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






   REVIEW OF THE PROPOSED GENERIC DRUG AND BIOSIMILARS USER FEES AND 
                 FURTHER EXAMINATION OF DRUG SHORTAGES

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 9, 2012

                               __________

                           Serial No. 112-114





[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]





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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

                                 _____

                         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. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     4
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     4
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     5
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................    16
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    17
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   170
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, prepared statement.........................   171
Hon. Cathy McMorris Rodgers, a Representative in Congress from 
  the State of West Virginia, prepared statement.................   172

                               Witnesses

Janet Woodcock, Director, Center for Drug Evaluation and 
  Research, Food and Drug Administration.........................    18
    Prepared statement...........................................    20
    Answers to submitted questions...............................   173
Theresa Mullin, Director, Office of Planning and Informatics, 
  Center for Drug Evaluation and Research \1\....................
Peter Beckerman, Senior Advisor, Office of Policy, Food and Drug 
  Administration \1\.............................................
Valerie Jensen, Associate Director, Center for Drug Evaluation 
  and Research, Drug Shortage Program, Food and Drug 
  Administration \1\.............................................
Heather Bresch, Chief Executive Officer, Mylan, Inc..............    97
    Prepared statement...........................................   100
    Answers to submitted questions...............................   189
David Gaugh, Vice President, Regulatory Sciences, Generic 
  Pharmaceutical Association.....................................   120
    Prepared statement...........................................   122
    Answers to submitted questions...............................   191
Bill Greene, Chief Pharmaceutical Officer, Pharmaceutical 
  Services, Member, Pharmaceutical Sciences, St. Jude Children's 
  Research Hospital..............................................   141
    Prepared statement...........................................   144
    Answers to submitted questions...............................   193

                           Submitted Material

Executive Summary of Society of Gynecologic Oncology's Drug 
  Shortage Survey, dated September 2011, submitted by Mr. Burgess     8
Letter, dated January 6, 2012, from Dale P. Conner, Director, 
  Division of Bioequivalence I, Office of Generic Drugs, Center 
  for Drug Evaluation and Research, Food and Drug Administration, 
  Department of Health & Human Services, to Michael Dwyer, Azaya 
  Therapeutics, submitted by Mr. Burgess.........................    14
Analysis, undated, of H.R. 1483, the Drug Safety Enhancement Act 
  of 2011, submitted by Mr. Dingell..............................    46
Statement, dated February 9, 2012, of American Academy of 
  Pediatrics, submitted by Mr. Pitts.............................    63
Statement, dated February 9, 2012, of American Society of Health-
  System Pharmacists, submitted by Mr. Pitts.....................    69
Statement, dated February 9, 2012, of National Community 
  Pharmacists Association, submitted by Mr. Pitts................    73
Statement, dated February 7, 2012, of the Biotechnology Industry 
  Organization, submitted by Mr. Pitts...........................    91

----------
\1\ Ms. Mullin, Mr. Beckerman, and Ms. Jensen did not present 
  statements for the record.

 
   REVIEW OF THE PROPOSED GENERIC DRUG AND BIOSIMILARS USER FEES AND 
                 FURTHER EXAMINATION OF DRUG SHORTAGES

                              ----------                              


                       THURSDAY, FEBRUARY 9, 2012

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Joe Pitts 
(chairman of the subcommittee) presiding.
    Members present: Representatives Pitts, Burgess, Shimkus, 
Murphy, Gingrey, Latta, Lance, Cassidy, Pallone, Dingell, 
Towns, Engel, Capps, DeGette, and Waxman (ex officio).
    Staff present: Clay Alspach, Counsel, Health; Michael 
Beckerman, Deputy Staff Director; Nancy Dunlap, Health Fellow; 
Paul Edattel, Professional Staff Member, Health; Debbee Keller, 
Press Secretary; Ryan Long, Chief Counsel, Health; Carly 
McWilliams, Legislative Clerk; John O'Shea, Senior Health 
Policy Advisor; Chris Sarley, Policy Coordinator, Environment 
and Economy; Heidi Stirrup, Health Policy Coordinator; Phil 
Barnett, Democratic Staff Director; Alli Corr, Democratic 
Policy Analyst; Eric Flamm, FDA Detailee; Karen Nelson, 
Democratic Deputy Committee Staff Director for Health; Rachel 
Sher, Democratic Senior Counsel; and Elizabeth Letter, 
Democratic Assistant Press Secretary.
    Mr. Pitts. The 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

    Today, we will discuss two new user fee authorizations, one 
for generics and one for biosimilars, and also examine the 
worsening drug shortage problem facing our country. Under the 
terms of the Generic Drug User Fee agreement that industry and 
FDA have negotiated, industry will pay approximately $1.5 
billion over the next 5 years in exchange for more efficient 
and predictable review of generic drug applications and 
increased inspections of drug facilities.
    Currently, there are approximately 3,000 generic drug 
applications sitting in a backlog at FDA. One of the goals of 
the agreement is to eliminate this backlog within 5 years, 
speeding generic drugs to the patients who need them without 
sacrificing quality or safety. Another goal of the agreement is 
to have FDA inspect all drug facilities at an increased 
frequency and to bring parity between inspections of foreign 
and domestic facilities.
    Industry and FDA have also negotiated a second user fee 
agreement for biosimilars--those products approved under the 
abbreviated approval pathway for biological products shown to 
be highly similar to an FDA-licensed biological product. This 
subcommittee has spent a great deal of time in the last few 
years trying to achieve a pathway to approval for biosimilars. 
This agreement authorizes four types of fees: application, 
product, establishment, and biosimilars product development, to 
make this a reality.
    Finally, every day we are hearing from providers in our 
districts about increased difficulties in acquiring the drugs 
necessary to treat their patients. As this subcommittee looks 
to develop a package of ways to alleviate drug shortages, I 
look forward to hearing from our witnesses and learning their 
views on the matter.
    Again, thank you to all of our witnesses on both panels and 
I will yield the balance of my time to Mr. Murphy from 
Pennsylvania for an opening statement.
    [The prepared statement of Mr. Pitts follows:]



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   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy. Thank you, Mr. Chairman.
    Brand name and generic medicines are simultaneously 
necessary and essential components of quality and cost-
effective healthcare, but approximately 78 percent of 
prescriptions dispensed in the United States in 2010 were 
filled with generic drugs. It is estimated that over the last 
10 years, the use of generic medications has saved our 
healthcare system nearly $1 trillion. However, in recent years, 
the backlog of generic drug applications at the Food and Drug 
Administration has dramatically increased. Today, there are 
over 2,500 applications awaiting review with an average review 
time of almost 31 months. At the same time, events like the 
2007 contamination of heparin manufactured in China have raised 
serious concerns about the security of the U.S. pharmaceutical 
supply chain.
    Today, 40 percent of all drugs sold in the U.S. are 
manufactured overseas and as much as 80 percent of the active 
pharmaceutical ingredients--called API--in those drugs come 
from foreign sources. According to the Government 
Accountability Office, FDA inspects U.S. pharmaceutical 
factories every 2 to 3 years but inspects overseas facilities 
on average only once every 9 years.
    In the face of these challenges, the FDA and the generic 
pharmaceutical industry have come together with other 
stakeholders to negotiate a historic 5-year agreement that will 
bring less expensive therapies to market faster. Less expensive 
drugs mean better access to care for patients; that means fewer 
costly complications from untreated chronic diseases, fewer 
hospitalizations. Industry has agreed to do their part by 
paying $1.5 billion in user fees to FDA over 5 years and in 
return FDA has pledged to review 90 percent of new applications 
within 10 months by year 5 of the agreement. The FDA has also 
agreed to work to address supply chain safety concerns while 
ensuring level playing fields for domestic and foreign 
manufacturers by achieving parity between domestic and foreign 
facility inspections.
    Yesterday, I introduced the Generic Drug and Biosimilar 
User Fee Act of 2012 based on this agreement with 
Representatives Pallone, Pitts, and Waxman. I look forward to 
working with my colleagues on this committee as we review to 
enact this critical piece of legislation.
    Finally, let me thank and commend Representative Dingell 
for his many years of leadership and work on the issue of drug 
safety. When we enact this legislation, it will be to a large 
extent because of his dedication and long-term efforts.
    And with that, I yield back.
    Mr. Pitts. The Chair thanks the gentleman and now yields to 
the ranking member of the full committee, Mr. Waxman, for 5 
minutes for an opening statement.

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

    Mr. Waxman. Thank you very much, Mr. Chairman.
    Today, we begin the process of establishing two critically 
important programs at FDA that will help speed low-cost generic 
drugs and biosimilars to the market. Because these are new user 
fee programs that will now join the other long-existing 
programs, just yesterday, Representative Murphy, Pallone, 
Pitts, and I introduced the Generic Drug and Biosimilars User 
Fee Act which will give FDA the authority and resources it 
needs to review generic applications in a timely and effective 
manner. I am proud that we were able to work together in such a 
strong bipartisan fashion on this legislation. It reflects our 
shared commitment to ensuring that American patients have 
access to these life-saving medicines early and at a price they 
can afford.
    I also want to commend FDA and the biotech and generic drug 
industries for the hard work they put into negotiating these 
thoughtful and thorough proposals. These programs are long 
overdue. We have had a long history of success with the other 
user fee programs for brand name drugs and medical devices. In 
contrast, for some time now, FDA's generic drug review program 
has been starved for resources, which resulted in a dramatic 
backlog of applications. That, of course, has meant fewer 
generic drugs on the market and consequently higher medication 
prices for American patients. At long last, this legislation 
will help us turn this untenable situation around.
    Likewise, FDA will also now have the resources it needs to 
review applications for biosimilar drugs. By most accounts, 
biotech drugs are the most promising medicines on the horizon. 
This law will permit FDA to fully implement the newly 
established biosimilars pathway and we will all begin to see 
its benefits.
    On a different note, I am encouraged that the subcommittee 
is taking another look at the very dire situation surrounding 
drug shortages. This is the kind of issue that can and should 
be tackled on a bipartisan basis. It is a complex and 
multifaceted problem but I feel confident that we will work 
together to find workable solutions.
    Thank you for holding this hearing today and I look forward 
to the testimony of our witnesses. I yield back my time.
    Mr. Pitts. The Chair thanks the gentleman and at this point 
recognizes the vice chairman of the Health Subcommittee, Dr. 
Burgess, for 5 minutes for an opening statement.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, for the recognition.
    Dr. Woodcock, welcome to our committee. Certainly, you have 
always been very receptive to our questions and we appreciate 
the efforts that you provided to me and my staff on our visit 
to the FDA a few months ago.
    We are discussing two of the pending user fee agreements 
before the committee, but also today, I think many of us are 
interested in the issue of the drug shortages. When doctors 
lack the essential tools, they are extremely restricted as to 
what they can do for patients. It is a complex issue. You have 
stated that before. Your agency has stated that before. But 
make no mistake; the FDA has a role in helping us find a 
solution.
    In calendar year 2010, over 240 drugs were identified as 
being in short supply or unavailable and more than 400 generic 
equivalents were backordered. Many generic lines operate at 
margins that are so tight that when production becomes 
difficult, they can't afford to make the changes to revamp 
their machinery and make those compounds available. In an ideal 
free market, competitors would then move in and assume this 
market share, but now we are in a situation where some 
competitors cannot afford to ramp up to meet the resulting 
demand. We have to ask ourselves is this the result of hyper-
competition? And if so, is that ultimately a good thing? So is 
approval of multiple competitors in a limited space leading to 
market forces that actually end up driving patients back to 
branded products at higher prices and increased spending? Is 
that good in the long run?
    And inevitably, we have to face the over 3,000 number of 
backlogs of generic applications and I am very interested in 
tracking the goals in this user fee agreement in regard to the 
one-time fee the industry has agreed to in order to clear that 
backlog.
    Finally, we have to look at the issue of bioequivalence and 
when the Food and Drug Administration chooses to exercise the 
flexibility they have in the approval process. In some 
instances, I believe this authority has been used questionably. 
In others, I question why it hasn't been used at all. On 
January 6, in response to a request for flexibility on 
bioequivalent studies for a substitute for Doxil, a 
chemotherapeutic agent used in treating gynecologic cancer, Mr. 
Conner, the Director of Bioequivalence of the Office of Generic 
Drugs wrote, ``the Food and Drug Administration may take steps 
to expedite regulatory reviews. However, the Agency has 
determined that it is necessary that bioequivalence or 
bioavailability study in patients be conducted.''
    Now, I don't have any other information on the quality of 
this submission, but I do know this: Doxil is gone now to treat 
patients. The line is shut down. Any stockpile that was there 
went to treat the ill, and that is appropriate, but how do you 
conduct a bioequivalent study if you don't have the product 
against which to test? When you are doing a randomized clinical 
trial, it requires that you have the product to test. You can't 
do that, and yet the Food and Drug Administration just simply 
wants to say, ``Well, you have got to do the bioequivalence 
study.'' They are not telling us what we should do in this 
event where we have no product left against which to test. 
These are tools on which physicians rely every day, and what do 
we do when they are not there?
    Here are some other observations: ``A 51-year-old patient 
with platinum-resistant ovarian cancer had already been treated 
with another chemotherapeutic agent. She has few choices for 
therapy and would likely die before the drug shortage is 
corrected. I have three promising clinical trials which are now 
on hold because of shortages. Please help us.'' Another quote: 
``I cannot obtain Doxil for patients stabilized on therapy. I 
have switched to alternate drugs with more side effects.'' 
Another quote: ``We have encountered regimen changes, 
difficulties with patient insurance approval, and an increase 
in hospitalization due to side effects of older regimens.'' I 
have 35 such testimonials as part of a survey conducted by the 
Society of Gynecologic Oncology and the FDA letter, and I would 
ask that those be submitted for the record.
    Look, no physician wants to tell a patient that they cannot 
receive the care they need because there is no treatment but 
because the product is simply not available and we won't 
provide alternatives is no solution at all.
     I will be glad to yield the remaining time to anyone one 
on my side who would request it. If not, I yield back to the 
chairman.
    Mr. Pitts. Without objection, those will be entered into 
the record.
    [The information follows:]



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    Mr. Pitts. And the Chair now recognizes the ranking member 
of the Subcommittee on Health, Mr. Pallone, for 5 minutes for 
an opening statement.

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

    Mr. Pallone. Thank you, Chairman Pitts.
    This hearing is the second in a series of important 
hearings that this subcommittee will hold in relation to the 
FDA User Fee Agreements, and I welcome everyone for joining us. 
And as I noted last week, I am encouraged by the bipartisan 
nature of these efforts, and I look forward to working with my 
colleagues.
    Today's topics will cover two brand new user fee programs 
that the subcommittee will authorize. The first is a Generic 
Drug User Fee Agreement, also known as GDUFA. That will create 
a program at the FDA in order to help expedite review of their 
applications similar to the way brand name drug manufacturers 
pay user fees. Primarily, the agreement will help address the 
significant backlog of generic applications currently at the 
FDA. Unfortunately, over the last several years, this backlog 
has continued to grow at an alarming rate. In fact, the median 
time for a generic drug approval has doubled to 32 months, and 
that means all these generic drug products are kept off the 
market and out of the hands of consumers, which is a waste and 
simply too long.
    Generic drugs, as we know, have proven to help lower 
healthcare costs. In the last decade alone, generic drugs have 
provided more than $824 billion in savings to the Nation's 
healthcare system. Clearly, bringing generic drugs to market 
faster should be a priority, and luckily, the generic industry 
was able to recognize that we must provide the Office of 
Generic Drugs with adequate resources to do their job 
effectively. As much as I advocate for increased government 
funding for the FDA, that simply has become too difficult a 
battle to overcome, and so I appreciate the industry's ability 
to work with the FDA and move forward on a strong agreement and 
I commend your efforts.
    The second user fee program is the Biosimilars User Fee 
Agreement, also known as BsUFA, which is the product of the 
Biologics Price Competition Innovation Act, the law that 
created a pathway for biogeneric medicine onto the marketplace. 
This agreement came together through a collection of brand and 
generic companies and FDA. Now, I know it is difficult for many 
to comment on the strength and robustness of the agreement 
because of the law's infancy, but it is a step forward in 
providing FDA the necessary resources to bring promising 
medicines to patients at a lower cost and I am supportive of 
its passage. I think that both Mr. Waxman and Mr. Murphy 
mentioned that last night, the two of us, as well as Chairman 
Pitts--the four of us I should say--introduced a standalone 
measure that covers both these agreements and shows that they 
have bipartisan support and that we are going to move forward 
with them.
    Another issue under discussion today is the current drug 
shortage of vital medications that are impacting clinicians, 
hospitals, and patients who have depended upon these 
medications for years. It is alarming the drugs that have been 
around for so long would suddenly be the most difficult to keep 
hospitals, pharmacies, and doctors' offices supplied with. I 
strongly believe this committee has the responsibility to 
address this sudden increase in drug shortages. We had a 
hearing last September that brought light to some important 
inadequacies of the system and I know there is a strong 
bipartisan appetite to work out a solution and I hope that we 
can get there. It is not a simple task but there are strong 
ideas that we have to consider and flesh out.
    Lastly, Ms. DeGette has a bill that focuses on industry 
reporting as a worthy objective. I am also aware the generic 
industry has a proposal that we will be discussing today about 
a voluntary self-regulatory system. While I welcome their 
advocacy on addressing the problem, self-regulation always 
raises some critical questions. So I look forward to hearing 
more about that and I trust the FDA and our other witnesses can 
give specific insight into some of these proposals.
    I wanted now to yield what time I have left to the chairman 
emeritus, Mr. Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Mr. Chairman, as I have brought to the 
committee's attention in the past, drug supply chain safety is 
critical to the issue of health and safety to the American 
people. This hearing is going to reinforce how imperative it is 
to provide FDA with appropriate authorities and resources to 
secure our medicines. This committee has a long bipartisan 
history of working on this issue and looking into drug safety. 
It is now time for us to act. Our friends in the Senate have 
put together a bipartisan working group on this matter and we 
in the House should follow suit. Time is short. If we don't 
work together in good faith on this issue, we will not be 
finding a solution and the situation will continue 
deteriorating with death and hurt occurring throughout the 
American population by reason of our failure to address the 
difficulty. The American public deserves a solution.
    As we proceed today, I am asking my colleagues to join me 
in working on this vital issue and to demonstrate to the 
American people that Congress does indeed work for them and 
that we follow on the steps that we took in the last Congress 
to see to it that we made foods much safer than they were by 
following on and addressing now questions relative to the 
safety of pharmaceuticals, appliances, and devices, and 
ultimately, cosmetics.
    And I thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman. That concludes 
the opening statements for the members. We are now voting on 
the floor. So we have two votes. We will take a recess until 
the end of the second vote at which time we will reconvene.
    The subcommittee stands in recess.
    [Recess.]
    Mr. Pitts. The subcommittee will come to order.
    Our first panel will have just one witness, Dr. Janet 
Woodcock, the Director of the Center for Drug Evaluation and 
Research at FDA. We are happy to have you with us today, Dr. 
Woodcock, and your written testimony will be made part of the 
record and you are recognized for 5 minutes to summarize.

    STATEMENT OF JANET WOODCOCK, DIRECTOR, CENTER FOR DRUG 
    EVALUATION AND RESEARCH, FOOD AND DRUG ADMINISTRATION; 
ACCOMPANIED BY THERESA MULLIN, DIRECTOR, OFFICE OF PLANNING AND 
  INFORMATICS, CENTER FOR DRUG EVALUATION AND RESEARCH; PETER 
  BECKERMAN, SENIOR ADVISOR, OFFICE OF POLICY, FOOD AND DRUG 
ADMINISTRATION; AND VALERIE JENSEN, ASSOCIATE DIRECTOR, CENTER 
 FOR DRUG EVALUATION AND RESEARCH, DRUG SHORTAGE PROGRAM, FOOD 
                    AND DRUG ADMINISTRATION

    Ms. Woodcock. Thank you very much and good morning.
    Mr. Chairman and members of the subcommittee, I would 
really like to thank you for the opportunity to testify about 
three important issues: the United States Generic Drug Program 
and user fees that would support it, the new Biosimilars 
Program and proposed user fee, and the ongoing crisis of 
shortage of essential drugs in the United States.
    I am joined today by Dr. Theresa Mullin on my right, who is 
the director of the Office of Planning and Informatics at the 
Center for Drugs. Dr. Mullin was the lead negotiator on 
Prescription Drug User Fee Program and on the Biosimilars 
Program. And to my left is Mr. Peter Beckerman, who is the 
senior advisor for policy in the Office of Policy at FDA. And 
he was one of the lead negotiators on the Generic Drug User Fee 
Program.
    Since enacted by Congress in 1984, the current generic drug 
program has been a stunning success by most accounts. Today, 
over 3/4 of prescriptions dispensed are for high quality, 
affordable generics, as the members have said, saving Americans 
billions of dollars literally. But this program has been the 
victim of its unprecedented success. Applications to the 
program have skyrocketed and the program has not been able to 
keep up. Times to approval have lengthened and are prolonged, 
and over 2,000 applications are in a so-called backlog at the 
Office of Generic Drugs.
    At the same time, globalization of the industry has 
challenged FDA to assure the same level of inspectional 
coverage that is carried out domestically for the foreign 
facilities. The new user fee program proposed to Congress 
addresses both these problems head on. The program would bring 
timelines and predictability to the review process, eliminate 
the backlogs. It would also provide a level playing field for 
inspections to ensure that the same quality standards are 
maintained wherever in the world the generic drug is made. 
These changes will ensure that U.S. consumers continue to have 
access to safe, effective, high quality, and affordable generic 
drugs.
    The proposed Biosimilar User Fee Program is intended to 
support a new emerging industry. Biologics drugs developed over 
the past 20 years have provided new and effective treatment 
options for patients with serious diseases such as rheumatoid 
arthritis and cancer, but the generic drug program that existed 
did not apply to and was not really appropriate for these 
complex biological molecules. In 2007, Congress created a new 
pathway for biosimilar biologics and instructed FDA to develop 
a user fee proposal, which we have done. This program is 
intended to support an emerging industry and I will be very 
pleased to be able to discuss it.
    I would like to thank the members--Mr. Murphy and Mr. Pitts 
and the additional members--for introducing legislation. We are 
really happy to hear that there is bipartisan support and we 
look forward to working with you.
    I am also pleased to announce that, later today, FDA will 
introduce three draft guidances for industry on biosimilars. 
These contain technical information that will help the industry 
as they develop these new products for the U.S. market.
    The third topic, drug shortages, is a very important issue. 
Millions of Americans rely on medicines to support or sustain 
their health, as we heard from Dr. Burgess. The recent 
shortages of sterile injectable drugs, many of which are 
essential in cancer treatment or in seriously ill patients, 
have brought a spotlight on this problem. The causes of drug 
shortage are multi-factorial, but in this case, a perfect storm 
came together to create the current situation of shortages. FDA 
does everything possible to both prevent and ameliorate 
shortages, including stimulating the production of other 
manufacturers, allowing risk mitigation strategies for products 
that have manufacturing difficulties, moving up the queue of 
applications so we could get additional products onto the 
market to alleviate shortages, and even arranging for temporary 
importation of similar products from other countries. For the 
current shortages, this has not been enough and hospitals and 
clinicians are facing and have been facing significant 
shortages.
    We look forward to working with you to ensure that 
Americans have continued, uninterrupted access to effective, 
safe, high quality, and affordable drugs to sustain their 
health. Thank you very much.
    [The prepared statement of Ms. Woodcock follows:]



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    Mr. Pitts. The Chair thanks the gentlelady and now begins 
the questioning and I will recognize myself for 5 minutes for 
that purpose.
    Dr. Woodcock, how many applications are in the generic 
backlog at FDA?
    Ms. Woodcock. We count what you might consider a backlog to 
have about 2,000 applications.
    Mr. Pitts. Two thousand.
    Ms. Woodcock. That includes some drugs that couldn't be 
approved now because the patents haven't expired on the 
innovators. You can send in your application beforehand and 
then you have to wait. But there are many in that backlog that 
could be approved if we had time to get to them or had the 
inspectional resources to do the inspection.
    Mr. Pitts. And how will the Generic Drug User Agreement 
help clear out this backlog?
    Ms. Woodcock. The agreement has several parts and one is 
specifically directed at the backlog. What we have recommended 
to Congress is that there be a one-time backlog fee paid at the 
start of the program of $50 million. That would go toward us 
beginning to work on the backlog. One of the goals of the 
program that we would be held to is clearing up the backlog by 
the end of the 5-year user fee program. So by that time, we 
would be in steady state--applications in the door, 
applications out the door with predictability in that process 
and timelines. So we would expect with the backlog fee and our 
commitments and timelines that the backlog would be eliminated.
    Mr. Pitts. Can you be a little more specific on what kind 
of generic drug applications are in this backlog and how will 
clearing this backlog save patients in our healthcare system 
money?
    Ms. Woodcock. Most of the drugs in the backlog are 
additional copies of a drug where there is already a generic 
because we expedite the first generic out the door to try and 
get patients that initial savings so that additional copies of 
a generic have been shown to further lower the cost of the 
drug, the price due to competition. So this is important for 
lower cost drugs and also to have a robust supply. I think we 
are learning and we know from the shortage situation it is 
important to have multiple manufacturers of important drugs.
    Mr. Pitts. Now, in your testimony you talk about FDA's 
efforts to expedite review of manufacturer submissions to help 
alleviate drug shortages, and currently, it takes FDA 31 months 
to review these submissions. Can you give us more background on 
what expedite means? On average, how long does it take to 
expedite those submissions that can help alleviate drug 
shortages?
    Ms. Woodcock. I can't give you an exact number but we have 
a queue, and so everything is waiting and usually generic drugs 
are reviewed first in and they are reviewed first. So if you 
are the third in, you are reviewed third and so forth for 
fairness purposes. What we do if there is a shortage drug where 
that application might help ameliorate the shortage, we pull it 
out of the queue and review it as quickly as possible. So much 
of that 30 months can be gone. If the application is good, we 
can review that rapidly and get that drug on the market. So we 
have very few drugs waiting in the queue that actually would 
address shortages. We have identified any of those drugs and we 
have expedited review of the applications.
    Mr. Pitts. Now, how will the Biosimilars User Fee Program 
provide predictability and consistency regarding the review of 
biosimilars applications, and how will the Biosimilars User Fee 
Program help this burgeoning industry?
    Ms. Woodcock. The Biosimilars User Fee Program will provide 
predictability of timelines and review and process to this 
industry similar to what the Prescription Drug User Fee does 
for innovator products. To some extent, the biosimilars program 
was modeled on the GDUFA program. However, it has a development 
piece in it to recognize the emerging nature of this industry 
and that development piece, they pay fees and they get a series 
of development meetings so we can give them extensive advice on 
how to develop their products. And then when the final 
application comes in, there are timelines and goals associated 
with those timelines. So FDA, in exchange for having this user 
fee program, will be expected to meet those timeliness goals on 
review.
    Mr. Pitts. All right, thank you.
    My time has expired. I will recognize the ranking member of 
the subcommittee, Mr. Pallone, for 5 minutes for questions.
    Mr. Pallone. Thank you, Mr. Chairman.
    Dr. Woodcock, we have heard these statistics about the drug 
production overseas that 40 percent of drugs and 80 percent of 
the active pharmaceutical ingredients come from abroad. That is 
my concern. As you know, Mr. Dingell, Ms. DeGette, myself, and 
Mr. Waxman have introduced the Drug Safety Enhancement Act that 
gives the FDA authorities and resource to address the problem 
of these ingredients and drugs from overseas. You mention in 
your testimony the challenge represented by foreign 
inspections, but my understanding is that current law requires 
FDA to inspect domestic drug facilities every 2 years but is 
silent with respect to foreign facilities. That seems to be an 
uneven playing field obviously, and I know resources are always 
going to be an issue, but I still think that the bifurcation 
doesn't make sense.
    You know, so assuming you have unlimited resources, which 
of course is absurd, but assuming you have unlimited resources, 
do you agree that inspecting foreign and domestic facilities at 
the same frequency would make sense?
    Ms. Woodcock. Yes, I believe that what we need to do is a 
risk-based approach, and some facilities in the United States 
and some facilities overseas may need very close FDA 
supervision because of the problems they are having. Other 
facilities may be on a different schedule based on the risks 
that they pose but I don't believe----
    Mr. Pallone. They are not based on whether they are 
domestic versus overseas?
    Ms. Woodcock. That is exactly right.
    Mr. Pallone. Now, would you need new authority to permit 
you to do that, which, you know, to make sure that it is not 
different foreign versus domestic and to do the risk 
assessment? Would you need new authority for that?
    Ms. Woodcock. We primarily lack the resources to perform 
this inspectional program and one of the principal goals of the 
new Generic Drug User Fee Program is to level that playing 
field of inspection. And one of the proposals there is that we 
conduct risk-based surveillance inspections around the world 
and achieve parity or a level playing field on----
    Mr. Pallone. So it is more a question of the resources than 
new authority then?
    Ms. Woodcock. Yes, I believe that. Of course the law sort 
of sends a message that you are supposed to do the domestic 
every 2 years and is silent on the foreign, but from what we 
are doing, we are trying to ensure the quality of drugs for our 
patients, and where the drug is produced should not be taken 
into account.
    Mr. Pallone. Thank you. Now, would it be helpful to have 
additional resources to conduct more foreign inspections of 
brand facilities? I mean this isn't confined to just generic, 
correct?
    Ms. Woodcock. We need to inspect all facilities producing 
drugs of any kind, including over-the-counter drugs and so on 
at the appropriate intensity for the risk that they bear.
    Mr. Pallone. OK. Now, what about the responsibility of U.S. 
companies? You know, for example, you know, we have the heparin 
situation illustrated the importance of raising expectations of 
pharmaceutical companies to be familiar with their own 
suppliers, you know, coming from abroad. Do you think that U.S. 
companies should have to be able to ensure that the products 
they sell meet U.S. requirements even though those ingredients 
are coming from abroad? Are there any new authorities that 
would help the FDA in making sure that companies meet those 
responsibilities?
    Ms. Woodcock. Yes. As we have said repeatedly, we feel that 
our authorities at the border in particular are somewhat 
limited and there are additional authorities that have been 
discussed that would aid in keeping foreign products that don't 
meet our standards out of this country.
    Mr. Pallone. All right, let me just ask--I have a minute 
left--with regard to BsUFA and the BsUFA negotiations. Both you 
and the FDA Commissioner Hamburg gave assurances to the generic 
industry that the Biosimilar User Fee Program would receive 20 
million in funding. Now, I understand we are talking about, you 
know, money that would be shifted around within the Agency. 
What steps are being taken to make sure that that happens?
    Ms. Woodcock. Well, we have made a commitment. Dr. Mullin, 
who is here, we have been just discussing our time reporting 
and other tracking mechanisms. We keep very close track of how 
we spend both our BA money and our user fee money.
    Mr. Pallone. But is this something that you are going to 
move around within the Agency, is it going to be in the budget, 
or is it a new $20 million that we have to come up with? I 
assumed it was within the Agency. That is what I am trying to 
find out.
    Ms. Woodcock. Of course we would appreciate, you know, 
having resources to conduct this program. However, we do have 
$1.8 million right now in appropriated dollars for the 
biosimilars program and we would make up the money. If we don't 
receive appropriated money, we would use BA funds that are 
existing within the Center for Drugs.
    Mr. Pallone. All right. Thank you so much.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentleman from Pennsylvania, Dr. Murphy, for 5 minutes for 
questions.
    Mr. Murphy. Thank you, Mr. Chairman, and thank you, doctor, 
for being here, appreciate your candid and informed comments on 
this.
    Let me start off by asking--I want to make sure I 
understand FDA rules with regard to these medications. The 
Federal Food and Drug Cosmetic Act assumes that a drug is 
adulterated unless the methods used for manufacture of drug 
products conform to good manufacturing practice. Am I right 
that it works under that assumption?
    Ms. Woodcock. That is correct.
    Mr. Murphy. Can you explain the role and importance of 
these good manufacturing practices in terms of helping to 
ensure the safety and integrity of FDA-approved products? Can 
you explain how that works?
    Ms. Woodcock. Certainly. When drugs are produced in mass 
production in a factory, all right, there are many procedures. 
The modern term would be quality management, oK, to make sure 
that each time the drug is produced adequately and of adequate 
quality and that no errors have occurred. And it would be 
amazing if you go in a factory as we do all the time to see how 
many times something can go wrong. And so you must check and 
you must observe and you must test and you must improve and do 
all that. And those are embodied in regulations called the 
current good manufacturing practices regulations. And we also 
have international agreements on a lot of this, how it should 
look, that we have worked out through the International 
Conference on Harmonization.
    Mr. Murphy. So the assumption is unless you have actually 
seen what they do and given your seal of approval to that, we 
are assuming it has not met that standard. Is that a fair 
statement?
    Ms. Woodcock. Well, we have set standards for what the 
quality management should be like, and also we review the drug, 
make sure the testing and so forth will control the drug 
adequately, but until we go in there, we don't know if they are 
actually following those procedures. And they may follow them 
at one time and then later slip from that and get into problems 
and not produce a quality drug.
    Mr. Murphy. Hence the importance of inspecting plants on a 
regular or a tighter basis and you sometimes do a surprise 
visit and they occur in a short period and show up again.
    I know we have had hearings in the past where there is no 
such thing as a surprise visit to a foreign country and they 
know you are coming----
    Ms. Woodcock. That is correct.
    Mr. Murphy [continuing]. And when you are going. So do 
these practices differ in the United States versus other 
countries then in terms of how medications are manufactured?
    Ms. Woodcock. You mean by the manufacturers themselves?
    Mr. Murphy. Yes, by the manufacturers themselves.
    Ms. Woodcock. Well, there is a wide range of capacity and 
functionality in different countries, all right. In the United 
States there has been a long history of FDA inspections and 
understanding of what the standards are. Nevertheless, I will 
point out over the past year or so we have had multiple recalls 
and some of the drug shortage problems are due to U.S. 
manufacturers who are not being able to manufacture their 
product. So it requires vigilance and continued attention to be 
able to manufacture these products right. That said, in other 
parts of the world, it is much more uneven. They may have 
extremely modern factories and be right on top of their game, 
and there may be many factories that may be substandard in many 
areas.
    Mr. Murphy. So given all that, what is preventing the FDA 
from updating good manufacturing practices right now that 
require companies to verify their suppliers are complying? And 
associated with that, do you think the bills before us here 
sufficiently address your concerns, and either way, will you be 
able to offer the recommendations or cleaning up these bills if 
you feel that is necessary?
    Ms. Woodcock. Yes, well, we would be happy to work with 
you. I believe that the user fee bills are not about policy or 
regulation. They are about providing extra resources to perform 
activities. The regulations or law around drug safety and 
quality have not been really modified for a long time and are 
probably not totally congruent with modern understanding. So 
there has been discussion by this committee and others about 
are there additional standards that could be put into place 
that bolster and bring these up to modern understanding of what 
is needed.
    For example, I am always surprised and I am sure most 
Americans would be to hear that we can't really--there is a 
presumption that anything that is being imported to our 
country, a drug, is OK. And we have to prove that there is 
something wrong with it rather than the opposite. Most other 
countries that is not the case.
    Mr. Murphy. I want to make sure I hear what you are saying. 
You are saying you have to prove something is wrong with the 
imported drug? So what you told me before is with companies 
here there, there is an assumption that it is adulterated 
unless they can prove they have gone through inspection. But 
you are saying when a foreign drug comes over, the assumption 
is everything is fine unless you prove otherwise?
    Ms. Woodcock. Yes, that----
    Mr. Murphy. It is two different standards.
    Ms. Woodcock. Now, I am not a lawyer, all right, but that 
is how I understand the legal framework is set up. So we have 
to look at that and prove some way that it is not adequate for 
entry into the United States.
    Mr. Murphy. I appreciate it. I think that would come as a 
shock to most Americans to understand that that is how things 
are going. Thank you so much.
    Ms. Woodcock. And I would tell you that is not the case in 
other countries where they can hold things at the border if 
they even feel that they may not meet the standards.
    Mr. Murphy. Thank you.
    I yield back. Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentleman from Michigan, Mr. Dingell, for 5 minutes for 
questions.
    Mr. Dingell. Mr. Chairman, I thank you for your courtesy.
    Welcome, Dr. Woodcock. I am sponsor of H.R. 1483, which I 
hope this committee will give some strong consideration to. My 
questions today are going to require only yes or no answers due 
to the fact that I have so many. Starting, over 70 percent of 
prescriptions filled today are for generic drugs. Considering 
the fact that 40 percent of all drugs come from overseas and 80 
percent of pharmaceutical ingredients are also from overseas, 
it is critical that we be able to protect American consumers by 
ensuring the safety of the drug supply chain. In order to do 
this, FDA must clearly have the proper authorities in place.
    Dr. Woodcock, yes or no if you please. Does the Federal 
Food and Drug Cosmetic Act require FDA to complete GMP 
inspections of domestic drug manufacturers every 2 years? Yes 
or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Does the Federal Food Drug and Cosmetic Act 
require FDA to complete GMP inspections of foreign drug 
manufacturers on a comparable basis? Yes or no?
    Ms. Woodcock. No.
    Mr. Dingell. Would you have the resources to do it if they 
did?
    Ms. Woodcock. Not currently.
    Mr. Dingell. Is it accurate to say that current law is 
silent on the frequency with which FDA must inspect foreign 
facilities? Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Does FDA generally meet the biennial 
inspection requirement for domestic drug facilities currently? 
Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Is it true that FDA does not inspect foreign 
facilities at the same frequency as domestic facilities? Yes or 
no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Is it true that a lack of financial and 
personnel resources are contributing to factors not for 
inspecting foreign drug facilities more frequently? Yes or no?
    Ms. Woodcock. I am sorry. Could you repeat that a little 
more slowly?
    Mr. Dingell. I will give it again. Is it true that a lack 
of financial and personnel resources are contributing factors 
to not inspecting foreign drug facilities more frequently? Yes 
or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Do you agree that conducting inspections of 
domestic and foreign drug facilities at comparable frequency is 
as important to ensuring a level playing field for drug 
manufacturers? Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Sometime the playing field gets slanted 
against United States manufacturers because of our inability to 
inspect foreign manufacturers and suppliers of different kinds, 
isn't that so?
    Ms. Woodcock. Yes.
    Mr. Dingell. Can our goal be achieved by using risk-based 
inspection systems? Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Do you agree that a risk-based inspection 
schedule for domestic and foreign drug facilities based, for 
example, on the compliance history, time since last inspection, 
volume and type of product would allow FDA to better target 
their resources? Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Do you agree that conducting comparable 
inspections of domestic and foreign facilities is important to 
public health? Yes or no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Do you agree that FDA needs adequate 
resources, both financial and personnel, to conduct comparable 
inspections of domestic and foreign drug manufacturers? Yes or 
no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Does the Prescription Drug User Fee Agreement 
currently provide resources for preapproval inspection? Yes or 
no?
    Ms. Woodcock. Yes.
    Mr. Dingell. Does the Prescription Drug User Fee Agreement 
currently provide resources for any inspections beyond 
preapproval inspection? Yes or no?
    Ms. Woodcock. No.
    Mr. Dingell. As you know, the Generic Drug User Fee 
Agreement provides additional resources for FDA to conduct GMP 
inspections of both domestic and foreign drug facilities. Now, 
does FDA need similar resources for inspections of facilities 
manufacturing innovator drugs? Yes or no?
    Ms. Woodcock. Yes, we need similar resources.
    Mr. Dingell. Now, one obstacle for ensuring comparable 
inspections of domestic and foreign facilities is a lack of 
complete and accurate information that FDA has on generic drug 
manufacturing establishments. Will the Generic Drug User Fee 
Act help FDA to identify all domestic and foreign drug and 
active pharmaceutical ingredient facilities involved in the 
making of generic drugs through registration? Yes or no?
    Ms. Woodcock. Yes, as proposed.
    Mr. Dingell. And I am assuming that that is a very badly 
needed authority at Food and Drug. Is that yes or no?
    Ms. Woodcock. Absolutely.
    Mr. Dingell. Mr. Chairman, I have completed my business and 
with 9 seconds to spare. I yield back the balance of my time.
    Mr. Burgess. [Presiding] The Chair thanks the gentleman for 
his gracious----
    Mr. Dingell. Mr. Chairman, I ask unanimous consent that the 
record will include an analysis of H.R. 1483, the Drug Safety 
Enforcement Act of 2011, of which I am a sponsor. Thank you, 
Mr. Chairman.
    Mr. Burgess. Without objection, so ordered.
    [The information follows:]



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    Mr. Burgess. I now recognize myself for 5 minutes for 
questions.
    And again, Dr. Woodcock, welcome to our humble little 
hearing room here at the Energy and Commerce Committee. We 
welcome you back. Let me ask you a couple of questions that 
deal with the issue of conflicts and the exclusion of people 
from the FDA advisory panels because of conflicts of interest. 
Have there been instances where experts have been disqualified 
from serving on advisory committees because they served as an 
investigator for the product under consideration?
    Ms. Woodcock. Yes.
    Mr. Burgess. Have there ever been instances where someone 
is disqualified because they have been in a clinical trial as 
an investigator for an unrelated product?
    Ms. Woodcock. Yes.
    Mr. Burgess. So I think I have an accurate quote from you 
where you say it is difficult finding highly experienced people 
who do not have conflicts?
    Ms. Woodcock. That is correct.
    Mr. Burgess. And we have delays in the panels because of 
this policy. And in fact your commissioner, Margaret Hamburg, 
Dr. Hamburg has said some meetings require expertise that is 
limited to a handful of experts who can often have conflicts of 
interest. So tell us what the real world consequences of this 
are. Most of us have never been in an FDA advisory panel 
meeting so what are the implications of having people that have 
to exclude themselves or be excluded because they either have 
knowledge of the product under consideration or they have been 
involved in an unrelated investigation?
    Ms. Woodcock. We are asking the committee for advice on 
very complicated scientific questions. Our scientists are very 
well versed on the topic and will have gone over all the 
information in the application and any related literature. So 
they really want people at the table who can help them grapple 
with these complex questions and they would really like 
experts, trialists or disease experts who can shed additional 
light on the problem they are trying to deal with.
    Mr. Burgess. Just as someone from the outside, is the 
converse of that universe also true that the people who are 
involved may not have the knowledge set or skills to make some 
of the decisions they are required to make and in some cases 
maybe even lack the basic fund of knowledge to deal with the 
clinical question at hand?
    Ms. Woodcock. Yes.
    Mr. Burgess. Thank you for that succinct and concise 
answer. Let me ask you this since you have given me the benefit 
of some time. I have been in a ping pong match for the past 
couple of weeks, couple of months, since the first of January 
when the EPA banned the sale of over-the-counter asthma 
inhalers. I am an asthma patient myself and I will just tell 
you all across this country people are going to be going to the 
CVS pharmacy at midnight because they have had an asthma attack 
and they are out of all of their other options and they are 
used to being able to buy for $16 Primatene inhaler and now 
they cannot. And we as Members of Congress are going to start 
hearing about that. It is not going to happen all at once but 
it is slowly going to start rolling out into the American 
landscape such that by the time of the August recess, I suspect 
there will be a number of people who show up in each Member's 
town halls complaining about this policy.
    Now, we have heard from the EPA and the EPA says it is your 
fault, and Commissioner Hamburg said no, it is the EPA. Can you 
help us? Primatene has been on the market for a long time and 
the only thing that has changed is the propellant, CFC changed 
to HFA. I would argue that HFA is not as efficient a dispersant 
at CFC but that being aside, there really is no difference in 
the active pharmaceutical ingredient in the over-the-counter 
inhaler Primatene, but for whatever reason, it is held up 
somewhere. Can you help us get that done?
    Ms. Woodcock. The switching of all the asthma inhalers was 
triggered by the Montreal Protocol that was agreed to by the 
United States to eliminate CFCs to help with the problem of the 
ozone layer. And FDA has gone through a very long process to 
inform the manufacturers, work with the community, prepare 
them, and then execute the switches. For the prescription 
albuterol inhalers, which are really a preferred standard of 
care, as you know, for asthma----
    Mr. Burgess. Yes, but I always don't plan ahead.
    Ms. Woodcock. Right.
    Mr. Burgess. You know, I am the world's worst asthma 
patient and I will forget----
    Ms. Woodcock. Right.
    Mr. Burgess [continuing]. And then something happens that 
triggers an attack at two o'clock in the morning and now the 
only option is to go to the emergency room and get a treatment 
and that is $1,500.
    Ms. Woodcock. I understand.
    Mr. Burgess. It was $16, $16.00 before, and this is what we 
have visited upon people. I do want to enlist your aid in 
getting this problem solved. I have asked the EPA to allow the 
sale of existing Primatene inhalers with CFC until those 
markets are exhausted, but we really do have to--that is why we 
have an approval rating of 8 percent because people look at 
this and say well, this is a simple problem. The stuff was for 
sale before, it has got a different propellant, sell it again. 
Or did you really think that asthma patients were blowing a 
hole in the ozone layer. I don't think so and you will never 
convince me otherwise. But my time has expired and I am going 
to yield to--who am I going to yield to? No one on your side. I 
will yield to Dr. Gingrey. Oh, I beg your pardon. OK, Dr. 
Gingrey, you are recognized for 5 minutes for questions, sir.
    Ms. DeGette. I just want to welcome Dr. Woodcock.
    Ms. Woodcock. Thank you.
    Ms. DeGette. Thanks.
    Mr. Gingrey. Mr. Chairman, thank you.
    Dr. Woodcock, much has been made over the past months and 
years about drug and medical production moving overseas to 
countries like China and many reasons for this migration have 
been put forward. In a study that ran in Health Affairs--this 
is November 2011--entitled ``Evolving Brand Name and Generic 
Drug Competition'' may warrant a revision of the Hatch-Waxman 
Act. The authors state that ``the Hatch-Waxman Act in 1984 
raises questions about whether the Act's intended balance of 
incentives for cost savings and continued innovation has been 
achieved. Generic drug usage and challenges to brand name 
drugs' patents have increased markedly, resulting in greatly 
increased cost savings but also potentially reduced incentives 
for innovators, new drug application, brand name. Congress 
should review whether Hatch-Waxman is achieving its intended 
purpose of balancing incentives of generics and innovation. It 
also should consider whether the law should be amended so that 
some of its provisions are brought more in line with recently 
enacted legislation governing approval of so-called 
biosimilars.''
    Dr. Woodcock, do you believe that Congress should review 
the current Hatch-Waxman paradigm to ensure that the intended 
balance of incentives for cost savings and innovation continues 
to have been achieved?
    Ms. Woodcock. I would say that deciding on those tradeoffs 
between innovation and cost saving for the American public is 
one of the jobs of Congress, and FDA will execute the 
provisions as they are laid out by the Congress. It is clear 
that there have been tremendous cost savings as many of the 
Members have indicated from the generics program. We also know 
that the innovator industry is struggling right now, and that 
again is multi-factorial and would have to be the subject of a 
different discussion. But the innovator industry overall is in 
a crisis.
    Despite that, they have put forth many innovative drugs 
which we have been able to approve over the past year. We 
approved 30 new entities last year, many of them very 
innovative drugs. So whether that is the correct balance I 
think is a very complicated economic issue that I am not able 
to opine on, and it involves many societal tradeoffs to 
decide----
    Mr. Gingrey. Well, I thank you and I know you can't state 
exactly, but your answer certainly suggests that you have some 
concerns that maybe the balance that we are trying to achieve 
is not there. Is that a fair statement or----
    Ms. Woodcock. I think many of us are concerned about the 
health of the innovator industry which is what brings new 
products and treatments and cures to people who lack therapies 
right now. However, whether or not Hatch-Waxman is the way to 
deal with that is beyond my purview.
    Mr. Gingrey. Yes. Thank you, Dr. Woodcock. I want to 
commend the FDA on its concern for U.S. patients in light of 
our current drug shortage crisis. As you know, this is an issue 
that is important to this committee and this Congress and I 
want to commend my colleague, Representative DeGette, for her 
leadership in this area. As a medical provider, I believe that 
proper notification can play a critical role in ensuring 
patients get the best care possible, especially those with 
life-threatening conditions such as cancer. In your testimony, 
you state that ``although many of the root causes of drug 
shortages are beyond our control, we are committed to 
addressing this important issue and look forward to working 
with the subcommittee on this issue. Tell me, Dr. Woodcock, 
what are the root causes of drug shortages and which ones are 
beyond our control?
    Ms. Woodcock. Well, I would refer you to the excellent 
document that was written at HHS, the Assistant Secretary for 
Planning and Evaluation, I believe, at HHS, that discussed this 
because many of them are economic issues. What we saw with the 
sterile injectables, which are the drugs that are in great 
shortage right now, was a surge in capacity over the past 10 
years but with a very limited number of manufacturers, most of 
whom are in the United States. And with that capacity surge, 
they took on a large inventory of sterile injectables that they 
were producing, each of these manufacturers, and then when they 
developed problems in their manufacturing ability where they 
were getting particulates or endotoxin or other potential 
bacterial contamination, so forth, which I will add these 
things are hard to avoid and they take a lot of diligence to 
keep sterile manufacturing, you know, at a high quality level. 
But when they encountered these problems, then we lapsed into a 
shortage situation with a few alternatives or maybe no 
alternatives.
    Mr. Gingrey. I see my time has expired and as I yield back, 
would you be sure and get that report to me? I would appreciate 
it.
    Ms. Woodcock. Happy to do so.
    Mr. Gingrey. Thank you. Mr. Chairman, I yield back.
    Mr. Burgess. I thank the gentleman for yielding. The Chair 
now recognizes Mr. Towns of New York for 5 minutes for the 
purpose of questioning the witness.
    Mr. Towns. Thank you very much, Mr. Chairman. Thank you for 
having this hearing.
    Dr. Woodcock, I am concerned about the large backlog of 
generic drug applications. What can be done about that?
    Ms. Woodcock. Well, I am concerned about it, too, and the 
proposal that we have given to Congress for the Generic Drug 
User Fee Program has a specific provision to eliminate the 
backlog over the first course of that program.
    Mr. Towns. Right. Is there cooperation across the board, 
you know, in terms of the pharmaceutical companies and all 
that? Everybody is on board with this agreement?
    Ms. Woodcock. Yes, I think it is in everyone's best 
interest to eliminate this backlog and to have a predictable 
and efficient generic drug process.
    Mr. Towns. Right. Once this goes into place, what will the 
turnaround time be approximately?
    Ms. Woodcock. The goal time for any generic drug 
application is a first review, a complete response within 10 
months of the submission of the application.
    Mr. Towns. All right.
    Ms. Woodcock. So the goal would be every generic drug 
applicant would get an answer back in 10 months and we would 
then look at how many of those could get right on the market or 
what were the problems that would keep them going into another 
cycle.
    Mr. Towns. Right. Mr. Chairman, I am going to do something 
we don't do around here. I am going to yield back.
    Mr. Burgess. The Chair recognizes the gentleman's 
generosity and recognizes the gentleman from Ohio, Mr. Latta, 
for 5 minutes for questions.
    Mr. Latta. I thank the chairman.
    And Dr. Woodcock, thanks very much for being with us today. 
I would like to kind of go back to what Dr. Gingrey was talking 
about at the very end in regards to drug shortages, and I have 
been working with several other members in the past few months 
on this issue. And first of all, you said in your opening 
statement that, especially on drug shortages, that we had a 
perfect storm. Could you describe what that perfect storm is or 
was?
    Ms. Woodcock. Well, it was the enhanced utilization of the 
older sterile injectable drugs, OK, so the demand went up for 
them. At the same time, new sterile injectable drugs went 
generic, and so then firms took those on as well so then the 
demand on their lines--they have a limited number of 
manufacturing lines that can make sterile injectables, all 
right, because it is very hard to do that. So the demand went 
up, both for the existing drugs and the new generic drugs that 
were sterile injectables. At the same time, it takes a while to 
expand the capacity and bring up new facilities. So that did 
not happen.
    And then manufacturing problems occurred within many of 
those lines, thus making them have to perhaps shut down the 
line and precipitate a sudden shortage. The other manufacturers 
who might take up the slack were also having capacity problems 
of their own and/or having manufacturing problems. So all these 
factors came together to create really an unprecedented amount 
of shortages that we are trying to deal with and shortages of 
drugs that Americans cannot do without.
    Mr. Latta. Let me ask, then, over the past year, what have 
you all done to alleviate that problem?
    Ms. Woodcock. In 2011, 175 drug shortages were alleviated 
by our actions. Now, 86 of those I think were from one firm 
where we were able to do interventions, but we have multiple 
interventions as I describe but we can alleviate those. 
Nevertheless, there are several hundred shortages that are 
ongoing.
    Mr. Latta. Are there additional items that you can do then?
    Ms. Woodcock. Pardon me?
    Mr. Latta. Are there additional items that you could work 
on to help on that issue?
    Ms. Woodcock. Yes. Well, since the executive order by the 
President that asked firms to notify us of any kind of shortage 
and we have also put in a database that we are tracking these 
very carefully. We have added staff to the drug shortage 
program that we have at FDA. But we do feel that if there were 
legislation that requested companies or required companies to 
notify us, that would help us in perhaps averting more 
shortages.
    Mr. Latta. And also is there a disease area where there are 
more significant drug shortages than others?
    Ms. Woodcock. Right now, we are hearing from the cancer 
community and that is because many of the cancer drugs are 
injectables. But the injectable drug shortage affects many 
other kinds of disease areas and over the years, historically, 
you couldn't predict where the shortages would arise. They have 
been in all sorts of disease areas.
    Mr. Latta. And also, will the generic drug user fee help 
with the drug shortage issue do you believe?
    Ms. Woodcock. I believe that having a robust industry that 
has predictable timelines for its applications and can get 
applications through and also having an inspectional force that 
we can get out there quickly and do the inspections in the 
appropriate time will help with shortages because one of the 
things we need for shortages is we need more than one 
manufacturer that is able to make that drug. So if something 
happens at one plant, then there is somebody else who can ramp 
up production.
    Mr. Latta. OK. And some of the committee hearings and the 
press have suggested the key characteristic of the drugs in 
shortage older physician-administered drugs underscore failure 
in the older generic market and that incentives in this market 
are critical in solving the crisis. Do you agree with that 
assessment?
    Ms. Woodcock. I am sorry. Could you repeat that?
    Mr. Latta. Yes. There has been in some of the committee 
hearings and also out in the press have suggested that the key 
characteristics of drugs in shortage older physician-
administered drugs underscore a failure in the older generic 
market and that incentives in this market are critical to 
solving that crisis. And do you agree with that assessment?
    Ms. Woodcock. I am not qualified to make a judgment on that 
being a physician and not an economist. The HHS report felt 
that it was a multiple number of factors and it wasn't simply 
an incentives problem. Theresa, do you have----
    Ms. Mullin. Yes, I think that that report would probably 
have the best description of all the kinds of factors. A number 
of them are economic and factors that are not within our 
ability to control and there may be other ways to address those 
but we have limited ability to address those factors.
    Mr. Latta. OK.
    Ms. Mullin. No ability in some cases.
    Mr. Latta. Thank you very much.
    Mr. Chairman, I see my time has expired and I yield back.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentlelady from California, Mrs. Capps, for 5 minutes for 
questions.
    Mrs. Capps. Thank you, Chairman, for recognizing me.
    And Dr. Woodcock, thank you for your testimony today. I am 
actually going to just make a statement to add onto the list of 
reasons why the topic at hand, the drug shortages, is a very 
real issue. I would ask a question following but it has already 
been asked and you supplied the answer that I know you would 
answer to me. But it is such a prevalent problem plaguing 
manufacturers, hospitals, doctors, and patients alike. So this 
is a story of one of my constituents who reached out to our 
office. She is a pharmacy buyer at a nonprofit organization in 
my district which works with cancer patients. So right now, her 
organization is not able to purchase life-saving critical care 
drugs, and for some of them, they have been waiting more than 4 
months. I know this isn't a new story to you either, but it is 
one more story. And the only route available for this 
organization because they are nonprofit is to get these drugs 
from the black market, who is essentially auctioning them off, 
often charging three times more than what they ought to cost. 
As a nonprofit, you can imagine they never are successful in 
their bids, and instead, the treatments for their patients they 
are representing are delayed. This is hard to believe in this 
country at this moment.
    So let me turn to something a little different----
    Ms. Woodcock. May I say something?
    Mrs. Capps. Of course, please.
    Ms. Woodcock. We are accepting reports from outside parties 
where they have encountered excessive pricing behavior and 
other behaviors that we can refer to the Department of Justice.
    Mrs. Capps. I appreciate that and actually will take that 
back to this constituent and to others who will let our 
district offices know when they hear these stories there is a 
path that can be followed. You don't just have to say I am so 
sorry. We can say, well, there is a path and there could be 
some recompense that is made in that area.
    Another mechanism for helping to address drug shortages is 
notifying the FDA of impending shortages. I know that in the 
next panel, you are going to hear testimony discussing the 
Accelerated Recovery Initiative that the industry is putting 
forward to help address and prevent shortage, anticipating that 
might come up in their discussion. What do you think of this 
proposal, and in particular, do you think it should be 
implemented, in what ways would it obviate the need for 
legislation, and how is this going to help us so we can focus 
on things that would make a difference for you and that are 
going to come up with a solution?
    Ms. Woodcock. Yes, we haven't had the opportunity to 
examine the proposal in detail and we look forward to working 
with the industry on the proposal as well as with Congress.
    Mrs. Capps. OK. So you are going to be listening carefully 
to the next panel as well.
    And then finally, with the rest of my time, we have heard a 
lot of discussion today about the increasingly globalized drug 
supply chain and the challenges it poses. I want to ask you 
about a couple of problems I have heard about in particular. 
First, I understand the FDA has had problems conducting or 
completing inspections of facilities overseas or abroad. Would 
you be willing to describe some of these problems such as if a 
foreign manufacturer doesn't allow you in to inspect its plant 
or unduly delays you for an inspection, what recourse do you 
now have and what additional authority would be helpful?
    Ms. Woodcock. Mr. Beckerman will address that.
    Mrs. Capps. Yes.
    Mr. Beckerman. Sure. Currently, FDA has to show that a drug 
appears to be adulterated or misbranded to keep it out of the 
country, and if FDA inspectors are delayed, limited, or denied 
in the inspection, there is no immediate recourse that the 
Agency can take. And so having an explicit authority to allow 
us to exclude a drug if our inspectors have been impeded would 
be extremely helpful.
    Mrs. Capps. So these companies know very well that if they 
delay or deny that nothing is going to happen anyway?
    Mr. Beckerman. There are very different incentives 
depending on the type of inspections being done. Firms have an 
obvious incentive to let FDA investigators in for a preapproval 
inspection because that is a condition precedent to getting 
their drug on the market. Once a drug is on the market, that 
incentive no longer exists and it would be helpful for FDA to 
have a tool.
    Mrs. Capps. So having a tool would be useful to you to 
have?
    Mr. Beckerman. That is right.
    Mrs. Capps. I also understand that information sharing with 
foreign regulatory partners has posed some challenges. Could 
you describe a couple of these challenges--there are a few more 
seconds left--and also the role of importers in the supply 
chain that has become a more prominent one in recent years?
    Mr. Beckerman. On the information sharing question, in 
particular the Food, Drug, and Cosmetic Act has a provision 
that prevents FDA from sharing what is called trade secret 
information, and this is not typically the sort of thing that 
we think about as, you know, the secret formula for Coke, but 
it is information related to the manufacturing process. It is 
critical to be able to share that information with regulatory 
partners if we want to take advantage of their regulatory reach 
and be as efficient as possible. So addressing the inability to 
share that sort of information would be very helpful.
    Mrs. Capps. Would that require legislation?
    Mr. Beckerman. It would.
    Mrs. Capps. OK. Thank you very much. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady and recognizes 
the gentleman from Louisiana, Dr. Cassidy, for 5 minutes for 
questions.
    Mr. Cassidy. Thank you, Dr. Woodcock. I am always impressed 
at how well you answer questions.
    The gray market--I am speaking of course about drug 
shortages--what is the volume of drug on the--5-FU is in a 
shortage, do we have a sense of how much the gray market will 
arise to fill that need?
    Ms. Woodcock. Well, I would ask Captain Valerie Jensen, who 
is our head of drug shortages. Do you have any insight into 
that?
    Ms. Jensen. Yes. I am Val Jensen, Associate Director of 
Drug Shortage Program, and we don't think there is a large 
supply in the gray market from what we understand about the 
gray market. FDA doesn't receive a lot of information about the 
gray market, but we do know that from what we hear, it is a 
very small volume that is in the gray market right now.
    Mr. Cassidy. Now, but I am concerned in this report of HHS, 
they speak about if there is early notification of shortages, 
there may be hoarding. That almost seems like you are throwing 
gasoline upon the potential of a gray market. Would you agree 
with that?
    Ms. Jensen. We would agree with that.
    Mr. Cassidy. And so it is good to have early notification 
or not?
    Ms. Jensen. So if we received the early notification, what 
we do with that is try to work with the company, whatever 
company is having the problem on addressing that issue as soon 
as possible. Hopefully, we can prevent the shortage before it 
even occurs. That is our goal.
    Mr. Cassidy. Now, I am also concerned, and I don't know 
this; I am just asking--do some people make it a practice to 
hoard in anticipation and therefore step in? It clearly would 
be a nice way to make some money. You mentioned there could be 
a referral to DOJ, but this is kind of a late development. Have 
people done that in the past? Have we looked at the ordering 
patterns of companies? Do they order here, then they suddenly 
order there sort of thing?
    Ms. Jensen. FDA doesn't normally get that type of 
information, the ordering information.
    Mr. Cassidy. Would that be HRSA?
    Ms. Jensen. The manufacturers would know what is being 
ordered. When there is a potential shortage, sometimes 
companies do----
    Mr. Cassidy. But let me ask because I think here last 
time--and people have mentioned they don't know the source of 
drugs on the gray market--it seems logical to look at wait, who 
is ordering? Is there a difference in ordering pattern relative 
to a particular entity's patient base? Does that make sense? 
Now, that just occurs to me and frankly I have looked at that, 
and when you look at that, you think that is kind of 
interesting, small little hospital ordering a lot of drugs. 
Now, has anybody pursued that more than just kind of looking at 
it?
    Ms. Jensen. It is just not data that FDA has access to as 
far as hospital ordering patterns.
    Mr. Cassidy. I could give it to you. I mean I just made a 
phone call and got it and it actually just kind of raises 
questions frankly.
    Ms. Woodcock. Right. Well, I think those are the types of 
things that law enforcement might be interested in. Also, I 
would say if we have early notification process, we would not 
plan to make it public unless we had failed to avert the 
shortage and the shortage was imminent.
    Mr. Cassidy. And again, as you were describing the means by 
which you averted shortage, there seems to be somewhat of an ad 
hoc basis to it. You got a call, you rushed in, you started 
making it. In my life I have learned that it is better to have 
a system as opposed to an ad hoc. Now, do you systemize that or 
is it still somewhat ad hoc?
    Ms. Woodcock. I think we have systematized it to the extent 
it is possible. The problem is that the manufacturers cannot 
predict when they are going to run into shortage. Many of these 
shortages are precipitated by manufacturing failures. They make 
the drug, they are going along making the drug, everything is 
fine, and then they discover particulates, they have mixed up 
the drug----
    Mr. Cassidy. Presumably there is quality control that on a 
regular basis they are going to pull up and say, OK, every 6 
weeks we are going to, you know, run a sample and make sure it 
doesn't have sporacide or something in it.
    Ms. Woodcock. Well, it is much more than that actually. 
There is a very tight system of controls. You were talking 
about the good manufacturing processes call for very tight 
controls----
    Mr. Cassidy. I only have 53 seconds. By the way, just to go 
back, if you don't have access to the ordering pattern of the 
hospitals, who does have that data?
    Ms. Jensen. Yes, I think we would have to look into that.
    Mr. Cassidy. Could you let me know that? I would be really 
interested in that.
    Let me ask one more thing. Going back, Mr. Dingell had a 
line of questions about whether or not you need more resources. 
I think it was our previous conversation you mentioned that 
union contracts would limit the ability to send people 
overseas. Dr. Hamburg was here and she really kind of rope-a-
doped me on that, so let me just ask a yes or no. Do you have 
the ability under your union contract to send somebody overseas 
to inspect a plant if they otherwise object? Yes or no?
    Ms. Woodcock. I don't know the answer to that. I don't 
supervise the field staff. And I imagine it depends on the 
circumstances. So I can get back to you but I can't answer that 
straight out.
    Mr. Cassidy. Does anybody on the panel know that? OK, if 
you could, I would appreciate that.
    Ms. Woodcock. Certainly.
    Mr. Cassidy. Thank you. I yield back.
    Mr. Pitts. The Chair thanks the gentleman. That concludes 
the members of the subcommittee questioning.
    Without objection, we will go to the members of the full 
committee. Ms. DeGette of Colorado is recognized for 5 minutes 
for questions.
    Ms. DeGette. Thank you, Mr. Chairman.
    I just want to ask a follow-up question about the drug 
shortages and I appreciate my colleagues on both sides of the 
aisle working with me on this issue because it is something 
that sort of hit and escalated, and we are all hearing about it 
from our hospitals. And, you know, we are all concerned about 
the stories we hear, particularly with these generic 
injectables, about the shortages that hospitals are having. A 
lot of them are pediatric cancer patients and other patients 
like that. But I am hearing from my pharmacist at the hospital 
that this is now expanding to many other drugs. They told me 
that they have a drug shortage a day at some of these 
hospitals, some place where they are trying to make these value 
judgments about what they treat the patients with. And so I 
also am concerned about the hoarding issues and the other 
issues, but I guess I would ask you, any of the witnesses, to 
talk about under the current voluntary program that you have, 
do you see a lot of problem with hoarding right now?
    Ms. Jensen. We do receive reports from pharmacists, mostly 
faxes and emails that they have received from gray marketers, 
from companies advertising these drugs at very high prices, and 
we do forward all of those reports to the Department of 
Justice.
    Ms. DeGette. And have you seen a large incidence of that?
    Ms. Jensen. We have----
    Ms. DeGette. OK.
    Ms. Jensen [continuing]. Over the past----
    Ms. DeGette. And do you think there are some ways we can 
write legislation so we don't experience a lot of hoarding if 
we make a mandatory reporting program?
    Ms. Jensen. So with notifications of mandatory reporting, 
we would not post a shortage until we know that shortage is 
going to occur, absolutely going to occur, or has already 
occurred. We would want to hold off because our goal is to try 
to prevent all shortages. If we can do that through working 
with the manufacturers, through working with alternate 
manufacturers to ramp up, as well as sometimes having to 
temporarily import product, that is what we are doing.
    Ms. DeGette. So your process would be if you got 
notification of a shortage to contact the manufacturers to see 
if it could be resolved internally----
    Ms. Jensen. Absolutely.
    Ms. DeGette. It is a little bit of a waiting game, isn't 
it, because if you don't notify the hospitals and the 
physicians quickly enough, then having any kind of a 
notification system is pointless, right?
    Ms. Jensen. Right.
    Ms. DeGette. So you are going to have to figure out how to 
do that.
    Ms. Jensen. We need a good way to get information out when 
we know there is going to be a shortage, get it out as quickly 
as possible so that hospitals can make decisions.
    Ms. DeGette. And what would happen if you did have a system 
where you could get that notification out? What would the 
hospitals then do with that information?
    Ms. Jensen. Well, they could plan accordingly. Sometimes 
treatments can be reserved for certain types of patients where 
there is an alternative for other patients. They can use those 
alternatives. Sometimes it helps hospitals make those 
decisions.
    Ms. DeGette. OK. Dr. Woodcock, in your written testimony, 
you had said that the FDA sent a letter to the pharmaceutical 
manufacturers reminding them of their current legal obligations 
to report certain discontinuances to the Agency and urging them 
to voluntarily notify the FDA of all potential disruptions of 
the prescription drug supply to the U.S. market even when 
disclosure is not currently required by law. After you did 
that, you said that there has been a significant increase in 
the number of potential shortages reported to the FDA. So my 
question is, is it your sense that manufacturers were not 
complying with current law before they got that letter?
    Ms. Woodcock. Our sense is I think that manufacturers were 
complying with current law, but the current law only has a 
limited universe of things that have to be reported. And we 
asked for voluntary reporting of a much wider universe.
    Ms. DeGette. So as I understand it, the Agency cannot 
expand the reporting, cannot require more reporting without 
authorization from Congress, is that right?
    Ms. Woodcock. Not more mandatory reporting.
    Ms. DeGette. Without authorization from Congress, right? 
OK. Thank you very much.
    Thank you, Mr. Chairman. I yield back.
    Mr. Pitts. The Chair thanks the gentlelady. The Chair 
recognizes the gentleman from Illinois, Mr. Shimkus, for 5 
minutes for questions.
    Mr. Shimkus. Yes, I am sorry, Dr. Woodcock. I know you have 
been here for a while. I had to go speak on Yucca Mountain, so 
I had my different jobs I have to do.
    So I just really wanted to focus on Generic User Fee Act 
issues and the proposal to develop better science for new 
bioequivalent methods for locally acting drugs. So how do we 
know what the promises are? So what types of metrics do you 
think there will be for Congress and the American people to 
judge whether we are getting our best return on investment with 
this?
    Ms. Woodcock. Well, similar with the user fee program, you 
know, there are interim goals throughout this Generic Drug User 
Fee Program that have been devised, and we will report on those 
goals and you will know exactly what our performance is against 
the goals. So there are many metrics that are put into place 
for performance of the program. We intend to meet those 
metrics, but right from the beginning, we will have to do 
things in the first year, and we can report on those actions.
    Mr. Shimkus. Yes, and I appreciate that. I think Congress 
would like to see I think the folks who are working with you 
collaboratively would like to make sure that is transparent, 
there is predictability. A lot of our concern is the length of 
time without it. So I mean there is just hope that in paying 
for an expedited, clear, safe system, that we are going to get 
what is going to be paid for.
    Ms. Woodcock. Well, I hope you can feel some confidence 
because of our track record of the Prescription Drug User Fee 
Program where we have exceeded or met our goals up through 
almost the entire program.
    Mr. Shimkus. And I mentioned this numerous times in various 
hearings and I applaud it; I think focusing on the risk-based 
approach in the recent reports is right on. I mean if good 
actors are good actors and they have been good actors, they 
continue to be good actors, then there may be a time to revisit 
but annually may--we can make that determination. Obviously, 
when we are not inspecting, we would much rather have 
inspections of facilities we haven't even visited versus 
continually re-inspecting the good actors. So I find that a 
positive and I look forward to that.
    Utilizing prediction information from companies, foreign 
governments, and third parties could help us, obviously, to do 
this risk-based system. Can you describe the importance of the 
risk-based approach in ensuring the safety of imported drugs?
    Ms. Woodcock. Certainly. What we know about facilities is 
that if they are having problems, they may not correct them and 
the problems may get worse. So we go into a plant initially, we 
discover problems, if we don't go and return and verify that 
they are on an improvement trajectory, we may be seeing a 
situation where the production methods may be deteriorating. 
And so it is very important for us to go sort of where the 
money is, where the risk is and to be able to follow up on 
those facilities that are subpar, all right, and also to follow 
up more closely on those facilities that are producing riskier 
products such as the sterile injectables to make sure they are 
continuing to meet their obligations.
    Mr. Shimkus. And I appreciate that. And my last question is 
how can we leverage the third party actors or foreign 
governments? Help me talk through how do we get a little more 
buy-in or can get them to understand the importance of what we 
are trying to do.
    Ms. Woodcock. The foreign governments?
    Mr. Shimkus. Right, or other third party entities that may 
be involved.
    Ms. Woodcock. Other third parties, um-hum. As Mr. Beckerman 
said, we would like to have better ability to exchange 
information with foreign countries who have inspectorates. Many 
countries now are developing pharmaceutical inspectorates. They 
go to the factories; they have information. We do get heads up 
from them when there are problems, but we would like to have a 
much better global safety net so that all the regulators are 
working together and any other inspectorates that might be out 
there, third party inspectorates. So we share information and 
we make sure around the world that that safety net exists.
    Mr. Shimkus. Yes, historically, I think we have all 
believed that FDA has been really the gold standard. I think 
the EU is because of their timeliness is getting into a 
competitive arena with us. We would like to continue the gold 
standard and maybe push those values but also a timely process 
so we don't lose that leverage.
    Thank you, Mr. Chairman, and I yield back.
    Thank you, Dr. Woodcock.
    Mr. Pitts. The Chair thanks the gentleman. And that 
concludes panel one. Do we have another one? I am sorry. I 
didn't see you.
    The Chair recognizes the gentleman from New York for 5 
minutes for questions.
    Mr. Engel. Thank you, Mr. Chairman. It is hard to see on 
the side, I know. Thank you.
    Dr. Woodcock, several of the witnesses in the second panel 
in their written testimony mention that the user fees included 
in GDUFA and BsUFA are meant to be in addition to a solid base 
of annually appropriated funds for the FDA. So I was pleased to 
see that for the fiscal year 2012 the FDA received a 50 million 
increase in funding over fiscal year 2011 funding levels. But 
this was a hard-fought victory given that the first proposal 
was a 285 million cut in FDA funding. So could you elaborate on 
why it is so important that the FDA be adequately funded and 
how cuts to the FDA could impact the Center for Drug Evaluation 
and researchers' ability to meet the review time frames and 
inspection standards outlined in the GDUFA and BsUFA user fee 
agreements?
    Ms. Woodcock. Yes. All of the user fee programs assume that 
there is an appropriated base funding that we build on and that 
is augmented by the user fees. As I think the discussion on 
drug shortage has illustrated, FDA has many other jobs, and the 
drug program has many other jobs other than simply review. And 
for the health and safety of our population, we need to do all 
those activities well and we do need resources to do them. So 
the Generic Drug User Fee Program that is being proposed is 
built upon a platform of appropriated dollars and is additive. 
The Prescription Drug User Fee Program has always had a trigger 
and is of appropriated funds and the fees are additive that 
allow us to meet the goals and accomplish all that ambitious 
program. And similarly, for biosimilars it will be built on an 
appropriated base.
    Mr. Engel. Well, thank you. You mentioned the drug 
shortages. The largest employer in my district is Montefiore 
Medical Center in Bronx, New York. They are, as you know, a 
premier academic medical center with centers of excellence in 
cancer care, cardiovascular services, pediatrics, 
transplantation, and neurosciences, and my constituents have 
really come to rely on them. All three of my children were born 
there and they are really, really a treasure. When I asked them 
about the impact of drug shortages on Montefiore, they 
estimated to me that members of their staff, including 
pharmacists and physicians, spent more than 110 hours a week 
addressing issues directly related to drug shortages. So 
clearly this issue, dealing with this, requires a significant 
amount of people power and labor costs in order to track down 
medications. Can you describe the steps the FDA is taking to 
assist our hospitals like Montefiore in staying on top of 
current and anticipated drug shortages?
    Ms. Woodcock. Certainly. We sent a letter out to all 
manufacturers reminding them of their statutory obligations and 
asking them to voluntarily notify us in advance of potential 
shortages so that we can do what we do to mitigate them. We 
work with manufacturers to mitigate. We have even allowed drugs 
to be shipped with filters, with instructions to filter the 
drug because it had particulates if we were sure that the 
filter wouldn't take out the agent as well and we had verified 
that. So we do those risk mitigation efforts. We even allow 
importation of unapproved drugs from other countries 
temporarily to fill the gap for our patients. And we have a web 
page and we work with the associations and with the physician 
community to try and figure out how to mitigate these 
shortages. But at the end of the day, if there is no drug there 
that can be had, we are all in trouble.
    Mr. Engel. I agree. Let me ask you this final question 
which also ties in with the drug shortage problem. I have heard 
from healthcare providers and patients that there is an added 
layer of difficulty in addressing shortages in this area 
because they say that the DEA limits the amount of active 
pharmaceutical ingredient a company can purchase and 
manufacture. I have also heard from parents who are frustrated 
when they have struggled to obtain generic forms of their 
children's ADHD medications in recent months. So I do recognize 
that the DEA has to do its part to ensure that controlled 
substances are not being abused, but how can DEA and FDA work 
together to ensure that the shortages of controlled substances 
such as the ADHD medications or pain medications like fentanyl 
are quickly addressed and access to these to patients with a 
clear need?
    Ms. Woodcock. Yes, we worked very closely with the DEA, and 
my understanding is that the manufacturers have received their 
2012 quotas for the ADHD drugs and we expect that situation to 
be ameliorated very rapidly. But we do work very closely with 
them. We provide information to them every year that is very 
relevant to them setting the quotas of these various drugs, how 
much we expect will be needed. So we have a very close 
relationship.
    Mr. Engel. OK, thank you.
    Thank you, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman.
    OK, I think that concludes panel one. The Chair would like 
to thank Dr. Woodcock and her panel for your excellent 
testimony.
    Ms. Woodcock. Thank you.
    Mr. Pitts. And excuse panel one and call panel two to the 
witness table. And while they are coming, without objection, 
the chair would like to enter into the record four documents: a 
statement by the American Academy of Pediatrics, one by the 
American Society of Health System Pharmacists, another by the 
National Community Pharmacists Association, and one by the 
Biotechnology Industry Organization. And it has been shared 
with minority. Without objection, they will be entered into the 
record.
    [The information follows:]



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    Mr. Pitts. All right. The Chair will call panel two to the 
table and would like to thank you all for agreeing to testify 
before the subcommittee today. And I would like to quickly 
introduce our panel. First, Ms. Heather Bresch is the CEO of 
Mylan, Inc; second, Mr. David Gaugh is the vice president of 
regulatory sciences at the Generic Pharmaceutical Association; 
and Dr. Bill Greene is the chief pharmaceutical officer at St. 
Jude Children's Research Hospital. Again, thank you all for 
coming. We have your prepared statements which will be entered 
in the record and we ask you to summarize your opening 
statement 5 minutes.
    Ms. Bresch, we will begin with you. You are recognized for 
5 minutes to summarize your testimony.

 STATEMENTS OF HEATHER BRESCH, CHIEF EXECUTIVE OFFICER, MYLAN, 
INC.; DAVID GAUGH, VICE PRESIDENT, REGULATORY SCIENCES, GENERIC 
  PHARMACEUTICAL ASSOCIATION; AND BILL GREENE, PHARM.D, BCPS, 
 FASHP, CHIEF PHARMACEUTICAL OFFICER, PHARMACEUTICAL SERVICES, 
 MEMBER, PHARMACEUTICAL SCIENCES, ST. JUDE CHILDREN'S RESEARCH 
                            HOSPITAL

                  STATEMENT OF HEATHER BRESCH

    Ms. Bresch. Thank you and good morning, Chairman Pitts and 
Ranking Member Pallone and members of the subcommittee, and 
thank you for the opportunity to testify today.
    I am Heather Bresch, CEO of Mylan, Inc., the largest global 
generics company in the world headquartered in the United 
States. Mylan was founded 50 years ago in West Virginia, and 
for the first 45 years of our history, Mylan was a domestic 
company that served the U.S. market. In 2007, we transformed 
into a global company. Today, we provide products in more than 
150 countries, have a global workforce of more than 18,000, 
including more than 5,000 employees in the United States. Our 
largest drug manufacturing facility is located in Morgantown, 
West Virginia, where we produce nearly 20 billion doses of 
medicine each year. We also have multiple facilities outside of 
the U.S. that produce drugs that are distributed in this 
country and which are inspected by the FDA. Today, 1 out of 
every 11 prescriptions dispensed in the United States is a 
Mylan product. In light of our success in the global market, 
Mylan is adding manufacturing jobs around the globe, and we 
would like to not only maintain what we already have here in 
the United States, but we would also like to expand our U.S. 
presence.
    As we transform from a domestic to a global company, we 
were surprised to discover that FDA is still operating as a 
domestic agency and is not equipped with the resources or legal 
authority to regulate the now global drug industry that serves 
the United States. In fact, FDA is governed by a 1938 law, 
which has been largely unchanged since its initial passage and 
does not give FDA the full authority it needs to oversee the 
global industry.
    Unfortunately, the 1938 law also creates an unlevel playing 
field for American manufacturers by requiring U.S. 
manufacturers to be inspected every 2 years while the law is 
silent on foreign drug manufacturers. As a result, two 
standards are created--one for the United States' manufacturers 
and one for foreign. U.S. manufacturers actually have a 
perverse incentive to move existing U.S. jobs abroad where they 
will face less regulatory scrutiny and also can avoid the 
second-highest combined Federal/State corporate tax rate of 39 
percent.
    As the Pew Health Group reported to this subcommittee last 
week, complying with quality systems and FDA regulations 
represents approximately 25 percent of a drug manufacturer's 
operating cost. This disparity in standards raises very real 
and profound questions about the integrity and quality of the 
drug supply in the U.S. Clearly, every consumer should have the 
peace of mind of knowing that every drug product dispensed in 
the U.S. is held to the same standard of quality regardless of 
whether the product originated in the United States or outside 
of its borders.
    Over the last several years, the number of foreign 
facilities supplying the U.S. has grown by 185 percent, while 
at the same time, FDA inspection rates have decreased by nearly 
57 percent according to the FDA. FDA estimates that up to 40 
percent of drugs now consumed by U.S. patients are manufactured 
abroad and 80 percent of the active ingredients used in drugs 
come from foreign countries.
    The growth in the number of foreign facilities coupled with 
a significant increase in generic drug application has caused 
FDA's workload to be far outpaced by its resources, and as a 
result, the time it takes to get a generic drug approved has 
nearly doubled with more than 2,700 generic applications 
awaiting approval from FDA today. Now more than ever Americans 
need more timely access to more affordable generic medicine 
which has saved patients and the government more than 930 
billion in the last decade alone.
    With a 50-year history of working closely with Congress and 
the FDA, Mylan is pleased that the generic industry has stepped 
up first and addressed an industry-wide issue impacting brand 
and generics to help address FDA's challenge of carrying out 
its mission within a global industry, especially given the 
current scarcity of government resources.
    The landmark and novel user fee program is aimed at three 
critical components: safety, access, and transparency. Through 
GDUFA, FDA will receive approximately 1.5 billion in new 
funding over the next 5 years, and in return, FDA has agreed to 
more timely reviews of generic drug applications, increased 
transparency, and by any old good manufacturing practice 
surveillance inspections of all generic finish dosage form and 
active pharmaceutical ingredient manufacturers, foreign and 
domestic, on a risk-adjusted basis, among other benefits 
outlined in a negotiated goals letter.
    Strengthening the supply chain, a key aim of GDUFA through 
routine GMP inspections for all facilities, as well as 
transparency initiatives that require the identification and 
registration of facilities involved in the supply chain will 
also provide a more holistic solution to current drug 
shortages. Additionally, decreased review times will ensure 
more timely access to new generic products, including those 
that addressed an unmet medical need or those in short supply.
    While the generic industry and API industries will help 
provide the financial resources to globalize the FDA, it is 
imperative for Congress to update the 1938 law to ensure the 
integrity of the supply chain and a level playing field so 
companies like Mylan are not disadvantaged to grow American 
manufacturing jobs. A level playing field will also benefit 
foreign facilities as well as small and first-time entrants who 
are currently disadvantaged by delays in new product approvals 
because of a lack of a recent inspection.
    We urge Congress to adopt GDUFA as negotiated and move 
forward in updating the 1938 law. Only by taking these steps 
can we provide more timely access to more affordable generics, 
ensure competitiveness by leveling the playing field for 
American manufacturers, and equip FDA with the authority it 
needs to become a global agency to ensure the integrity of the 
global drug supply chain.
    Thank you. And I would be happy to address any questions of 
the committee.
    [The prepared statement of Ms. Bresch follows:]



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    Mr. Pitts. Thank you. Mr. Gaugh, you are recognized for 5 
minutes to summarize your opening statement.

                    STATEMENT OF DAVID GAUGH

    Mr. Gaugh. Thank you. Good morning, Chairman Pitts, Ranking 
Member Pallone, and members of the subcommittee. Thank you for 
inviting me to testify on these very timely and important 
issues. I am David Gaugh, Vice President for Regulatory 
Sciences at the Generic Pharmaceutical Association and a 
licensed pharmacist. GPhA represents the manufacturers and 
distributors of finished-dose generic pharmaceuticals, bulk 
pharmaceutical chemicals, and suppliers to the generic 
industry. Generic pharmaceuticals fill 78 percent of all 
prescriptions dispensed in the United States but consume just 
25 percent of the spending for prescription medicines.
    I would like to begin by commending the committee for your 
continued focus on these most important issues that you are 
examining today. Though I have just begun my time with GPhA, I 
have been working in and around the generic industry for more 
than 2 decades and have witnessed firsthand the industry's 
remarkable growth and the vital role it plays in the lives of 
Americans every day. This growth of the generic industry has 
also served to underscore the critical importance and the role 
of the Food and Drug Administration. As shown by these two 
historic user fee agreements and our continued efforts to 
address drug shortages, the level of cooperation between the 
industry and the FDA has never been greater. It is our hope 
this collaboration will continue and even extend throughout the 
interactions for future activities with the Agencies.
    However, the Agency remains underfunded and the 
responsibilities of ensuring safe and effective access for 
affordable medications is shared with the entire pharmaceutical 
industry, not just with the FDA. This is why the generic 
industry has stepped up to the plate, and I would be pleased to 
provide some examples.
    Currently, well more than 2,000 generic drug applications 
are awaiting approval for the FDA Office of Generic Drugs and 
average approval time for these applications is now stretched 
to 32 months. Unfortunately, the backlog keeps growing for 
these generic drugs, keeps off market competitors, and prevents 
the prices from continuing to go down further. The proposed 
Generic Drug User Fee, or GDUFA, that we are discussing today 
will provide the FDA with nearly $1.5 billion over the next 5 
years to help alleviate this backlog and expedite consumers to 
new generic drugs. It will also take the historic step of 
holding all players contributing to the U.S. generic drug 
system, both foreign and domestic, to the same inspection 
standards and enhance FDA's ability to identify and require the 
registration of active pharmaceutical ingredients and finish 
dosage from manufacturers involved in the production of the 
products being sold in the U.S.
    It is paramount that as we work and save the future of our 
country's generic industry, we also work with the FDA to bring 
them into the 21st Century and ensure that the Agency's 
authority to achieve its mission and the goals are kept up to 
date. This is exemplified by the user fee program we are 
discussing today, both GDUFA and the biosimilar fee structure.
    During the biosimilar fee negotiations, GPhA expressed its 
support for user fee funding to provide FDA with adequate 
resources to apply consistent regulatory standards to all 
biologics. Both industry and patients will benefit from this 
user fee program by gaining a higher degree of certainty in the 
timeliness of the applications, the review, and their approval. 
It is important to emphasize that the funding provided by these 
user fee programs is in addition to and not a substitute for 
congressional appropriations.
    And while the programs provide an excellent framework for 
the industry to help support the growing global needs of the 
FDA, they do not completely solve the problems. For example, 
some manufacturers are using the REMS program as a way to delay 
generic competition. For products that require a full REMS and 
distribution in accordance with restricted systems, REMS 
manufacturers are making it difficult for the generic 
manufacturers to acquire samples of products so that they can 
actually run the tests on the products to be able to produce 
the exact bioequivalent product in a generic form. GPhA also 
supports the adoption of a Federal drug tracking system with 
uniformed standards across all States to prevent a patchwork by 
state law.
    Now, let me address the drug shortage crisis. The generic 
pharmaceutical industry has spearheaded the development of an 
unprecedented multi-stakeholder collaboration, which we believe 
will accelerate the recovery of certain critical drugs in short 
supply that are in patient need. This private sector solution, 
which we have labeled as the Accelerated Recovery Initiative, 
is designed to provide a more accurate, timely, and 
comprehensive view of the critical drugs and drug shortage, 
provide greater visibility to potential shortages of those 
critical drugs that are established for potential loss, and 
voluntary production adjustments to lessen and even eliminate 
certain current drug shortages. This initiative is predicated 
on voluntary communication between an independent third party 
and all key stakeholders involved in the approval, the 
manufacturing, and the distribution of drugs that are in 
shortage.
    In conclusion, Mr. Chairman, it is our hope that Congress 
will act on these historic user fee proposals as an expeditious 
process. Nothing is more important to our industry than 
ensuring patients have access to life saving generic 
medications they require, and with a joint effort among all 
involved, we believe we can continue to make significant steps 
towards accomplishing this goal.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Gaugh follows:]



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    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes Dr. Greene for 5 minutes to summarize your opening 
statement.

                    STATEMENT OF BILL GREENE

    Mr. Greene. Chairman Pitts and other members of the 
committee, I am grateful for the opportunity to address you 
today as a representative of St. Jude's Children's Research 
Hospital and also a representative of colleagues at children's 
hospitals throughout the United States. As you know, I am chief 
pharmaceutical officer at St. Jude and at St. Jude we are 
committed to developing research that leads to new cures for 
children with catastrophic diseases. We are also committed to 
providing unsurpassed clinical care for those patients. I am 
really grateful that you would offer me time to share some 
comments.
    My short testimony--if we can have some slides here--I 
would like to share three ways Congress can help alleviate drug 
shortages for the pediatric community. But first, I would like 
to begin by putting a face to my discussion, and it doesn't 
look like the face will be able to be displayed.
    I can tell the story of Lucy, who is a 5-year-old from 
Covington, Tennessee. Lucy and her family have given me 
permission to share her story as a way of illustrating the 
challenges that drug shortages pose for patient care and for 
the caregivers that are providing that care. She is being 
treated for medulla blastoma, which is a type of brain cancer. 
She has been doing well, and last spring she was being treated 
in her prescribed course of treatment and was being supported 
by intravenous nutritional support. She began to develop 
symptoms, rapid eye movements, blurred vision, other visual 
changes, some gait changes that caused her care team to suspect 
that her cancer was relapsing. So she was admitted to the 
hospital and worked up. Fortunately, during that time, she was 
treated with intravenous thiamin. She experienced a dramatic 
recovery and was able to continue with her treatment course.
    The interesting background on this issue is that the cause 
of the thiamin deficiency was very simple. We were simply 
unable to secure intravenous preparations of multivitamins to 
add to her intravenous nutritional support. That caused the 
thiamin deficiency, the thiamin deficiency caused the symptoms, 
the symptoms resulted in a hospital admission. This was a 
preventable admission and it should not have happened.
    You are aware that the number of drug shortages occurring 
in the United States has increased dramatically in recent 
years. While not all of these shortages have directly affected 
St. Jude, the number of shortages affecting us have increased 
dramatically. If I were able to show my second slide, I would 
be able to illustrate to you that we have experienced a 10-fold 
increase in the number of shortages requiring action at our 
organization since 2008. In the last 2 months alone, January 
and December, I have had to issue communications to our 
clinical staff on 14 separate occasions. Now, once that 
requires my action, those are important drug shortages that 
impact patient care--14 times in the last 2 months.
    Our drug shortages threaten our Nation's healthcare system 
and especially children in three distinct ways. First, we know 
that we cannot always provide the best care for these patients. 
Second, we know that shortages do affect research that cause 
modifications for protocols, sometimes delays in research and 
terminations. We know that at least 85 children's oncology 
group protocols that have been affected by shortages. And 
third, we know that all of these shortages definitely add real 
cost to the system. I know the subcommittee has previously 
heard testimony of this type. Much data has been shared. Many 
of the comments today have been very interesting and helpful. 
It is now time for immediate action.
    I have three points I would like to make about what 
Congress can do to help. First, I urge Congress immediately to 
pass legislation to give the Food and Drug Administration the 
tools that it needs to prevent and minimize the impact these 
shortages have on pediatric care and research. The FDA has been 
effective in minimizing the impact of shortages when 
appropriate communication is made to the Agency. Their efforts 
have avoided almost 200 shortages in 2011. Congress can 
strengthen their reporting system by enacting H.R. 2245, Senate 
Bill 296, to give the FDA more complete knowledge of permanent 
and temporary supply chain disruptions in advance and allowing 
the FDA to facilitate its communications with caregivers like 
me.
    Second, I urge Congress to give the FDA the resources and 
authority it needs to combat drug shortages in a proactive 
manner. While the FDA's efforts have been laudable, these 
efforts have been largely reactive. Once a shortage has 
evolved, we know patients are going to be affected. The Agency 
must have what it needs to develop proactive approaches to 
predict and prevent shortages and the FDA should have 
sophisticated systems in place facilitating forecasting, 
prediction, and enabling proactive work with suppliers and 
purchasers to prevent shortages from ever occurring. Further, 
other relevant agencies such as the DEA must work closely, 
collaboratively, with the FDA to combat these shortages.
    Third, Congress must ensure that in any solution it 
develops, pediatric protections are built in and pediatric 
experts are broadly engaged. Children require medications in 
special strengths, packaged in smaller dose sizes, dye-free and 
preservative-free when possible. Hospitalized children 
frequently require intravenous medications, and in many cases, 
fewer alternatives exist for them when a drug is in short 
supply. For these reasons, the expertise of pediatric 
practitioners who are familiar with the nuances and intricacies 
of the care of children must be included in developing 
solutions for shortages.
    Finally, I would like to conclude by recognizing that the 
underlying causes of drug shortages are complex. Solutions 
offered today will not solve the many reasons drug shortages 
exist and continue to increase in frequency. Before enacting 
legislation focused on addressing these underlying factors, I 
urge you to carefully and comprehensively study and understand 
these factors and the downstream impact of any proposed 
solutions with input from healthcare professionals and other 
stakeholders. We must return to a state that used to exist when 
I was a younger practitioner, a state when we had a consistent, 
reliable, and safe supply chain of needed pharmaceutical 
products. Nothing less is acceptable.
    Thank you for your dedication to this issue and for 
allowing me minutes to speak as a provider and caregiver 
representing children throughout this country who have been 
affected by these shortages. Thank you.
    [The prepared statement of Mr. Greene follows:]



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    Mr. Pitts. The Chair thanks the panel for your opening 
statements. We will now go to questioning, and I will recognize 
myself for 5 minutes for that purpose.
    Ms. Bresch, how will the Generic Drug User Fee Agreement 
bring predictability and efficiency to FDA's review of generic 
drugs?
    Ms. Bresch. Thank you. As I think you have heard this 
morning, especially through Dr. Woodcock's testimony, the need 
for the resources to truly globalize the FDA is of upmost 
importance. So as I mentioned, the fact that the generic 
industry stepped up to provide those resources, the fees are 
split primarily in two buckets, about 70 percent going towards 
the inspection and fees for facilities and about 30 percent for 
the applications. So we believe that with the goals and the 
metrics laid out in GDUFA that that parity, not just from a 
timing perspective but also the rigor at how inspections are 
performed because, you know, I can tell you as having 
facilities around the world inspected by many regulatory 
agencies, the FDA does have the gold standard and I think it is 
very important to raise the bar for the rest of the world, not 
let the United States' bar come down.
    Mr. Pitts. Will this predictability and efficiency bring 
down the cost of generic drugs and what are the metrics that 
are included in the goals letter to ensure that progress is 
made on the review of generic applications?
    Ms. Bresch. So as we have noted, that approval time today 
for generic drugs is about 31 months, almost double that in 
recent years. So the goals the metrics laid out bring that back 
down to about 10 months within 5 years. So it certainly keeps 
the competitive nature of our industry very much at the 
forefront while, as we level that playing field, making sure 
that it is not just competition at any cost. I think what is 
important to remember is that the competition is important if 
everybody is held to the same standard. So the certainty comes 
with the reduction of approval time but making sure that we are 
having good competition, not just any competition.
    Mr. Pitts. Mr. Gaugh, why is the new Biosimilars User Fee 
Program important to the generic industry and to patients and 
what are the metrics included in the goals letter to ensure 
that progress is made in that regard?
    Mr. Gaugh. Well, it is extremely important to the American 
public to have access to the biosimilar pathway of products. As 
you heard Dr. Woodcock say today, today is the first day that 
they have announced that they are going to release the 
guidelines for the biosimilars. So unfortunately, until we see 
those guidelines, it is going to be hard for me to answer the 
rest of the question. But it extremely important to have that 
affordable access to the American public. And you will find 
that many of the companies that GPhA represents already have 
these products produced and approved in foreign countries, both 
Europe and other markets.
    Mr. Pitts. Thank you.
    Dr. Greene, talk a little bit about how drug shortages 
affect St. Jude and how many drugs used at your hospitals 
regularly go into shortage.
    Mr. Greene. Thank you for that question. We deal with 
shortages on a continual basis. I believe Mr. Engel referred to 
Montefiore and the number of hours that they have dedicated to 
managing drug shortages. I believe you have mentioned 100 or 
120 hours per week of total personnel time. That is not a gross 
exaggeration in any form or fashion. As I mentioned, I am 
continually engaged in interacting with my clinical staff on 
what are the shortages, what are the alternatives, when we have 
fentanyl, when we don't have fentanyl, when we have Zofran, 
when we don't have Zofran, when we have multivitamins, when we 
have mannitol, what are we doing when it goes away. It has a 
dramatic impact and it diverts significant resources away from 
actually taking care of the patients because we are focusing on 
one of the most basic elements of care and that is simply do we 
have the product available for us? So it is a very dramatic 
impact on us on a day-in, day-out basis. Some days are better 
than others but some days are simply very traumatic in trying 
to provide that care.
    Mr. Pitts. Can you walk us through, Dr. Greene, 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 people in your organization? Is there any way 
at present to anticipate a shortage and what preparations do 
you need to put in place at the hospital level?
    Mr. Greene. You know, I made reference in my testimony the 
need to support the proposed legislation that effectively 
builds the tools to allow for early warning types of systems. 
Historically, we are not aware of a drug shortage evolving 
until we simply place an order, we check our inventory when it 
comes in, and we realize after 1 day, 2 days, or 3 days, we 
keep getting shorted on the order. We don't know about it. 
Nobody tells us the shortage is there. So effectively, you 
place an order, you get the drug or you don't, and of course, 
the shortage is recognized when we don't get it the day after 
we order it. We place another order, again we are shorted in 
it, and then finally you begin to realize there is something 
going on here.
    Now, fortunately, at the University of Utah Drug 
Information Center and American Society of Health System 
Pharmacists now have a very useful tool that allows 
organizations to become aware of the experience of other 
organizations healthcare systems that have experienced 
shortages so that, for example, I might report to that system 
that we are having trouble getting methotrexate and that might 
be the first notification that we are beginning to see problems 
with methotrexate in the country. And that way other 
organizations become aware of that. So there is no warning in 
too many cases and we simply have to be reactive in dealing 
with those problems.
    Mr. Pitts. OK. The Chair thanks the gentleman and now 
recognizes the ranking member for 5 minutes for questions. Mr. 
Pallone?
    Mr. Pallone. Thank you, Mr. Chairman.
    I wanted to ask a question, Ms. Bresch first, if I could. 
In your testimony, you emphasized that the imbalance of 
inspection requirements between U.S. and foreign manufacturing 
facilities creates an uneven playing field for pharmaceutical 
plants in the U.S., and certainly one way to help level the 
playing field, which was mentioned by our previous panel, is to 
apply a risk-based oversight system to all manufacturing 
facilities, both foreign and domestic. However, my question is 
to ensure real parity for all manufacturing locations, do you 
think that a minimum inspection frequency is also necessary and 
should that be defined in the statute that we would pass.
    Ms. Bresch. I believe that risk-based is appropriate but I 
do believe that defining how that risk-based works is 
incredibly important. I mean if I give the example--I talk 
about our facility in Morgantown, West Virginia. There are two 
full-time employees by the FDA who live in Morgantown, West 
Virginia, for just our facility. So if the risk-based is not 
defined properly, our concern is that it will be easy to go to 
where FDA has been going and that compliance-based will be 
extremely important to define that formula. So I believe that 
the legislation needs to have a very well defined formula and 
that there should be some minimum that a facility would need to 
have been inspected by.
    Mr. Pallone. OK. Thank you.
    Let me ask Mr. Gaugh, I am interested in this Accelerated 
Recovery Initiative, or ARI--I mentioned it previously also, I 
think before the last panel--that you described in your 
testimony. It sounds like a promising effort that would help 
industry address or prevent shortages, and I am interested in 
hearing exactly how it would interface with the FDA. Could you 
explain what the role of the FDA would be in that initiative 
and particularly I would like to learn what the third party 
would be able to do that the FDA does not do and whether you 
see this initiative as potentially complementary to legislation 
that would mandate FDA notification? Or is it your hope that it 
would be instead of legislation?
    Mr. Gaugh. Thank you. From the standpoint of pulling this 
together, as I said earlier in my verbal testimony but also in 
the written testimony, this will be a multi-stakeholder event. 
And there are many questions that were asked of Dr. Woodcock 
that would be addressed by the ARI. For example, as we were 
talking about the gray market and I can't remember--I think it 
was Mr. Cassidy that asked about how we know how much product 
different organizations, a hospital can get when they order or 
how much is available to them. That would mean that in this 
ARI, the key stakeholders would be the manufacturers, the 
wholesalers and distributors, purchasing organizations, the FDA 
most importantly, and then the third party, as you mentioned, 
which would be an independent third party.
    The issues that we have addressed in the small group that 
is pulling the ARI together is that this is a very competitive 
marketplace, of course, and it would be fraught with some FTC 
potential issues if not handled in an appropriate fashion. So 
the appropriate fashion that we have come up with to this point 
is an independent third party that will be a blinding party if 
you will so they are the only party that sees all information 
coming from all the competitive companies.
    To answer your question about why the FDA couldn't perform 
this, there are multiple reasons. One, it isn't currently in 
their responsibility of duties as you see the responsibilities. 
Number two, Dr. Woodcock talked about the limited resources 
they currently have, which is very true. The drug shortage was 
only four or five people up until a few months ago. It has now 
been doubled, I believe, to seven or eight people. So that 
would be a limiting factor. The other piece is the third party 
is going to have to be somebody who really understands 
production planning extremely well and can take production 
planning reports from the multiple different companies to make 
determinations and decisions on who could or who could not 
produce products to help alleviate this drug shortage. That is 
not something that currently exists within the----
    Mr. Pallone. Just because I am running out of time, it 
sounds to me that in terms of the question I asked that you are 
saying that the initiative, the ARI is complementary to 
legislation that we would initiate. In other words, not that it 
would be instead of, but because of the need to work together 
and certain things that can't be done, this would have to be 
something that we would have to work out in terms of the 
legislation. Is that accurate?
    Mr. Gaugh. That is correct. That is accurate.
    Mr. Pallone. OK. All right. Thanks so much.
    Mr. Gaugh. You are welcome.
    Mr. Pitts. The Chair thanks the gentleman, recognizes the 
vice chairman of the committee, Dr. Burgess, for 5 minutes for 
questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    And Mr. Gaugh, if I could stay with you for a moment. And 
let me just ask you and I know this is a wide-ranging question 
so I am going to ask you to be as brief as you can, but in your 
opinion, what are the reasons that a drug goes into shortage?
    Mr. Gaugh. I am sorry. Can you repeat----
    Mr. Burgess. What are the reasons that a drug goes into 
shortage?
    Mr. Gaugh. Dr. Woodcock described the overall situation 
with drug shortage, so it really is a demand versus supply 
situation right now. So the demand continues to increase in the 
United States with the graying of America, et cetera. So demand 
continues to go up. The currently available supply is going 
down, so as she talked about in the injectable industry in 
particular, there is a defined quantity of production 
capability in the U.S. Currently, most of the companies that 
are under the production capability piece are in remediation 
efforts due to their compliance or their lack of compliance 
situation. So the available capacity today is less than it was 
about a year and a half ago.
    Mr. Burgess. And here is the thing. The manufacturing 
processes in many of these drugs are not new. They have been 
around for a long time. The FDA has been doing inspections for 
years. The companies have had to get the raw materials for 
years. They have been making injectables for years. So why the 
acceleration in the last 5 years?
    Mr. Gaugh. If we are still just talking about sterile 
generic injectables, the basic five companies that have the 
majority of the production capability, these are aged 
facilities. So as the manufacturing lines are becoming older, 
they need to be replaced, refurbished, upgraded. Specifically, 
also, the specifications, the criteria that need to be met are 
changing year after year. Those have to be implemented. Sterile 
injectable production is a very complex process. It takes time 
to upgrade those systems, and when you do upgrade them, you 
have to take them down for a period of time.
    Mr. Burgess. Right. But don't you find it odd that it 
really has been a snowball effect? I can remember in the 2004 
presidential election, in one of the debates that fall, flu 
vaccine had been contaminated with serratia. We got it from an 
overseas source and President Bush was just pummeled for this 
flu vaccine shortage. And now the shortages are happening all 
the time. That level of scrutiny doesn't seem to be being 
applied to the fact that more and more drugs are drifting off 
into a shortage situation. Why is that?
    Mr. Gaugh. Because I would say the level of scrutiny that 
is upon those companies by the FDA has increased over the last 
3 to 4 years, and that level of scrutiny is what----
    Mr. Burgess. But the shortages are going to be manifested 
by the clinicians not having the compound to deliver to their 
patients, not the Food and Drug Administration saying aha, we 
have identified a shortage in your line. It is because at the 
end of the line, the doctor and the patient are saying I can't 
get this stuff. So let me ask you this. There are some new 
branded drugs that are complex molecules, difficult to 
manufacture, and there are 10 to 15 generic oncology drugs that 
have been around forever and are quite basic in their 
formulation, and those are the ones that are in shortage, not 
the complex new molecules. So why is it that the complex 
branded drugs are readily available and the basic generic drugs 
are in short supply?
    Mr. Gaugh. Typically, the complex brand molecules you are 
talking about are manufactured in one facility, one line for 
that particular product. Or do you look at the generic 
injectables. Those companies produce anywhere from 50 to 120 
different molecules on their different lines. So it is a 
supply-and-demand issue again within that facility of the 
number of products that are made.
    Mr. Burgess. I brought this up in my opening statement. Do 
you think there is the possibility that we have perhaps made 
things a little too tight, made the margins a little too tight 
where it is difficult for companies to justify continued 
manufacture if they have a difficulty in their manufacturing 
process or for other companies to step in and fill the gap if a 
company has to withdraw from the manufacturing?
    Mr. Gaugh. In the market----
    Mr. Burgess. We just don't have the profit margins built in 
under current constraints?
    Mr. Gaugh. Profit margin could be one of the causative 
effects, but it is not one of the major causative effects, no.
    Mr. Burgess. OK.
    Mr. Gaugh. It is still a demanding market in the U.S. and 
you can change the price as needed.
    Mr. Burgess. Very well. Dr. Greene, let me just ask you a 
question. You heard Dr. Cassidy on our side, you heard Lois 
Capps on the other side of the dais reference what they suspect 
was a problem in the gray market where some hospitals might be 
buying up a compound that is going into shortage and then 
reselling it at a much higher markup. I mean Dr. Cassidy has 
some specific questions. You deal in hospital purchasing all 
the time. Was he on the mark there or was that off?
    Mr. Greene. Someone certainly is getting product somewhere 
and, you know, maybe it is an entrepreneurial way, but they are 
taking advantage of shortages to make dramatic markups. Now, 
how they get the product, I don't know. I would be very, very 
surprised if any hospital is actually purchasing it for the 
purpose of diverting it to the gray market. We know that it 
happens; we just don't know where these individuals get their 
drug. And that is one of the reasons why St. Jude, we do not 
purchase off of a gray market.
    Mr. Burgess. Well, where would be a more likely place to 
look, then, if it is not the hospital purchasing?
    Mr. Greene. I wish I could explain that. I don't know. I 
know that there are thefts. There are reports of tractor-
trailer loads of drugs that have been simply stolen and you 
don't ever know where those go and how they get into the 
marketplace and so I simply do not know where those drugs come 
from.
    Mr. Burgess. You agree that it is a problem?
    Mr. Greene. I don't know that it contributes dramatically 
to shortages. I think it is a problem in the context that it 
provides potentially very expensive and potentially harmful 
products for use in patients.
    Mr. Burgess. All right. Thank you for your time.
    I yield back, Mr. Chairman.
    Mr. Pitts. The Chair thanks the gentleman and yields to the 
ranking member emeritus, Mr. Dingell, for 5 minutes for 
questions.
    Mr. Dingell. Mr. Chairman, I thank you.
    These questions go to Ms. Bresch. First I want to welcome 
you to the committee. Thank you. And second, I want to thank 
you for your leadership in this matter and tell you how much it 
has meant to me. These questions will be all yes or no. Do you 
agree that both FDA and the industry have a responsibility to 
ensure the security of our drug supply chain? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. Do you agree that the knowledge of your 
suppliers is important? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. Does Mylan have systems in place to know their 
suppliers and monitor manufacturing quality? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. It would be nice if you had more assistance in 
this, however, from FDA, would it not?
    Ms. Bresch. Yes.
    Mr. Dingell. Does Mylan have systems in place to 
demonstrate quality control? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. Should all companies making drugs for the 
United States know their suppliers and have quality systems in 
place?
    Ms. Bresch. Yes.
    Mr. Dingell. Should all companies making drugs for the U.S. 
be able to demonstrate quality control? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. Should companies be using risk analysis to 
target safety risks? Yes or no?
    Ms. Bresch. Yes.
    Mr. Dingell. Do you need to have the same kind of attention 
given to the supplies and the commodities and the other things 
that go into the pharmaceuticals that you sell as finished 
products?
    Ms. Bresch. Yes.
    Mr. Dingell. Do you agree that strong quality management 
systems and risk analysis will help companies to ensure the 
safety and quality of the finished drug product?
    Ms. Bresch. Yes.
    Mr. Dingell. I want to turn now to inspections. The brand 
industry has noted that its user fees go to pay for a 
preapproval inspection which could include an inspection of a 
foreign facility. Is preapproval inspection the same as a GMP 
inspection? Yes or no?
    Ms. Bresch. No.
    Mr. Dingell. Please explain the difference.
    Ms. Bresch. The way PDUFA was written and is implemented is 
really focused on the speed for an individual product. So a 
preapproval inspection is on a certain product which could be 
made on one line in a facility, and once that product is 
approved, it would never require the FDA to come back and 
inspect that line. GMP inspection covers the entire facility 
and ensures that that facility is complying to good 
manufacturing practices.
    Mr. Dingell. And you do desperate need Food and Drug to 
come back for that purpose to ensure that good manufacturing 
processes are being carried out at the plant being inspected. 
Is that right?
    Ms. Bresch. Absolutely. I think as we have heard a lot 
today, the vigilance that is required is on an ongoing basis. 
Just because you meet GMP inspection or are GMP compliant, that 
does not mean you are GMP compliant for the rest of that 
facility's life. And that is why earlier when asked about a 
risk-based approach to inspections and that we still believe 
that there would be a minimum number of years that the FDA 
would need to be back in that facility because it requires 
ongoing constant vigilance.
    Mr. Dingell. Now, you stated in your testimony that the 
Federal Food and Drug and Cosmetic Act should be updated to 
require parity of inspections for domestic and foreign 
facilities. Why does Congress need to change the statutory 
language when FDA has already agreed to do on a voluntary basis 
in the Generic Drug User Fee Act?
    Ms. Bresch. Well, and I want to thank you for your 
leadership in this area for many years. I think to have an 
agency as important as the FDA to be governed by a 1938 law 
that was written from a very domestic standpoint and yet we are 
needing and demanding the FDA to govern a global industry. So 
if we are not going to have the global industry return to a 
domestic one, we have no choice but to have the 1938 law be 
representative of the world that the FDA needs to operate in 
today. I think we heard Dr. Woodcock speak about the fact that 
there is just a different standard. For products manufactured 
in the United States, it is assumed to be adulterated unless 
proven that it has been made to GMP, yet if we are importing 
drugs, the standard that we hold those imports to are we have 
to show and prove that they are not up to GMP or we have to let 
them in. So I believe that that 1938 law desperately needs----
    Mr. Dingell. To be changed.
    Ms. Bresch [continuing]. To be updated so that the FDA has 
all the ability to make all the decisions and necessary demands 
to ensure the safety in the supply chain integrity on a global 
basis.
    Mr. Dingell. Now, it is also grossly unfair to surround 
American manufacturers with all these requirements while 
literally FDA is able to surround foreign manufacturers with 
virtually none, isn't that right?
    Ms. Bresch. Absolutely. Again, we talk about the 
competitive nature of this industry, so we are forced to 
compete really at any cost. So we are competing every day from 
competition and companies around the globe that perhaps don't 
hold their facility to the same standard as we do. We have 
facilities all over the world, as I mentioned, that make 
product for the United States and we hold all of our companies 
to the same GMP whether that facility is in the United States 
or outside of the United States. So the need for the 
competitiveness as a U.S. manufacturer is very unlevel at the 
moment, and unfortunately, as a manufacturer who employs many 
American jobs, like I said, we would like to not only maintain 
those but to increase them. And right now we are 
disincentivized to do so.
    Mr. Dingell. Mr. Chairman, I have used all my time but 
could I have one more question?
    Mr. Pitts. You may proceed.
    Mr. Dingell. Ma'am, the Generic Drug User Fee Act Agreement 
is unique in that it recognizes that FDA needs new resources 
and new authorities to properly oversee what is now a 
globalized industry as you have been pointing out to us. I 
happen to believe that the Food, Drug, and Cosmetic Act should 
and needs to be updated to reflect the global nature of our 
drug supply, again as you were pointing out, and to adequately 
equip FDA with the authority to properly ensure the safety of 
our drug supply, and that would include the commodities that go 
in an unfinished state. This committee has worked in a 
bipartisan manner to secure the safety of consumer products in 
our food supply, and I hope that we can do so for 
pharmaceuticals.
    I want to commend you for what it is you have done today 
and for your guidance and counsel in these matters. It has been 
most helpful and you go with my thanks and I think the thanks 
of the committee.
    Mr. Chairman, thank you for your courtesy.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentleman from Illinois, Mr. Shimkus, for 5 minutes for 
questions.
    Mr. Shimkus. Thank you, Mr. Chairman. Again, I do 
appreciate the panel and your time today.
    Ms. Bresch, you are from West Virginia, is that correct? I 
mean the facility is in West Virginia, is that what you said?
    Ms. Bresch. That is where our largest facility is. We have 
facilities all over the United States.
    Mr. Shimkus. OK. Do you know how many drug manufacturing 
facilities are in the State of West Virginia?
    Ms. Bresch. I don't know of any other.
    Mr. Shimkus. At the West Virginia facility, there are two 
FDA inspectors 24/7?
    Ms. Bresch. They live in Morgantown, yes.
    Mr. Shimkus. And they are dedicated solely to your 
facility?
    Ms. Bresch. I can't speak to what they are dedicated to but 
I can tell you that they live in Morgantown, West Virginia, and 
like I said, we are the only pharmaceutical company----
    Mr. Shimkus. I mean, do they come in every day to your 
facility?
    Ms. Bresch. They are not necessarily in our facility every 
day so that is why I am saying I am sure the FDA can utilize 
them in other manners. My point is being that we have countries 
that don't have an FDA employee, so when you think about 
Morgantown having two, it can just demonstrate the unlevel 
playing field.
    Mr. Shimkus. Yes, I would like to have two in China maybe.
    Ms. Bresch. Or maybe 200, but yes.
    Mr. Shimkus. Yes, at least two would be a start.
    Ms. Bresch. Exactly.
    Mr. Shimkus. But I think that raises an issue and I do 
appreciate your comments. I have been focused on this risk-
based system for a long time and it is not to walk away from 
U.S. facilities but it is to recognize the fact that as 
Chairman Emeritus Dingell said, I mean you had an inspector 
onsite, you have got programs and plans and systems to 
obviously check that yourself. We also have a pretty good 
litigious environment that also keeps U.S. Manufacturing 
facilities somewhat cognizant of the safety and efficacy of 
what they are doing in the facility. So I think there would be, 
if we did aggressively move in a risk-based approach, there 
would be a return. It is not like they are never going to come 
back to Morgantown, West Virginia, and check in on you.
    Ms. Bresch. And we want them to. And I think that is the 
point of the vigilance that I spoke about. It is that need, you 
know, we say all the time there are good actors out there and 
bad actors everywhere, United States included. It is just the 
rigor that the FDA has to inspect the U.S., we find those 
quicker or perhaps never in some other countries.
    Mr. Shimkus. Thank you. Dr. Greene, I apologize for you not 
getting your charts and stuff up on the overhead because we 
were able to pull it from your testimony. And this is pretty 
stark. And I would guess you are pretty concerned that trend 
line is not changing any time soon, is that correct?
    Mr. Greene. It doesn't portend good things for the future 
if it continues in the same direction.
    Mr. Shimkus. And so from the other members in this 
discussion, it seems like we kind of mealy-mouth around trying 
to really identify the problem. We talked about this in the 
last hearing and I was just asking a basic question because I 
am a conservative competitive market corporate Republican, 
believer in supply-and-demand principles. Why is that not 
working here? Why isn't there a signal being sent to 
manufacturers, hey, there is a demand that is not being filled. 
Can you not send a price signal----
    Mr. Greene. Right.
    Mr. Shimkus [continuing]. That would then generate an 
interest, especially as Dr. Burgess said. Some of this stuff 
isn't really the high-tech type stuff. I mean when the mention 
of saline solution with vitamins inside of it you are thinking 
he is telling me that, that stuff we do all the time. For that 
to be a limited availability, that is crazy talk.
    Mr. Greene. Yes, I am not qualified to really comment on 
whether the economics are dramatically a part of this or not. I 
would leave that to the economists. It would seem to me that--
--
    Mr. Shimkus. Well, let me ask if anyone else can talk--I 
mean part of hearings is trying to find an answer. So go ahead, 
Mr. Gaugh.
    Mr. Gaugh. So economics can be a piece of it, absolutely, 
but are they the driving factor? They are not the driving 
factor.
    Mr. Shimkus. OK, when you say the economics could be, so 
drill down a little bit.
    Mr. Gaugh. So in drilling down a little bit, the economics, 
yes, if a product in the competitive market space went down so 
far that there was no more margin, you would make a decision 
potentially to get out of that market, but this is a free 
market environment and you can raise that price back up and 
get----
    Mr. Shimkus. That is what I would assume but it doesn't 
seem that the market signals are being sent when there is a 
limit that the price is going up to encourage people that are 
in the market.
    Mr. Gaugh. Right. And the issue we are talking about now is 
sterile generic injectables. When you look at that line on the 
graph that he had, the majority are those. It is purely a 
capacity limitation to be able to produce those products.
    Mr. Shimkus. So the market signal would send if they can 
get a return on investment, it would send a signal to the 
manufacturers, expand to meet the demand, but the signal is not 
being sent.
    Mr. Gaugh. It is being sent but expand is a 7-year 
proposition typically from the day that you----
    Mr. Shimkus. OK. But why is that?
    Mr. Gaugh. The day you break ground until you are approved 
by----
    Mr. Shimkus. Rules, regulations, siting, permitting, all 
this other junk?
    Mr. Gaugh. The FDA approval is an 18-month process----
    Mr. Shimkus. There is a--OK.
    Mr. Gaugh [continuing]. And that is just to get the site 
approved and then to move the products into that site is an 
additional----
    Mr. Shimkus. Well, and that is a great--and my time has 
expired, Mr. Chairman, and I appreciate it, but I think that is 
where some of this debate needs to be. How do we move 
aggressively, safely to allow expansion to meet these 
shortages? Because this is ridiculous and we shouldn't put up 
with it. And I yield back my time.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentleman from New York, Mr. Engel, for 5 minutes for 
questions.
    Mr. Engel. Well, thank you. Thank you, Mr. Chairman.
    Mr. Gaugh, I want to follow up on something that Dr. 
Burgess mentioned before. In your written testimony, you stated 
that your trade association acknowledged that roughly half of 
all reported shortages are associated with manufacturing 
problems. Why do you believe that there has been such a 
significant increase in manufacturing-related issues in recent 
years and can you please elaborate on what steps the 
manufacturers of generic medications are taking to address this 
problem? Obviously, we cannot neglect patients' safety and so 
it is a matter of great concern.
    Mr. Gaugh. So if I understand your question correctly, you 
look at the environment today--and again I am going to focus on 
the sterile generic injectables--roughly 25 to 30 percent of 
the currently available capacity is not available for 
production due to remediation efforts. So if you take that 30 
percent roughly out of production, that is the majority cause 
of these drug shortage situations.
    Mr. Engel. All right, thank you. Dr. Greene, you had 
commented on a comment I had made involving Montefiore Medical 
Center having to take hours to, you know, make sure the things 
are ameliorated. I want to give you a chance to elaborate on 
that a little more.
    Mr. Greene. Specific to St. Jude I presume?
    Mr. Engel. Yes.
    Mr. Greene. Yes, one of the things we have simply developed 
is a standard practice every week is one of the questions we do 
in our routine administrative discussion is what is our latest 
state of drug supply issues? What are they? What is their 
acuity? Do we move them out into the clinical discussion realm 
or is this one that we work within the pharmacy? I have 
literally three individuals that are routinely engaged in the 
discussion and evaluation and follow up to me every day. That 
is not all that they do but they spend a significant amount of 
their time dealing with these issues. And part of the problem 
from my point of view is the volatility in the supply. I have 
fentanyl today; no, I don't have fentanyl tomorrow. It is back. 
I only have large-volume files. I don't have small volume. 
Well, I have got single-dose vials this week but I don't have 
the vials that I need to use to make PCAs. So those are the 
kinds of issues that we are dealing with at any given time.
    Mr. Engel. Thank you. I mentioned to Dr. Woodcock, I had 
asked her this question that many of you mention in your 
written testimony that the user fees included in GDUFA and 
BsUFA are meant to be in addition to a solid base of annually 
appropriated funds of the FDA. In fiscal year 2012, the FDA 
received a 50 million increase in funding, which was a very big 
victory for those of us who felt that happen because the first 
proposal was a $285 million cut in FDA funding for fiscal year 
2012. So would any of you care to elaborate on why it is so 
important that the FDA be adequately funded and how cuts to the 
FDA could impact your industry or the patients your 
associations serve?
    Ms. Bresch. I will speak to that. I think that as Dr. 
Woodcock mentioned the premise has always been the FDA would 
have the appropriations and that they would never solely rely 
on user fees for any particular industry. And that is why I 
think as you see the GDUFA being, you know, a very novel and 
landmark user fee, the Agency has obviously funded the Office 
of Generic Drugs since 1984 and has been very successful. 
Hopefully, the user fee is now complementing that. I think that 
when you look at the need for the Generic Biologics Program, 
the same does not hold true and I think that is where we run 
some risk of having it being way too weighted on strictly user 
fees and not having the appropriate appropriations from the 
Agency perspective to carry out their mission.
    Mr. Engel. Thank you. I agree with you.
    Anybody else care to--oK, well, then thank you, Mr. 
Chairman. I yield back the balance of my time.
    Mr. Pitts. The Chair thanks the gentleman and recognizes 
the gentleman from Louisiana, Dr. Cassidy, for 5 minutes for 
questions.
    Mr. Cassidy. If I seem in a hurry, I am missing a lunch 
with the greatest chefs in Louisiana, so--oh, my gosh, I am 
tasting the food.
    Now, Mr. Gaugh, you mentioned, though, that there is no 
reason a price signal could not be sent, but there actually are 
constraints on how 340B will allow a company to raise its 
pricing. And you will know more about 340B than I but I am 
struck that this price signal Shimkus is after is dampened by 
the 340B process.
    Now, Dr. Greene, you are St. Jude's?
    Mr. Greene. That is correct.
    Mr. Cassidy. Now, I think I know but correct me if I am 
wrong that pediatric IV immunoglobulin, because of a shortage, 
was taken out of the 340B program. One, is that correct? And 
two, if correct, how has that affected supply?
    Mr. Greene. Well, it is my understanding that that is 
correct. We have not to my knowledge in the time that we have 
been engaged in the 340B program, it has only been about a year 
and a half now I suppose, not quite that long. I don't think we 
have ever been able to purchase any consistent supplies of IV 
IG in the 340B program, and yes, I would say that that is true. 
The supply has been available to us; it is just that we have 
had to pay the regular market rate defined through our group 
purchasing organization.
    Mr. Cassidy. So that is interesting. And again, I think IV 
IG was taken off of 340B pricing. I think that is true. So now 
the supply is there and it was absolutely taken off because it 
was never available before. I think I know that but I am a 
little rusty on my thought.
    Mr. Gaugh, you are nodding your head yes. Is that a 
correct----
    Mr. Gaugh. That is correct.
    Mr. Cassidy. I remember that correctly?
    So if you will, the restoration of a price signal restored 
supply. I will just point that out. Now, Dr. Greene, you also 
mentioned St. Jude's--everybody knows St. Jude's--that you have 
had a hard time at times in your testimony you said you could 
not get chemotherapeutic agents. But you all are big so I 
presume you obtained them someplace. I was kind of interested 
in the gray market. Do you get them from other hospitals, do 
you buy them from third parties, do you go into the gray 
market? I am not asking you to indict yourself but I am trying 
to understand what do companies do when they can't get this 
drug?
    Mr. Greene. I can think of two specific examples in the 
last year, one was cytarabine--we use a lot of that for 
treatment of our ALL patients--and it got to the point where we 
had to consider seriously whether we could accept new patients 
for treatment of ALL.
    Mr. Cassidy. I knew it at the time so if you could cut to 
the chase, how did you supplement your supply?
    Mr. Greene. Well, we were diligent first on the marketplace 
to try to find any source but also communicated with colleagues 
at other organizations. I had other hospitals in the region----
    Mr. Cassidy. Did you ever go on the gray market?
    Mr. Greene. Oh, no. No, we do not buy from gray market.
    Mr. Cassidy. OK. Ms. Bresch, I am struck when I asked in a 
previous time why don't you just backtrack? OK, here is a 
hospital that buys on the gray market. Why don't you just take 
this all the way back and find out where the source of the gray 
market was? Because different hearing but same topic, oh, we 
don't know where it is coming from. You don't know where it is 
coming from? Why don't you just call up hospital X and say who 
did you buy it from? Now, you are on this end, not that end, 
but how would you comment upon how we are tracking drugs?
    Ms. Bresch. I think you perhaps just answered your 
question. We don't track drugs and the FDA does not track drugs 
and in fact one of the premises of GDUFA, the generic industry 
proposal was the fact that this has led to a very weak supply 
chain. So I know there has been a lot of discussion today on 
drug shortages about is there a price point, what is really the 
cause of it? And I would contend that one of the issues that we 
are seeing as a result is this very weak supply chain we have 
today. So not only do we not track--I mean I believe the FDA 
would tell you they have no idea where some products are 
manufactured throughout the world, they have no even idea where 
the facility is----
    Mr. Cassidy. So when people buy online from oversea 
pharmacies, we have no clue whether that pharmacy is doing GMP, 
the manufacturers, or even whether it is counterfeit drug, 
correct?
    Ms. Bresch. You don't have any idea if you walk into your 
corner pharmacy here in Washington, D.C. You don't even have to 
go online. Today, you have no idea where the product you are 
buying comes from.
    Mr. Cassidy. My jaw drops.
    Ms. Bresch. I couldn't agree more, and that is why 
sterilization which has been a topic, I know of some other 
hearings, and the need for us to be able to track and trace, we 
highly agree that that needs to happen----
    Mr. Cassidy. Now, let me stop just because we have 18 
seconds left before I return to my Louisiana seafood, how would 
you all define the gray market? I am just curious what is a 
working definition in your mind?
    Mr. Gaugh. Entrepreneurial America is how we define it.
    Mr. Cassidy. So you wouldn't see a problem with it or you 
would just say that----
    Mr. Gaugh. Oh, I do see a problem with it, absolutely, but 
it is not illegal that we are aware of. It is a brokerage firm 
if you will so it is people----
    Mr. Cassidy. So it is not a black market in the sense that 
it is legal. On the other hand, it is a gray market created by 
price distortions and shortages?
    Mr. Gaugh. Exactly.
    Mr. Cassidy. Would you agree with that, Dr. Greene?
    Mr. Greene. I would. And there is no pedigree that runs 
through the gray market process and that is why you can't trace 
it back through the gray market.
    Mr. Cassidy. OK.
    Mr. Greene. You can trace it to a certain level but not 
completely because the pedigree doesn't exist in a gray market 
environment.
    Mr. Cassidy. OK. Thank you all. I yield back.
    Mr. Pitts. The Chair thanks the gentleman and now 
recognizes the gentlelady from Colorado, Ms. DeGette, for 5 
minutes.
    Ms. DeGette. Thank you very much, Mr. Chairman. And thank 
you for the comity that you have given to allow me to question 
as a member of the full committee.
    Dr. Greene, I wanted to ask you what would you be able to 
do with these patients if you were informed in a timely fashion 
of an impending drug shortage?
    Mr. Greene. Well, of course, it would depend upon the 
severity and the shortage and what details would come out of 
that, but the first step we would assess is the number of 
patients that would be dependent upon that drug, the number of 
patients affected, the alternatives that we would have to 
consider and their relative risk-benefit compared to the first 
drug of choice that would----
    Ms. DeGette. Let me ask you this because you said that you 
were supporting House Bill 2245----
    Mr. Greene. Yes.
    Ms. DeGette [continuing]. Which gratified me because I am 
the prime sponsor of that bill----
    Mr. Greene. We are grateful for that, too.
    Ms. DeGette [continuing]. Along with Congressman Rooney. It 
is a bipartisan bill that has Democratic and Republican 
cosponsors, so what that does is it basically expands the 
current FDA voluntary reporting program and makes it----
    Mr. Greene. Right.
    Ms. DeGette [continuing]. Mandatory. Who would that help 
you be able to do your job better in treating these patients?
    Mr. Greene. In short, it would alert us to situations that 
we could do something about before it reached us. We could 
modify our dosing approaches; we could take additional steps to 
minimize waste. You know, there are sometimes alternatives 
depending on the drug that we could easily switch to before we 
deplete our on-hand supply. There are a number of on-hand 
things we could do.
    Ms. DeGette. Now, you would agree with all of us that this 
legislation and just doing reporting, that doesn't solve the 
underlying problems. It just mainly helps you deal with that 
chart that some folks were showing where you have these 
terrible shortages and it impacts patient treatment, right?
    Mr. Greene. That is correct.
    Ms. DeGette. Now, Ms. Bresch, I am going to assume you 
don't like the idea of drug shortages either, do you?
    Ms. Bresch. No.
    Ms. DeGette. And I would assume, Mr. Gaugh, you don't like 
them either, right?
    Mr. Gaugh. Do no.
    Ms. DeGette. And I know, Ms. Bresch, your company right now 
in fact participates in the voluntary FDA reporting program 
right now. You have got four drugs, largely injectables, that 
are right now on the shortage list, right?
    Ms. Bresch. But to my knowledge, our shortage is because we 
have helped fill the capacity because another manufacturer----
    Ms. DeGette. Right. No, I am just saying you participated 
in that program, right?
    Ms. Bresch. Yes, absolutely.
    Ms. DeGette. And it has worked for you, right?
    Ms. Bresch. Yes, for years.
    Ms. DeGette. And for years. And what you are suggesting I 
think is really important, which is if we modified some of the 
underlying laws that have been on the books for decades and 
decades, that might help solve the underlying problem of drug 
shortages, right?
    Ms. Bresch. Absolutely. I believe strengthening the supply 
chain----
    Ms. DeGette. Right.
    Ms. Bresch [continuing]. Would go a long way.
    Ms. DeGette. Right, and expediting the approval process and 
everything else----
    Ms. Bresch. Absolutely.
    Ms. DeGette [continuing]. Right? And Mr. Gaugh, you are 
nodding, too. You think so, too, right?
    Mr. Gaugh. Yes, I would agree.
    Ms. DeGette. But, you know, it is time to start fixing the 
underlying problems even if we pass legislation right away, 
which I would support doing that, that is not going to solve 
the drug shortage issues that Dr. Greene and all the other 
hospitals are dealing with right now, correct?
    Mr. Greene. That is correct.
    Ms. DeGette. Yes. And so I know Mr. Gaugh, your association 
has proposed this Accelerated Recovery Initiative, which would 
be a voluntary collaboration for the industry to work on some 
reporting issues, correct?
    Mr. Gaugh. Yes.
    Ms. DeGette. And you are not moving forward with that until 
you make sure that the FTC has addressed your antitrust issues, 
right?
    Mr. Gaugh. We are moving forward in a parallel path if you 
will, yes.
    Ms. DeGette. Right, but if there is antitrust issues, you 
are going to have to address those. Now, that particular 
program, it is not either/or with the FDA reporting program, 
right? You could have both the industry program and the FDA 
program, right?
    Mr. Gaugh. Yes, and it would be in support of it. We have 
already presented to the FDA and they are in agreement in 
concept with the process.
    Ms. DeGette. Yes. And by the way, I am in agreement with 
the concept, too. I like the concept of having industry having 
a reporting process but also having the FDA have a reporting 
process. Now, has your association taken a position on House 
Bill 2245? That is the legislation that I talked about.
    Mr. Gaugh. Not the notification process. We agree with 
notification; it is the details that would be in that. And----
    Ms. DeGette. Have you looked at my bill?
    Mr. Gaugh. Oh, absolutely, yes.
    Ms. DeGette. And what is your position on my bill?
    Mr. Gaugh. And have spoken with your staffers as well.
    Ms. DeGette. Sorry?
    Mr. Gaugh. And have spoken with your staffers as well, yes.
    Ms. DeGette. I heard that rumor. And what is your position 
on my bill?
    Mr. Gaugh. We support the communication process as far as 
industry communicating to the FDA when drug shortages are 
known. The devil, as I said, is in the details on----
    Ms. DeGette. What details do you have a concern about?
    Mr. Gaugh. The mandatory timing of those, so, you know, the 
6-month or the 1-year notification process as long as we are 
aware of that is appropriate, but in many cases we are not 
aware----
    Ms. DeGette. So it is just some technical language that you 
think we could work out?
    Mr. Gaugh. Technical, yes, absolutely.
    Ms. DeGette. And we look forward to working with you.
    Thank you very much, Mr. Chairman.
    Mr. Gaugh. Thank you.
    Mr. Pitts. The Chair thanks the gentlelady. The Chair 
thanks panel two for your testimony, excellent information.
    That concludes our second panel. And I would like to thank 
all of 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 I ask the witnesses to 
respond promptly to the questions. Members should submit their 
questions by the close of business on Friday, February the 
24th.
    Without objection, the subcommittee is adjourned.
    [Whereupon, at 1:09 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]



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