[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





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                    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:]
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    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.
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    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.
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    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:]
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    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:]
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    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:]
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    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:]
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    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:]
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    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:]
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    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:]
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    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:]
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    [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:]
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