum of
    critically important drugs--including oncology drugs to treat
    lymphoma, leukemia, breast and other cancers--and the seizure
    drugs without which surgeries have to be postponed and
    antibiotics to remedy life-threatening bacterial infections.
    Without these drugs, patients' lives are at risk.
        Drug scarcities generally affect sterile injectable drugs.
    These drugs are technically difficult to make and each drug is
    usually manufactured by only one or a handful of producers. If
    any one company develops manufacturing problems, which is not
    uncommon, other companies may have little excess capacity to
    help fill the need.
        With the aging of our population, the outsourcing of drug
    manufacturing, the increasing consolidation of drug companies,
    and the general adoption of a just-in-time approach to drug
    production and distribution, this problem may be significantly
    worse unless immediate measures including congressional action
    are taken to address its multiple causes.
        Representative DeGette has introduced legislation that
    would be an important first step in this process. H.R. 2245,
    the Preserving Access to Life-Saving Medications Act of 2011,
    would require manufacturers to notify FDA of any actual or
    prospective drug shortages. Such advance notice would enable
    FDA to help avoid or mitigate the shortage by both working with
    the manufacturer and alerting hospitals and physicians of the
    problem.
        While this is an important piece of legislation that has
    broad bipartisan support, I don't think anyone believes it
    alone can solve the drug shortage problem. So I look forward to
    hearing from our witnesses today to better understand the
    causes of what is already a crisis for many patients and to
    find out what we in Congress can do to help prevent shortages
    in the future. We already had been working in bipartisan manner
    to learn about this very disturbing issue, and I trust that we
    will continue to work together to develop and enact legislation
    to help address it and address it quickly.
        Thank you, Mr. Chairman. I yield back the time.
        Mr. Pitts. The chair thanks the gentleman. That concludes
    our opening statements.
        Our first panel will be Assistant Secretary for Health at
    HHS, Mr. Howard Koh. And Mr. Koh, you may begin your testimony.
    Please summarize in 5 minutes. We will put your entire written
    testimony in the record. You may begin.

      STATEMENT OF HOWARD K. KOH, ASSISTANT SECRETARY OF HEALTH,
    DEPARTMENT OF HEALTH AND HUMAN SERVICES; ACCOMPANIED BY SANDRA
            KWEDER, DEPUTY DIRECTOR, FDA OFFICE OF NEW DRUGS

        Mr. Koh. Thank you, Chairman Pitts, Ranking Member Pallone,
    and distinguished members of the committee. I am Dr. Howard
    Koh, the Assistant Secretary for Health at the U.S. Department
    of Health and Human Services. I am very pleased to be joined
    here by my colleague, Dr. Sandy Kweder, Deputy Director of the
    FDA Office of New Drugs.
        As you already heard, the growing problem with drug
    shortages is a troubling situation and one that the Department
    and the Secretary take very seriously. This growing trend has
    the potential to impact on our entire healthcare system, and as
    we discuss this problem today, we should always remember that
    our goal is to protect the health of people affected most by
    these shortages--patients and their families. And I say that as
    a physician who has cared for patients for over 30 years.
        According to the FDA's Center for Drug Evaluation and
    Research (CDER), the number of drug shortages has been rising
    steadily over the last 5 years, as you have already heard. And
    although shortages can occur with any drug, generic sterile
    injectables currently make up a large and increasing share. And
    in fact, in 2010, 74 percent of these shortages involved these
    older sterile injectable agents. So these include critical
    products such as oncology drugs, anesthetics, parenteral
    nutrition drugs, and many drugs used in emergency rooms.
        There is no single reason why drug shortages occur so
    ultimately, in any given situation, many factors are involved
    and underlying causes they operate either alone or in
    combination to cause a shortage. These factors include but are
    not limited to industry consolidation, major issues of quality
    and manufacturing challenges, changes to inventory and
    distribution practices, difficulty in producing a given drug,
    production delays, discontinuations for business reasons,
    unanticipated increased demand, and shortages of underlying raw
    materials. These are some of the causes, but more importantly,
    we the Department are trying to focus now on finding solutions
    that protect patients.
        In 1999, the FDA formed the drug shortage program within
    CDER in an effort to proactively begin monitoring and
    mitigating--that is, lessening the impact of--potential and
    actual drug shortages. And when the FDA becomes aware of any
    potential shortage, it was collaboratively with the affected
    firm to return the product to its usual market availability as
    quickly and as safely as possible while striving to prevent any
    harm to any patient. Although the FDA cannot require firms to
    continue production of a product or increase production in
    response to a shortage, it does encourage other firms to do so.
        FDA also expedites the review of submissions from
    manufacturers, which may include request to extend the
    expiration date of products, increase capacity, use a new raw
    material source, license new manufacturers, and prevent changes
    in product specifications. The FDA is committed to working with
    drug manufacturers to prevent shortages whenever possible, and
    in fact, as a direct result of this commitment and the work of
    the FDA drug shortages staff and experts from across the
    Agency, last year, 2010, 38 shortages were prevented. And so
    far for 2011, this year, I am pleased to report for the first
    time that 99 shortages have been prevented.
        Also, at the same time, the FDA goes to great lengths to
    mitigate shortages--that is, lessening the impact when they
    occur. One notable recent example involves the well described
    shortage of the drug cytarabine used to treat certain types of
    acute leukemia. Crystal formation in the vials of this drug
    represented a quality and manufacturing problem that led to a
    disruption in production and a shortage that received
    tremendous publicity across the Nation within recent months. In
    this case, the FDA worked with the manufacturer, found that if
    the vials were warm, the crystals would dissolve and the drug
    could be then safety administered to the patient, and as a
    result of this collaboration, the manufacturer was then
    subsequently able to ship the vials to healthcare professions
    along with a letter from the FDA notifying them to inspect for
    crystal formation, and if present, warm the vials to dissolve
    the crystals. And in this way, the collaboration led to
    ensuring and upholding patient safety. So as a result of this
    work, we can report today that this well reported drug shortage
    has been recently resolved.
        In limited circumstances, the FDA can allow the temporary
    importation of critical drugs when the shortage cannot be
    resolved immediately. However, there are several factors that
    limit the applicability of this option. The product may already
    be in short supply abroad, so importation to the U.S. could
    exacerbate the shortage. FDA must also ensure that drugs
    imported from abroad are manufactured in facilities that meet
    FDA quality standards.
        To discuss these and other possible solutions, the FDA will
    be hosting a public meeting next Monday, September 26, and this
    meeting is being held to gain additional insight about causes
    and impact of this challenge and possible strategies for
    solutions.
        Then on Friday, September 30, the FDA is conducting a
    webinar for the general public, and this is an opportunity for
    people to learn more about what the FDA is doing to address
    this challenge, and it will also be a venue for citizens to ask
    questions directly to FDA experts who are working on this topic
    every day.
        Although I have focused my comments until now on the FDA, I
    should stress that the entire Department of Health and Human
    Services has been fully engaged on this topic for quite some
    time. We view this as a pressing public health challenge, and
    we want to resolve this on behalf of the Department and indeed
    the entire country.
        This past summer, I personally convened a series of
    meetings with representatives from FDA; NCI, our National
    Cancer Institute; CDC, our Centers for Disease Control and
    Prevention; the Office of the Assistant Secretary for
    Preparedness and Respondent; the Office to the Assistant
    Secretary for Planning of an Evaluation; the Centers for
    Medicare and Medicaid Services, CMS; and others. We have joined
    together as one department to explore more deeply the root
    causes of this problem and the possible steps that can be taken
    to address them. These have been productive meetings and we
    pledge to continue them until the problem is solved. We look
    for as many ways as possible to maximize our efforts within the
    Department to protect the public health.
        Also, earlier this morning, Secretary Sebelius, along with
    other senior leaders in the Department hosted a meeting with
    over a dozen representatives from pharmaceutical manufacturers,
    professional medical organizations, hospitals, insurance
    companies, group-purchasing entities, and patient advocacy
    organizations, and this crucial meeting gave us firsthand
    insight into these challenges, generated a good discussion with
    the stakeholders, and also served as a foundation for our
    future collaboration.
        Shortly, later on this fall, the FDA will release a report
    which reflects an even more detailed analysis of the problem
    and updated recommendations for the future. Potential solutions
    are being examined. One suggestion is a mechanism for
    manufacturers to report impending supply disruptions and
    discontinuation of drugs, which could help to curb shortages
    and improve the continuity of the drug supply. The sooner the
    FDA learns of a drug shortage, the more effective they are
    going to be in helping to notify providers and the public and
    upholding patients' safety.
        So we remain committed to working with all parties--
    manufacturers, providers, patient advocates, and other
    stakeholders to help minimize and solve this problem. So in
    conclusion, the Department is committed to addressing and
    solving this critical public health challenge. It is our goal
    to advance this dialogue with all interested parties both
    internal and external, and we also recognize and deeply respect
    the important roles of the Members of Congress, and we welcome
    the opportunity to discuss this important topic with you today.
        So thank you very much, and Dr. Kweder and I will be very
    happy now to take any questions you may have.
        [The prepared statement of Mr. Koh follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.003

        [GRAPHIC] [TIFF OMITTED] 77032.004

        [GRAPHIC] [TIFF OMITTED] 77032.005

        [GRAPHIC] [TIFF OMITTED] 77032.006

        [GRAPHIC] [TIFF OMITTED] 77032.007

        [GRAPHIC] [TIFF OMITTED] 77032.008

        [GRAPHIC] [TIFF OMITTED] 77032.009

        [GRAPHIC] [TIFF OMITTED] 77032.010

        [GRAPHIC] [TIFF OMITTED] 77032.011

        [GRAPHIC] [TIFF OMITTED] 77032.012

        [GRAPHIC] [TIFF OMITTED] 77032.013

        [GRAPHIC] [TIFF OMITTED] 77032.014

        Mr. Pitts. The chair thanks the gentleman. Dr. Koh, why
    have drug shortages increased so much in the last few years?
        Mr. Koh. Well, again, there is no one single reason but
    there are changes here that we are seeing in the backdrop of an
    economic and business climate that is leading to market
    consolidation, a complicated manufacturing process that is
    being conducted increasingly in aging facilities that is
    leading to quality and manufacturing issues as we have heard
    now. Sometimes products are discontinued for business reasons.
    Oftentimes the production of any of these agents is a
    complicated process. So all these factors converge to create
    the issue that we are facing right now.
        Mr. Pitts. Have other countries experienced shortages such
    as we have?
        Mr. Koh. Unfortunately, the United States is not unique in
    this situation and yes, we are indeed seeing similar situations
    in other countries around the world.
        Mr. Pitts. And when a shortage occurs in another developing
    country, how is that situation resolved there?
        Mr. Koh. Well, we want to learn more from our colleagues
    there. I don't know if Dr. Kweder wants to say more about that
    particular issue.
        Ms. Kweder. We are often contacted by our regulatory
    colleagues from other countries looking to collaborate on
    finding solutions to particularly when there are worldwide
    problems. Different countries have different ways of producing
    drug, as assuring production of product, but we work as much as
    possible with others to try and make sure that shortages are
    limited and mitigated.
        Mr. Pitts. Does Europe have a particular method of
    resolving this situation?
        Ms. Kweder. I believe the method is pretty much similar to
    ours, particularly since they have multiple countries. They
    seek other sources of supply from other countries.
        Mr. Pitts. And do you know what is causing these drug
    shortages in these countries in Europe?
        Ms. Kweder. Many of them are the same sorts of things. They
    are, you know, many of these products are marketed globally.
    They are not just in the U.S. The sources of the drug
    substances itself, most of them are foreign sources, so if
    there is an interruption of a source in the U.S. at a U.S.
    plant, if a manufacturer in another country has the same
    source, they will be in the same situation and everyone will be
    out looking for alternatives at the same time.
        Mr. Pitts. OK. Dr. Kweder, what specific steps has the FDA
    taken to prevent or alleviate drug shortages?
        Ms. Kweder. First, we tend to learn in terms of preventing
    drug shortages. When companies let us know that they are
    experiencing a problem, it is usually a problem in production.
    Sometimes it is a business decision to discontinue a product.
    When they inform us in advance that that is the case, we work
    very closely with them to understand the problem and assess
    whether this shortage would be something that would be critical
    for patients.
        So, for example, if a company is making a product that 20
    other companies make, that is not likely to be a critical
    public health situation. But particularly for these sterile
    injectables, that is usually not the case. So we will work with
    a company to help them develop solutions to fix the problem and
    avoid an interruption in production. That is not always
    possible. It is just simply not always possible.
        When it is not possible and it looks like the company may
    have to interrupt production, we go to other manufacturers and
    we talk to them about their capacity to increase their
    production. They usually can't turn that around on a dime, but
    we work with them to facilitate ramping up in order to supply
    the market with usual sources.
        In the original company that is having a problem, we have a
    number of tools in our kit that we can use to help them address
    the problem. Dr. Koh gave you an example of the kinds of things
    that we can do in some cases, you know, to look at the end
    product itself if there is a problem with the end product
    itself. In that case it was crystallization of the actual
    active drug. And we worked with the company. They got right on
    the case to figure out why those crystals were forming, what
    could be done to mitigate that, inform providers, and since
    then, the crystal problem has been fixed.
        Mr. Pitts. Do you feel you need earlier warning than you
    currently have?
        Ms. Kweder. We can always use earlier notification. There
    certainly are circumstances where things happen very, very
    unexpectedly. But the majority of cases of shortages, we could
    have been notified, and in the majority of cases, we are not
    notified in advance. It is getting better. I will say it is
    getting better, but we still have a large percentage of actual
    shortages where we were not aware that it was coming.
        Mr. Pitts. Thank you. My time has expired.
        The chair recognizes the ranking member, Mr. Pallone, for 5
    minutes for questions.
        Mr. Pallone. Thank you, Mr. Chairman. I would like to
    initially ask unanimous consent to enter into the record the
    testimony of the National Coalition for Cancer Research. I
    think you have a copy of it.
        Mr. Pitts. Without objection, so ordered.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.015

        [GRAPHIC] [TIFF OMITTED] 77032.016

        [GRAPHIC] [TIFF OMITTED] 77032.017

        [GRAPHIC] [TIFF OMITTED] 77032.018

        [GRAPHIC] [TIFF OMITTED] 77032.019

        Mr. Pallone. Thank you, Mr. Chairman.
        Dr. Koh, we all agree that drug shortages are a real
    problem facing the country and from what I understand, it is
    actually getting worse. But I guess it is hard to figure out,
    at least for me, what the cause is and I would like to ask some
    questions about the root cause of the problem.
        The FDA has said that in 2010, last year, over half of the
    shortages were due to manufacturing and product-quality issues,
    and I understand I think you mentioned that many or a majority
    of those are sterile injectable drugs. Why would these drugs be
    prone to manufacturing and product-quality issues in
    particular?
        Mr. Koh. Well, many of these products are the result of a
    long production process, and those production processes are now
    occurring in fewer manufacturing sites because of industry
    consolidation. There is also aging of the facilities where this
    work is ongoing. There are business and economic factors in the
    background that are lowering the profit margin. So oftentimes,
    businesses will make a decision to perhaps discontinue a
    particular product for business reasons, and as a result, we
    are seeing the quality in manufacturing issues, Congressman,
    that you are referring to.
        Some of these quality issues are quite disturbing where we
    literally are tracking products that have particulate matter,
    even pieces of glass and pieces of metal in what should be
    sterile products that are injected into patients. So this is
    the reason why the FDA continues to uphold this mission of safe
    and effective drugs, also high-quality drugs in the middle of
    this challenging environment.
        Mr. Pallone. Now, Teva is on the next panel, but in their
    written testimony, they state that it takes 2 or 3 years to get
    FDA approval for a new supplier for ingredients or an
    alternative manufacturing site. Is that really true? Does it
    really take 2 or 3 years to get the FDA approval? And why would
    that be if it is true? And does it take that long if there is a
    drug shortage issue involved?
        Mr. Koh. Well, let me start, and I am sure Dr. Kweder can
    add. One of the advances of the FDA in this situation is to
    prioritize generic drug applications, expedite and accelerate
    approval in every way possible, particularly if the public
    health is threatened. So there are efforts to try to advance
    that time frame. That is also the goal of the Generic Drug User
    Fee Act, which is under review right now. So these are issues
    that are very important to the FDA and they take it seriously.
        Mr. Pallone. But I mean is that time period that Teva
    mentioned, would that generally be true and is there any kind
    of flexibility that you have to expedite review and inspections
    of new facilities so they could address the shortage when it
    exists?
        Ms. Kweder. There absolutely is flexibility, and we do that
    routinely when we are aware that, say, a new facility is needed
    or a new supplier is needed and when there is a circumstance
    that might lead to a potential shortage of an important medical
    product. We do it routinely. We can often turn things around in
    a matter of weeks.
        Mr. Pallone. But I mean you haven't answered that 2- or 3-
    year time span.
        Ms. Kweder. Sure, I would be happy to do that. The 2- or 3-
    year time span is what is being referred to under usual
    conditions when there is not a shortage situation or not a
    shortage situation pending.
        Mr. Pallone. But if there is, then you deal with it
    quicker?
        Ms. Kweder. Absolutely. But even the 2- to 3-year time
    frame, as Dr. Koh said, we are working and we are happy to see
    that there has been agreement on generic user fees that will
    change that and make that a matter of months and not years.
        Mr. Pallone. I mean my concern is, you know, we face these
    extraordinary fiscal pressures. The House passed budget for FDA
    contained a 21 percent cut in appropriated funds. I mean is
    this cut, would that adversely affect your ability to work with
    companies to avoid or mitigate shortages? And, you know, I know
    you mentioned generics. Are you negotiating with the generic
    industry to develop a user fee and can that help prevent or
    alleviate drug shortages? This is about the funding now.
        Ms. Kweder. We are negotiating and have reached agreement
    with the generic industry about user fees. And that will be
    coming up for discussion by yourself, you know, within the next
    year.
        Mr. Pallone. And what about this House budget cut, the 21
    percent?
        Ms. Kweder. There is no question that resources matter and
    these are not automated processes. They take people with
    judgment and knowledge and having enough people makes a big
    difference.
        Mr. Pallone. All right. Thank you very much.
        Thank you, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman.
        And I would like to request the following statements be
    entered into the record. I think you have copies. The statement
    of the National Community Pharmacist Association, the letter
    from the American Society for Hematology to the House Energy
    and Commerce Subcommittee on Health, and the statement of the
    Generic Pharmaceutical Association.
        Mr. Pallone. I have no objection, no.
        Mr. Pitts. Without objection, so ordered.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.020

        [GRAPHIC] [TIFF OMITTED] 77032.021

        [GRAPHIC] [TIFF OMITTED] 77032.022

        [GRAPHIC] [TIFF OMITTED] 77032.023

        [GRAPHIC] [TIFF OMITTED] 77032.024

        [GRAPHIC] [TIFF OMITTED] 77032.025

        [GRAPHIC] [TIFF OMITTED] 77032.026

        [GRAPHIC] [TIFF OMITTED] 77032.027

        [GRAPHIC] [TIFF OMITTED] 77032.028

        [GRAPHIC] [TIFF OMITTED] 77032.029

        [GRAPHIC] [TIFF OMITTED] 77032.030

        [GRAPHIC] [TIFF OMITTED] 77032.031

        [GRAPHIC] [TIFF OMITTED] 77032.032

        [GRAPHIC] [TIFF OMITTED] 77032.033

        Mr. Pitts. I recognize this time the gentleman from
    Illinois, Mr. Shimkus, for 5 minutes.
        Mr. Shimkus. Thank you, Mr. Chairman.
        I think all would agree that resources matter in this tough
    fiscal period, as the ranking member said. I think also part of
    our issue would be prioritization, especially in life-saving
    issues and what are agencies doing to put first things first
    and what can they do obviously redirect funds in a different
    direction.
        For Dr. Koh, going in line with my opening statement, how
    have cost and payment factors impacted these drug shortages?
        Mr. Koh. Well, again, this is an industry that is producing
    products in an environment where they are facing increasing
    economic pressures. The profit margin for any particular agent
    is declining for them, so they have to make business decisions
    but also keep their products moving until the decision is made,
    perhaps to discontinue a product. On the quality manufacturing
    issues and possibly delay issues and what is often a
    complicated production process, it just all contributes to the
    situation that we are seeing now.
        Mr. Shimkus. And who are the big payers?
        Mr. Koh. Well, there is a process where purchasers--
    hospitals and physicians and providers--buy these products but
    there are also group-purchasing organizations and pharmacy
    benefit managers who are trying to drive down the price for
    understandable business reasons. So these are all the
    stakeholders who are involved in the purchasing chain.
        Mr. Shimkus. And I do appreciate your opening testimony
    because we had a series of questions and really you answered
    them in your opening statement. And I am just going to
    highlight one of the things was a question we were going to ask
    was closely collaborating and you gave the example of the drug
    with the crystallization, and I thought that was very helpful.
        The other issue I was going to focus on was alternative
    sponsors, and that is where you talked about maybe temporary
    easing import restrictions or importation or--I can't even read
    my writing--temporarily doing something else. But you said that
    is constrained based upon if there is a shortage overseas of
    the same product, and something that we have talked about over
    the past years with Ranking Member Dingell is the ability to
    make sure that the drugs that we are importing are inspected by
    our inspectors so we know the efficacy and safety of that.
        I have always been a risk-based person on the focus point
    of saying that those that are more questionable facilities
    ought to get a lot of look. If they have been operating safely
    and they have inspected like a U.S. facility every year, then
    it might make that you could go every 2 years or maybe every 18
    months. And that is the whole issue of shifting sources, too,
    to the more critical elements and safety versus known products
    and industries that you all have real confidence in. We want to
    expect you to do that in industries that have a poor record,
    but those that you have really good confidence in, that is the
    funding issue.
        You also mentioned, you know, business reasons and aging
    facilities and I think you mentioned increased regulations. Is
    that part of your testimony?
        Mr. Koh. Well, the quality standards that the FDA puts
    forward in areas like this have been unchanged for the last 4
    decades. And in fact the FDA has really gone the extra mile in
    my view to show tremendous regulatory flexibility here. So
    again, since we can't require any manufacturer to do much of
    anything, all we can ask is for information, communication,
    collaboration, and then the FDA shows maximum regulatory
    flexibility. This re-warming of the cytarabine that I mentioned
    to you is one example of filtering out particular matter so
    again these medications can be used and not put aside is
    another example.
        Mr. Shimkus. Yes, I only have 12 seconds----
        Mr. Koh. Sure.
        Mr. Shimkus [continuing]. I will go back to the testimony--
    --
        Mr. Koh. Um-hum.
        Mr. Shimkus [continuing]. Because I did scribble a note a
    comment on increased regs, and I will have to go back and look
    at that. But why doesn't the shortage of a product in this
    sector then send an increased price signal to manufacturers for
    them to then produce the good?
        Mr. Koh. Well, we have come to learn that the standard
    economic principles of supply and demand----
        Mr. Shimkus. And the question is why is that distorted? I
    think that is the basic fundamental question of this problem.
    What has distorted the fundamental principle of supply and
    demand, and my time has expired, but I think that is the heart
    of this issue. I yield back my time.
        Mr. Koh. Sure. And I am sure Dr. Kweder can add, too. First
    of all, these agreements are made often through these long-term
    contracts and so also this whole process involves multiple
    stakeholders, especially and including the pharmacy benefit
    managers and the group purchasing organizations. So it
    complicates this environment and sort of does not make relevant
    the sort of standard supply and demand economic principles that
    we see in other businesses.
        Mr. Pitts. Dr. Kweder?
        Ms. Kweder. You have said what I would say. Thank you.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentlelady from Illinois, Ms. Schakowsky, for 5 minutes for
    questions.
        Ms. Schakowsky. Thank you, Mr. Chairman.
        I, too, am sponsor of the DeGette legislation that would
    ask for early notification. I just wanted to mention we
    actually have a Chicago-based injectable drug company Hospira
    that has endorsed the bill and they already do many of the
    things including proactively reporting to the FDA about
    potential drug shortages.
        You have explained, Dr. Koh and Dr. Kweder, the advantage
    of that early notification. Let me just raise a question that
    some have raised. Early warning could exacerbate the problem
    and lead to hoarding of critical drugs. Is this anything we
    need to watch out for, account for? I mean I am hoping that
    that is not the result of this legislation, obviously, which I
    support. Have you heard of that?
        Ms. Kweder. I will respond to that question. When we are
    notified of a potential shortage, we do not automatically turn
    around and put that on our Web site and notify the public of a
    potential shortage, which would have the opposite effect of
    what we want. We judge very carefully when is the right time to
    make a public announcement about a potential shortage. First,
    we assess what are we talking about? Is this a true product
    shortage or is it an imbalance in distribution? Because
    sometimes you see things that seem to be in shortage in one
    part of the country but there is plenty of it and more so in
    another part.
        So we take that potential for making things worse very,
    very seriously. We meanwhile are working on it to assess it and
    assess what we might do to mitigate it if it is real. If it is
    real, we usually announce the fact that it exists and try to
    let the public know what we are doing to try to address it.
        Ms. Schakowsky. So early notification, then, is something
    that is a very useful tool?
        Ms. Kweder. Right, early notification to FDA is a very
    useful tool. We see that as different than early publication.
        Ms. Schakowsky. Got it. Let me ask you this. The FDA has
    limited authorities. Let me run through some of those. At this
    point you can't require manufacturers to do this early
    notification, you have no authority to require companies to
    increase production of a drug during a shortage, you can't
    impose an allocation plan when a shortage causes life-
    threatening conditions, and FDA has limited ability to post
    timely information on its Web site for healthcare professionals
    and patients regarding reasons for shortages and timelines for
    resolution. I don't really understand that one. But in addition
    to early notification, are there other authorities that you
    need that would help mitigate this problem?
        Ms. Kweder. I think there are 2 things. One, in the early
    notification is something that helps us in the mitigation and
    prevention greatly. What we need to be able to do is we need to
    be able to have the industry assure that they are making a
    quality product and upholding their responsibility to produce
    high-quality products where these things won't happen. Our goal
    is to prevent even the potential for a shortage from occurring,
    not always possible.
        In the case of many of these threatened and real shortages,
    as Dr. Koh said, these are in plants that manufacture multiple,
    multiple products. If you look at the record, the things that
    led to the actual problem with production are things that we
    have been telling the companies about in routine inspections
    for years but only became critical in order that they needed to
    address these, modernize, so that they could continue producing
    quality product without a glitch.
        So that is first and foremost from our standpoint, assuring
    that we are aware so that we can step in and use every possible
    communication tool and flexibility and regulatory action.
        Ms. Schakowsky. Let me just ask you to what extent is the
    issue of business decisions--what percent of those cases where
    we have shortages would you say this is a business decision?
        Ms. Kweder. You know, I can't give you an exact percentage.
    I will be happy to provide that follow up.
        Ms. Schakowsky. Is it a major issue and is there anything
    that we can do about that?
        Ms. Kweder. I would say that it is not. That is not the
    major issue.
        Ms. Schakowsky. OK.
        Ms. Kweder. I would say by far and away the more common
    scenario has something to do with manufacturing and product
    quality.
        Ms. Schakowsky. Thanks you. Thanks to both of you for being
    here.
        Mr. Koh. Thank you.
        Mr. Pitts. The chair thanks the gentlelady and recognizes
    the gentlemen from Kentucky for 5 minutes for questioning.
        Mr. Guthrie. Thank you for being here. I am just going to
    follow up a little bit on Congressman Shimkus. I mean you
    answered a lot of the questions in your opening testimony. But
    I had a group of oncologists in the other day. These aren't
    people that make drugs, they aren't people that sell drugs,
    people that--FDA issues or whatever you want to--these are guys
    just are taking care of patients, and they say they literally
    have to make choices about who they take care of because they
    don't have the drugs available. So I ask kind of the questions,
    say, well, I can't believe a company won't make them if you
    have the demand for them. And they told me that this particular
    type of drugs, the generic are priced different in the Federal
    Government. So the Medicare actually prices these different
    than other drugs. Was that what they were saying was true?
        Mr. Koh. Well, I can start with that. And first of all,
    Congressman, thank you again for your attention to the patient.
    This is a dire situation for patients and I have actually
    trained in cancer as well as other fields so this is very
    personally and professionally important to me.
        We have a rule of Medicare here that reimburses according
    what is called the average sales price, so that is one factor
    here, but we don't view that as a significant issue in driving
    the shortages that we are seeing here.
        Mr. Guthrie. But these generics are a different system than
    others because what we are seeing is you mentioned that
    pharmacy benefit managers, all these are driving down drug
    costs where they are doing it, you know, a pharmacy benefit
    manager is trying to do all drug costs.
        Mr. Koh. Sure.
        Mr. Guthrie. But we seem to see this particular class of
    drugs having a bigger problem than others and the only thing
    that I can see that is different is the way the Federal
    Government treats them. They treat them different than other
    drugs.
        Ms. Kweder. I am not sure I can answer your question but
    these are generic drugs. They are off patent for the most part.
    You know, there are some that--so they are at a point in time
    where the profit margin for the drugs--generally because they
    are generic and you can have multiple manufacturers--is lower.
        Mr. Guthrie. Right.
        Ms. Kweder. And it wouldn't be just--you mentioned
    Medicare, CMS, but there are many other group purchasers--some
    of them are government-related, others are private insurance
    companies that are negotiating in bulk basically of prices. And
    they are no different than what the Federal Government does. It
    is the same.
        Mr. Guthrie. But why isn't that happening in other
    classes--I mean this seems to be particularly more than others.
        Ms. Kweder. Well, in the other classes, in the non-generic
    world, there is one source.
        Mr. Guthrie. Um-hum.
        Ms. Kweder. And so they are in a great bargaining position
    because they are a sole source, the innovator product, they
    have a patent.
        Mr. Guthrie. But there is a different system for generic
    drugs in Medicare than----
        Ms. Kweder. They tend to be priced lower.
        Mr. Guthrie. Priced lower?
        Ms. Kweder. Absolutely. And that, of course, is the access
    point for the public.
        Mr. Guthrie. Right, if you have lower costs, which we all
    want to drive lower costs, believe me. We are all trying to
    save--but you have lower cost, then you get less supply as you
    are saying because the prices are obviously lower and you have
    less quality of people producing. And so according to the
    oncologists there is not a mechanism where if just you pay just
    a little bit more, you are going to get the drug that is going
    to take care of--you know, there is not a price mechanism to
    say we have got a low supply that Congressman Shimkus is
    talking about. Therefore, if we can adjust the price, we get
    the supply that we need to take care of patients.
        Mr. Koh. Well, the situation is summarized by Dr. Kweder,
    but Congressman, I think you were raising some interesting
    points where we can get you more information----
        Mr. Guthrie. OK.
        Mr. Koh [continuing]. And work with you.
        Mr. Guthrie. Because whatever we can do--I mean the things
    that you mentioned, business decisions, that is all part of the
    mix but there are some things we can do from this side.
        Mr. Koh. Thank you.
        Mr. Guthrie. And one other thing just quickly on the FDA,
    the 2 to 3 years you said, now you have got the flexible teams,
    is that relatively new? Because after these oncologists said
    this I reached out to some people and they did talk about some
    issues with inspection and inspection time like Congressman
    Shimkus. So it is being addressed----
        Ms. Kweder. Absolutely, it is being addressed. It
    absolutely is being addressed.
        Mr. Guthrie. OK. Maybe just hear from the ones who have the
    worst experiences I guess but that is good because I know with
    your physicians and the oncologists I met, you take care of
    patients, so I appreciate your attitude in moving forward to do
    so.
        So thank you and I yield back.
        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the ranking member emeritus of the full committee,
    the gentleman from Michigan, Mr. Dingell, for 5 minutes for
    questions.
        Mr. Dingell. Mr. Chairman, thank you for your courtesy and
    thank you for holding this hearing.
        Let me begin by asking this question yes or no. Do you have
    authority at FDA or at HHS to waive any of the requirements
    with regard to efficacy, good manufacturing practices, or
    safety, yes or no, in the event of shortage?
        Ms. Kweder. Yes.
        Mr. Dingell. You do have it?
        Ms. Kweder. We have the authority to use flexibility in how
    we implement the regulations.
        Mr. Dingell. OK.
        Ms. Kweder. Regulatory discretion.
        Mr. Dingell. I would like to have a further answer on that
    particular point.
        Ms. Kweder. But the requirements are the same. How one
    reaches them is flexible.
        Mr. Dingell. OK. I would like to have further statement on
    that for the record so we can understand what your authority
    there is.
        It is my understanding that the FDA has been working to
    address shortages of medically necessary drugs. Can you please
    define what medically necessary means, please?
        Mr. Koh. Medically necessary is defined as a product used
    to treat or prevent a serious disease or condition for which
    there is no other product available to act as a substitute.
        Mr. Dingell. I believe you have indicated in your testimony
    that the vast majority of shortages experienced in the United
    States is attributable to sterile injectables. Is that correct?
        Mr. Koh. Yes, sir, that is correct.
        Mr. Dingell. And according to your testimony, the majority,
    some 54 percent of these shortages were due to ``product
    quality issues such as particulates, microbial contamination,
    impurities, stability changes resulting in crystallization.''
    Is that right?
        Mr. Koh. That is right, Congressman.
        Mr. Dingell. Were you finding those in American
    pharmaceuticals or imports?
        Mr. Koh. We were finding them here in the United States.
        Mr. Dingell. What about imports?
        Mr. Koh. Well, those are exactly issues we try to prevent
    which is why importing is always a challenging issue. In fact--
    --
        Mr. Dingell. Yes, but you have really no authority to
    address the question of the manufacturing practices abroad. You
    have no real authority to deal with good manufacturing
    practices. You have no real authority to see to it that the
    requirements that are imposed on American manufacturers for
    safety, efficacy are there, and you have very little power to
    effectively inspect those foreign manufacturers either of
    finished pharmaceutical products or components and
    constituents, right?
        Mr. Koh. That is correct, Congressman.
        Mr. Dingell. And you have no ability, really, to know who
    is manufacturing these things or to trace them through the
    product line, is that right?
        Mr. Koh. That is right. That is why the importation process
    is done very carefully and selectively.
        Mr. Dingell. I have got some legislation to address that
    and I hope that we will be shortly addressing it here in this
    committee.
        I have a bill, as I mentioned, where we address the problem
    of quality problems in drug manufacturing process by requiring
    the drug manufacturers implementing effective quality system
    that complies with GMP. The quality system would also be
    required to ensure risk management procedures that would
    address all relevant factors through the supply chain,
    including original source materials and their origin, onsite
    audits, and methods to detect or include potentially risky
    substances. Manufacturers would also have to maintain records
    and establish that the drug was manufactured and distributed
    under conditions that ensured its identity, strength, quality,
    and purity. Would legislation of this kind help you address
    quality issues?
        Mr. Koh. Yes, tracking quality every step of the way would
    certainly uphold patient safety.
        Mr. Dingell. This is a matter on which I have worked with
    the gentleman, my colleague Mr. Shimkus. Now, it has been
    widely reported that when information becomes public about a
    drug shortage, an active gray market tries to sell drugs in
    short supplies to pharmacists or hospitals. Does this present a
    safety concern?
        Mr. Koh. Yes, it does, Congressman.
        Mr. Dingell. Why and how and what can you do about it?
        Mr. Koh. Well, this is largely unregulated. The Federal
    Trade Commission is involved to some degree but unfortunately--
    --
        Mr. Dingell. They don't have the expertise that you have
    and would you submit to us a proper answer informing me what we
    have to do to address that particular problem?
        Mr. Koh. I would be happy to do that, um-hum.
        Mr. Dingell. Now, when drugs are purchased in the gray
    market, do we know if these drugs have been stored properly to
    ensure effectiveness, whether the drugs have been diluted, or
    whether the drugs are free of filth contaminants or
    adulterates? Yes or no?
        Mr. Koh. No. Unfortunately, we know very little about the
    products in the gray market.
        Mr. Dingell. Now, as I mentioned, I have a bill that would
    require manufacturers to maintain records establishing where
    the drug and its raw materials were produced, including all
    information relative to producers, manufacturers, distributors,
    and importers. Would such legislation and such power assist
    Food and Drug in assuring the safety of these kinds of
    pharmaceuticals? Yes or no?
        Mr. Koh. Yes, we want to uphold the safety and quality, so
    thank you for that.
        Mr. Dingell. At the end of the day, American consumers and
    patients are facing 3 problems: 1) the drugs, they need to be
    available and affordable; 2) are there drugs they need safe;
    and 3) are they efficacious? Do they work?
        I believe the committee needs to examine these issues
    carefully and swiftly. Our colleagues in the Senate, Mr. Harkin
    and Mr. Enzi have already called on Food and Drug to improve
    its oversight of the pharmaceutical supply chain. I would hope
    this committee would follow suit, but I would like to have you
    give us a statement of what authorities you need to adequately
    carry that out. I don't believe that sending you a letter
    asking you to do something for which you have no authority
    works. Would you submit, please, for the record because my time
    is up what it is that has to be done to give you the authority
    to address those problems?
        Mr. Koh. I would be happy to, Congressman. Thank you.
        Mr. Dingell. Thank you. Mr. Chairman, I thank you for your
    courtesy. I ask unanimous consent that the responses be
    inserted in the record upon receipt?
        Mr. Pitts. Without objection, so ordered.
        Mr. Dingell. Thank you.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentleman from Louisiana, Dr. Cassidy, for 5 minutes for
    questions.
        Mr. Cassidy. Hello. Thank you.
        Now, you do have the ability to import from overseas
    obviously, and there were issues raised regarding adequacy of
    quality control if you will. We think of Hepburn from China
    causing many deaths, correct? One of the issues that was raised
    here in a previous hearing was that the inspectors, as part of
    their union contract, can refuse to go overseas. And so I think
    Mr. Pallone spoke about inadequate resources, but the issue was
    that here there was enough money to inspect or a requirement to
    inspect a pharmaceutical every 2 years and there is happening
    only every 9, and when I ask could we just redirect resources
    to send that person over to maybe alleviate some of these by
    expanding importation, the point was that the unions would not
    allow this to occur. They had the right to refuse the overseas
    assignment. Is that true and to what extent is that limiting
    our ability to approve the APIs--I forget the acronym but you
    know what I am speaking of.
        Ms. Kweder. In the terms of a shortage situation, that has
    not been a big issue. For the most part, when we have a
    circumstance where some inspection activity is necessary in
    order to prevent a drug shortage, we find that our staff are
    extremely cooperative and willing to roll up their sleeves and
    step in. We are addressing the issue of our inspection force
    more broadly in parallel to this, but it has not been a
    critical issue in mitigating or preventing drug shortages.
        Mr. Cassidy. But there are a heck of a lot of generics
    being manufactured in India and other Third World countries so
    are they just not producing the ones that we are in short
    supply of or are we just not confident of the quality of the
    product which they produce?
        Ms. Kweder. I am not sure I understand your question.
        Mr. Cassidy. So is there a worldwide supply of drugs that
    are currently in shortage here? It is just that we are not
    trusting the manufacturing process by which they are produced
    and therefore do not allow their importation?
        Ms. Kweder. I would say the lack of allowance to import a
    product has been unusual. If there is a foreign source, we are
    usually able to work through and get it approved. There have
    certainly been circumstances where there have been important
    problems that would prevent that, but in most cases if there is
    a foreign source and going to a foreign source is necessary, we
    are able to work through that.
        Mr. Cassidy. OK. In the gentleman who is going to testify
    from Teva, he speaks about how DEA has a quota for controlled
    products and that if somebody goes out of business, that quota
    might not necessarily be assigned to another manufacturer, and
    so you have a kind of centrally planned economy-induced
    shortage. Any comment on that and any way we can address that?
        Mr. Koh. I can start. I know that controlled substances
    represent only a very small part of the drug shortage situation
    that we are talking about, so we do work with DEA but it is
    limited only to several instances. And Dr. Kweder might add
    more.
        Ms. Kweder. And it is more complicated having the DEA
    involved for obviously good reasons. It does create an
    additional step and complicates this, but we work closely with
    the DEA when a controlled substance shortage is at issue.
        Mr. Cassidy. And I understand that but is there any plans
    to make it so that if somebody stops producing their quota it
    is transferred to someone who would? Because I gather that is
    not the situation now. And although we are working closely,
    that is an obvious solution that I am not sure is being
    implemented from your statement.
        Ms. Kweder. We are continuing to try and figure out how to
    expedite these kinds of issues with DEA. And I don't have an
    answer for you about exactly when that will be resolved, but we
    are committed to doing it, as are they.
        Mr. Cassidy. OK. Teva also mentioned--just because I, you
    know, I like to read what the other panels say so I refer to
    this--that the ``speaking of a source or an active
    pharmaceutical ingredient,'' they say that the qualification
    process to identify a supplier for such can be very onerous,
    the qualifying gain after you get approval for a new API
    supplier or alternative manufacturing site for an already-
    approved supplier can take as long as 2 to 3 years. Now, I am
    channeling my inner Teva wherever Teva is. You don't have to
    testify anymore, but what would be your response to that?
        Mr. Koh. Again, these are areas where we are trying to show
    as much regulatory flexibility as possible to accelerate
    approvals when necessary. So we often address these themes
    through the maximum flexibility possible.
        Ms. Kweder. And we already do. Whenever there is an issue
    related to a supplier where it requires FDA to approve a new
    supplier or even a new facility, I think that was one of the
    other concerns. We turn those around very, very quickly.
        Mr. Cassidy. What would----
        Ms. Kweder. In a matter of weeks to months. These are not
    business as usual where there is a long wait time. We
    understand that patients are at the end of this line and we
    need to do everything possible to get on the case and work with
    the companies. And we have done that with Teva.
        Mr. Cassidy. OK. I yield back. Thank you.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentleman from Utah, Mr. Matheson, for 5 minutes for
    questions.
        Mr. Matheson. Thank you, Mr. Chairman. I appreciate your
    yielding time to me and I appreciate you holding this hearing.
    I think we have established the problem. I am sure lots of
    people have talked about circumstances in their district. I
    represent the University of Utah. They project more than 360
    products having shortages and that many products by the end of
    this year. And I was at the Huntsman Cancer Institute just 2
    weeks ago and they were talking to me about the challenges they
    are facing. So I guess everybody up here has a story, but I
    thought I would tell you it is in my backyard as well.
        I was wondering if you could address for me some of the
    concerns about gray market activity as a result of these drug
    shortages and the integrity of what is out there, the quality
    of the medications if they are counterfeit or how we can
    address some of these challenges of a gray market when these
    medications have shortages.
        Mr. Koh. Well, I can start. And first of all, thank you,
    Congressman, for your commitment to research. We didn't say
    explicitly but we can say now that this drug shortage issue is
    dramatically affecting clinical trials as well in cancer and
    infectious disease in many parts of NIH, so that is very, very
    troubling to us as a Nation that prizes scientific advances.
        The gray market, unfortunately, is very poorly understood
    and, as we have mentioned already, it is largely unregulated.
    And to have now this dimension complicating an already
    complicated situation is very disturbing. So we appreciate your
    attention to that and we want to address that as well as all
    the other factors that are involved here.
        Mr. Matheson. Are there actions we should be taking on
    addressing the gray market specifically or should we really
    just be addressing on the underlying problem of the shortage of
    these medications? Is that the more valuable way to address--
    that would eliminate the gray market problem I guess if we
    don't have shortages?
        Ms. Kweder. One of the questions that was asked previously
    was about what we know about the products that appear on this
    gray market.
        Mr. Matheson. Right.
        Ms. Kweder. Do we understand when they expired, where they
    came from, and are they made by the company that is
    experiencing the shortage or are they counterfeit products? We
    don't because we don't have a tracking system within the drug
    supply to know what product comes from where.
        Mr. Matheson. I appreciate that. I will do my 30-second
    advertisement. I just introduced with Mr. Bilbray this week our
    track and trace legislation, pedigree legislation for
    maintaining the integrity of the drug supply in this country.
    We are operating on rules that were created in 1988 and the
    world has changed. I don't think this is going to be on the
    topic of this hearing, but there is just too much money on the
    table for the counterfeiters in terms of the U.S.
    pharmaceutical marketplace, and I hope this committee can take
    a look at this legislation Mr. Bilbray and I have introduced
    because I do think it is an important safety factor for the
    integrity of our supply in general.
        I appreciate your coming here for this hearing. Mr.
    Chairman, I yield back.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentlelady from Tennessee, Mrs. Blackburn, for 5 minutes
    for questions.
        Mrs. Blackburn. I want to thank our witnesses for being
    here, and as you know, some of us arrived a little bit late. We
    did have the Solyndra oversight hearing going on downstairs, so
    we completed that one before coming up. But we are grateful
    that you are here and our second panel of witnesses we are also
    looking forward to. And I am glad we have a Tennessean on that
    panel who will be joining us.
        Just a couple of questions. As you can see, we are going to
    look at how we address this issue and having you here helps to
    inform our decision-making process. So a couple of things I
    would like know, and if you don't have the answer for me,
    please submit it to us so that we can include it in our record.
        I wanted to see if each of you had any examples where you
    had worked closely and collaboratively with your agencies with
    manufacturers' drugs where there was a known or a projected
    shortage and see if you could articulate what that process was,
    the interface that transpired there. And if you have those
    examples, ma'am, please go ahead and give them, and if not, we
    will accept those in writing.
        Mr. Koh. So Congresswoman, I can repeat the example that we
    are very proud to share actually here for the first time that
    had to do with cytarabine, which is a----
        Mrs. Blackburn. OK.
        Mr. Koh [continuing]. Lifesaving drug used for acute
    leukemia. And this shortage received tremendous national
    publicity and represented a dire challenge for cancer patients.
    And so when the FDA worked with the industry on this particular
    drug, they found that one of the issues complicating the
    production was the crystallization of the drug in the solution
    and that re-warming it would restore the safety features that
    would allow infusion into patients. So with that collaboration
    between the FDA and industry, that issue has now been recently
    resolved and we are very, very pleased to report that. And I
    know my colleague has other examples.
        Ms. Kweder. I actually would like to expand on that one----
        Mr. Koh. OK.
        Ms. Kweder [continuing]. Because before the issue of the
    crystals in the vials, where the cytarabine shortage began was
    it was being made by 3 companies but the majority of the supply
    was being made by one firm. They were experiencing significant
    production delays, so what FDA did was we contacted the other
    manufacturers to work with them to increase their production in
    order to be able to supply the market. In the course of them
    increasing their production and trying to produce product
    rapidly, the crystallization occurred in both facilities. So
    that preceded the crystals. We then resolved that activity as
    well. So in that case, we also, when there was concern about
    whether we would find a solution to the crystallization, we
    also investigated alternative manufacturers, whether there were
    any overseas. We were not able to identify any alternative
    manufacturers. They were all U.S. firms.
        Mrs. Blackburn. Let me interject there. Do you have
    examples other than this one? Are there examples where you
    worked with some of those alternative manufacturers and brought
    them into the fold, and then once you identify that there is a
    near-shortage that is approaching, do you think that there is a
    way through the production process or the compensation model to
    provide incentives so that you have a more predictable supply?
        Mr. Koh. Well, another example that we can provide for you,
    Congresswoman, has to do with purple fall, which is an agent
    that is used in anesthesia. And when those shortages started
    occurred, the FDA could facilitate temporary importation of a
    substitute agent to help ameliorate that situation. So that is
    yet another example and I know the FDA has many others. The
    economic issues here are so complex that offering any economic
    solution requires first a careful analysis. And we are trying
    to do more of that, especially through our assistant secretary
    for planning an evaluation and we hope we can come out with
    some more definitive recommendations for you in that area in
    the near future.
        Mrs. Blackburn. Thank you. We appreciate that, and in the
    interest of time, I will yield back.
        Mr. Pitts. The chair thanks the gentlelady and recognizes
    the gentlelady, Mrs. Myrick, for 5 minutes for questions.
        Mrs. Myrick. Thank you, Mr. Chairman. And thank you all,
    all of our witnesses for being here. I was also at another
    hearing so I am sorry I missed your testimony and some of the
    questions.
        Like everybody else, our area is experiencing the same
    problems and our doctors, we meet with them constantly. But
    particularly in anesthesiology and oncology as you well know,
    we have the problems. And it is scary from the standpoint of
    what could happen with somebody if they are given another drug
    that really doesn't either work or they, you know, have a
    reaction to it or something. And thank you very much for any
    efforts in trying to get to the bottom of it.
        And I wanted to ask if really the consolidation has taken
    place in the drug industry over the last few years and
    continues to place, you know, what effect or how does that
    contribute to the problem that we are seeing today? I mean is
    this a large contributing factor because of fewer manufacturers
    available?
        Mr. Koh. Thank you, Congresswoman, for your interest and
    support. And yes, we view industry consolidation as one of the
    driving causes here, and as you can imagine if you are a
    denominator of or a manufacturer shrinks and then any one of
    them has a manufacturing problem or delay, it really puts the
    onus on the others, and if the others don't happen to produce
    that product and if this particular company is a sole source
    producer, then you have the number of occasions that we are
    seeing right now. So there is no doubt that industry
    consolidation has contributed to this.
        Mrs. Myrick. So what if any recommendations do you have of
    how we get over this hump? Because, you know, you mentioned the
    generics which we are all very much aware of and the fact that
    are just as popular to do because of the cost factors and other
    things that have entered into it. I mean what is it that you
    think we should be doing or looking at to try and get to the
    bottom of how we can help with this.
        Mr. Koh. Well, we again want to stress the importance of
    communication and early notification because that will help all
    parties to work together. And as the number of industries
    involve shrinks, we want to really maximize our communication
    with those manufacturers, and we are doing so as we speak. And
    then as Dr. Kweder mentioned, we also want to have more
    assurances that the products that are being produced have high
    quality so that we don't run into these quality and
    manufacturing issues. So those are 2 things that would be very
    helpful to us.
        Mrs. Myrick. And you find the companies work well with you?
        Mr. Koh. We have had excellent dialogue to date and I want
    to do much more of that, not just the FDA but the entire
    department and also engage the public in this as you have
    heard.
        Mrs. Myrick. Thank you. I will yield back, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentlelady and recognizes
    the gentleman from Pennsylvania, Dr. Murphy, for 5 minutes for
    questions.
        Mr. Murphy. Thank you. And I thank this distinguished panel
    and we appreciate your concern for our citizens of this
    country.
         A couple areas here. Are you meeting with the
    manufacturers? I want to ask a couple questions to find out
    here with regard to what are some of the causes of this drug
    shortage. You laid out a number of these things very well,
    thank you. But let us say, for example, cancer drugs. Why the
    shortages with cancer drugs? We know they are very expensive in
    many cases. What specifically is the reason for that?
        Mr. Koh. Well, it is very distressing, Congressman, some of
    these time-honored lifesaving medications now being caught in
    the middle of this public health crisis and some of the agents
    we have mentioned here, cytarabine, vincristine, bleomycin,
    time-honored agents that have been shown to be effective for
    decades are now stuck in these shortages. So again these are
    older generic sterile injectable drugs that are typical of the
    ones that are being----
        Mr. Murphy. But can I ask specific things. Do we not have
    enough manufacturers, for example, working on these things? Is
    that part of the problem?
        Mr. Koh. That is part of the problem, again, because the
    industry has consolidated and so we don't have the dozens and
    dozens----
        Mr. Murphy. Of those who are there, are they not working at
    capacity? Do we know if that is an issue?
        Mr. Koh. I am not sure I can address that directly.
        Ms. Kweder. I think that what often happens in a lot of
    these companies, they make dozens of products.
        Mr. Murphy. Um-hum.
        Ms. Kweder. These sterile injectables can only be made in
    certain types of facilities so there are a limited number of
    those. And because of the market and the few number of
    producers, there is pressure to produce and continually
    produce. And so maintenance of the facilities themselves is
    often put off because it requires an investment on these low
    profit margin----
        Mr. Murphy. They are expensive, the low profit margins?
        Ms. Kweder. Right. Some of them are not terribly expensive
    but low profit margin. So there is----
        Mr. Murphy. That is important what you just said. So this
    is one of the concerns we have. Certainly, we want medications
    to be affordable. I mean why window shop when you can't afford,
    but in our push to make sure that drugs are affordable, are we
    also tripping over ourselves? It is hurting the patients when
    we say we want there to be such a low profit margin that it
    ends up backfiring and we don't end up with the medications
    that save lives? Is that part of our policy that is getting
    away for us?
        Mr. Koh. Well, thank you for posing those questions and
    obviously ultimately our goal is to protect the patient and
    give timely delivery of a lifesaving medication----
        Mr. Murphy. And even if you don't have the information
    today, is that something you could advise us on? I am looking
    for anything politics aside. I really want to know from the
    standpoint of myself as a healthcare provider. If we are doing
    something that is saying we want drugs to be affordable but we
    are cutting the price so much that people don't want to make
    them, that is a serious concern. And so my question is policy
    interference. If you can't answer that today, I just want to
    know if you will get back to us with that.
        Mr. Koh. Sure, Congressman. Those are precisely the issues
    that we are wrestling with as a department and as a country. So
    thank you for posing that.
        Mr. Murphy. And I say this from the standpoint of, look,
    what oftentimes what goes around the Hill is lots of
    accusations and politics. We can't afford to engage in any of
    that on these lifesaving issues. And so I am trusting you to
    give us those honest answers and I really appreciate it from
    one colleague to another here.
        Mr. Koh. Thank you so much, Congressman.
        Mr. Murphy. And also with regard to inventories, I am
    hearing that hospitals are saying they are having a hard time
    keeping their inventory. It is not an issue that they are not
    purchasing enough, correct? Or is it? If a hospital says we
    can't have some of these things in supply because it may be too
    expensive or too difficult for us to keep these in inventory
    because of special requirements for how to maintain them, how
    to secure them, the special conditions under which they might
    be--is that part of the problem, too, they may not be ordering
    enough because for themselves it is also very expensive?
        Ms. Kweder. I believe that it can be a problem. There also
    has been a trend--this is certainly not 100 percent but there
    has been a trend in the industry to have what some people call
    just-in-time production.
        Mr. Murphy. Um-hum.
        Ms. Kweder. They don't have the long lead time at
    production that may be--particularly for these sterile
    injectables that there may be for other products that have
    longer shelf lives. So they tend to make less and distribute it
    out in smaller amounts----
        Mr. Murphy. Um-hum.
        Ms. Kweder [continuing]. Which certainly contributes to
    hospitals not being able to maintain a large supply and cushion
    in addition to what the other concerns that you mentioned----
        Mr. Murphy. And again, the just-in-time inventory is one
    where they are thinking that they also have a small margin. I
    mean it is one of these things, look, we understand healthcare
    is expensive. Sickness is more expensive and we all want to
    work together. And so I do appreciate and look forward to
    seeing your information on this. Thank you very much.
        I yield back, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentleman from Georgia, Dr. Gingrey, for 5 minutes for
    questions.
        Mr. Gingrey. Mr. Chairman, thank you very much. I am sorry
    I missed a lot of your testimony, witnesses, but thank you for
    being here.
        Let me first address to Secretary Koh, in your testimony
    you cite that there were 178 drug shortages in 2010 and that
    sterile injectable drugs make up a large and increasing share
    of these shortages and by my count, roughly 132 of the 178 were
    for sterile injectables. Of these injectable drugs, can you
    tell me how many were in shortage in previous years? Has it
    been a long-term problem or just more recently?
        Mr. Koh. This is a long-term problem, Congressman, and
    unfortunately, the trend is going the wrong way. The shortages
    are increasing year by year. We did it back through 2006 and
    the trend is getting worse since then.
        Mr. Gingrey. And then tell me this. Are there any other
    common characteristics that you are aware of among these 132
    besides the fact that they are generic and they are sterile
    injectables? For instance, are these drugs typically newer
    generics or drugs that have been on the market for years?
    Actually, you just answered that and I thank you. Well, the
    other thing on that is are the profit margins typically very
    low or any other issues that you might be aware of?
        Mr. Koh. So on the first question, Congressman, the irony
    here is that these are older generic drugs that we understand
    are very helpful if not lifesaving and so to have this
    situation is really quite ironic and tragic. And you are right,
    there is an issue with respect to business forces here and the
    profit margin is understood to be quite low for many of these
    individual products.
        Mr. Gingrey. And my last question can really go to either
    one of you, Mr. Secretary or Dr. Kweder. Am I saying that
    correctly? Good. Help me understand something. Mr. Shimkus
    earlier addressed this. Many of the drugs we are talking about
    are these older generics, not just the sterile injectables,
    where the profit margins can often be very low. These low
    profit margins can oftentimes lead to very little competition
    or even drugs for which only one company make the product. Mr.
    Shimkus raised this point about the market prices and I
    understand maybe, Secretary Koh, you tried to answer this for
    him. I just want to be clear. Do either one of you have any
    thoughts as to why you get to the point where there is a
    limited number of manufacturers of a particular generic, why
    the prices at that point remain low? I mean the market should
    be able to work--the market of supply and demand and obviously
    when a brand name drug, which is very expensive, first goes
    generic and you have several manufacturers jumping in an
    producing that generic at a much, much lower price, and then
    finally it gets too low for some of them to survive, they stop
    doing it and go on to something else, maybe another generic and
    a couple or maybe even one company hangs on. It would seem
    because of supply and demand that that company would be able to
    raise their prices. Are there any government rules,
    regulations, laws, pharmacy benefit managers, something that
    would cause them not to be able to raise their prices even
    though the market would certainly let them do that otherwise?
        Mr. Koh. Yes, Congressman, so we have come to understand
    that this is a complex business situation where the standard
    economic principles of supply and demand do not easily apply.
    And we have manufacturers, we have purchasers, providers,
    hospitals, we have group purchasing organizations and pharmacy
    benefit managers, so we have multiple forces here all working
    to the final outcome that ordinarily you would see with a rise
    in pricing profit, but that doesn't apply here. So this is why
    we need the extra analysis that our department is doing and
    others and we welcome new information and modeling to really
    help us understand the root causes better.
        Mr. Gingrey. Dr. Kweder?
        Ms. Kweder. I think the questions that you raise are
    exactly some of the questions that we have as we really try to
    understand the roots of this problem. What are the things that
    could be done to try and prevent these shortages from occurring
    or even being at risk in the first place.
        Mr. Gingrey. Well, I thank both of you for those answers
    because, you know, the Federal Government tries to do the right
    thing in many instances--I would hope in all instances and it
    seems that far too much of the time they screw it up. And so
    that is why I ask you those questions and I hope that you will
    continue to look at that so that market forces can continue to
    prevail. Then I don't think we would be faced with these
    shortages.
        Mr. Pitts. The gentleman yields back? This is the round of
    questions for the subcommittee members. We have a couple of
    members of the committee who have joined us. The chair
    recognizes the gentleman, Mr. Walden, for 5 minutes for
    questions.
        Mr. Walden. I thank the chairman very much, first of all,
    for his recognition since I am not a member of the subcommittee
    but also for having this hearing. And I appreciate the
    testimony from the 2 witnesses today. I got involved in this
    issue some time ago because of an oncology doctor in my
    district, Dr. Chuck Dibs, who brought this issue to my
    attention, my staff's attention. And the drug specifically that
    I recall he mentions was--and I will try and say this right--
    doxorubicin. Is that right? I understand it is an ovarian
    cancer drug which he has prescribed for a very long time,
    apparently a very effective drug. And I am not a doctor but
    that is what he tells me. What was the FDA's role in
    interrupting the production of that drug? Can you speak to
    that?
        Ms. Kweder. I can speak to that very generally. There were
    several companies that produced doxorubicin. One of them which
    was the major supplier also was the same producer for the
    cytarabine, APP, that Dr. Koh mentioned earlier. Some of the
    issues were exactly the same. There were facility issues,
    production delays because of, you know, chronic problems in an
    aging facility is probably the best way to summarize it. What
    FDA did was we worked with the other 2 producers to facilitate
    their ability to increase production. It did take a while. As I
    said, these are complex products to make. Companies can't just
    ramp up production overnight.
        Mr. Walden. Right.
        Ms. Kweder. But in the meantime, a fourth company came in
    with a new version of the product and helped to make up the
    supply. So we make sure to expedite review of that fourth
    company's application and the inspections, et cetera, that were
    necessary in order to turn this around.
        Mr. Walden. Now, Dr. Koh, do you have any comment on that?
        Mr. Koh. I think Dr. Kweder summarized it well.
        Mr. Walden. So you feel like you have taken all the steps?
    This drug is now available on the market again and without
    shortage? Is this accurate?
        Ms. Kweder. My expert tells me, yes. Yes, doxorubicin
    itself is. There is another version of the drug that is sort of
    a special formulation that has a sole source that continues to
    be a problem, but again, that is a different company.
        Mr. Walden. All right. I know, Dr. Koh, you mentioned glass
    and metal in injectables I think you were discovering which
    sends sort of shivers up everybody's spine. I have also heard
    though that with the new technologies, the scientists are able
    to see deeper into the drugs we had ever seen before in parts
    per billion or whatever. Again, this is your field, not mine.
    But are we looking deeper and finding things that we never knew
    was there before and is that really a problem from a health
    standard or is it a question that may play a role?
        Mr. Koh. Well, again, those examples, Congressman, are very
    graphic examples on the quality issues that we are facing. I
    must say though that again the FDA has worked with companies so
    in the case of particulate matter--pieces of glass, pieces of
    metal--first to identify the issue but also there have been
    advances in developing filtering systems so we can filter those
    out and make those drugs then safe to inject into patients. So
    that is another example of regulatory flexibility that has
    marked this chapter of our history. So I guess the end of my
    time is about to expire but--I mean my time to ask questions is
    about to expire. I just want to clarify that.
        It is this sense of urgency. I applaud you for bringing
    people together and trying to figure this problem out, but as I
    am hearing from both Dr. Dib and others in my district there is
    this, you know, patient comes in, the drug is not available,
    they have been prescribed it for years, it is effective, it
    works, and they can't get it. I know my own mother had ovarian
    cancer and died from it and so I have just this sense of
    patient urgency. I know you feel that, both of you. We all do.
    And so if there is a way we can play a constructive role here,
    whether it is Ms. DeGette's bill on notification, I mean she
    has put a lot of work into this. You know, we just need to do
    everything we can to be a partner in this to find a solution. I
    look forward to working with both of you and members of this
    committee to the extent they will let me play a role. So with
    that, I would yield back the balance of my time.
        Mr. Pitts. The chair thanks the gentleman and recognizes
    the gentlelady from Colorado, Ms. DeGette, for 5 minutes for
    questions.
        Ms. DeGette. Thank you very much. And I want to thank my
    colleague from Oregon for the free commercial announcement.
        Mr. Chairman, thanks for letting me participate. It is good
    to be back in my old stomping grounds of the House
    subcommittee. As I know you have been discussing, Congressman
    Rooney and I have introduced in a bipartisan way the Preserving
    Access to Lifesaving Medications Act, which creates an early
    warning system between FDA drug companies and providers so that
    we can respond to these drug shortages quickly and efficiently.
    Do I think that this bill will solve the root problems of the
    drug shortage crisis? No. But do I think it is a necessary
    first step? Absolutely. And I appreciate the witnesses coming
    here to talk to the members of this committee.
        This bill came up because Mr. Rooney and I independently
    were going around meeting with our hospitals and our doctors
    and suddenly, they started saying to us, you know, I was in the
    middle of a chemotherapy treatment of a child and suddenly I
    couldn't get the drug. And I am sure it didn't happen
    immediately but it seemed like it did. Doctor, you are shaking
    your head. Do you want to comment on that?
        Ms. Kweder. Well, to the prescriber, you know, they are not
    following, you know, Web sites. They just know that they can't
    get the drug and they have a patient who is ill and needs it
    today or tomorrow and not in 2 months when the supply can be
    re-upped, and that is a very difficult position to be in as a
    physician and even worse as a patient.
        Ms. DeGette. And is there some reason why these shortages
    have increased recently? Either one of you?
        Ms. Kweder. We are trying to understand that. Some of the
    things that we have identified is that these are products that
    are complicated. Most of the products that have been
    problematic are complicated to produce, there are a limited
    number of producers, and many of them are working in facilities
    that are aging and have had chronic challenges in maintaining
    production or product quality.
        Ms. DeGette. Yes. And you know, I think before I got here,
    Mr. Chairman, you had discussed the current reporting system,
    which is the reporting system for companies that don't have
    competition and it is a voluntary system. Even though it is
    much more limited, it has really worked. In 2010, 38 drug
    shortages were avoided when the Agency was given advance
    notice. And I just want to give a couple of examples. In August
    of 2009, Hospira notified FDA of their intention to discontinue
    the drug potassium phosphate in 2010 due to low volume. The
    drug is often critical for neonatal care. Hospira received a
    note back from the FDA drug shortage in September 2009 thanking
    them and then in March 2011 the other supplier of potassium
    phosphate, American Regent, recalled its product because of a
    quality issue. So what happened then is in April 2011, the FDA
    made Hospira aware of the drug shortage caused by the recall
    and asked them to assess their ability to return to
    manufacturing. And then in that same month, Hospira told the
    Agency that they would return to manufacturing potassium
    phosphate so that the patients could be served. And so it
    worked. But that is on a very limited basis. And so I just
    think that this could really work.
        And I guess I want to ask you, Dr. Koh, in my minute
    remaining, how will it work if we enact legislation like this
    to get the information into the providers' hands that there is
    an impending drug shortage? Because you folks have had some
    experience with it.
        Mr. Koh. Sure. And Congresswoman, first of all, thank you
    for your leadership on this issue. It is very, very much
    appreciated. And we all feel that establishing the highest
    level of communication as early as possible about any potential
    shortage could give us the opportunity all to be proactive. And
    that is not just FDA and HHS but also providers and hospitals
    and patients. So if we can do this together, understand that a
    potential shortage is on the horizon as soon as possible, make
    that information available to relevant parties and ultimately
    to patients and the public, then we can all work together in a
    proactive way.
        Right now we are in a situation that you have summarized
    very well where the reporting is voluntary. Oftentimes the FDA
    does not know until too late and then patients are stuck in
    this dire situation, which is just not acceptable. So we are
    looking forward to greater emphasis on early notification and
    communication.
        Ms. DeGette. Great. Thank you so much, Mr. Chairman. My
    time has expired.
        Mr. Koh. Thank you, Congresswoman.
        Mr. Pitts. The chair thanks the gentlelady.
        Before we go to Panel 2, we have one request for a follow-
    up for Panel 1. Without objection, we will let Dr. Cassidy ask
    that follow-up question.
        Mr. Cassidy. Thank you. My office had looked into I think
    maybe it had been cysteine. And there was a problem that we
    heard back from you of endotoxin being in the product and it
    was unclear where in the manufacturing process that endotoxin
    had been introduced. Now, obviously that is an issue and
    frankly, I called my constituent. I said FDA did the right
    thing. We don't know whether endotoxin was introduced. It is
    very disturbing to me that endotoxin should be in the product
    so we are kind of euphemistically speaking about manufacturing
    problems but really they are significant. So is it a pattern?
    And when we are saying manufacturing that know there is
    actually some sort of contamination such as endotoxin for which
    in their GMP they do not know where it is entering. Because
    that is a process problem that is of tremendous concern.
        Ms. Kweder. The answer is yes. That is exactly the kind of
    thing that we are concerned about. When you find end product
    that has endotoxin in it, the first thing one needs to do is
    figure out how that endotoxin is getting in there in the first
    place. And there are multiple steps in production where that
    could be occurring and figuring it out is not easy and it can
    take a very long time to determine that and then a long time to
    fix it. And particularly we see this with metal shavings in
    medicine, glass shards in vials, all things that would be
    unconscionable to give to patients. But the key is being on top
    of those good manufacturing practices and maintaining
    facilities to avoid those kinds of events. And where you have
    facilities that are in 100 percent production mode all of the
    time, it is often difficult to maintain your facilities and
    modernize them in a way for a company to assure that they are
    producing a reliably high-quality product.
        Mr. Cassidy. Thank you, Mr. Chairman.
        Mr. Pitts. The chair thanks the gentleman. I believe Mr.
    Pallone has a follow-up as well.
        Mr. Pallone. Dr. Koh, as Mr. Shimkus said earlier, classic
    economics would suggest that when a product is in demand,
    prices should rise and the market establish a new equilibrium,
    yet we are now in the seventh consecutive year with more
    shortages than the year before. I am also curious why the
    market has failed to establish an equilibrium because both Mr.
    Shimkus and Mr. Guthrie discussed public program pricing
    constraints, and as I understand these constraints, they apply
    to brand name drugs and not generics. Is that correct that they
    only apply to the name brand and not generics?
        Mr. Koh. Well, Congressman, those economic issues are
    precisely the ones that we are analyzing right now. And we have
    especially our assistant secretary for planning and evaluation
    and health economists looking at the economic principles and
    the modeling that could help us predict where we need to go in
    the future. So thank you again for raising these issues. These
    are very, very complicated business and economic models we have
    come to find.
        Mr. Pallone. The generic drugs are where we have seen most
    of the drug shortages in recent years.
        Mr. Koh. That is right.
        Mr. Pallone. I mean if there is that distinction, is that
    the problem?
        Mr. Koh. Well, we do know that is it older generic sterile
    injectables that are making up about 3/4 of these shortages.
    And so that is where we are indeed focusing our attention.
        Mr. Pallone. I don't know if either Mr. Shimkus or Mr.
    Guthrie asked you if you said you were going to get back to
    them, but, you know, I would really like to get some answers,
    you know. I mean obviously you are not prepared or you don't
    feel you have an answer today, but I would like you to get back
    to us through the chairman if you could.
        Mr. Koh. I would be happy to, Congressman. So again I did
    mention we have an upcoming report from the FDA that is going
    to give further economic analyses that are also intensely
    underway right now.
        Mr. Pallone. Is that going to relate to this or you don't
    know for sure?
        Mr. Koh. Hopefully we will get a better understanding of
    root causes.
        Mr. Pallone. Mr. Chairman, if he could get back to us on
    that because I know many of us have sort of asked the same
    question and I would really like to know.
        Mr. Koh. Sure. Thank you.
        Mr. Shimkus. If the chairman would yield just on this
    point.
        Mr. Pitts. Go ahead.
        Mr. Shimkus. And I thank my friend for following up on this
    debate and this question. But in my opening statements, I
    didn't just focus on the government pricing. I did say
    insurers, too, so I mean we are all kind of in this together
    and the market going to work it has got to work. So I just
    wanted to just correct the record. I wasn't just picking on----
        Mr. Pallone. Oh, no, I understand. I just wanted to bring
    up the public program aspect. Whenever, you know, you can get
    back to us on it because I think, you know, I mean I understand
    to be perfectly honest, I mean a lot of the questions that we
    have asked today we have gotten a response and we have a little
    better idea, but I almost feel like more questions have been
    raised than answered today. And that is not anybody's fault but
    that is kind of where I feel we are right now, Mr. Chairman.
        Mr. Pitts. All right, thank you. If you will respond to the
    questions in writing, we will get those to the committee
    members----
        Mr. Koh. Thank you, Chairman.
        Mr. Pitts [continuing]. And I look forward to reading your
    report. The chair thanks the first panel for your----
        Mr. Koh. Thank you very much.
        Mr. Pitts [continuing]. Testimony. Thank you. We will call
    at this time Panel 2. And our second panel consists of 7
    witnesses. Our first witness is Mr. Jonathan Kafer, Vice
    President of Sales and Marketing for Teva Health Systems and
    testifying on behalf of Teva Pharmaceuticals. Next is Mr. John
    Gray, the President and CEO of Healthcare Distribution
    Management Association. Our third witness is Kevin Colgan. He
    is the corporate director of pharmacy at Rush Medical Center in
    Chicago. Our fourth witness is Mr. Mike Alkire, Chief Operating
    Officer of Premier, Inc. Next, we will hear from Dr. Charles
    Penley, who is testifying on behalf of the American Society of
    Clinical Oncology. We also have Mr. Richard Paoletti, the Vice
    President of Operations at Lancaster General Health. And
    finally Dr. Robert DiPaola, Director of the Cancer Institute of
    New Jersey.
        We thank all of you for coming. Your written testimony will
    be entered into the record. We ask that each of you would
    summarize your testimony in 5-minute opening statements.
        And Mr. Kafer, you may begin your testimony.

      STATEMENTS OF JONATHAN M. KAFER, VICE PRESIDENT, SALES AND
      MARKETING, TEVA HEALTH SYSTEMS; JOHN M. GRAY, PRESIDENT AND
     CEO, HEALTHCARE DISTRIBUTION MANAGEMENT ASSOCIATION; KEVIN J.
    COLGAN, CORPORATE DIRECTOR OF PHARMACY, RUSH UNIVERSITY MEDICAL
        CENTER, ON BEHALF OF AMERICAN SOCIETY OF HEALTH-SYSTEM
      PHARMACISTS; MIKE ALKIRE, CHIEF OPERATING OFFICER, PREMIER,
    INC.; W. CHARLES PENLEY, CHAIR, GOVERNMENT RELATIONS COMMITTEE,
     AMERICAN SOCIETY OF CLINICAL ONCOLOGY; RICHARD PAOLETTI, VICE
      PRESIDENT, OPERATIONS: PHARMACY, LABORATORY, AND RADIOLOGY,
     LANCASTER GENERAL HEALTH; ROBERT S. DIPAOLA, DIRECTOR, CANCER
                        INSTITUTE OF NEW JERSEY

                     STATEMENT OF JONATHAN M. KAFER

        Mr. Kafer. Thank you, Chairman. Chairman Pitts, Ranking
    Member Pallone, and distinguished colleagues within the
    subcommittee and full committee, thank you very much for the
    opportunity to be here today. As referenced by the chairman, my
    formal testimony has been submitted to you. I am more than
    willing to answer questions specific to that testimony
    throughout the questioning period and I will summarize my
    remarks in my opening.
        I am John Kafer. I am vice president of sales and marketing
    for Teva Health Systems, representing Teva Pharmaceuticals.
    Teva Pharmaceuticals is a global leader in brand, generic, and
    biologic pharmaceutical products. We are a market leader in
    many of the markets in which we serve. Here in the United
    States, we are the market leader in generic products. We have a
    vast portfolio including many dosage forms, including oral
    solid presentations, injectable presentations, including a
    significant portfolio of oncology generic injectable
    presentations, and I look forward during the questions period
    to share some insights specific to that very important
    category.
        As referenced, we are a market leader. Teva is a market
    leader and we understand and embrace the responsibility that
    does come with being a market leader, and in that context, I am
    very happy to be here today.
        One side note, as all of us have been, we all have personal
    stories as it relates to family, friends, people we know,
    individuals that have been impacted by not being able to get
    medications. In my particular situation, I have friends and
    family as well. Given the role I play, they reach out to me
    hoping I may be able to make a difference. Unfortunately, there
    is many times I can't and it is very challenging. At the same
    time, given the role I play, I hear from patients, I hear from
    family members of patients, I hear from constituents, I hear
    from physicians looking to the manufacturer to ask the
    question, ``Why?'' And we respond and we certainly understand
    that.
        And at the same time, I see every day when I go to work
    hundreds and hundreds of people working tirelessly around the
    clock, sparing no expense to do whatever we can to return to
    historical production volumes so that we can get these critical
    products back to market.
        As referenced in earlier testimony, this is a very complex
    multi-stakeholder issue and it is going to require the
    coordination and communication amongst all those stakeholders
    in order for us to resolve this issue. As noted in earlier
    testimony as well, there are many factors that impact the drug
    shortage issue, whether it be API being sourced and available.
    We have discussed that. The industry has experienced
    manufacturing challenges. I will go into greater detail
    specific to how it impacts a sterile facility versus an oral
    solid facility. And there has been regulatory impacts on
    facilities.
        As appropriate and as required, the FDA regulates these
    complex facilities and these products to assure that the
    manufacturing community is operating within full CG&P
    compliance, ultimately to provide the highest quality of
    products to all of us in this room. We understand that and, as
    a manufacturer, we certainly embrace that.
        Most of the shortages, however, are unanticipated. Those
    unanticipated shortages can have boomerang effects up and down
    the supply chain. And as noted in earlier testimony, as we will
    get into in greater detail, there are a handful of
    manufacturers that sometimes are unable to pick up the lost
    supply from another manufacturer, and we will go into detail
    around that as well.
        What is Teva doing specifically to address some of the drug
    shortage issues? We have made a significant investment in
    enhancement of our facilities as well as our quality systems.
    We have unrestricted access to our resources globally to
    prioritize those people in those facilities that require the
    work that needs to be done to get the products back to market.
    We have embarked on a very aggressive redundancy plan. There is
    no requirement to a manufacturer to have a secondary or
    tertiary facility qualified to manufacture these products. We
    have identified, in combination with drug shortage division,
    those most critically medically necessary products and we have
    5 FDA-approved facilities and we have put a team in place that
    is actively working on redundancy planning for these critical
    products.
        As referenced also from the testimony of Dr. Kweder and Dr.
    Koh, there has been extraordinary collaboration within the FDA
    branches as it relates to resolving and mitigating these
    challenges. I can speak to a couple of different references. 1)
    There was a discussion earlier in testimony around coordination
    of importation of products to alleviate critical drug
    shortages. There was a specific instance in which we worked
    with the FDA to bring in a product called leucovorin that is
    used in combination with chemotherapy twofold to enhance the
    effectiveness of that treatment as well as to mitigate side
    effects. We brought it in, we had a significant amount of
    resources to work collaboratively with that, and we were able
    to help mitigate that problem.
        The solutions that we are looking at, recognizing it is a
    multi-stakeholder issue, I do need to comment that as it exists
    today, there is tremendous cooperation within the drug shortage
    group and the manufacturing community. As referenced earlier,
    there is no formal process. It is an informal process. And I
    can speak on behalf of Teva and the other leading manufacturers
    in this space that we do all collaborate with the FDA, as
    testified earlier, and we take that very seriously and we are
    responding where we can. The doxorubicin example mentioned
    earlier, I received a phone call from York shortage, do what we
    can. We were able to work in collaboration with them and get
    product released to market and we continue to prioritize those
    types of products.
        During questioning, I would be more than happy to go into
    greater detail around how we are seeing the coordination and
    the effectiveness and how we would like to see a greater
    communication amongst multiple stakeholders beyond the
    manufacturer and FDA. Going forward, we had seen discretion by
    the Agency deployed to allow earlier available of key products.
    That is working. We would like to see a process in which we can
    get that on the front end as well to potentially mitigate
    potential problems while incorporating remedial steps that have
    no impact or concern to the patient.
        I know I am over my time share, so I apologize.
        [The prepared statement of Mr. Kafer follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.034

        [GRAPHIC] [TIFF OMITTED] 77032.035

        [GRAPHIC] [TIFF OMITTED] 77032.036

        [GRAPHIC] [TIFF OMITTED] 77032.037

        [GRAPHIC] [TIFF OMITTED] 77032.038

        [GRAPHIC] [TIFF OMITTED] 77032.039

        [GRAPHIC] [TIFF OMITTED] 77032.040

        [GRAPHIC] [TIFF OMITTED] 77032.041

        [GRAPHIC] [TIFF OMITTED] 77032.042

        Mr. Pitts. The chair thanks the gentleman. Mr. Gray, you
    are recognized for 5 minutes.

                       STATEMENT OF JOHN M. GRAY

        Mr. Gray. Good morning, Chairman Pitts, Ranking Member
    Pallone, and the members of the Energy and Commerce
    Subcommittee on Health. I am John Gray, President and CEO of
    the Healthcare Distribution Management Association, Arlington,
    Virginia. I appreciate the opportunity to come here today,
    provide some overview of the pharmaceutical distribution system
    and inform your committee on efforts regarding some critically
    important issue around drug shortages.
        A little history--HDMA is a national association
    representing America's primary healthcare distributors, a vital
    link in our Nation's system of healthcare distribution. Each
    business day, our 34-member companies ensure that nearly 9
    million prescriptions, medicines, and healthcare products are
    delivered safely and efficiently to nearly 200,000 pharmacies
    and clinics, hospitals, nursing homes, and other providers
    nationwide. Approximately 90 percent of all pharmaceutical
    product sales in the United States flow through our member
    companies. Continuous innovation and operation efficiency have
    really set our members apart in trying to annually contribute
    an estimated about $42 billion in value to the Nation's
    healthcare system.
        Now, Federal law defines wholesale drug distribution as
    ``the distribution of prescription drugs to other than the
    consumer or patient.'' Wholesale distributors are licensed
    entities that are bound by a range of Federal and State laws.
    In addition, our distributors must comply with licensure
    requirements in every State in which they operate.
        It is important to note HDMA members are primary
    distributors. I said that earlier; I will reiterate it. But
    they buy predominantly from pharmaceutical manufacturers and
    sell only to appropriate licensed customers, the vast majority
    of which are pharmacies or healthcare providers.
        Pharmaceutical products are distributed through a highly
    coordinated supply chain in this country to provide maximum
    efficiency and effectiveness and safety. Pharmacies and other
    healthcare entities generally place orders for prescription
    medicines by 8 o'clock in the evening and receive deliveries
    from their distributors the next morning. The average
    distribution center in this country processes nearly 2,000
    orders a day. On the average, a warehouse maintains about 30
    days of inventory level. This number varies by product, is
    subject to demand, seasonality, cost, and other factors.
    Pharmaceutical products with special handling requirements
    typically have shorter cycle times in the system.
        Distributors provide an array of services for manufacturers
    beyond simply the movement of product, including but not
    limited to receivables risk management for the manufacturer,
    customer validation, order management, inventory management
    tracking, processing returns and recalls, and contract
    management. For pharmacy and provider customers, our
    distributors provide an equal array of services, including
    aggregate ordering, assistance with stocking needs, support for
    information systems and software, as well as accounting and
    credit support. In the case of inventory management,
    distributors are able to fill customer orders 6 or 7 days per
    week, 365 days a year, which limits the need for large
    inventory levels at the pharmacy level.
        In sum, distributors serve to maximize the efficiency
    between manufacturers and healthcare providers by managing a
    very complex network of products of systems by efficiently
    providing mechanisms for this seamless transformation of
    information and product.
        Through the unique position of distributors and our close
    relationship with all the stakeholders, we are acutely aware of
    the impact of drug shortages on patients. Effectively
    addressing the drug shortage is difficult and complex for the
    entire healthcare community in large part because the shortage
    typically appears with little or no warning and often requires
    significant resources to manage. HDMA and our member companies
    work hard to improve the communications within the supply chain
    from manufacturer to distributor to provider where possible and
    try to mitigate the impact of the drug shortage.
        Although distributors do not manufacture product, they do
    play an important role in helping to coordinate and share
    information about drug shortages when those shortages arise.
    Distributors are typically notified of a shortage by a
    manufacturer or a provider partner. Once that shortage
    information is received, distributors communicate with their
    manufacturer partners about product availability to understand
    the scope and expected duration of any shortage. Then the
    distributor works as quickly as possible with customers to fill
    orders to the extent they are able to do so based upon
    purchasing history or, if necessary, to identify alternative
    products in the supply chain. So as you can appreciate, there
    is a delicate balance between the need to share information at
    the appropriate level, but at the same time preventing an
    environment for panicked buying.
        HDMA has worked collaboratively with the American Society
    of Health System Pharmacists, Federal agencies and the
    Congress, and other supply chain partners to share expertise
    about the whole drug supplies chain. In addition, we are
    working with our distributor members and manufacturer providers
    to update voluntary industry guidelines on improving
    communications between supply chain partners in the event of
    shortages. We hope this effort will contribute to the better
    management of the process in its entirety.
        HDMA strongly believes the healthcare industry as a whole,
    the government, and stakeholders must continue to work together
    towards some collaborative solutions of this problem that
    mitigate the impact of the shortages, and most importantly, the
    impact on the key stakeholder--the patient. To that end, I
    thank you again for this invitation to participate and I hope
    the overview has been valuable. And I look forward to your
    questions.
        [The prepared statement of Mr. Gray follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.043

        [GRAPHIC] [TIFF OMITTED] 77032.044

        [GRAPHIC] [TIFF OMITTED] 77032.045

        [GRAPHIC] [TIFF OMITTED] 77032.046

        [GRAPHIC] [TIFF OMITTED] 77032.047

        [GRAPHIC] [TIFF OMITTED] 77032.048

        [GRAPHIC] [TIFF OMITTED] 77032.049

        Mr. Pitts. The chair thanks the gentleman. Mr. Colgan, you
    are recognized for 5 minutes for an opening statement.

                      STATEMENT OF KEVIN J. COLGAN

        Mr. Colgan. Good morning and thank you, Chairman Pitts,
    Ranking Member Pallone, and distinguished members of the
    subcommittee, for holding this hearing. My name is Kevin
    Colgan. I am the corporate director of pharmacy at Rush
    University Medical Center in Chicago, Illinois. I am here today
    because I cannot serve my patients or the caregivers due to
    shortages of medications, some of them critical to patient
    care.
        While there is no single solution that will immediately
    solve the problem of drug shortages, there are things we can do
    to help address this issue. First, bipartisan legislation in
    both houses of Congress would enable FDA to require that drug
    manufacturers report confidentially to the Agency when they
    experience an interruption in the production of their product.
    This early warning system will help the FDA work with other
    manufacturers to ramp up production when another company
    experiences a problem. Moreover, the bills call upon FDA to
    work with manufacturers to develop continuity of supply plans
    which could help to identify backup sources of active
    pharmaceutical ingredients and produce redundancies in
    inventory to serve as reserve supplies.
        While some have argued that this legislation won't have any
    impact, we disagree. You have already heard this morning from
    the FDA that in 2010, 38 drug shortages were avoided, and last
    year, 99 drug shortages were avoided when the Agency was given
    advance notice. Further, opponents of this approach argue that
    it will lead to hoarding. We know that hoarding already occurs.
    How do some find out about shortages before others? We don't
    know all the answers to this question. What we do know is that
    early warning to FDA will help make sure that everyone has the
    same information at the same time. Simply put, the public
    benefit of an early warning system far outweighs the risk of
    hoarding. In other emergency preparedness areas such as
    bioterrorism, flu pandemic, and natural disasters, we develop
    action plans and communication channels among necessary
    responders. Why would we approach drug shortages any
    differently?
        Second, health-system pharmacists have been collaborating
    with other clinicians and members of the supply chain to work
    with the FDA to address this problem. For example, we believe
    FDA should have and devote necessary resources to speed up the
    regulatory process to address drug shortages. Other
    alternatives include improved communication between FDA field
    personnel and the drug shortages program to assess the
    comparative risk of public harm when a potential enforcement
    action will cause or worsen a drug shortage; exploring
    incentives for manufacturers to continue or to re-enter the
    market; a generic user fee program to speed approvals; and
    last, ensuring the Agency has the funding it needs to carry out
    its mission.
        Many of you sitting in this room sometime over the next
    several months is going to receive the news that you, a family
    member, or a friend has been diagnosed with cancer, needs
    surgery, has been admitted to an intensive care unit, has a
    serious infection that requires an IV antibiotic or antiviral
    medication, or has a premature baby or grandbaby that requires
    nutritional support. And the last thing you want to hear is
    that we don't have first-line medication therapy to treat you;
    that the medication we have may not work as well and could
    cause heart damage, but it is all we have to offer; or that we
    are delaying your treatment until we are able to obtain drugs
    that are in short supply. These are all situations, I, my
    clinical pharmacy staff, and the physicians, nurses, and
    respiratory therapists that we work with have had to manage
    over the past year. From our perspective, drug shortages
    represent a national healthcare crisis. We don't have one
    single solution, but we have offered a number of solutions that
    together can help resolve this problem.
        Again, thank you Mr. Chairman, ranking member, and all
    members of the committee for the opportunity to provide input
    on this problem. Thank you.
        [The prepared statement of Mr. Colgan follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.050

        [GRAPHIC] [TIFF OMITTED] 77032.051

        [GRAPHIC] [TIFF OMITTED] 77032.052

        [GRAPHIC] [TIFF OMITTED] 77032.053

        [GRAPHIC] [TIFF OMITTED] 77032.054

        [GRAPHIC] [TIFF OMITTED] 77032.055

        [GRAPHIC] [TIFF OMITTED] 77032.056

        [GRAPHIC] [TIFF OMITTED] 77032.057

        [GRAPHIC] [TIFF OMITTED] 77032.058

        [GRAPHIC] [TIFF OMITTED] 77032.059

        [GRAPHIC] [TIFF OMITTED] 77032.060

        [GRAPHIC] [TIFF OMITTED] 77032.061

        Mr. Pitts. The chair thanks the gentleman. We are in the
    middle of votes. We have 14 votes. We are going to try to get a
    couple more before we go and recess for the vote and we will
    come back. So Mr. Alkire, you are recognized for 5 minutes.

                        STATEMENT OF MIKE ALKIRE

        Mr. Alkire. Thank you. Good morning, Chairman Pitts,
    Ranking Member Pallone, and members of the committee. I am Mike
    Alkire, Chief Operating Officer of the Premier Healthcare
    Alliance. Premier is owned by not-for-profit hospitals and
    health systems. We use the power of collaboration to lead the
    transformation to high-quality and cost-effective healthcare.
    One of the ways we do this is by aggregating the buying power
    of 2,500 hospitals to get the most effective medical supplies
    and drugs at the best prices.
        I thank the committee for leading efforts to address drug
    shortages. As you are aware, the number of drug shortages has
    tripled since 2005 and many of these medicines are essential to
    patient care. Premier set out to understand the extent of the
    problem through a survey. We found that between July and
    December of 2010, more than 240 drugs were either in short
    supply or completely unavailable in 2010. Over 400 generic
    equivalents were backordered for more than 5 days. Many of the
    drugs noted as backordered in 2010 have remained unavailable or
    in short supply in 2011, and 80 percent of the hospitals
    reported that shortages resulted in a delay or cancellation of
    a treatment.
        Drug shortages also carry a cost--an estimated $415 million
    annually through the purchase of more expensive substitutes and
    additional labor costs. We don't have the ability to estimate
    the financial impact of shortage drugs where there are no
    alternatives. We are working to diminish these costs by
    determining manufacturing capabilities to assess whether a
    manufacturer can supply the market; we look for alternatives if
    capabilities don't meet demand; instituting an early warning
    system for hospitals to notify us of shortages; once notified,
    we determine the scope of the problem and communicate with the
    FDA; and exploring longer-term contracts with manufacturers to
    create more predictable volumes and stability in the market.
        In this crisis, we hope people will do everything they can
    to help patients get the drugs they need. Instead, we have seen
    the gray market vendors taking advantage of a problem offering
    to sell shortage products at exorbitant prices. Premier
    analyzed unsolicited offers from gray market vendors on
    shortage drugs. We compared their prices to Premier's. We found
    that average markups were 650 percent and the highest markup
    was 4,500 percent. In this case, a vial to treat high blood
    pressure that sells for 25.90 was offered for $1,200. Markups
    were 4,000 percent for drugs to treat leukemia and non-
    Hodgkin's lymphoma, 3,100 percent for drugs to help cancer
    patients to retain bone marrow. Forty-five percent were marked
    up 1,000 percent above a normal price and a quarter were marked
    up 2,000 percent.
        Where and how gray market vendors are getting these
    medicines no one knows. And how can the integrity of these
    drugs be ascertained? Again, a question that few know. That is
    why Premier has taken a position that pharmacies should avoid
    these vendors and stick to known primary distributors. But in
    times of shortage, pharmacies may need to look elsewhere. In
    these cases, we develop a set of best practices. These
    practices include verifying the product's chain of custody,
    confirming licensure, verifying that a seller is authorized to
    sell the product, and confirming that the seller is a verified,
    accredited wholesale distributor.
        But in our view, the best way to stop price gouging is to
    fix the drug shortage crisis. We ask the committee and the FDA
    to consider the following: speed the approval process for
    medically necessary drugs that appear to be in shortage;
    encourage FDA to engage stakeholders in discussions determining
    whether a drug is medically necessary--the objective is to
    prioritize drugs that are necessary for treatment and also may
    be at risk for shortages--grant the DEA flexibility to adjust
    quotas that are limiting the amount of active ingredients
    manufacturers may purchase for controlled substances, thus
    limiting their ability to ramp up production when a supplier
    exits the market; fast-track approvals of new active
    pharmaceutical ingredient suppliers for medically necessary
    drugs in shortage; work with manufacturers to slow the trend of
    acquiring raw materials outside the U.S.; require manufacturers
    to notify the FDA of planned supply interruptions--this will
    allow time to work with remaining manufacturers to increase
    production--and establish an early warning point of contact at
    the FDA.
        In closing, I thank the committee for the opportunity to
    share what we have learned about drug shortages and the
    alarming impact it has on the safety and health of our
    communities, as well as our healthcare costs. Premier stands
    ready to assist Congress in finding ways to ensure a safe,
    reliable drug supply.
        [The prepared statement of Mr. Alkire follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.062

        [GRAPHIC] [TIFF OMITTED] 77032.063

        [GRAPHIC] [TIFF OMITTED] 77032.064

        [GRAPHIC] [TIFF OMITTED] 77032.065

        [GRAPHIC] [TIFF OMITTED] 77032.066

        [GRAPHIC] [TIFF OMITTED] 77032.067

        [GRAPHIC] [TIFF OMITTED] 77032.068

        [GRAPHIC] [TIFF OMITTED] 77032.069

        [GRAPHIC] [TIFF OMITTED] 77032.070

        [GRAPHIC] [TIFF OMITTED] 77032.071

        [GRAPHIC] [TIFF OMITTED] 77032.072

        [GRAPHIC] [TIFF OMITTED] 77032.073

        [GRAPHIC] [TIFF OMITTED] 77032.074

        [GRAPHIC] [TIFF OMITTED] 77032.075

        Mr. Pitts. The chair thanks the gentleman. And again, we
    appreciate your patience. We have got 5 minutes left for a
    vote. I think we will break here and come back as soon as the
    last vote is over and continue the testimony.
        The chair recognizes Mr. Pallone.
        Mr. Pallone. Mr. Chairman, I just wanted to ask unanimous
    consent to submit the written statement for the record of
    Congressman Matheson.
        Mr. Pitts. Without objection, so ordered.
        At this point, the subcommittee stands in recess until
    after the last vote.
        [Recess.]
        Mr. Pitts. The subcommittee will come to order. Again, I
    apologize for the schedule, and I appreciate very much your
    patience and your thoughtful testimony. We will resume the
    testimony with Dr. Penley. I believe you are up next, so you
    have 5 minutes.

                     STATEMENT OF W. CHARLES PENLEY

        Mr. Penley. Good afternoon, Chairman Pitts, Ranking Member
    Pallone, and the remainder of the subcommittee. I am Charlie
    Penley, and I am a practicing oncologist in Nashville,
    Tennessee. I spend the majority of my time taking care of
    patients, and this is why I am pretty uncomfortable in this
    environment. But I am here today to talk about the impact of
    drug shortages on my patients. I speak today on behalf of the
    American Society of Clinical Oncology. Our 30,000 members and
    their patients thank you for holding this hearing. Drug
    shortages have indeed reached crisis proportions in oncology.
    We hope that this hearing will better frame potential
    solutions.
        ASCO is hearing from practices all around the country,
    large and small, community-based and hospital-based practices
    who are having challenges treating their patients. The
    situation, as you have heard this morning, is worsening. Drug
    shortages in the United States have tripled since 2005/2006.
    Almost all cancer types are affected--leukemia, lymphoma,
    breast cancer, ovarian cancer, testicular cancer, and colon
    cancer. Shortages are indeed forcing us to change the way we
    treat our patients. Often, a drug in short supply is
    potentially curative. There is no reasonable substitute.
        Our practice treats many patients who have been diagnosed
    with acute myelogenous leukemia, AML. It is a life-threatening
    but potentially curable disease. Cytarabine, as you have heard,
    is one of the essential components of treatment for AML but
    that agent has been and remains intermittently in short supply
    today. Physicians have been forced to tell patients that this
    potentially curative drug is not immediately available to them.
    Treatment delay can result in grave consequences in these
    critically ill patients.
        In other situations, there are alternative drugs, but they
    are less effective, they have more side effects, or they are
    dramatically more expensive. For example, the standard
    treatment for non-Hodgkin's lymphoma is known as the CHOP
    regimen. CHOP chemotherapy includes doxorubicin, which has been
    and is in shortage. A colleague shared the story of a young
    woman who was recently diagnosed with lymphoma during
    pregnancy. Now, that is a very complex situation which
    fortunately doesn't happen very often, but it involves
    potential risks for both the mother and the child. Because of
    the doxorubicin shortage, the woman had to be treated with a
    substitute, one for which the risk for the baby is not as well
    known and which may be less effective treatment for her
    lymphoma. Oncologists and patients should not have to make such
    difficult choices.
        I am currently treating a national firefighter who has an
    advanced gastrointestinal cancer and who was responding to 5-FU
    based chemotherapy. Earlier this summer, we were unable to
    obtain 5-FU and had to use an alternative regimen, which both
    caused him more personal side effects and significantly
    increased his out-of-pocket cost.
        The price of substitute drugs can be up to 100 times more
    expensive than the drug normally chosen, especially if the
    substitute is a brand name drug. As an example, when the
    mainstay generic drug leucovorin went into shortage,
    oncologists had to treat patients with the substitute,
    levoleucovorin. Medicare payment for 50 milligrams of
    leucovorin is $1.25. An equivalent dose of levoleucovorin is
    approximately $90.
        The clinical trials infrastructure in this country is
    threatened by drug shortages as researchers alter or delay
    trials because the drug that is part of the study becomes
    unavailable. As many as 60 percent of clinical trials have been
    delayed, this at a time of great promise in cancer research.
        We understand that there are many causes of this problem, a
    number of them involving the manufacturing process. However,
    market factors appear to be a key driver in this rapidly
    escalating crisis. Shortages in cancer drugs are almost
    exclusively in generic sterile injectables, which are generally
    inexpensive drugs with a very low profit margin. Companies that
    experience manufacturing complications may not have the
    incentives to invest resources required to upgrade facilities
    or to correct quality problems.
        As we have heard, there does not appear to be a single
    solution to the crisis. Our primary expertise is in patient
    care, but we would offer these potential solutions, which we
    would encourage the committee to explore. First, Congress
    should urge expedited abbreviated new drug applications, or
    ANDAs, for drugs vulnerable to shortage in a way that does not
    compromise safety. Secondly, because this amounts to a public
    health crisis, Congress could work with Medicare to address
    pricing and payment for ultra-low-cost generic drugs. Third,
    Congress should pass S. 296 and H.R. 2245, bipartisan
    legislation that would give the FDA increased authority to
    manage the shortages. Fourth, consider tax incentives to
    encourage or enable generic manufacturers to continue to
    produce vital drugs, update their facilities, or enter the
    market to produce the drugs vulnerable to shortage.
        Mr. Chairman, ASCO has been and will remain an active
    partner in seeking resolution to the problem. The stress of
    dealing with a cancer diagnosis and the risks of necessary
    treatment is a heavy enough burden for patients and families to
    bear. It is absolutely unacceptable that the lack of effective
    oncologic therapeutics should add to that stress, or worse,
    threaten lives. We must do everything in our power to resolve
    this crisis, and we should do it immediately. We appreciate
    your leadership on this issue, and we stand ready to do
    everything that we can to assist. Thank you very much.
        [The prepared statement of Mr. Penley follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.076

        [GRAPHIC] [TIFF OMITTED] 77032.077

        [GRAPHIC] [TIFF OMITTED] 77032.078

        [GRAPHIC] [TIFF OMITTED] 77032.079

        [GRAPHIC] [TIFF OMITTED] 77032.080

        [GRAPHIC] [TIFF OMITTED] 77032.081

        [GRAPHIC] [TIFF OMITTED] 77032.082

        [GRAPHIC] [TIFF OMITTED] 77032.083

        [GRAPHIC] [TIFF OMITTED] 77032.084

        [GRAPHIC] [TIFF OMITTED] 77032.085

        [GRAPHIC] [TIFF OMITTED] 77032.086

        Mr. Pitts. The chair thanks the gentleman and now
    recognizes the gentleman from Lancaster, Mr. Paoletti.

                    STATEMENT OF RICHARD D. PAOLETTI

        Mr. Paoletti. Good afternoon. I want to thank the committee
    for convening this hearing and for the opportunity to
    participate in this important discussion. My name is Rich
    Paoletti, and I am vice president of operations at Lancaster
    General Health in Lancaster, Pennsylvania. My comments today
    will address the daily challenges hospitals, patients, and
    providers are experiencing as a result of increasing drug
    shortages occurring nationwide.
        In the current healthcare climate, hospitals are being
    asked to restructure to meet the quality, safety, fiscal
    constraint, and community-benefit standards expected in today's
    world. Our resources are being stretched to the limit. Ongoing
    drug shortage challenges at Lancaster General are further
    taxing and diverting those resources to respond to the almost-
    daily patient impacts these shortages create. This pattern is
    increasingly becoming the norm for hospitals, physician
    practices, emergency responders, and most importantly, patients
    everywhere.
        At Lancaster General, we work hard to maintain a culture of
    quality and patient safety largely based on fundamental
    building blocks of standardization through elimination of waste
    and variability. In direct conflict with these safety
    practices, drug shortages add variability, complexity, and
    additional burden, increasing the possibility of medication
    misadventure, poor outcomes, and patient harm.
        The lack of an early warning system regarding impending
    shortages is one of the greatest challenges we face as
    healthcare providers, such that sometimes learn about shortages
    or their severity when products are not received in our daily
    shipments.
        A review of our drug wholesaler orders last month revealed
    receipt of only 3,452 of the 4,344 line items orders processed,
    representing a fill-rate of about 80 percent. In other words,
    892 line items ordered in August were not received. Every
    disruption to medication supply creates new responsibilities to
    investigate alternative treatments and evidence to update
    protocols, procedures, and various technologies. Additionally,
    we must disseminate effective education on alternatives not
    always readily familiar to frontline caregivers. In our fast-
    paced, complex environment, every substitution adds variation
    and risk.
        These logistical tasks consume significant dedicated hours
    from multiple stakeholders and staff working collaboratively on
    detailed plans to maintain safety, while requiring execution in
    limited timeframes. This means working with anesthesiologists
    and emergency physicians in contemplating how we might maintain
    airway in a patient presenting to the trauma center without the
    availability of a paralyzing agent; neonatologists considering
    how we may best provide nutritional care to compromised
    premature infants; infectious disease specialists searching for
    alternative anti-infectives; and oncologists discussing
    alternative treatment regimens midway through a course of
    therapy; and more importantly, how we will reveal to patients
    that we may not have the medication necessary to treat their
    ailments. In our opinion, this issue represents the national
    healthcare crisis.
        Relieving and minimizing avoidable drug shortages requires
    both short-term interventions and longer-term, permanent
    solutions. These potential solutions require system changes and
    increased capacity, including the following: establish an early
    warning system as proposed in bipartisan legislation currently
    in both Houses of Congress to immediately help to avert or
    mitigate drug shortages proactively; establish and improve
    communications between the FDA and manufacturers to develop
    evidence-based allocation plans for critical drug therapies;
    secure the pharmaceutical supply chain; and direct available
    supplies to our most critical patient populations; explore
    incentives to encourage drug manufacturers to stay in, reenter,
    or initially enter the market critical to specific drugs in
    short supply. These could include creation of a fast-track for
    approval of new production lines, alternative manufacturing
    sites, or new suppliers of raw materials for medically
    necessary drugs in shortage or vulnerable to shortage without
    compromising the quality and safety.
        Again, I want to thank the committee for holding this
    hearing. Lancaster General Health offers its continued support
    and commitment to assist in the development of solutions that
    will help to prevent and mitigate risks caused by drug
    shortages. Thank you.
        [The prepared statement of Mr. Paoletti follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.087

        [GRAPHIC] [TIFF OMITTED] 77032.088

        [GRAPHIC] [TIFF OMITTED] 77032.089

        [GRAPHIC] [TIFF OMITTED] 77032.090

        [GRAPHIC] [TIFF OMITTED] 77032.091

        [GRAPHIC] [TIFF OMITTED] 77032.092

        [GRAPHIC] [TIFF OMITTED] 77032.093

        [GRAPHIC] [TIFF OMITTED] 77032.094

        Mr. Pitts. The chair thanks the gentleman.
        Dr. DiPaola, you are recognized for 5 minutes for your
    statement.

                     STATEMENT OF ROBERT S. DIPAOLA

        Mr. DiPaola. Thank you. Good afternoon, Chairman Pitts and
    Ranking Member Pallone and members of the subcommittee. My name
    is Dr. Robert DiPaola. I am director of the Cancer Institute of
    New Jersey, the State of New Jersey's National Cancer
    Institute-designated Comprehensive Cancer Center. I also speak
    as a member of the American Association for Cancer Research
    (AACR) and its Science Policy and Legislative Affairs
    Committee. Thank you for convening this hearing and recognizing
    the impact that the current drug shortage problem is having on
    our patients and on our ability to advance cancer research and
    improve patient outcomes.
        You have heard about the effects of drug shortages on
    treating patients. As the director of an NCI-designated
    Comprehensive Cancer Center and a medical oncologist myself who
    treats and cares for patients, I have the same frustrations
    regarding the care of our patients and the negative impact of
    drug shortages. This impact is not only immediate for the
    patients in our clinics today, but also affects the future care
    of cancer patients because the next generation of cancer
    therapy is driven by today's clinical trials that are critical
    to meeting the national goal of improving the outcomes for
    cancer patients. Shortages of drugs is actually--as you know
    and you heard today--a very complex problem.
        There are a number of ideas regarding what is causing them,
    and how they can be remedied. I am here today to discuss how
    this growing problem of shortages of already approved drugs,
    which in some cases, as you have heard, have been used and made
    for decades, is affecting our best cancer care, our clinical
    trials, and is threatening our ability to continue on our
    trajectory of steadily improving cancer patient outcomes.
        FDA statistics show that the number of drug shortages has
    more than tripled over the past 6 years, with a marked increase
    in drugs involving sterile injectables, which negatively
    impacts the treatment of cancer patients--again as you have
    heard--that most shortages in oncology are sterile injectables.
    The medications in short supply include cancer treatment drugs,
    anesthetics, antimicrobials, and pain medications. A list
    maintained by the American Society of Health-System Pharmacists
    recently identified 193 shortages in 2011, of which 22 are
    cancer drugs, and the shortage is predicted to worsen. These
    include drugs that are the standard treatment regimens used to
    treat patients with many different cancers in adults and in
    children.
        These shortages are now affecting clinical trial options
    for patients with cancer. Due to the uncertainty of being able
    to obtain many of these drugs, enrollment of patients on
    clinical trials has been delayed or stopped in several of our
    trials. Many of these drugs that are in short supply are a part
    of the standard regimens in which new treatments are added or
    compared to within a clinical trial. Many of the drugs on the
    shortage list are also used in our large national cooperative
    group trials. The Coalition of Cancer Cooperative Groups
    reports that approximately 50 percent of active cooperative
    group cancer clinical trials involve drugs subject to
    shortages. Many reports contain examples in which sites are
    unable to enroll patients on approved clinical trials due to a
    lack of drug supply. Investigators in these clinical studies
    are unable to enroll new patients when the drug supply is not
    available; patients on-study are sometimes receiving alternate
    drugs when supply is not available, and there is concern about
    interpretation of results when drug substitutions occur.
        It is important to remember that the impact from the drug
    shortages on clinical trials today will also have a long-term
    effect on cancer research and future treatment options for
    cancer patients. Clinical trials represent the final step of a
    long process of developing new therapies that improve the
    outcome of patients and add treatments for patients in which
    there were no effective prior options.
        When, after years of effort, a single researcher discovers
    a potential new drug or treatment, that particular new drug is
    often best added to an existing treatment in combination and/or
    tested in comparison to the best current treatment in a
    clinical trial. If that trial yields positive results, patients
    can ultimately have access to a new and improved drug or
    treatment combination. Currently, however, we are running out
    of many of the existing drugs. When a clinical trial runs out
    of a drug, even temporarily, the trial results may be
    compromised, and an enormous amount of work and expense is
    wasted. This means that during a clinical trial, a shortage of
    only a few weeks in an existing drug might mean delays in years
    for developing a new drug. In other words, the drug shortages
    of today can have a ripple effect on the availability of new
    drugs and treatment combinations tomorrow.
        Today, we estimate that 1 in 2 men and 1 in 3 women will
    develop cancer in their lifetimes. This year, over 1.5 million
    Americans are estimated to be diagnosed with cancer and more
    than half a million Americans are expected to die of their
    disease. That is more than 1,500 people a day or more than 1
    per minute. While these numbers seem staggering, we have made
    great strides in our ability to diagnose, treat, and prevent
    cancer and are at a most promising time in cancer research.
        Earlier this week the American Association for Cancer
    Research issued a progress report marking 40 years of progress
    in fighting cancer. In fact, thanks to advances made in cancer
    research, today more than 68 percent of adults are living 5 or
    more years, which increased from 50 percent in 1975. It was
    also reported that in the period from 1990 to 2007, death rates
    for cancer in the U.S. decreased by 22 percent for men and 14
    percent for women.
        The challenge we now face is to continue to turn
    groundbreaking science into lifesaving care at even greater
    speed. By facilitating clinical trials, we lay the groundwork
    for discoveries in basic cancer research to be translated into
    cutting-edge treatments for cancer patients.
        The current drug shortage is hindering our ability to treat
    cancer patients overall. We are entering a new era of cancer
    treatment and prevention. However, an inability to have best
    treatment for our patients in general and conduct clinical
    trials is a serious impediment to our goal and will hamper our
    ability to reduce the toll of cancer for the people of our
    Nation.
        Thank you.
        [The prepared statement of Mr. DiPaola follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.095

        [GRAPHIC] [TIFF OMITTED] 77032.096

        [GRAPHIC] [TIFF OMITTED] 77032.097

        Mr. Pitts. The chair thanks the gentleman and thanks all of
    our 7 witnesses for your thoughtful testimony. And we will
    begin questioning at this time. I recognize myself for 5
    minutes for that purpose. Let me begin with you, Mr. Paoletti.
    A couple of questions. Can you walk us through what happens
    from your perspective when there is a drug shortage? Who
    notifies you? How much warning do you get? What do you need to
    do to notify the people in your organization?
        Mr. Paoletti. It differs in every instance, but like I
    said, a lot of times we find out when a drug order doesn't come
    or our buyer-and-receiving process, through the receiving
    process, we learn that we didn't get a medication on order. The
    buyer then has to follow up with the wholesaler to find out if
    that is a temporary outage, when we would maybe next expect
    that, and then that would relay into an investigation of more
    than probably for us 100 to 150 inventory locations in
    automated cabinets throughout our facility. So we look at what
    we have on hand, how much we continually use on a day-to-day
    basis, and estimate how much supply we would have if we
    continued business as is.
        Based on that and the information we get, we have to
    convene a team. It is typically pharmacists, nurses, the
    specific stakeholder physicians depending on what medicinal it
    is. We look at the indications, we look for alternative
    therapies that we may have available to us, and kind of assess
    how critical the nature of the shortage is. And then based on
    that, we have to create action plans. Sometimes it involves the
    pharmacy manually preparing specific minimal doses of
    medications to make our supply last as long as conceivably
    possible. That was the case with one instance last October that
    to me was the tipping point of the drug shortages with a drug
    called succinylcholine. We came down to the last couple days of
    therapy and really contemplating cancelling surgeries and, you
    know, how we would, you know, manage those situations.
        Mr. Pitts. Is there any way, at present, for you to
    anticipate a shortage?
        Mr. Paoletti. Through some online web sources, as good as
    the information is based on what the drug companies reveal and
    what is published, we have an active surveillance program now
    that goes out to the FDA Web site, that goes out to ASHP
    resources to look at that information, which sometimes is
    published with alternatives. So the University of Utah's Drug
    Information Center has been very helpful in that regard, but it
    is only as good as the information that is available. And a lot
    of times, no information exists until we self-report that we
    are having difficulty.
        Mr. Pitts. Thank you. Let us just go down the line. Mr.
    Kafer, from your company's experience, what are the main
    reasons for a drug going into shortage, and how does your
    company work with FDA to notify them of the shortage?
        Mr. Kafer. From a notification standpoint, our primary
    point of contact when we become aware of a shortage for any
    number of reasons we could have had a manufacturer lot rejected
    during release testing. And what that means is after you finish
    your manufacturing process, every injectable goes through about
    a 3- to 4-week series of tests. If those tests fail for quality
    reasons or not meeting a specification, you reject that lot. If
    we anticipate a shortage, our primary point of contact
    continues to be FDA drug shortage. As testified this morning by
    Dr. Kweder, I think the point was made that they do not
    immediately post that information because that can trigger
    additional behavior where the awareness of the potential
    shortage could lead to purchasing of another generic product or
    even another comparative therapy which can drain those supplies
    as well. So we coordinate directly with the drug shortage group
    and then we coordinate with our hospital partners and our
    distribution partners.
        Mr. Pitts. And how have you worked with the FDA to
    alleviate a shortage?
        Mr. Kafer. We have worked extremely well with the FDA.
    There has been many instances in which we have collaborated. I
    think through the drug shortage group, they have been playing
    quarterback on this. I think we mentioned earlier this morning,
    it is not a formal process, but they do a fantastic job in
    pulling instances together. There has been at least 3 occasions
    where we had submitted a prior approval supplement, and by
    definition of that, that is an extensive review that indicates
    that we have had significant changes to a product or process
    which would typically take long, but they have been able to
    expedite those reviews and get those approved in about a 3-
    month period that allowed us to get those critical products to
    market.
        Mr. Pitts. Thank you. Mr. Gray, can inventory management
    practices create the impression of a drug shortage, and how do
    distributors and others work to avoid that situation?
        Mr. Gray. Well, inventory management practices or just-in-
    time or whatever you want to call it, those are actually across
    the supply chain from just-in-time production to just-in-time
    delivery. Our members focus on the delivery side, the
    manufacturers on the production side. And that actually is a
    process developed over the last 25 years in the consumer goods
    area, which is really to spread out the predictability of
    manufacturing, as well as altering both the manufacturer, the
    wholesaler, and the retailer or pharmacy when product
    potentially is short. It is more real-time information across.
    So the reality is the inventory management programs are really
    there to spot the shortages potentially before they happen, and
    that is really what has been developing since the late 1980s
    from the food industry into the pharmaceutical industry.
        So I am not sure there is a connection there. I have heard
    that today. If you really look at the science of that, the
    mentality behind those is really to identify those shortages
    early on.
        Mr. Pitts. Now, when a secondary distributor purchases a
    drug product, they often pay more than the primary distributor
    would pay. So if they then charge more for the drug, they are
    simply responding to market, aren't they? This is not a gray
    market practice, is it? Can you contrast that with the gray
    market?
        Mr. Gray. I can't speak to the secondaries. I know our
    members, our 34 primary wholesalers, we are buying directly
    from manufacturers, and then we sell only to state-licensed
    entities, be that a secondary distributor, a hospital,
    pharmacy, or whatever. And so, usually, we are under contract
    pricing with the manufacturers for those products. So if we are
    selling them on down to a provider, it is usually a contract
    price already preset. What a secondary would do with that
    product, I do not know. In terms of pricing, I have no
    information on that.
        Mr. Pitts. Thank you. Mr. Colgan, in your testimony, you
    state that there is no one solution to this problem; however,
    you stress the importance of enacting legislation to require
    manufacturers to notify FDA of possible shortages. Can you
    explain why this requires legislation to accomplish and why it
    needs to be done on a confidential basis?
        Mr. Colgan. Sure. I think when there is a leak or a hole in
    the dam, I think you need to stick your finger in it first to
    stop the leak, and then you need to explore what the reason is
    for it, and then you need to solve the problem. What this
    legislation really does is sticks your finger in the hole in
    the dam to stop the leak. And basically, we have heard from
    testimony today from the FDA that they have been able to
    basically abort 99 drug shortages this year with regards to
    early warning systems. So we believe that is needed.
        I am definitely not in favor of regulation when regulation
    isn't needed, but honestly, anything that I am putting in my
    body or my mouth, I want to make sure that it is manufactured
    in the right way, that it is done correctly. And certainly, we
    support the FDA in terms of their role in protecting drug
    safety within this country. Needless to say, they need to be
    able to have the power and the jurisdiction to enforce early
    reporting of drug shortages.
        And the other thing that I said I think was really most
    important is get the word out to everybody at the same time. It
    is beyond me sometimes that others have drug product when I
    don't have drug product. When drugs come back onto market,
    there are only certain places that you can get those drugs from
    and you can't get it from your normal supply chain. So again, I
    think we need regulation in order to solve the problems that we
    have at hand.
        Mr. Pitts. Thank you. Mr. Alkire, we have heard that often
    the end users of drugs that go into shortage have very little
    advanced warning. For example, a surgeon may find out that the
    preferred anesthetic drug is not available only after the
    patient is prepped and on the operating room table. How does
    this happen? How do hospitals give warning of shortages to
    their own doctors?
        Mr. Alkire. For the most part, now, I have not necessarily
    heard that, but for the most part, there is very strong
    communication that actually occurs in the hospitals and doctors
    are made aware of what is happening from a shortage, especially
    as they are doing prep for these procedures. And then they have
    to go about figuring out what are the potential clinical
    alternatives to ensure that their patients are getting the
    highest quality care.
        Mr. Pitts. OK. Dr. Penley, how many drugs that you use in
    your practice regularly go into shortage? It appears that there
    are a finite number of drugs that regularly go into shortage.
        Mr. Penley. The current number for oncology drugs is around
    23 I believe, and those are very commonly used agents. So we
    would use most of them in our practice on a day-in, day-out
    basis.
        Mr. Pitts. And is there any way, at present, for you to
    anticipate a shortage?
        Mr. Penley. On a practice level, it is difficult. We get
    information the same way most of these folks do, through the
    FDA Web site or the hospital pharmacist Web site. ASCO, our
    national organization, serves primarily as an information-
    gathering and distributing service there for our members, and
    certainly at times when we see that they are going to be
    prolonged shortages, ASCO convenes expert panels to try to
    brainstorm and come up with the best available work-arounds in
    situations where we have to make substitutions. We try to bring
    together the best minds in oncology so that they can come up
    with workable and reasonable solutions for our patients when we
    know that those drugs are going to be in shortage for any
    length of time.
        Mr. Pitts. Thank you. Dr. DiPaola, your description of the
    impact of drug shortages on future cancer patients because
    clinical trials may have to be stopped or not started in the
    first place is quite compelling. You mention that 50 percent of
    the cooperative group trials involve drugs that are subject to
    shortage. That sounds like it should have a devastating effect
    on cancer research. Could you give us an idea of the magnitude
    of this problem?
        Mr. DiPaola. I think that it is, you know, as we are all
    concerned with, you know, the shortage even worsening and
    already we are seeing a number of trials even with our cancer
    center as an NCI-designated Comprehensive Cancer Center, we
    take care of patients with both the best standard treatments
    and then offer clinical trials for patients who want that
    option. And those clinical trials are geared towards our new
    discoveries of new regimens. If a clinical trial is compromised
    because it needed to substitute a particular drug for another
    drug or, in some cases, clinical trials won't allow a
    substitution, all of the work that went into the discovery
    getting to the point of the clinical trial is going to be
    compromised.
        And so, you know, we have made gains on cancer research
    overall, but ultimately, the discoveries in terms of the
    targets in the lab, the drug development, and then either the
    comparison to these existing drugs or the addition of these new
    targeted agents to existing drugs make it very, very difficult
    to continue this. And I agree, you know, those statistics
    relate to data we have been given regarding the cooperative
    group trials. Those are usually the large national trials that
    do comparisons. And nowadays, most of the trials don't contain
    a placebo, so at least the existing drug is part of the
    clinical trial. So this already is a very difficult and
    concerning problem, and the way the stats are looking, may
    worsen.
        Mr. Pitts. Thank you. I have gone way over my time. I thank
    the ranking member for his indulgence and I will yield to Mr.
    Pallone for such time as he may consume.
        Mr. Pallone. Thank you, Mr. Chairman. Let me ask unanimous
    consent to put in the record this statement from I guess the
    Fight Colorectal Cancer group on the U.S. drug shortage. You
    have it.
        Mr. Pitts. Without objection, so ordered.
        [The information follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.098

        [GRAPHIC] [TIFF OMITTED] 77032.099

        Mr. Pallone. And I am going to just go back to what you
    said, Mr. Chairman, or follow up on what you asked Dr. DiPaola,
    who, as you know, is from my district. The Cancer Institute is
    in New Brunswick in my district.
        Do you have an example of a clinical trial that was halted
    at the Cancer Institute because of the drug shortage? Is there
    an actual example at the Cancer Institute of New Jersey where
    you had to halt because of the drug shortage?
        Mr. DiPaola. Yes. I mean there are actually a number of
    examples, trials that we were about to launch that we have
    made, you know, the plans and development to start a clinical
    trial. Most of them, Congressman Pallone, have to do with
    trials where a new drug is added to existing therapies. And we
    have had difficulties in at least 1 or 2 trials where a new
    drug was added to a combination that included TAXOL as one
    particular example. And the trial was held in terms of
    initiating the trial. What ends up happening is is in the
    clinic, we then have concern in offering patients who actually
    come to the center looking for these new options in terms of
    clinical trials, the trial when we are not assured of the, you
    know, particular drug supply.
        There was another trial where a young patient with breast
    cancer was enrolled where Doxil was included, along with
    another set of combination of drugs, and it required amendment
    to the trial to allow the patient to be treated, to change the
    drug from Doxil to another agent, which again has concerns
    about compromising the trial, and again the delay involved in
    trying to look at options and then even change the drug because
    in that case the trial allowed.
        And then in a number of cases, delayed trials where
    doxorubicin was part of the regimen, again with a novel what is
    called PARP inhibitor, which in the case I am referring to is
    an NCI trial that was delayed. So all of these, you know, taken
    together, any one of these, you know, weeks, months delays
    really delay us getting an answer. And more importantly,
    patients are coming because they are concerned that in that
    case, the standard option may not be what they are looking for
    enough and they are looking for these options in clinical
    trials.
        Mr. Pallone. Sure. I mean just give me an idea. I mean how
    do you think the drug shortage impacts the future of cancer
    research and treatment? I mean are you concerned and, you know,
    just in an overall sense?
        Mr. DiPaola. Well, I mean I think, you know, it is going to
    be important and that is why I think it is important that
    everybody get together in a collaborative way to look at all of
    the root causes and come up with solutions because it is
    concerning, especially if it does worsen. And, at least as
    statistics would indicate ,that it is. So I think it is
    concerning. I think that we need to keep pushing forward in all
    areas of research. I mean as you know well, you know, it
    includes the discovery on the basic science end leading into
    the efforts of translating into clinical trials. But it is
    concerning, especially with the statistics that we are seeing.
        Mr. Pallone. OK, thank you.
        I wanted to ask Mr. Kafer from Teva a couple things. A
    frequent cited reason for shortages is manufacturing problems,
    and of course we have heard that sterile injectable drugs are
    hard to manufacture. So if your supplier, I guess, has a
    problem, that can lead to a shortage. So obviously, there are
    circumstances outside of your control that can interfere with
    your ability to deliver a product. I mean are these problems
    unique to the drugs prone to shortages? For example, are all
    sterile injectable drugs prone to shortage or is there
    something about these drugs that makes controlling their
    manufacture more difficult? Are there things manufacturers can
    do to avoid these problems?
        Mr. Kafer. I think one of the things you need to understand
    from a complexity standpoint, by the nature of a sterile
    manufacturing facility, it is sterile and it is a very complex
    manufacturing environment. Picture, if you will, people in
    spacesuits kind of doing the prep work. If you are in an oral
    solid manufacturing facility, it is much different. So there is
    more complexity.
        The other thing within a manufacturing facility, each
    technology has its own defined manufacturing line or
    manufacturing suite. For instance, you cannot manufacture
    cytotoxic oncology products on the same line you would manage
    hormones or something of that nature. Many of the products,
    some of them are lyophilized, which is a powder that has a very
    unique manufacturing suite. And a liquid fill line is also a
    very unique manufacturing suite. So it is possible that within
    one manufacturing facility, you have a disruption in just one
    suite, one of those technologies. And one of the questions we
    have heard repeatedly from the panel is specific to oncology,
    and it is a very dynamic complex environment. And
    unfortunately, over the last couple of years, industry has had
    some disruptions within those manufacturing suites that we are
    in the stages of recovery so we are manufacturing product, but
    we are in a slow build and it is impacting, obviously, patients
    as the panel has testified today.
        Mr. Pallone. Of course, we always worry not only today but
    in so many cases about active ingredients in drugs sold in the
    United States that are supplied from abroad. So I guess I am,
    you know, asking you to what extent that is problem and, you
    know, in the wake of heparin, of course, there is major concern
    about cracking down on some of the ingredients that are sold
    abroad. I mean to what extent does the availability of these
    ingredients from abroad impact this discussion today? I mean it
    is very likely that, you know, we put a lot more regulation and
    make it more difficult for things to come from abroad.
        Mr. Kafer. Regardless if the materials coming from abroad
    or domestically, to your point regarding the heparin scare of
    years ago, the testing requirements and scrutiny that we will
    go through before we will release the active ingredient into
    production is significant, and we will not jeopardize that. So
    the testing requirements that we impose on our manufacturing
    partners on the API side are significant. And there has been
    repeated instances in which we are failing API coming in for
    production because they have not met our specifications. If
    that does happen on a repeated basis, then you are obviously
    going to have a gap in readily available material to produce
    product. So without question for good reason that we are
    testing that material to the requirements that we are required
    to and we will not use it unless it passes those tests.
        Mr. Pallone. Now, you heard me earlier mention your
    testimony in the context that you and Dr. Kweder, I guess,
    acknowledged in your testimony that it can take 2 to 3 years
    for FDA to approve a new facility or API supplier, and
    obviously, that is not a good situation. However, on the first
    panel, they also said that FDA has the flexibility to adjust
    resources so that it can approve facilities and suppliers very
    quickly. I mean has that been your experience that that
    flexibility is exercised or works or are you sort of sticking
    to this 2 to 3 years?
        Mr. Kafer. The standard process as it exists today
    historically has been 2 to 3 years for an API secondary
    manufacturer approval or a manufacturing site traditional past.
    And, you know, those reviews take time because it is a complex
    review and it does require extensive work. At the same time,
    yes, we have seen expedited reviews in that area. We have been
    the beneficiary of expedited reviews to handle critical
    situations.
        But also in my earlier statement, in my opening remarks, I
    mentioned a lot of the shortages are unforeseen. We are
    applying a great deal of coordination and a great deal of
    collaboration when we are solving the problem. And as a
    standard of practice, is it possible to expedite some of those
    reviews as a standard of practice was the point of my written
    testimony. But we do see on a routine basis now where
    applicable, without jeopardizing the product, you know, we
    never jeopardize the product or system, but we have seen
    collaboration to expedite those reviews in a matter of months.
        Mr. Pallone. And I appreciate that, but I guess what I am
    trying to say is, you know, when I mentioned your 2 or 3 years
    in your written testimony, I don't want to put words in their
    mouth but it was sort of suggested at the first panel that
    maybe it is not so much a problem because we can use this
    flexibility, but I mean is it your experience that there is
    enough flexibility to deal with these situations or not? I mean
    I know that is a difficult question. You don't have to say----
        Mr. Kafer. I have had experience where we have had
    expedited reviews, collaborative work, and favorable outcomes.
    You know, the volume of work that could be forthcoming based on
    continued remediation, I can't predict and I can't, you know,
    forecast that impact. But prior to significant shortages--which
    the industry planned for--I mean, so we would plan for a 2-year
    review, we knew what that type was, but at the time when we
    were just making sure we had redundancy in place for those
    critical products, it wasn't of immediate need. Now that we are
    seeing immediate need, we are seeing those expedited reviews.
        Mr. Pallone. All right. Thanks. I just wanted to ask one
    more question of Mr. Colgan here, Mr. Chairman.
        In his written testimony he suggested a number of
    incentives that might be provided to encourage manufacturers to
    stay in the field or enter the field and, of course, I think in
    principle that incentives are a good idea. If we can get more
    companies to manufacture these products or to produce excess
    supply, you would think that shortages would be less likely to
    occur and less severe if they do occur. But that being said,
    the suggestions in your testimony I think need a little more
    fleshing out for me to better understand, you know, what you
    are trying to achieve or how you would achieve the goal.
        And I know they are only presented as options to be further
    explored, but I was puzzled by the suggestion of granting
    temporary exclusivity for a new product line of drug either
    already in short supply or deemed vulnerable to a shortage
    considering that the goal would seem to be to get as many
    companies into the field as possible. It would seem that
    granting exclusivity would appear to be doing the exact
    opposite, and it is my understanding that exclusivity works
    best as an incentive when the company is the only one
    manufacturing the product, or in the case of a new generic, is
    the only company offering a generic alternative to a name
    brand. So it is not clear to me that granting exclusivity would
    be much of an incentive. And I am not trying to be critical. I
    just wanted you to walk me through how you think this would
    actually work practically.
        Mr. Colgan. Well, there are 2 things here. One is the
    generic user fees and we believe those can be utilized to
    incent manufacturers to enter in the market or reenter into the
    market in producing a product that they have produced before or
    not produced. We have drugs that are single-source sometimes or
    we have drugs where we don't have enough production and
    throughput. In those situations, we think within limits this is
    a concept that needs to be explored in terms of some sort of
    temporary exclusivity in the market so that there is a period
    of time that would incent a manufacturer to get into the market
    and produce the product. It could be that the FDA provides
    accelerated review of a supplemental NDA to that manufacturer,
    allows that manufacturer a period of 6 months or so to put the
    product together and produce the product. We see the whole idea
    of incenting the industry to jump into the generic market as
    being really important.
        Let me give you an example of that. Hopefully, that will
    play out and you will understand. Right now, we have production
    problems with carmustine and we use this in non-Hodgkin's
    lymphoma as a conditioning therapy in getting patients ready
    for autologous bone marrow transplants. Right now, that is not
    a medically necessary drug because we can use bendamustine. If
    I have a patient who is on carmustine, I would pay $938 for
    that patient's drug if they had a body surface area of 2. For
    bendamustine I would pay $14,440. It advantages us to have
    other manufacturers in producing carmustine so we have adequate
    supplies and some sort of incentive that would allow them to do
    that so we are not forced to use bendamustine would be very
    important to us in terms of securing a supply line for that
    drug. And it certainly adds up to the economics of the
    situation, too, in terms of being able to supply a drug that is
    category one, recognized as the appropriate treatment for the
    patient, but also provides the lowest overall cost continuum of
    providing the care to that patient.
        Mr. Pallone. All right. Thanks a lot. Thank you, Mr.
    Chairman.
        Mr. Pitts. The chair thanks the gentleman and that
    concludes our round of questioning. Again, I would like to
    thank the witnesses for your testimony, for answering the
    questions. We will ask you to please respond to any questions
    in writing.
        In conclusion, I would like to thank all the witnesses and
    members for participating in today's hearing and remind members
    that they have 10 business days to submit questions for the
    record, and then I ask the witnesses to please respond promptly
    to the questions. And members should submit their questions by
    the close of business on October 7.
        There being no further business, the subcommittee is
    adjourned.
        [Whereupon, at 2:18 p.m., the subcommittee was adjourned.]
        [Material submitted for inclusion in the record follows:]
        [GRAPHIC] [TIFF OMITTED] 77032.100

        [GRAPHIC] [TIFF OMITTED] 77032.101

        [GRAPHIC] [TIFF OMITTED] 77032.102

        [GRAPHIC] [TIFF OMITTED] 77032.103

        [GRAPHIC] [TIFF OMITTED] 77032.104