[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
COUNTERFEIT DRUGS: FIGHTING ILLEGAL SUPPLY
CHAINS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 27, 2014
__________
Serial No. 113-120
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
___________
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois FRANK PALLONE, Jr., New Jersey
JOSEPH R. PITTS, Pennsylvania BOBBY L. RUSH, Illinois
GREG WALDEN, Oregon ANNA G. ESHOO, California
LEE TERRY, Nebraska ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan GENE GREEN, Texas
TIM MURPHY, Pennsylvania DIANA DeGETTE, Colorado
MICHAEL C. BURGESS, Texas LOIS CAPPS, California
MARSHA BLACKBURN, Tennessee MICHAEL F. DOYLE, Pennsylvania
Vice Chairman JANICE D. SCHAKOWSKY, Illinois
PHIL GINGREY, Georgia JIM MATHESON, Utah
STEVE SCALISE, Louisiana G.K. BUTTERFIELD, North Carolina
ROBERT E. LATTA, Ohio JOHN BARROW, Georgia
CATHY McMORRIS RODGERS, Washington DORIS O. MATSUI, California
GREGG HARPER, Mississippi DONNA M. CHRISTENSEN, Virgin
LEONARD LANCE, New Jersey Islands
BILL CASSIDY, Louisiana KATHY CASTOR, Florida
BRETT GUTHRIE, Kentucky JOHN P. SARBANES, Maryland
PETE OLSON, Texas JERRY McNERNEY, California
DAVID B. McKINLEY, West Virginia BRUCE L. BRALEY, Iowa
CORY GARDNER, Colorado PETER WELCH, Vermont
MIKE POMPEO, Kansas BEN RAY LUJAN, New Mexico
ADAM KINZINGER, Illinois PAUL TONKO, New York
H. MORGAN GRIFFITH, Virginia JOHN A. YARMUTH, Kentucky
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Oversight and Investigations
TIM MURPHY, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
Vice Chairman Ranking Member
MARSHA BLACKBURN, Tennessee BRUCE L. BRALEY, Iowa
PHIL GINGREY, Georgia BEN RAY LUJAN, New Mexico
STEVE SCALISE, Louisiana JANICE D. SCHAKOWSKY, Illinois
GREGG HARPER, Mississippi G.K. BUTTERFIELD, North Carolina
PETE OLSON, Texas KATHY CASTOR, Florida
CORY GARDNER, Colorado PETER WELCH, Vermont
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
BILL JOHNSON, Ohio JOHN A. YARMUTH, Kentucky
BILLY LONG, Missouri GENE GREEN, Texas
RENEE L. ELLMERS, North Carolina HENRY A. WAXMAN, California (ex
JOE BARTON, Texas officio)
FRED UPTON, Michigan (ex officio)
C O N T E N T S
----------
Page
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 3
Hon. Diana DeGette, a Representative in Congress from the state
of Colorado, opening statement................................. 4
Prepared statement...........................................
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 7
Witnesses
Howard Sklamberg, J.D., Deputy Commissioner for Global Regulatory
Operations and Policy, Food and Drug Administration (FDA)...... 9
Prepared statement........................................... 13
Answers to submitted questions............................... 162
Lev Kubiak, Director, National Intellectual Property Rights
Coordination Center, Department of Homeland Security,
Immigration and Customs Enforcement (ICE)...................... 30
Prepared statement........................................... 32
Marcia Crosse, Ph.D., Director of Health Care, U.S. Government
Accountability Office.......................................... 65
Prepared statement........................................... 67
Prashant Yadav, Ph.D., M.B.A., Director of Health Care Research
Initiative, Director of the William Davidson Institute,
University of Michigan......................................... 84
Prepared statement........................................... 87
Answers to submitted questions \1\........................... 178
John P. Clark, Vice President and Chief Security Officer, Global
Security, Compliance Division, Pfizer, Inc..................... 97
Prepared statement........................................... 100
Answers to submitted questions............................... 182
Jean-Luc Moreau, Global Head of Product Security, Novartis
Corporation.................................................... 108
Prepared statement........................................... 110
Bruce Longbottom, Ph.D., Assistant General Counsel, Eli Lilly and
Company........................................................ 123
Prepared statement........................................... 125
Elizabeth Jungman, J.D., M.P.H., Director of Drug Safety And
Innovation, Pew Charitable Trusts.............................. 137
Prepared statement........................................... 139
Submitted Material
Subcommittee memorandum.......................................... 156
Report entitled,``Countering the Problem of Falsified and
Substandard Drugs,'' The Institute of Medicine \2\
Executive summary of report entitled,``Countering the Problem of
Falsified and Substandard Drugs,'' The Institute of Medicine... 186
1Report entitled,``Ensuring Safe Foods and Medical Products
Through Stronger Regulatory Systems Abroad,'' The Institute of
Medicine \3\
Executive summary of report entitled,``Ensuring Safe Foods and
Medical Products Through Stronger Regulatory Systems Abroad,''
The Institute of Medicine...................................... 200
Article entitled,``What to do about unsafe medicines,'' The BMJ.. 212
Report entitled, ``Internet Drug Outlet Identification Program,''
National Association of Boards of Pharmacy..................... 214
Key Data About Online Sales of Prescription Medicines, Alliance
for Safe Online Pharmacies..................................... 229
----------
\1\ The attachment to Mr. Yadav's response is available at:
http://docs.house.gov/meetings/if/if17/20140228/101812/hhrg-
113-if17-wstate-manneg-20140228-sd002.pdf.
\2\ The information is available at: http://docs.house.gov/
meetings/IF/IF02/20140227/101804/HHRG-113-IF02-20140227-
SD005.pdf.
\3\ The information is available at: http://docs.house.gov/
meetings/IF/IF02/20140227/101804/HHRG-113-IF02-20140227-
SD007.pdf.
COUNTERFEIT DRUGS: FIGHTING ILLEGAL SUPPLY CHAINS
----------
THURSDAY, FEBRUARY 27, 2014
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:02 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Tim Murphy
(chairman of the subcommittee) presiding.
Members present: Representatives Murphy, Burgess,
Blackburn, Griffith, Johnson, Long, Ellmers, DeGette, Braley,
Tonko, Dingell, and Waxman (ex officio).
Staff present: Karen Christian, Chief Counsel, Oversight;
Noelle Clemente, Press Secretary; Brad Grantz, Policy
Coordinator, Oversight and Investigations; Brittany Havens,
Legislative Clerk; Sean Hayes, Counsel, Oversight and
Investigations; Alan Slobodin, Deputy Chief Counsel, Oversight;
Tom Wilbur, Digital Media Advisor; Jessica Wilkerson,
Legislative Clerk; Brian Cohen, Democratic Staff Director,
Oversight and Investigations, and Senior Policy Advisor; Eric
Flamm, Democratic FDA Detailee; Kiren Gopal, Democratic
Counsel; Hannah Green, Democratic Staff Assistant; and Stephen
Salsbury, Democratic Investigator.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy. Good morning, and welcome to the Oversight and
Investigations Subcommittee hearing of Energy and Commerce
titled ``Counterfeit Drugs: Fighting Illegal Supply Chains.''
This hearing could also be titled ``Poison Pills in Your
Medicine Cabinet, or Counterfeiters Deliver Deadly Drugs,'' and
it is due to the fact that we need to examine the growing
problem of counterfeit drugs in our country.
Last year Congress took an important first step against
this threat by enacting the new track-and-trace law known as
the Drug Quality and Security Act of 2013. This new law will
secure the legitimate distribution channels, and when
implemented will solve the legal supply chain part of the
counterfeit drug problem.
However, many Americans purchase medicines through illegal
supply chains, such as rogue Internet pharmacies and other
black markets. It is that part of the counterfeit drug threat
that we address today. This hearing focuses on the illegal
supply chains of counterfeit drugs, and on efforts to deter and
disrupt these illegal supply chains.
The legitimate U.S. drug supply is safe. But counterfeit
drugs from illegal sources are a significant and growing global
public health threat, potentially causing treatment failure or
death and contributing to increased antimicrobial resistance.
The policy of the U.S. government is not to wait for a full-
blown crisis before taking appropriate action.
Drug counterfeiters do not just steal intellectual
property. They recklessly and intentionally endanger human
lives. They sell counterfeits that do not contain active
ingredients and provide no treatment benefit to the patient.
Thus, a child suffering from malaria who takes a fake anti-
malaria drug might die within 48 hours because the malaria
remains untreated. The counterfeiters sell fakes that may
contain incorrect ingredients, improper dosages, hazardous or
poisonous ingredients. For example, an emergency room doctor
from Texas in 2011 took a counterfeit weight loss drug he
bought from an online pharmacy. The drug was contaminated with
a controlled substance and he suffered a stroke.
The counterfeiters sell drugs with risks for harmful side
effects or allergic reactions. For example, in 2007 and 2008,
dozens of heart surgery and kidney dialysis patients in the
United States suffered unexpected allergic-like reactions and
several lost their lives due to intentionally contaminated
heparin imported from China that had entered the Chinese
heparin supply purporting to be pure heparin.
The counterfeiters do not care about the patients who are
hurt. One counterfeiter, Richard Taylor, was notified in May
2011 that two patients who had been on a counterfeit cancer
drug he had distributed had started to shake in the middle of
being transfused and had to be disconnected from treatment.
However, the penalties for drug counterfeiters under the
Federal Food Drug and Cosmetic Act have not been updated since
1938. As the FDA Commissioner has said, there is a steeper
penalty for counterfeiting a designer purse under the Federal
Criminal Code than a drug product under current FDA law.
Drug counterfeiting is highly profitable, and the criminals
only face the maximum penalties under the FDA law of $10,000 or
3 years in prison. In contrast, penalties for trafficking
narcotics can have prison sentences up to life and fines in the
millions of dollars. There is one estimate that the return on
counterfeit drugs may be 10 times greater than that of the sale
of illegal narcotics.
Now, experts tell us the counterfeit drug problem has
worsened over the last decade, and the reasons for this
disturbing trend include increasing opportunities created by
larger, more complex supply chains; more customers reachable
through the Internet; more cases where the counterfeiting
crimes occur in several countries making enforcement more
difficult; and the expansion of counterfeiting from so-called
lifestyle drugs into therapeutic medicines used to treat
cancer, heart disease or other illnesses.
The illegal supply chains are numerous and global. Rogue
Internet pharmacies are now proliferating. There are believed
to be about 35,000 to 50,000 active online sellers, 97 percent
of which do not comply with U.S. laws, according to one review
of over 10,000 Internet sites. One report estimated that one in
six Americans--36 million people--have bought medicines online
without a valid prescription. These illegal pharmacy operations
are big business, with the largest ones reportedly making $1 to
2.5 million of sales each month.
The sheer volume of imported drugs into the United States
is overwhelming and opportunities have never been greater for
foreign, unapproved drugs to get into the United States. Nearly
40 percent of drugs taken by Americans are made overseas, and
80 percent of the active ingredients are imported from about
3,800 foreign manufacturers, in more than 150 countries.
According to a 2011 FDA report, the number of foreign drug
suppliers has doubled in the last 7 years. The Government
Accountability Office has found FDA is only able to inspect
foreign drug plants every 9 years while FDA inspects domestic
drug manufacturers every 2 years.
The subcommittee will also examine other illegal supply
chains such as medical clinics and doctors who purchase drugs
from illegal sources, business-to-business networks, and
smugglers bringing unapproved or counterfeit drugs from Mexico
into the United States.
I welcome all of today's outstanding witnesses and I look
forward to your testimony.
[The prepared statement of Mr. Murphy follows:]
Prepared statement of Hon. Tim Murphy
The subcommittee meets to examine the growing problem of
counterfeit drugs. Another fitting title for our hearing today:
``Poison Pills in Your Medicine Cabinet: Counterfeiters Deliver
Deadly Drugs.''
Last year Congress took an important first step against
this threat by enacting the new track-and-trace law known as
the Drug Quality and Security Act of 2013. This new law will
secure the legitimate distribution channels, and when
implemented will solve the legal supply chain part of the
counterfeit drug problem.
However, many Americans purchase medicines through illegal
supply chains, such as rogue Internet pharmacies and other
black markets. It is that part of the counterfeit drug threat
we address today. This hearing focuses on the illegal supply
chains of counterfeit drugs, and on efforts to deter and
disrupt these illegal supply chains.
The legitimate U.S. drug supply is safe. But counterfeit
drugs from illegal sources are a significant and growing global
public-health threat, potentially causing treatment failure or
death and contributing to increased anti-microbial resistance.
The policy of the U.S. government is not to wait for a full-
blown crisis before taking appropriate action.
Drug counterfeiters do not just steal intellectual
property. They recklessly and intentionally endanger human
lives.
They sell counterfeits that do not contain active
ingredients and provide no treatment benefit to the patient.
Thus, a child suffering from malaria who takes a fake anti-
malaria drug might die within 48 hours because the malaria
remains untreated.
The counterfeiters sell fakes that may contain incorrect
ingredients, improper dosages, hazardous, or poisonous
ingredients. For example, an emergency room doctor from Texas
in 2011 took a counterfeit weight loss drug he bought from an
online pharmacy. The drug was contaminated with a controlled
substance and he suffered a stroke.
The counterfeiters sell drugs with risks for harmful side
effects or allergic reactions. For example, in 2007 and 2008,
dozens of heart-surgery and kidney-dialysis patients in the
U.S. suffered unexpected allergictype reactions and several
lost their lives due to intentionally contaminated heparin
imported from China that had entered the Chinese heparin supply
purporting to be pure heparin.
The counterfeiters do not care about the patients who are
hurt. One counterfeiter, Richard Taylor, was notified in May
2011 that two patients who had been on a counterfeit cancer
drug he had distributed had started to shake in the middle of
being transfused and had to be disconnected from treatment.
However, the penalties for drug-counterfeiting under the
Federal Food Drug and Cosmetic Act have not been updated since
1938. As the FDA Commissioner has said, there is a steeper
penalty for counterfeiting a designer purse under the Federal
Criminal Code than a drug product under current FDA law.
Drug counterfeiting is highly profitable, and the criminals
only face the maximum penalties under the FDA law of $10,000 or
three years in prison. In contrast, penalties for trafficking
narcotics can have prison sentences up to life and fines in the
millions of dollars. There is one estimate that the return on
counterfeit drugs may be 10 times greater than that of the sale
of illegal narcotics.
Experts tell us the counterfeit drug problem has worsened
over the last decade. The reasons for this disturbing trend
include: increasing opportunities created by larger, more
complex supply chains; more customers reachable through the
Internet; more cases where the counterfeiting crimes occur in
several countries making enforcement more difficult; and the
expansion of counterfeiting from so-called lifestyle drugs into
therapeutic medicines used to treat cancer, heart disease, or
other illnesses.
The illegal supply chains are numerous and global. Rogue
Internet pharmacies are proliferating. There are believed to be
about 35,000-50,000 active online sellers, 97 percent of which
do not comply with U.S. laws, according to one review of over
10,000 Internet sites. One report estimated that one in six
Americans--36 million people--have bought medicines online
without a valid prescription. These illegal pharmacy operations
are big business, with the largest ones reportedly making $1 to
2.5 million dollars of sales a month.
The sheer volume of imported drugs into the U.S. is
overwhelming and opportunities have never been greater for
foreign unapproved drugs to get into the U.S. Nearly 40 percent
of drugs taken by Americans are made overseas and 80 percent of
the active ingredients are imported from about 3,800 foreign
manufacturers, in more than 150 countries. According to a 2011
FDA report, the number of foreign drug suppliers has doubled in
the last seven years. The Government Accountability Office
(GAO) has found FDA is only able to inspect foreign drug plants
every nine years while FDA inspects domestic drug manufacturers
about every 2 years.
The subcommittee will also examine other illegal supply
chains such as medical clinics and doctors who purchase drugs
from illegal sources, business-to-business (B2B) networks, and
smugglers bringing unapproved or counterfeit drugs from Mexico
into the U.S.
I welcome all of today's outstanding witnesses and look
forward to their testimony.
Mr. Murphy. And now I turn to recognize my friend, and the
Ranking Member, Ms. DeGette of Colorado.
OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Ms. DeGette. Thank you very much, Mr. Chairman. I really
appreciate you having this hearing.
We had a number of hearings some years ago in this
committee on drug counterfeiting, and it was shocking and
appalling to see how serious this problem is. While we did pass
that great bill last year, still I think that drug
counterfeiting is a terrible problem that we need to address in
a bipartisan fashion.
As you said, counterfeit drugs can contain dangerous
impurities, incorrect ingredients, improper dosages, and also
have improper handling, and legitimate drugs have been diverted
or stolen from the supply chain and they have been handled
improperly or stored at the wrong temperature, and then of
course, these fraudsters spend a lot of time recreating labels
and packaging for the dangerous drug so that they look exactly
like the real thing.
I got some samples today. These are Lipitor samples, and
they look exactly the same. The blister packs are the same, the
pills are exactly the same, the alleged dosages are exactly the
same, and if you ordered these online, you would think that you
were getting Lipitor. However, which one is the real and which
one is the fake? You couldn't possibly tell except where there
is a label on the package. Here is the fake and here is the
real. And this is what these counterfeiters do. They spend more
time worrying about what the packaging is going to like look so
it will fool the consumer and a lot less time worrying about
whether there's actual medication inside that's going to help
people.
We have seen a number of troubling cases recently.
Criminals have tampered with pharmaceuticals used to treat
illnesses like cancer and HIV/AIDS. Drugs used to treat
schizophrenia were replaced with aspirin. Counterfeit cancer
drugs were tainted with non-sterile tap water, and counterfeit
AIDS drugs have been found to lack any ingredient, and as you
said, the Internet is really especially problematic for these
unsafe drugs, and according to a recent FDA survey,
approximately one in four Americans has purchased prescription
drugs online. Most consumers purchase drugs from reputable
businesses but there are thousands of rogue Internet
pharmacies, some of which you couldn't tell from just looking
onsite that sell drugs of dubious quality without a
prescription. I couldn't believe it that you said that there
was a doctor who bought these drugs online. I mean, surely if
anybody should know, it should be a doctor.
Now, Congress passed the Ryan Haight Act in 2008 and then
last year, as you said, the Drug Quality and Security Act,
which provide additional enforcement tools, and so I am eager
to hear from the GAO whether these laws have had an impact in
combating this problem and what more can be done. I am also
interested to learn from the stakeholders and agencies how we
can increase awareness and education in the medical community
and the public more broadly about the prevalence of and risks
associated with counterfeit drugs.
I must say, I talk to my constituents, and people assume if
they are buying drugs from a pharmacy online that it would be
safe, and that is an incorrect assumption to make. I think we
need to have partnerships between the pharmaceutical companies,
between government agencies, between nonprofit agencies and a
variety of sources to let people know how dangerous it can be
to buy drugs from an Internet source.
And I want to commend the FDA, ICE, and the other federal
agencies for their work in protecting consumers from unsafe
drugs, but I also want to learn more about what we can do about
counterfeiting drug activity and whether we need more
authorities or stricter penalties to effectively carry out this
work.
Globally, the FDA works with World Health Organization and
Interpol to build global capacity to monitor counterfeit drugs
and to coordinate international law enforcement action, and so
I know that our witness from the University of Michigan, Dr.
Yadav, will talk about the global health implications of
counterfeit drug activity and how existing international
efforts can be strengthened. Prosecuting these wrongdoers is
difficult because they are shady and they are international,
but I think if we have domestic and international partnerships,
we can do it.
Consumers should never have to fear the prescription drug
they need may actually make them sick or endanger the lives of
their loved ones, and so that is why these partnerships are
critical. I look forward to hearing from our witnesses and
continuing to work together to make sure that when a consumer
buys a drug, they know that it is going to be safe.
Thank you, Mr. Chairman, and I yield back.
Mr. Murphy. The gentlelady yields back and I now recognize
the vice chairman of the subcommittee, Dr. Burgess, for 5
minutes.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. I thank the chairman for the recognition. I
thank our witnesses for being here, a terribly important
hearing that we are having this morning.
Let me begin my statement with a quote: ``The market for
prescription drugs has been the catalyst for a continuing
series of frauds against American manufacturers and has
provided cover for counterfeit drugs. The effect of these
practices and conditions is to create an unacceptable risk that
counterfeit, adulterated, misbranded, subpotent or expired
drugs will be sold to American consumers.''
Now, you might think I am reading from today's hearing memo
but in fact they were from the findings of the Prescription
Drug Marketing Act of 1987. That bipartisan law was the result
of a series of hearings conducted with Chairman Dingell in this
very subcommittee. In the report accompanying the bill from
1987, this subcommittee found, again quoting, ``American
consumers cannot purchase prescription drugs with the certainty
that the products are safe and effective. This is not to say
that the shelves of the Nation's pharmacies are lined with
substandard products or that there are inadequate controls in
the manufacturing process. Rather, the integrity of the
distribution system is insufficient to prevent the introduction
and the eventual retail sale of substandard, ineffective or
even counterfeit pharmaceuticals,'' again, quoting from the
findings in 1987.
The United States has the best drug supply chain in the
world, and this committee's work has been long and notable and
medications have become more advanced. Our supply chain has
become more global in its reach. The equally consistent and
sophisticated attacks each and every day by counterfeiters,
rogue distributors and those willing to adulterate products and
put patients at risk are no less today than they were in 1987.
According to the World Health Organization, in 2010
worldwide counterfeit medicine sales topped $75 billion. That
was almost doubling in 5 years, and some speculate the number
will continue to grow by 20 percent each year.
At its most extreme, these criminals are willing to
literally risk patients' lives to sell counterfeits. As a
doctor, such immorality of knowingly sentencing a patient to
death by either denying them treatment or selling them an
adulterated product, that is an absolutely chilling
proposition. In my opinion, punishment for counterfeiting
prescription medications is so far from adequate as to be
laughable.
From fake flu vaccines to oncology drugs, counterfeit
medications have been able to enter the supply chain and in
fact administered to patients. Detecting counterfeit drugs is
difficult, if not impossible. There is no field test that we
can send people out to perform to indicate whether a drug is
fake or real, and even the trained experts are often unable to
detect whether a drug is what it purports to be. Counterfeit
and other adulterated drugs present an unreasonable risk to
Americans.
Thankfully, this committee, this subcommittee has remained
vigilant, and I believe the passage of the Drug Quality and
Security Act last year will provide a valuable tool. Some will
argue it took too long but nevertheless, it does tighten our
distribution system. While our system may be the best in the
world, our health care workforce does not have the confidence
that they should have that the drugs they are dispensing or
administering are the ones that came from the manufacturer.
I will also note that a December 2005 report found that
nearly half of the imported drugs the Food and Drug
Administration intercepted from four selected countries to fill
orders placed with firms that consumers thought were Canadian,
in fact, 85 percent came from 27 other countries around the
globe. A number of these products were also found to be
counterfeit.
Just as a practical matter, I will never forget the day in
my practice back in north Texas when the story broke that fake
oral contraceptives had been introduced into the market. Our
phones melted down that morning, and many anxious patients
spent many anxious hours trying to determine if they had the
pill or the lot number from the inappropriate counterfeit pills
and whether or not they would have the potency to provide the
protection they were purported to provide.
Maintaining the integrity of the United States prescription
drug supply is a compelling national priority and requires
national solutions involving business, health care providers
and governments coming together and being vigilant in the face
of threats. The vigilance of this committee, this subcommittee,
has been established in the past and continues today.
I thank the chairman for the recognition. I will yield back
the balance of my time.
Mr. Murphy. The gentleman yields back. I now recognize the
ranking member of the full committee, Mr. Waxman, for 5
minutes.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. I am pleased
that we are having an important oversight hearing where 20
minutes so far into the opening statements, no one has blamed
the problem on President Obama. This is rare for this
committee.
But we are doing the job that we should be doing because
the entry of counterfeit drugs into our drug supply chain poses
a great public health threat. Time and again, we have read
stories about patients getting drugs from Internet pharmacies
or even their doctors or local pharmacies that were unsafe or
ineffective counterfeits, or that were stolen, or not stored
properly so they no longer worked.
We have taken legislative steps on a bipartisan basis to
address this problem. In 2012, we passed the bipartisan Food
and Drug Administration Drug Safety and Innovation Act. The law
requires companies to notify FDA of drug thefts and counterfeit
or adulterated drugs that could cause serious harm. It requires
manufacturers and importers to register annually with the FDA
and provide unique facility identifiers so that FDA knows who
and where they are. It bans imports of drugs from foreign
facilities that delay, deny or limit FDA inspection, and it
enhances criminal penalties for intentionally counterfeiting or
adulterating a drug in a way that could cause serious adverse
health consequences.
Last year, we passed the bipartisan Drug Quality and
Security Act. This law gives the FDA and industry new tools to
deter, discover and remedy the entry of illegal drugs into the
supply chain. However, the legislation was not designed for
sophisticated criminal enterprises intent on evading the law
and the most useful of the new tools, an electronic unit-level
tracking and tracing system is not required to be in place
until 2023. So it is hard to reach a conclusion other than more
needs to be done.
Today the government has to prove an intent to violate the
law before it can even win a criminal case, and even then, the
maximum penalty for some violations with potentially life-
threatening consequences is only 3 years. We need a stronger
deterrent.
We also need to consider what to do about the fact that so
many of our drugs are sourced from abroad. This can create
serious drug safety and security issues. In India, where FDA
inspections have tripled since FDASIA, FDA is finding serious
lapses in quality. And as the New York Times reported recently,
even India's top drug regulator concedes that most of the drug
facilities supplying the domestic Indian market do not meet FDA
standards. This is a serious problem because India is the
second largest exporter of drugs to the U.S., supplying 40
percent of our generic and over-the-counter drugs.
In China, the U.S. government had to negotiate for almost a
full year just to get visas for the additional inspectors that
FDA needs to conduct more frequent and timely inspections. It
could put much of our drug supply at risk because the crucial
ingredients for nearly all antibiotics, steroids and many other
lifesaving drugs are now made exclusively in China.
Well, Mr. Chairman, I look forward to hearing from our
witnesses today, and I thank you for holding this important
hearing. It is appropriate, it is legitimate, it is what
oversight committees should be doing, and I hope it is the
first step towards passing legislation that will effectively
deter and punish those who put Americans' health at risk with
counterfeit pharmaceuticals.
And I want to say in my closing minute, Mr. Chairman,
unfortunately, there is another subcommittee meeting at the
same time so I will be in and out of this hearing. I will
review the testimony of the witnesses that will be making a
presentation. Thank you.
Mr. Murphy. Thank you. Mr. Waxman yields back.
I would now like to introduce our witnesses on the first
panel for today's hearing. We do have two panels of
distinguished people. First, Mr. Howard Sklamberg is the Deputy
Commissioner for Global Regulatory Operations and Policy for
the Food and Drug Administration. I would like to note that due
to the amount of exhibits the FDA would like to show in support
of the testimony, both sides agree to allow Mr. Sklamberg 10
minutes for his oral testimony instead of the usual 5.
And Mr. Lev Kubiak, welcome, the Director of the National
Intellectual Property Rights Coordination Center for the
Department of Homeland Security's Immigration and Customs
Enforcement.
I will now swear in the witnesses. You are aware that the
committee is holding an investigative hearing, and when doing
so has the practice of taking testimony under oath. Do either
of you object to testifying under oath? The Chair then advises
you that under the rules of the House and the rules of the
committee, you are entitled to be advised by counsel. Do either
of you desire to be advised by counsel during the testimony
today? In that case, would you please rise and raise your right
hand, and I will swear you in.
[Witnesses sworn.]
Mr. Murphy. You are now under oath and subject to the
penalties set forth in Title XVIII, section 1001 of the United
States Code.
Mr. Sklamberg, you may now give your opening statement and
video.
TESTIMONY OF HOWARD SKLAMBERG, J.D., DEPUTY COMMISSIONER FOR
GLOBAL REGULATORY OPERATIONS AND POLICY, FOOD AND DRUG
ADMINISTRATION (FDA); AND LEV KUBIAK, DIRECTOR, NATIONAL
INTELLECTUAL PROPERTY RIGHTS COORDINATION CENTER, DEPARTMENT OF
HOMELAND SECURITY, IMMIGRATION AND CUSTOMS ENFORCEMENT (ICE)
TESTIMONY OF HOWARD SKLAMBERG
Mr. Sklamberg. Thank you very much, Mr. Chairman, Ranking
Member DeGette, and members of the subcommittee. I am Howard
Sklamberg, Deputy Commissioner for Global Regulatory Operations
and Policy at the Food and Drug Administration, and thank you
for this opportunity to be here today to discuss the important
issue of counterfeit drugs.
Counterfeit drugs raise significant public health concerns.
A counterfeit drug could be made using ingredients that are
toxic to patients and processed under poorly controlled and
unsanitary conditions. In the United States, a relatively
comprehensive system of laws, regulations and enforcement by
federal and State authorities has kept drug counterfeiting
incidents in the United States relatively rare. FDA continues
to believe and works to ensure that Americans can have a high
degree of confidence in the drugs they obtain through legal
channels. Nonetheless, with the dramatic increase in the
complexity of the global supply chain, we face enormous
challenges regarding supply chain security.
FDA is not alone in its effort to address the problem of
counterfeit drugs, and I want to note the efforts of my
colleagues on this panel and on the other panels in their work
on this problem as well.
Growth in counterfeiting may be spurred by several things
including the increasing volume of drugs, longer supply chains,
the development of technologies that make it easier to
counterfeit drugs, and the involvement of international
organized crime. This growth also is exacerbated by the
relatively low criminal penalties for distribution of
adulterated, unapproved or misbranded drugs under the Federal
Food, Drug and Cosmetic Act compared to other types of crime.
In addition, the Internet presents another layer of
complexity by introducing more players and more opportunities
for criminals to reach consumers. The global anonymity of the
Internet can provide a safe haven for illicit prescription drug
sales. Many Web sites leave unsuspecting customers in the
United States to believe the dispensing pharmacy is in the
United States or Canada.
FDA has made it a priority to investigate reports of
counterfeit products. As part of these efforts, FDA's Office of
Criminal Investigations, or OCI, aggressively investigates
reports of counterfeit products in order to protect U.S.
citizens. OCI's investigations have led to some notable
successes. I would like to provide some examples from our
investigations.
The first is from an investigation into counterfeit Alli,
and would the clerk please pull up the Alli video?
[Video shown.]
Thank you. And would the clerk please load picture one?
[Slide shown.]
And as it is being loaded, the picture shows a refrigerator
used to store illegally imported, adulterated and misbranded
prescription drugs that were smuggled into the United States.
These drugs were discovered in the home of a repacker who had
subsequently shipped the drugs to doctors throughout the United
States.
Would the clerk please load picture two?
[Slide shown.]
One of the ways some traffickers obtain prescription drugs
is to buy them from customers at various pharmacies whose
medications were paid for by Medicaid. In order to be able to
reuse the bottle with the original label, they would have to
clean the pharmacy label and the Medicaid sticker off of the
label using things such as lighter fluid. Where we have
observed bottle washing with a solvent, we generally observe
chemicals in the solvent that have migrated through the bottle
onto the drug.
Would the clerk please load picture three?
[Slide shown.]
Well, through the particular bottle, I am not sure in the
instances what type of bottle it is but we can get back to you
on that, but it is common for things to migrate through
plastic.
Would the clerk please load picture three?
[Slide shown.]
The following photos were taken from a Belize-based
manufacturing facility involved in selling unapproved
prescription drugs and controlled substances. The pills from
the trashcans in this picture were transferred into plastic
bags to be counted and bagged by using a scoop. The same scoop
was used for many different drugs including controlled drugs.
This led to cross-contamination.
Would the clerk please load picture four?
[Slide shown.]
This picture shows some of the conditions at the
manufacturing facility.
Would the clerk please load picture five?
[Slide shown.]
This picture shows the condition of a tablet room at the
facility. I want to show a comparison of what a legitimate
tablet press should look like. Would the clerk please load
picture six?
[Slide shown.]
So you can see the difference.
FDA has been working with industry and international
partners to develop new methods to address the problem of
counterfeit drugs. FDA scientists have developed and have been
testing a counterfeit detection device, CD-3, at U.S. ports of
entry and elsewhere for use by FDA investigators to check for
suspect counterfeit products. CD-3, which I am now holding, is
a battery-operated, handheld and inexpensive tool that costs a
fraction of the price of existing laboratory-based and field-
deployed technologies. Would the clerk please play the CD-3
video?
[Video shown.]
It is important to note that while this technology is
helpful it won't solve the problem, particularly given the
volume of products that come through ports of entry.
FDA also participates in Operation Pangaea, which is a
global cooperative effort in partnership with international
regulatory and law enforcement agencies to combat the online
sale and distribution of potentially dangerous counterfeit and
illegal medical products. As part of the 2013 annual effort,
the partnership took action against more than 13,700 Web sites
illegally selling potentially dangerous unapproved prescription
medicines to customers. These actions included the issuance of
regulatory warnings and the seizure of offending Web sites and
over $36 million worth of illegal medicines worldwide. FDA in
coordination with the U.S. Attorney's Office for the District
of Colorado seized and shut down 1,677 illegal pharmacy Web
sites.
The case of Manuel Calvelo illustrates the inherently
international and thus difficult-to-prosecute nature of the
Internet pharmacy investigations. Calvelo is a Belgian citizen
operating a global Internet pharmacy with a call center in the
Philippines and a credit processor in the Netherlands.
Calvelo's Web sites offered for sale more than 40 prescription
drugs such as Viagra, Glucophage, Zoloft, Lipitor, Cialis,
Xanax, Ativan and Klonopin. Note that Xanax, Ativan and
Klonopin are controlled substances. OCI was able to arrest
Calvelo in Costa Rico and extradite him to the United States
after an extended undercover operation in which OCI agents
posed as pharmaceutical wholesalers seeking to do business with
them/him.
Public education is very important as a first line of
defense against counterfeit drugs. The agency is conducting
proactive educational outreach to the medical community and
other stakeholders. In September 2012, FDA launched a national
campaign called Be Safe RX: Know Your Online Pharmacy. Be Safe
RX provides resources for patients and caregivers who might
purchase prescription drugs online to enable them to better
understand who they are buying from and to help ensure the
drugs they buy match the product the doctor prescribed.
The Food and Drug Administration Safety and Innovation Act,
or FDASIA, enacted in July 2012, provided the agency with new
authorities that help to secure the safety and integrity of
drugs imported into and sold in the United States. For example,
the law provides the FDA with the authority to administratively
detain drugs believed to be adulterated or misbranded and the
authority to destroy certain adulterated, misbranded or
counterfeit drugs offered for import. The law also requires
foreign and domestic companies to provide complete information
on threats to the security of the drug supply chain and to
improve current registration and listing information. The
recently enacted Drug Quality and Security Act outlines
critical steps to build an electronic and operable system to
identify and trace certain prescription drugs. Within 10 years
after enactment, the system will facilitate the exchange of
information at the individual package level about where a drug
has been in the supply chain.
While the new authorities under FDASIA and the DQSA help
address some of the risks posed by counterfeit drugs, they will
not prevent all types of illegal diversion or distribution
schemes. These laws would not prevent the numerous instances
FDA has uncovered of medical practitioners deliberately
obtaining unapproved drugs, some of which have been
counterfeits directly from foreign sources for administering to
patients. The reality is that the criminal penalty under the
Food, Drug and Cosmetic Act for the risky and inherently
dangerous practice of importing unapproved foreign drugs is
simply not sufficient to deter the criminal element. The
penalty for such conduct, which generally falls under the
misbranding and unapproved new drugs provisions of the FD&C Act
is 3 years imprisonment and then only if the government can
show there is a specific intent to defraud or mislead.
Otherwise it is a misdemeanor punishable only by a maximum of
one year of imprisonment.
The Ryan Haight Act also sets forth for the first time
under federal law the definition of a valid prescription with
regard to controlled substances. Many online pharmacies,
however, sell prescription drugs that are not controlled
substances. These drug sales are regulated under the FD&C Act
and require a valid prescription, but the FD&C Act does not
define what constituents a valid prescription. In the online
pharmacy context where numerous doctors and their respective
customers are often located in different States, this can
complicate criminal prosecution under the FD&C Act.
Given the challenges and threats posed by an increasingly
globalized marketplace, it is important that FDA regulatory and
law enforcement partners and industry continue to work together
to address the problem and threat of counterfeit drugs and that
we continue to ensure authorities keep pace with the complex
system that counterfeiters and traffickers take advantage of.
We look forward to continuing to work together to achieve our
shared goal of protecting American consumers.
I would be happy to answer any questions. Thank you.
[The prepared statement of Mr. Sklamberg follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you, Mr. Sklamberg.
Mr. Kubiak, you are now recognized for 5 minutes.
TESTIMONY OF LEV KUBIAK
Mr. Kubiak. Good morning, Chairman Murphy, Ranking Member
DeGette and distinguished subcommittee members, thank you very
much for this opportunity to speak today about the efforts of
ICE--Immigration and Customs Enforcement--and the Center that I
run, the National Intellectual Property Rights Center.
I currently serve as the Director of that Center. It is led
by ICE, and the Center operates as a task force model comprised
of 21 federal and international partners including FDA, which I
am pleased to join today here on this panel. It is this
collection of agencies partnered together pooling resources,
expertise and authorities that makes the IPR Center truly
unique and effectively. No subset of agencies has the
individual capacity or capability to address the significant
and growing threat of IP crime alone. The Center optimizes the
effectiveness of each agency and provides a single location for
industry collaboration and reporting.
Can you put the second slide up, please?
[Slide shown.]
As the picture that you are about to see illustrates, our
biggest challenge right now is that criminals now counterfeit
and effectively market virtually any product with no regard to
public health and safety, be it exploding airbags, as it
represented in the right hand of the screen, to counterfeit
industrial bearings used in mineshafts and mining equipment, to
drugs without active ingredient, the callous nature of
counterfeiting results in dangerous, even deadly outcomes.
Another significant challenge we face is while ocean-
crossing shipping containers are necessary for the bulk
movement of quantities of counterfeit items like handbags,
batteries or razor blades, other high-value items including
counterfeit pharmaceuticals and semiconductors used by our
United States military are being smuggled in thousands of
smaller packages through mail and express courier packages.
Next slide, please.
[Slide shown.]
As this slide shows, the Internet poses yet another
significant challenge. Criminals operating unregulated Web
sites, providing counterfeit pharmaceuticals continue to be a
growing global phenomenon. In April 2013, Legit Script, an
online pharmaceutical verification service, stated there were
over 34,000 active rogue Internet pharmacies selling
substandard, counterfeit or harmful prescription drugs. The
screenshot you see here is from an actual criminal Web site
that we seized as one of the 686 Web sites seized as a result
of Operation Better Pill, a worldwide operation run by ICE
through the IPR Center targeting the online sale of counterfeit
illegal medicine. This Web site was run by a criminal
organization based overseas and purported, as you can see, to
be a legitimate Canadian health care facility.
With this type of ambiguity, consumer fraud can run
rampant. Next slide, please.
[Slide shown.]
In early 2010, law enforcement authorities from the United
Kingdom provided FDA information on an intercepted shipment of
unapproved oncology drugs. The package, derived from Pakistan,
was destined for California. Together, ICE, FDA, FBI, the U.S.
Postal Service, and Customs and Border Protection collaborated
on the investigation discovering that Martin Paul Bean of
Florida ordered the unapproved drugs from foreign sources in
Turkey, India and Pakistan and then sold those drugs to doctors
in the United States at substantially reduced prices. In
September, Bean was sentenced to 2 years' incarceration for
distributing more than $7 million worth of unapproved and
misbranded oncology drugs through his illicit pharmaceutical
scheme, significant harm caused by just one criminal.
This case example on the screen illustrates our strategy,
which is to attack the criminal network throughout the entire
global supply chain from the point of manufacturer through
shippers of illegal commodities to those that distribute the
illegal drugs to unsuspecting people in need of effective
medicine. This strategy requires a robust collaboration through
our attach AE1e network with foreign counterparts where the
majority of counterfeit items are made and through which they
are transhipped en route to the United States and our trading
partners worldwide.
I know we are not going to be able to arrest and seize our
way out of this growing problem, and that is why the IPR Center
has committed significant effort to close collaboration with
industry and education to the public. I do believe that we can
reduce demand through education and I also believe that this is
the most critical component of any long-term viable solution.
Next slide, please.
[Slide shown.]
As part of our robust public education efforts, we have
developed the IPR Center Web site, which includes information
on efforts of all of our partner agencies and where they can
report IP crime through our ``report IP theft'' button.
Industry and other U.S. government agencies have joined the
fight by placing the ``report IP theft'' button on their Web
sites as well, now totaling more than 100 industry and embassy
Web sites worldwide, including this one from the Pharmaceutical
Security Institute pictured on the screen. New leads to the
Center have increased nearly 500 percent since fiscal year 2012
as a result of this. I encourage the members of this committee
to visit our Web site, and I invite you to place our ``report
IP theft'' button on your page as well. Recently we had
Congressman Green visit the Center himself and we are working
with his staff to do just that for his constituents. And I also
welcome other members of this committee to visit the Center. It
is one thing to hear about it; it is another to see it, and we
are just across the river in Crystal City.
Once again, thank you very much for the opportunity to
appear before you today, and I am pleased to answer any
questions you may have at this time.
[The prepared statement of Mr. Kubiak follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. I thank you both our witnesses today for giving
us some honest, solid and somewhat chilling testimony of this
huge public health risk.
Mr. Sklamberg, in your video you showed Alli, that drug
there. I had referenced something in my opening statement about
an emergency room doctor in Texas ordering this drug from a
rogue Internet pharmacy. Was that the same pharmacy, do you
know?
Mr. Sklamberg. I don't believe it was the same one.
Mr. Murphy. But he suffered a stroke. Is that correct?
Mr. Sklamberg. Yes, the one you are referring to, Mr.
Chairman.
Mr. Murphy. And unfortunately, he wasn't alone. I mean,
many, many Americans, there are dozens of cases of death or
serious injury suffered from these counterfeit, unapproved
drugs from these rogue Internet pharmacy sites. Is that
correct?
Mr. Sklamberg. That is correct, and in fact, the illnesses
that we know about would severely understate what is actually
happening because, as you pointed out, Mr. Chairman, and some
of your colleagues have, a lot of times the patients who are
receiving these drugs are already quite sick, so if you are
taking Avastin and you have cancer, the Avastin, let's say it
is counterfeit and let's say completely doesn't work, it has no
active ingredients, you may well end up dying from your cancer.
The doctor who is giving you the Avastin might not know that,
in fact, the Avastin was counterfeit and might think that you
had died from your cancer despite getting real Avastin, and so
it is very hard to establish the cause and effect. So what
instances we have we think severely and absolutely understate
the effect and the problem.
Mr. Murphy. Thank you. Are you aware that the National
Association of Boards of Pharmacy and Legit Script indicate
that 97 percent of online pharmacies are actually rogue Web
sites that operate in violation of federal law?
Mr. Sklamberg. Yes, I have seen that statistic. The number
of them is astonishing. I believe the GAO report as well has a
rather astonishing number.
Mr. Murphy. And my understanding is, when they don't
recover any prescription, that number may go closer to 100
percent.
Mr. Sklamberg. It would go up.
Mr. Murphy. Are you aware that according to a report from
the PartnershipforDrug-Free.org, one in six Americans, or 36
million people, have bought medication online without a valid
prescription?
Mr. Sklamberg. Yes.
Mr. Murphy. And given all this, would it be fair to
conclude there are probably millions and millions of Americans
right now who have in their purse, their medicine cabinet,
their pocket some significant safety risk of some medication
that they may be taking today?
Mr. Sklamberg. There are millions of Americans now who may
very well have what they think is medication but that in
reality could make them very sick.
Mr. Murphy. While I am asking these questions, I went into
an online pharmacy, and there's cancer drugs here and
hypertension and psychiatric drugs, et cetera. I could just tap
a button here, buy these. No one is asking me any questions,
and I would assume that none of that is helpful. So this is
really a major public health nightmare.
Mr. Sklamberg. It is a major and growing problem.
Mr. Murphy. Could the CD-3 device that the FDA is
developing be made available to pharmacies or clinical settings
or others to help spot counterfeit drugs?
Mr. Sklamberg. Right now it is still in the early stages.
We developed it a short time ago. We have something like about
25 of them now. There are, to put the number in perspective,
1.2 million international mail entries in the United States
every day, so we have about 25 of these. We are testing them.
We are working on agreements with private industry to scale it
up.
Mr. Murphy. Just make sure that those aren't counterfeit?
Mr. Sklamberg. Yes. No, this one is real. But they are an
important tool because they can do kind of a quick test, but
they are not a panacea for two reasons. First of all, in terms
of building a criminal law enforcement case, it catches what
you think is counterfeit. If you are actually going to build a
criminal case, then you have to test it and send it to a lab
and do that right because the criminal law has standards for
evidence that are, you know, awfuly stringent.
Mr. Murphy. There are also spectrometers that test the
chemical content, and we will probably hear about that from the
second panel.
Mr. Sklamberg. Yes.
Mr. Murphy. Let me ask this. Heather Bresch, who is the CEO
of Mylan Laboratories, which is headquartered in my district,
has plants in the United States and India, and the New York
Times recently stated that the increased regulatory scrutiny in
India was long overdue. Do you agree that we need to have
greater scrutiny in places like India and China, and what are
the concerns about counterfeit drugs specifically related to
India?
Mr. Sklamberg. I would say that as the supply chain of both
legitimate and counterfeit drugs grows and becomes more
international, FDA has to step up its international presence,
which is what we have been doing. So for the legitimate supply
chain, we have been using the tools that you gave us in FDASIA,
for example, with ways of defining risk more clearly, ways of
keeping drugs out, to keep drugs that are suspected of being
adulterated out. We have increased foreign presence and
increased the number of foreign inspections, of the legitimate
supply chain.
We have to act aggressively in the legitimate supply chain
when we encounter fraud that calls into question the integrity
of the products, the integrity of the applications, and of
course, as the legitimate industry grows, there is also the
illegitimate industry around the world that is growing and what
is happening that makes it particularly challenging for us from
a law enforcement perspective is, it is no accident that in the
counterfeit industry, it is developing in places where we do
not have mutual legal assistance treaties, in places where we
don't have extradition agreements, and it makes it harder for
us to investigate those folks if they are in a country where we
don't have the normal--we don't have the avenues of federal
criminal law enforcement cooperation that we do in some other
countries. So they are smart, they are careful, and what they
are doing is evil, and so we have to, when we do catch them, be
very aggressive and try to get penalties that will not only put
the person in prison but send a very, very strong message.
Mr. Murphy. Thank you. I hope some other members will
follow up and get some more details and recommendations for
Congress.
I am out of time now, and turn to Ms. DeGette for 5
minutes.
Ms. DeGette. Thank you very much, Mr. Chairman.
Mr. Sklamberg, I just want to ask you quickly, it sounds
like the penalties are too low for these counterfeiters, but on
the other hand, if we increase the penalties, I want to make
sure that that is going to have a deterrent effect. And I have
a background before I came to Congress in criminal law, and one
thing is that penalties don't deter people unless they think
there is a likelihood that they might get caught. So I want to
ask you, under the current system, if Congress just increased
penalties and did nothing else, would that solve the problem?
Mr. Sklamberg. I think obviously penalties are an important
step in the process, and let me agree with you, Ranking Member
DeGette, and particularly single out one penalty that is
particularly low. Foreign unapproved drugs which pose the same
public health risk as a counterfeit drug, they could be----
Ms. DeGette. I understand. I am sorry, I don't have very
much time. So if we increase those penalties, do you think that
would defer people from counterfeiting those drugs?
Mr. Sklamberg. I think it would increase the frequency at
which those cases are investigated. I think it would increase
the frequency which----
Ms. DeGette. Because prosecutors would take it more
seriously?
Mr. Sklamberg. Yes, and it would increase the penalties.
Ms. DeGette. Thanks. Now, do you think the problem of
counterfeit drugs has gotten worse in recent years?
Mr. Sklamberg. Yes, and more sophisticated?
Ms. DeGette. And what new methods are the counterfeiters
using to evade detection?
Mr. Sklamberg. They are more effectively hiding their money
around the world and they are more effectively using Web sites
around the world, hundreds and hundreds of rogue Web sites
linked together. They resemble international organized crime
and they are using the tools of it.
Ms. DeGette. OK. And that is why you think we need more
serious investigation and prosecution?
Mr. Sklamberg. Yes. It is hard to prosecute international
organized crime.
Ms. DeGette. They are going to be more sophisticated on
that end, and we have got to be more sophisticated.
Can you talk to us for a minute about the Office of Drug
Security, Integrity and Recalls, about when the office was
created, what its mission is, and has it been successful in
addressing the supply chain threat?
Mr. Sklamberg. Yes, the Office of Drug Supply, Integrity,
and Recalls is part of the Center for Drugs' Office of
Compliance, which I used to be director of. That office, ODSIR,
as it is called, was created in 2011, I believe, and the part
it plays in this is, it is the office charged with implementing
the track-and-trace aspect of the DQSA, and number two, when we
have a counterfeit incident, part of it is law enforcement,
part of it is public health notification.
Ms. DeGette. Right.
Mr. Sklamberg. So when we have an incident like with
Avastin a couple of years ago, ODSIR sent out 1,500 letters to
the medical community that note, here is a drug that you have
that you think is Avastin that is actually a counterfeit. This
protects patients, and also works to educate the medical
community.
Ms. DeGette. So do you think it is working, or could it be
working better?
Mr. Sklamberg. I think it is working quite well, and of
course, we always want it to work better.
Ms. DeGette. And what could you do to make it work better?
Mr. Sklamberg. We would, and are, putting more resources
into the problem, and we think working on implementing track
and trace and further educating the medical community----
Ms. DeGette. Will help? OK.
Mr. Dingell. Would the gentlewoman yield?
Ms. DeGette. I would love to yield to my friend, Mr.
Dingell.
Mr. Murphy. Just so people could hear, his microphone
wasn't on, he is asking if you could submit to the committee
what changes you would suggest that we make.
Mr. Sklamberg. We would be glad to.
Ms. DeGette. Thank you.
Now, I want to talk about resources for a minute because
this FDA report that the chairman referenced in his opening
statement says that the FDA is inspecting the foreign sites
once every 9 years compared with the domestic sites every 2
years. Is that because of a lack of resources, Mr. Sklamberg?
Mr. Sklamberg. That was a relic of the way the drug
industry looked years ago. FDASIA has----
Ms. DeGette. No, no, I mean why only once every 9 years? Is
that because of a lack of resources to do it?
Mr. Sklamberg. That was the difficulty and expense of
foreign inspections and the logistics.
Ms. DeGette. So your answer is yes?
Mr. Sklamberg. It is more challenging to do foreign
inspections than domestic ones.
Ms. DeGette. OK. So what would the FDA need to do more
frequent inspections? Would you need more resources to do that?
Mr. Sklamberg. As we have gotten more resources, we are
able to increase the foreign inspections.
Ms. DeGette. So do you have enough resources to do these
foreign inspections at the regularity you think you need to do
them?
Mr. Sklamberg. We found that as the resources have
increased with user fees, generic drug user fees, we have been
able to increase it, so there is a direct relationship.
Ms. DeGette. So answer my question, please. Do you have
enough resources to be able to do these inspections with the
regularity you think you need to do them?
Mr. Sklamberg. We have the resources to do that now. The
thing is, the situation is going to grow and grow and grow in
the future as the percentage----
Ms. DeGette. You may not have the resources in the future?
Mr. Sklamberg. We would have to evaluate that in the
future, but the situation is growing.
Ms. DeGette. OK. Thank you.
I yield back.
Mr. Murphy. The gentlelady yields back. I now recognize the
vice chair of the full committee.
Mrs. Blackburn. Thank you, Mr. Chairman. I want to thank
you all for being with us today, and as you can see, it is an
issue that we are all quite concerned about.
Mr. Sklamberg, CSIP, are you familiar with the Center for
Safe Internet Pharmacies?
Mr. Sklamberg. I am.
Mrs. Blackburn. OK. Talk a little bit about who they are
and how you are working with them, and just for the audience so
that they will know, this is a group that is working Google, Go
Daddy, IPEC, and trying to root out and keep some of these
rogue Web sites out, and I would love to hear how you are
interfacing with them because it seems as if they as an
industry voluntarily are seeing some results.
Mr. Sklamberg. Yes. What we do with CSIP and with other
folks in industry, be they credit card companies and others, is
when we obtain information about a counterfeit or when industry
does, they report it. Now, it is important that, for example,
if it is a Web site, that the Web site be taken down; if it is
a credit card company, that the credit account be disabled.
Mrs. Blackburn. Right.
Mr. Sklamberg. That is challenging.
Ms. Blackburn. Right, and payment processors.
Mr. Sklamberg. And payment processors as well.
Mrs. Blackburn. They have to participate with it. Has
Google using the AdWords program to permit only U.S.-based
online pharmacies, has that been helpful?
Mr. Sklamberg. Well, Google, as you know, entered into an
agreement a couple of years ago where they forfeited $500
million because of the AdWord program had let in Canadian
unapproved drugs. As a result of that, Google has been
cooperating with us in our efforts.
Mrs. Blackburn. I think all of us have a tremendous amount
of concern about the rogue Web sites and the rogue pharmacies
and the damage that it does, and also the phishing and the data
security issues, you know, it is just a really sticky ball of
wax. So I am pleased to know that you are working with them and
that you all are information sharing. Do you have the right
authority to share information back and forth, or is there some
changes that we should make to allow that?
Mr. Sklamberg. We have authority but one of the things that
is difficult is, just as an example, Internet service providers
want to be cooperative with us, so we have all these Web sites.
Right now we have to get grand jury subpoenas to obtain
information that they want to give to us about Internet service
providers. We don't have an administrative subpoena authority
targeted even to just Internet service providers. That is
incredibly time-consuming and cumbersome for the Assistant
United States Attorney who would get the case and then for us,
and it slows us down. We have to get court orders for some of
our actions and subpoenas from others, and there would be a
series of tools that we could get that would make these
investigations move more quickly, and since we are dealing
basically with organized crime, and that is what it is,
organized crime using medicine, fake medicine, we have to have
tools that are as fast as the criminals are.
Mrs. Blackburn. So as we look at data security and privacy
issues, we need to review the elements that would allow you
greater access and speed, a little bit of clarity?
Mr. Sklamberg. I think that would help.
Mrs. Blackburn. OK. Just as I have a little bit of time
left, the botulinum issues, and I know everybody thinks in
terms of just Botox but of course some of my researchers at our
facilities in Tennessee, migraines, Parkinson's, cerebral palsy
for children and they are using the drug there, and I know you
all have had some processes in place dealing with the
unlicensed suppliers of the botulinum and also your security
supply chain pilot project. I am hopeful that you are seeing
companies that are applying for this pilot. How many----
Mr. Sklamberg. Twelve so far, and the program basically
just started, so----
Mrs. Blackburn. And you can take up to 100?
Mr. Sklamberg. That is correct.
Mrs. Blackburn. OK. And in what countries are the companies
located?
Mr. Sklamberg. A variety of countries. I don't have the
information. I can get that to you.
Mrs. Blackburn. I would like you to submit for the record
just for our understanding as we go through and monitor it.
Mr. Sklamberg. We would be glad to.
Mrs. Blackburn. And I think also we are going to want to
look at the successes that you have in analyzing the project,
how you are equating the variables, and then what you see as
your deliverables from that project as we move forward. But
thank you for the update.
Mr. Sklamberg. Thank you.
Mrs. Blackburn. And I will yield back, Mr. Chairman.
Mr. Sklamberg. We would be glad to get that to you.
Mr. Murphy. The gentleman yields back, and I now recognize
Mr. Waxman.
Mr. Dingell. Will the gentlewoman yield?
Ms. Blackburn. I yield.
Mr. Dingell. Will you submit for the record the suggestions
that you essentially were about to make to my colleague about
what it is you need in the way of authority to address the
questions that you were just describing?
Mr. Sklamberg. We would be glad to, sir.
Mr. Dingell. I thank the gentlewoman for yielding.
Mr. Murphy. Thank you. Now Mr. Waxman is recognized for 5
minutes.
Mr. Waxman. Thank you very much, Mr. Chairman.
Mr. Sklamberg, Congress has made a number of changes to FDA
law in the last year and a half that should help fight
counterfeit drugs. For example, the FDA Safety and Innovation
Act increased the maximum prison time to 20 years for knowingly
and intentionally selling a counterfeit drug or knowingly and
intentionally adulterating a drug such that it has a reasonable
probability of causing serious harm or death, and the Drug
Quality and Security Act sets up a track-and-trace system that
over the next 10 years should make it increasingly difficult
for criminals to introduce counterfeit drugs into the drug
supply. Can you tell us how useful these new laws have been?
Mr. Sklamberg. They have been quite useful, but of course,
they don't solve the entire problem. I will take track-and-
trace as an example, which I want to thank this committee for
its work on. Track-and-trace works when you have folks in the
supply chain who want it to work, who want to look and see, is
this a legitimate product that I'm dispensing or that I'm
getting? What it doesn't do is stop a couple of unscrupulous
people or criminals who want to have a transaction together
where they are selling a crooked product. So if you have a
person outside the legitimate supply chain selling to another
person outside the legitimate supply chain administering it to
somebody, that is not what track-and-trace is intended for, and
track-and-trace wouldn't stop that. The increased penalties in
FDASIA, Congressman Waxman, that you mentioned, are useful but
there is still a major gap, and this is foreign, unapproved
drugs, and they are as dangerous as counterfeits but you can
use--in a criminal case--and I used to be a prosecutor, and one
of the hard parts of it is, you have to prove what the person
did and the mental state. So to get the counterfeit penalties,
you have to prove that the person knew it was a counterfeit
that they were selling and you have a conspiracy involving
maybe dozens of people, hundreds of people, conceivably. We are
not going to be able to arrest all of them.
So you may be able to show that, for example, it is a
foreign, unapproved drug and not a counterfeit. If you sell a
foreign, unapproved drug and the government can't prove fraud,
which would often be the case because it is not purporting to
be the U.S. drug, it is a foreign, unapproved drug, and a
person gets sick and dies, that is a misdemeanor, even with the
changes that were made over the last couple of years. If you
are selling a dangerous product that causes a death, then the
criminal penalty under federal law in that situation would be a
misdemeanor.
Now, if there is fraud, the penalties go up under the Food,
Drug, and Cosmetic Act. There is also mail fraud, wire fraud,
other statutes, but we have that gap.
Mr. Waxman. I also mentioned in my opening statement that
if you prove an intent to violate the law, which is necessary
before you can win a criminal case for drug counterfeiting,
then even if we win, the maximum penalty for some violations
with potentially life-threatening consequences is only 3 years.
Isn't that correct?
Mr. Sklamberg. Under the Food, Drug, and Cosmetic Act, for
fraud, it would be 3. Specifically for counterfeit, it is
higher. But again, counterfeit versus foreign unapproved from a
public health consequence, there is really often not much of a
difference.
Mr. Waxman. So what impact do these weak penalties have on
our ability to deter drug counterfeiting?
Mr. Sklamberg. They do significantly. I mean, even at the
front end. When a case is presented to a federal prosecutor who
has 200 other investigations and they have narcotics
conspiracies, public corruption, fraud, they are also looking
at this. It is not an area of law they have seen before, and if
an agent comes to them and says here is a case and they are
looking and they will say, well the penalty is 1 year or 3
years, so I can do an investigation, take 2 years, put the
other cases in the back of my file cabinet, and as I look at
the federal code is, and the federal is Congress's priority for
the crime, it is 3 years, the penalty that was in place since
1938. Rationally, that prosecutor is going to look at this and
say should I prioritize this, and I am not faulting that
prosecutor. That would have been my calculus. And it affects
the whole system and kind of what drives the priorities in the
whole system.
Mr. Waxman. Well, as my colleagues have mentioned, we need
your recommendations for what additional tools you need to help
prevent these kinds of actions and to discover such actions and
to punish these actions, so we will look forward to getting
further recommendations from you.
Thank you, Mr. Chairman.
Mr. Murphy. In anticipating Mr. Dingell's question, details
of that to this committee would be most welcome of all those
processes Mr. Waxman asked for.
Mr. Sklamberg. And my answer is the same: we would be glad
to.
Mr. Murphy. Thank you. I am learning from the master. We
only have a few months left of him, so we are all trying to
learn from him.
I now recognize the vice chair of the subcommittee, Dr.
Burgess, for 5 minutes.
Mr. Burgess. Thank you, Mr. Chairman.
Mr. Sklamberg, I just really want to underline the point
you just made, because on the penalty aspect, there is the
deterrent, and then from a prosecutor's perspective, there is
the priority, and we are damaging ourselves on both sides. We
are not really providing a deterrent to the criminal, and then
on the other side, we are not really prioritizing it or getting
that impetus to the prosecutor. Did I understand you correctly?
Mr. Sklamberg. That is correct, Dr. Burgess.
Mr. Burgess. And you think that changing that certainly
would alter the priority from a priority standpoint at the
prosecutorial level?
Mr. Sklamberg. It would make it easier for FDA to present
those cases to prosecutors, yes.
Mr. Burgess. Now, I do want to also go back to something
that Ms. DeGette was saying on whether or not you have the
funding that you need to inspect foreign sites. My
understanding with the user fee agreement that was reauthorized
in 2012 that we gave you, the FDA, the authority, you go where
you need to go, you stay as long as you need to stay. Is my
understanding correct?
Mr. Sklamberg. That is correct. One thing that we did in
the last round of the user fee negotiations is went to a goal
of parity of foreign and domestic inspections. So our foreign
inspection numbers go up every year, and they are going to move
up to get into line with what the reality is. And of course, in
the next round of user fee negotiations, I am sure we will look
at what funding would be appropriate at that time.
Mr. Burgess. And I also presume that during that time you
will provide the committee with feedback as to the utility of
that flexibility which the law, the committee enabled you to
have the last time this was reauthorized.
Mr. Sklamberg. Yes, we would do that.
Mr. Burgess. I will also point out, it was probably prior
to your time with the agency, but Mr. Sharfstein came to this
committee in 2007 or 2008, and in response to that same
question, perhaps asked by another member, his answer was, we
have everything we need.
So look, I have been on this committee for 10 years. I
understand how this threat has changed, how the globalization
of our economy has in fact affected your ability to do your
work within our shores. So I appreciate the fact that it is an
evolving process, but as Mr. Dingell has pointed out, we need
your feedback so that we can help you keep up with the threat
as it emerges. No one knew back in 1998 when some of these
stories were first being written the degree to which it would
evolve today.
Mr. Sklamberg. Yes, and that is why when we have the
reauthorization of the user fees, I am sure, FDA and the
committee will be engaged.
Mr. Burgess. But don't wait. Let us know along the way.
Now, Ms. Blackburn was talking, and I didn't realize this,
you have an agreement with Google about online pharmacies?
Mr. Sklamberg. There was, I believe it was in 2011, Google
entered into a non-prosecution agreement where they forfeited
$500 million, and as part of that, they established a
compliance program.
Mr. Burgess. Well, I don't want to speak out of school, but
I just typed in ``cheap Viagra'' to Google, and you get a lot
of sites. Now, the House server won't let me go to any of them,
but just so you know, I am not sure that is working all that
well. You might want to check it out when you get to a non-
House server location.
I do need to ask you this. In 2008, this subcommittee had a
big investigation on, it was an active pharmaceutical
ingredient in the drug thinner heparin imported from China, and
it had been contaminated with a product called hypersulfated
chondroitin sulfate, if I recall correctly, and this product
that was adulterating the heparin not only didn't thin the
blood, it killed the patients. So it was a real troublesome
aspect of that contamination. I don't feel like we have ever
received the resolution of that that we should have, so can I
just ask you today from the FDA's perspective, is this still an
open and ongoing investigation or have we just simply said we
are never going to get to the bottom of this?
Mr. Sklamberg. I would have to get back to you, Dr.
Burgess, if I may, on that.
Mr. Burgess. I wish you would.
Mr. Sklamberg. I mean, there is an aspect of it that is
open but I want to make sure about that. I know committee
counsel has been engaged with FDA on this issue.
Mr. Burgess. And I would just make the point again that
this molecule, hypersulfated chondroitin sulfate, was actually
patented in China. I believe this was criminal attempt before
the act occurred, and as a consequence, American patients were
killed, and from the perspective of a physician, you think of
somebody in a dialysis center flushing a line with heparin in a
dialysis patient and they died right after that, I mean, that
is something they are going to have to live with for the rest
of their lives, so this is not a small and inconsequential
thing. We make jokes about Viagra. But this was a terribly
significant event in the lives of patients and physicians and
nurses across this country. I really don't want to see us not
resolve this problem.
So Mr. Chairman, I thank you for the time and I will yield
back.
Mr. Murphy. The gentleman yields back. I now recognize Mr.
Dingell for 5 minutes.
Mr. Dingell. Mr. Chairman, I thank you for your courtesy,
and I commend you for this hearing. This is a very important
hearing, and I think you have conducted it with extraordinary
skill. I want to welcome a little later Dr. Prashant Yadav,
which is a constituent of mine from the University of Michigan,
who will be testifying on another panel. I am sorry I may not
be able to be here to hear him.
Now, the Congress has taken some remarkable steps under the
leadership of this subcommittee and this committee, giving FDA
the authority they need by passing the FDA Safety and
Innovation Act, which contained a number of provisions from my
Drug Safety Enhancement Act, and most recently the Drug Quality
and Security Act, and I think that we can all be proud of what
we have done, but as indicated this morning, you pointed out
that more can be done.
So answer if you please yes or no. One of the oldest
challenges facing this Nation is the globalized nature of our
drug supply chain. Commissioner, is it correct that 40 percent
of the pharmaceuticals and 80 percent of the active
pharmaceutical ingredients are made in foreign countries, yes
or no?
Mr. Sklamberg. Yes.
Mr. Dingell. You also have a big problem with some of the
raw materials that later go into some of these pharmaceuticals
in their finished form, do you not?
Mr. Sklamberg. Yes, that is correct.
Mr. Dingell. You won't have time to answer this, but would
you submit to us a brief comment as to whether you have
authority to get at those people who manufacture and ship these
into the United States and what additional authorities you
need. The FDA Safety and Innovation Act gave your agency new
authorities such as registration of foreign drug facilities and
mandatory detention to help the agency deal with globalized
drug supply chain. Is your authority there sufficient and what
more is required, if you please, and answer that for the
record.
Now, Commissioner, does FDA need additional authorities to
keep Americans safe from counterfeit and substandard drugs that
are coming in from abroad? Yes or no.
Mr. Sklamberg. Additional authorities would help us do the
job.
Mr. Dingell. Would you please define in a written response
for inclusion in the record what is required there?
Now, Commissioner, does FDA have the resources it needs to
carry out the new authorities granted to the agency in the FDA
Safety and Innovation Act? Yes or no.
Mr. Sklamberg. We found that additional funding has helped
us implement statutes like FDASIA.
Mr. Dingell. Would you please submit to us what is needed
there?
I happen to believe one key reason that counterfeit and
substandard drugs are still a public health problem in the
United States is the penalties are not sufficient to deter
criminals from engaging in this activity. We seem to have an
agreement on this. I am wondering if we should make the
penalties which we collect be turned over to Food and Drug for
additional enforcement. We do that on narcotics. Would this be
helpful, and would you submit additional comments on how that
would work to assist you with your business?
Mr. Sklamberg. We would be glad to.
Mr. Dingell. Now, Commissioner, the maximum penalty you
mentioned for these activities is only $10,000 or 3 years in
prison. What should it be, and please define that by relating
it to other questions involving narcotics and other events
which are essentially similar? Would you submit that for the
record?
Mr. Sklamberg. We would be glad to.
Mr. Dingell. Now, Commissioner, is it correct that a Utah
man was recently convicted of shipping over $5 million in
unapproved drugs but received only a 1-year prison sentence?
Mr. Sklamberg. That is correct.
Mr. Dingell. It seems rather contemptible.
Now, Commissioner, does FDA support strong civil monetary
penalties against those charged with misbranding or
counterfeiting drugs? Yes or no.
Mr. Sklamberg. We have in the past, I believe, but we can
get back to you on that.
Mr. Dingell. I would like to have something on the record.
This reminds me of some great lines from Gilbert and Sullivan
where the emperor indicated that it was his purpose so sublime
to make the punishment fit the crime, and it would seem that
this committee might want to do something of that sort today,
and with your guidance, I think we can do it.
Mr. Chairman and my colleagues, I thank you. You have been
very gracious to me this morning.
Mr. Murphy. Thank you for also not singing those lines. We
appreciate that.
I now recognize Mr. Griffith from Virginia for 5 minutes.
Mr. Griffith. Thank you, Mr. Chairman, and I appreciate a
lot of the questions that have been asked today. Let me ask
some questions. I agree that we ought to figure out how we need
to do this.
In regard to the situation that Mr. Dingell just mentioned
in Utah, was the gentleman charged with any other crimes as a
part of his scheme?
Mr. Sklamberg. I don't recall right now. Maybe I can get
back to you if we can go ahead with another question.
Mr. Griffith. That will be fine, because previously you
correctly stated that a lot of times there are other charges
that can be brought and that those may carry additional time,
and so I guess what I would ask you is, is that since law
enforcement can bring other wire fraud, mail fraud, whatever
other charges, are you seeing that prosecutors are looking at
that and raising up the priority on these crimes, and do we
need to look at raising the penalties or do we just need to
encourage prosecutors to go forward on all fronts as opposed to
just one?
Mr. Sklamberg. I think what is happening, Congressman
Griffith, is that when the case is initially presented to the
prosecutor, they are not going to know whether they are going
to be able to prove the fraud. So if they prove fraud, mail
fraud's maximum penalty is 20 years, wire fraud is 20 years. If
I sell you a fake Rolex and mail it to you, I am getting
hammered. But they don't know if they're going to be able to
prove that, and that is going to require a lengthy, years' long
grand jury investigation.
Mr. Griffith. So that is what discourages the prosecutions?
Mr. Sklamberg. Up front. Now, they are going to stack the
charges the best they can if they prove it.
Mr. Griffith. Sure. Now, obviously you have got a better
shot with somebody in Utah of apprehending the individual than
you do if they are from some foreign nation. Do you think that
there is a better chance of collecting if we raise the
penalties or the civil penalties and criminal penalties on the
financial side more than the prison time, would that have a
greater impact on the foreign imports?
Mr. Sklamberg. I think enhancing, for example, asset
forfeiture and seizure would make a big effect because we can
then take the money, which would have a big effect, deterrence,
and also just reducing the upside of engaging in the criminal
activity in the first place.
Mr. Griffith. And I would agree that a lot of times that
helps law enforcement in other fields and maybe this is one of
those areas where we need to agree with Mr. Dingell when he
said that perhaps we need to see that the enforcement agency
gets at least a portion of those funds back to help them go
after other bad actors in this area. I do appreciate that.
Let me ask you this, because you talked earlier about the
prioritization of the various crimes by a prosecutor. If we
raise these penalties up, at what point do we then deprioritize
something else that we may consider important?
Mr. Sklamberg. I refer you to the Department of Justice.
No, obviously that always is a problem, and to a prosecutor,
every case is like their baby. But these are ones, I think
because they are not common. Prosecutors or white-collar
prosecutors will see mail fraud cases a lot, typical ones. They
will see an odometer rollback case much more than they would
see a counterfeit drug case. We will present the public health
risk and we will convince them, and we are not saying
Department of Justice is not cooperative; they are. It is just
that the maximum punishments reflect Congress's sense of the
priority, and you go into court, you have a trial. We have a
case of an unapproved oncology drug. It was a trial, I believe,
late last year. The person was convicted of over 20
misdemeanors, and they were just misdemeanors. And to a
rational prosecutor, do you want to spend a couple of years
investigating what turned out to be a misdemeanor?
Mr. Griffith. Sure. Let me switch gears, and I know it is
not your area of jurisdiction but I would ask you to take the
message back. We have been talking about FDA's authority over
the drug supply chain, the Drug Quality and Security Act. That
also had in it an issue of compounded drugs. Again, I know it
is not your jurisdiction but I am continuing to follow the
FDA's regulation activities in that area, and I would remind
the agency that the DQSA was supposed to preserve the status
quo when it comes to compounding drugs for office use and the
repackaging of sterile drugs. Unfortunately, we are starting to
see some reports that indicate that warning letters are being
sent to prohibit these activities by traditional pharmacies,
which were going on before we passed the bill and there was
kind of an agreement between the House and the Senate that we
would leave that as the status quo. So if you could just take
it back and just tell them we will keep monitoring this, but I
am concerned about that.
Mr. Sklamberg. OK.
Mr. Griffith. I appreciate the work you are doing, and this
hearing has been great. Thank you for your testimony, and I
yield back, Mr. Chairman.
Mr. Sklamberg. Thank you, sir.
Mr. Murphy. I now recognize Mr. Johnson for 5 minutes.
Mr. Johnson. Thank you, Mr. Chairman, and gentlemen, thank
you for your testimony here today.
A large percentage of the people that I represent in
eastern and southeastern Ohio are seniors, and often with
limited and fixed incomes. There are many seniors who struggle
with the cost of prescription drugs, and I have heard from some
individuals who look to purchase drugs from Canada as a way to
achieve drastic savings on their prescriptions. But I also have
concerns about these practices and how to protect seniors from
illegal pharmacies that may be distributing dangerous drugs and
playing on their need to save.
So can you clarify the legality of seniors purchasing drugs
either in person or online form Canada in order to achieve
savings? Is this a legal practice?
Mr. Sklamberg. It is not a legal practice.
Mr. Johnson. It is not a legal practice?
Mr. Sklamberg. It is not legal.
Mr. Johnson. It is not legal? OK. Thank you.
Are most Internet pharmacies that purport to be in Canada
actually not in Canada or certainly not providing drugs that
originated in Canada?
Mr. Sklamberg. We found many, many online pharmacies that
purport to be Canadian that are not Canadian, and it is a ruse
that is used because a lot of vulnerable Americans and people
who are very sick, seniors, they will think well, Canada, that
is safe, and it turns out it is not Canada, it is someplace
like we saw in the videos.
Mr. Johnson. Right. OK. Didn't FDA's Operation Bait and
Switch survey show that about 85 percent of the online
pharmacies were not from Canada? Is that true?
Mr. Sklamberg. I don't remember the exact statistic but the
number is very high.
Mr. Johnson. Can you verify that back to me, please?
Mr. Sklamberg. It is correct, 85 percent.
Mr. Johnson. OK. Great. I am not a lawyer, but I don't
typically ask questions I don't already know the answer to.
Mr. Sklamberg. Well, happily I had someone with me who
could answer that.
Mr. Johnson. Thank you. Last year, the FDA worked with
international regulatory and law enforcement agencies to shut
down more than 1,600 illegal pharmacy Web sites. Is it true
that most of the Web sites represented themselves as Canadian
pharmacies claiming that the medicines that they sold were FDA
approved or brand-name drugs, which they were not? Is that also
true?
Mr. Sklamberg. I believe that many of them were. I am not
sure if it is the majority. Yes.
Mr. Johnson. OK. Thank you.
Mr. Murphy. Mr. Johnson?
Mr. Dingell. Will the gentleman yield quickly? And I
apologize to him.
This is a very excellent point. Would you submit something
for the record so that we have something that would tell us
what would assist the gentleman in understanding and help me to
understand what is going on? And I will ask unanimous consent
that the gentleman get the time back that I have taken from
him.
Mr. Johnson. My pleasure, Mr. Chairman.
Even in the instance of an online pharmacy actually being
in Canada, haven't some of these Internet pharmacies come under
criminal investigation?
Mr. Sklamberg. Correct.
Mr. Johnson. All right. Well, shifting gears here just for
a second, let me see if I can get through this next one.
In 2005, five teenage boys from three different States died
after ingesting raw DXM powder that they bought in bulk from an
online source. All of these tragic deaths were linked to the
same Internet supplier operating out of Indianapolis where two
men bought the drug in bulk from India, repacked it and sold it
over the Internet. Investigators estimated they made $70,000 on
sales of the misbranded drug into interstate commerce. This is
every parent's worst nightmare. These three incidences have
been the subject of scrutiny by this committee in the past when
Chairman Upton introduced legislation on the matter in 2009,
and I am proud to continue his work on the matter along with my
colleague, Mr. Braley, through the introduction of the PACT
Act, which would ensure that only legitimate entities
registered with the FDA or comparable State agencies can
purchase raw, bulk DXM. But there are still questions to be
answered.
How did these young men obtain this drug online? How easy
is it still for teens to purchase bulk drugs online in order to
abuse the substances they get?
Mr. Sklamberg. It is very easy to purchase drugs online,
whether it be teens or adults, and teens are better at using
the Internet than adults.
Mr. Johnson. That is true. How prevalent are similar
circumstances to the one I just described? How prevalent are
they today in your experience and what you guys are seeing?
Mr. Sklamberg. We don't have a number specifically on teens
versus adults but I would say it would stand to reason that
that problem is prevalent.
Mr. Johnson. And it is growing.
Mr. Sklamberg. As the whole problem is, I would think so.
Mr. Johnson. What is being done to protect our Nation's
young people and crack down on the illegal online drug sales
targeting those who aim to abuse the substances?
Mr. Sklamberg. This would be part of our larger effort
regarding rogue Internet pharmacies and foreign, unapproved
drugs and counterfeit drugs, and obviously we prioritize more
vulnerable victims in how we look at cases. So it would be part
of that effort and obviously a very important part of it.
Mr. Johnson. OK. Thank you, Mr. Chairman, and I yield back.
Mr. Murphy. Thank you. I now recognize Mr. Long for 5
minutes.
Mr. Long. Thank you, Mr. Chairman, and thank you all for
being here today and for your testimony.
Mr. Sklamberg, we asked you for a lot of things here today,
a lot of questions we have of you, but a question I have for
you is, if you were going to say the top three things that you
need from us, that you need from Congress--now, you rolled your
eyes, so I don't know what that means. But what can we do to
help this dire situation?
Mr. Sklamberg. I wasn't rolling my eyes. I was thinking
of----
Mr. Long. When I first ran for office, my political people
said that I did that and they told me not to do that.
Mr. Sklamberg. Oh, OK.
Mr. Long. I still do it.
Mr. Sklamberg. I have never won an election nor run for
office.
There are a series of things that I think would help us.
One is, we talked about increased penalties, we talked about
increased authorities.
Mr. Long. Let me step you on that one. I had to step out of
the room for a moment, and I don't know if I missed it or not,
but what was the upshot of the video we saw, the gentleman on
there that had this huge operation and apparently was induced
to come to the United States after 7 months of communication?
What was the final upshot of that?
Mr. Sklamberg. I don't remember what the ultimate
disposition of the case was. He was arrested and sentenced but
I don't know what the sentence was exactly. Oh, 87 months'
imprisonment.
Mr. Long. OK. I interrupted you. Number one is larger
sentences. Number two?
Mr. Sklamberg. Yes. Now, that is one where we were able to
prove the crime set at the higher penalties so ones I had
mentioned before where we were unable to prove counterfeit
drugs or fraud, then you end up with misdemeanors. So I think
some of the increased enforcement tools we talked about, asset
forfeiture, we talked about seizure, we talked about authority
for us to obtain records that would be useful in these cases. I
think that for us, we are working with our foreign regulatory
partners to enhance international cooperation, so that is more
that FDA is doing, because as this international organized
crime activity grows, that is something we have to do.
Mr. Long. Are we getting more cooperation?
Mr. Sklamberg. From certain locations. It is sporadic, and
as I had mentioned, I think, to one of your colleagues,
international organized crime is clever and so they are going
to situate themselves in places that have minimal cooperation
with the United States, which makes detection harder and then
makes investigation and apprehension and punishment harder on
the back end.
Now, there are lots of countries we have very cooperative
relationships with and their law enforcement.
Mr. Long. Let us know what we can do to help you in those
instances, if you will.
Mr. Sklamberg. Yes, sir.
Mr. Long. And I would like to yield the balance of my time
to my friend, Dr. Burgess, from Texas.
Mr. Burgess. I thank the gentleman for the time.
Mr. Sklamberg and Mr. Kubiak, a question to both of you,
but really an observation. What is the main driver here? It is
the ability to make money, and of course, we know people make
money in illicit drug trade all the time, but in this instance,
you can do a counterfeit drug and no one is shooting at you on
the border so in some ways it is a safer occupation for someone
who wants to work on the wrong side of the law, and then as you
pointed out, the penalties are not all that great.
Prior to the passage of the Medicare Modernization Act in
2003, you did see the news stories of large amounts of seniors
getting on buses and going to Canada to shop for their
medications. I don't know if you are aware of it, but the
Affordable Care Act, which began working one way or another on
January 1st, individuals now buying the individual market, a
bronze plan, back in my home State of Texas, a deductible is
$6,000. So people who have been used to receiving their
medications where something is paid for by the insurance
company now find themselves on the hook for a big part of that
out-of-pocket expense. Some might even argue they are
functionally uninsured when it comes to their prescription drug
benefit. Are you prepared--what is going to be the natural
tendency of someone who needs whatever, Crestor, Lipitor, and
now they are having to pay the full out-of-pocket freight or
the full freight for the cost of that medication, are they now
likely to seek a lower cost on a ready device like their iPad
or their laptop?
Mr. Kubiak. Sir, yes, I think they are likely to seek that.
I think the challenge, though, is they need to understand who
they are buying it from and----
Mr. Burgess. I have no quarrel with that, and I don't mean
to interrupt you but the time is about to expire. Are you
preparing yourself for the fact that there is the possibility
that this type of activity may increase and may increase
significantly for a population where historically it hasn't
been happening?
Mr. Kubiak. Congressman, I think across the board we have
been preparing ourselves for an increase in continued growth
unfortunately in this program and this problem over time, and
as we deal with that and deal with these illegal Internet
pharmacy sites, we are trying robustly through education and
also through enforcement to shut down and close out those
opportunities to purchase those that are not secure sites.
Mr. Burgess. I am just not sure you recognize what is
coming your way, and I wanted to warn you what is right over
the horizon because people are going to act in their own self-
interest when they are faced with those questions.
Thank you, Mr. Chairman. I will yield back.
Mr. Murphy. The gentleman yields. Yes, Mr. Dingell?
Mr. Dingell. I ask unanimous consent that the gentleman's
time be extended for 1 minute, and I would ask that the
gentleman yield to me.
Mr. Burgess. I knew there was a catch.
Mr. Murphy. I will tell you what, Mr. Chairman, I have one
follow-up question so I will give you a minute and I will give
myself a minute.
Mr. Dingell. I will yield to you, Mr. Chairman. You are
more important than I am in this place.
Mr. Murphy. Well, thank you. Let me start with mine and
then I will yield the rest to you.
I want to ask Mr. Kubiak just as a follow-up, are there any
legal barriers that constrain you in sharing information with
foreign government partners and cooperating with efforts
against counterfeit drugs?
Mr. Kubiak. Sir, collectively, with all the agencies that
are represented at the Center, we have quite a broad
capability. Individually, each of the agencies has different
capabilities to share. So for instance, within Homeland
Security investigation, ICE, my parent organizations, we have
the broad ability to share information with our customs
counterparts around the world through customs mutual assistance
agreements, which are outside of the normal mutual legal
assistance treaties that normally are required and that Mr.
Sklamberg talked about earlier in the day. We do have very
broad authority to share, and combined, I think we have those
authorities and those capabilities that we need to do that.
I would also suggest just if I may that an increase in the
minimum mandatory sentence, an enhancement, if you will, for
pharmaceuticals, for those engaged in the sale of illegal or
unapproved drugs would be a significant improvement as well. We
see kind of across the board that absent that increase in
minimum mandatory sentence, an ability to hold those people
more accountable that are engaged in the life-threatening
activity would greatly enhance our capability to hold people
accountable and also be a major deterrent.
Mr. Murphy. Two things we will have to be addressing. One
is the severity of punishment and second is the certainty of
punishment.
I will yield a minute to Mr. Dingell
Mr. Dingell. I thank my friend.
Has there ever been an international conference on this
kind of thing so that we could get everybody together so we
could all pull in the same direction?
Mr. Sklamberg. There have been through a variety of
vehicles. The World Health Organization, for example, has been
involved in this.
Mr. Dingell. Would something of this kind be useful again,
given the way things are changing?
Mr. Sklamberg. There is an established mechanism in the
World Health Organization to deal with this issue and some
other foreign ones. FDA is pursuing that aggressively.
Mr. Dingell. All right. My next concern here is the hard
fact, and that is, you have difficulty with the funding of your
agency. If you could get the funding of your agency to do as it
has done by the drug enforcement people where the proceeds of
the stuff that is used in this could be seized and utilized for
either sale so that you could get revenue or so that you could
get other help, would that be of assistance to you in terms of
increasing your levels of funding to deal with these kinds of
questions?
Mr. Sklamberg. I think if I could get back to you on the
record for that.
Mr. Dingell. I would rather have you do that after you have
had a chance to think about it.
Mr. Chairman, you have again been most courteous. Thank
you.
Mr. Murphy. The gentleman yields back, and with that, I
really want to thank our two distinguished panelists. Mr.
Sklamberg and Mr. Kubiak, you have been most helpful in giving
us information. We will look forward to getting your follow-up
information as soon as you can to this committee so we can take
action from there. Thank you.
With that, those two witnesses are dismissed and I would
like to ask the next set of witnesses on the second panel to
come forward, and while you are coming forward and taking your
seat, I will introduce the panelists. Dr. Marcia Crosse is the
Director of Health Care at the United States Government
Accountability Office. We are also joined by Dr. Prashant
Yadav, who is here on behalf of the Institute of Medicine. He
is the Director of their Health Care Research Initiative. He is
also the director of the William Davidson Institute at the
University of Michigan. We would also like to welcome Mr. John
Clark, who is the Vice President and the Chief Security Officer
of Global Security in the Compliance Division at Pfizer
Incorporated, and our other panelist is Mr. Jean-Luc Moreau,
the Head of Product Security at Novartis Corporation. Mr. Bruce
Longbottom is the Assistant General Counsel at Eli Lilly and
Company, and Ms. Elizabeth Jungman is the Director of Drug
Safety and Innovation at Pew Charitable Trusts.
So if the witnesses are ready, I will prepare to swear all
of you in. You are aware that the committee is holding an
investigative hearing, and when doing so has the practice of
taking testimony under oath. Do any of you have any objections
to testifying under oath? All the witnesses say they do not.
The Chair then advises you that under the rules of the House
and the rules of the committee, you are entitled to be advised
by counsel. Do any of the panelists today desire to be advised
by counsel during testimony? And all of the panelists say no.
In that case, if you would all please rise and raise your right
hand, and I will swear you in.
[Witnesses sworn.]
Mr. Murphy. So now you are all under oath and subject to
the penalties set forth in Title XVIII, section 1001 of the
United States Code. You may now each give a 5-minute summary of
your written statement.
We will begin with Dr. Crosse for 5 minutes.
TESTIMONY OF MARCIA CROSSE, PH.D., DIRECTOR OF HEALTH CARE,
U.S. GOVERNMENT ACCOUNTABILITY OFFICE; PRASHANT YADAV, PH.D.,
M.B.A., DIRECTOR OF HEALTH CARE RESEARCH INITIATIVE, DIRECTOR
OF THE WILLIAM DAVIDSON INSTITUTE, UNIVERSITY OF MICHIGAN; JOHN
P. CLARK, VICE PRESIDENT AND CHIEF SECURITY OFFICER, GLOBAL
SECURITY, COMPLIANCE DIVISION, PFIZER, INC.; JEAN-LUC MOREAU,
GLOBAL HEAD OF PRODUCT SECURITY, NOVARTIS CORPORATION; BRUCE
LONGBOTTOM, PH.D., ASSISTANT GENERAL COUNSEL, ELI LILLY AND
COMPANY; AND ELIZABETH JUNGMAN, J.D., M.P.H., DIRECTOR OF DRUG
SAFETY AND INNOVATION, PEW CHARITABLE TRUSTS
TESTIMONY OF MARCIA CROSSE
Ms. Crosse. Thank you.
Chairman Murphy, Ranking Member DeGette and members of the
subcommittee, I am pleased to be here today as you discuss the
danger posed by counterfeit drugs.
As we have just heard, one source of counterfeit drugs is
Internet pharmacies. While some Internet pharmacies are
legitimate businesses that offer consumers a safe, convenient
and cost-effective way to obtain their medications, many are
criminal enterprises that defraud consumers and deny patients
effective treatments. So-called rogue Internet pharmacies often
sell counterfeit prescription drugs, sell drugs that have not
been approved for sale in the United States, sell drugs that
are substandard and have no therapeutic value, and sell drugs
that are harmful to consumers. Drugs sold by rogue Internet
pharmacies have been found to contain too much, too little, or
no active pharmaceutical ingredient, or the wrong active
pharmaceutical ingredient. Even worse, these drugs may contain
dangerous contaminants such as paint, heavy metals, or poison.
Despite the risks, FDA reports that nearly one in four U.S.
adults who shop online have purchased prescription drugs from
Internet pharmacies.
Although the exact number of rogue Internet pharmacies is
unknown and can change daily, one estimate suggests that there
are over 36,000 in operation, up from an estimated 34,000 less
than a year ago. Most operate from abroad. They illegally ship
prescription drugs into the United States, sell drugs without a
prescription and make efforts to evade scrutiny by Customs
officials. A recent analysis by NABP, the professional
organization for the State Boards of Pharmacy, shows that 97
percent of the Internet pharmacies it reviewed were out of
compliance with laws or industry standards.
Rogue Internet pharmacies are often complex operations, and
federal agencies face substantial challenges investigating and
prosecuting those involved. Piecing together these operations
can be difficult because they may be composed of thousands of
related Web sites and operators take steps to disguise their
identities. The ease with which operators can set up and take
down rogue Web sites also makes it difficult for agencies to
identify, track, and monitor them because Web sites can be
created, modified, or deleted in a matter of minutes.
The global nature of rogue Internet pharmacy operations
complicates federal investigations. These Web sites and their
operators are often located in countries that are unable or
unwilling to aid U.S. agencies, with components of the
operations scattered in several countries. If the clerk would
show our first figure?
[Slide shown.]
This shows one rogue Internet pharmacy that registered its
domain name in Russia, used Web site servers located in China
and Brazil, processed payments through a bank in Azerbaijan,
and shipped its prescription drugs from India.
Rogue Internet pharmacies use sophisticated marketing
methods to appear legitimate. This makes it hard for consumers
to differentiate between legitimate and rogue sites. Some rogue
sites seek to assure consumers of the safety of their drugs by
purporting to be Canadian despite being located elsewhere or
selling drugs sourced from other countries. They may also
fraudulently display an NABP logo on their Web site despite not
having earned the accreditation.
Our second figure, if the clerk would post it, shows a Web
site that may appear to consumers to be legitimate but the
operators of this site pled guilty to multiple federal offenses
including smuggling counterfeit drugs into the United States.
Even when such operations are uncovered, the Department of
Justice may not prosecute because of competing priorities and
the complexity of these operations. Rogue Internet pharmacy
activity clearly violates the Federal Food, Drug and Cosmetic
Act, but as we have heard, proving violations can be difficult
and violations are subject to relatively light criminal
penalties, a maximum of 3 years in jail or a fine of $10,000,
or both.
When federal prosecutors do pursue such cases, they often
charge operators with violations of other laws such as
smuggling, mail fraud, wire fraud, or money laundering since
these violations can be less onerous to prove and carry
stronger penalties, up to 20 to 30 years in jail and fines up
to a million dollars.
In summary, while federal agencies have conducted
investigations that have led to convictions, fines and asset
seizures, rogue Internet pharmacies continue to provide a
convenient mechanism for criminals to sell counterfeit drugs or
substandard prescription drugs to U.S. consumers with a low
probability of being prosecuted.
Mr. Chairman, this completes my prepared statement. I would
be happy to respond to any questions that you or other members
of the subcommittee may have.
[The prepared statement of Ms. Crosse follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you, Doctor.
I now recognize Dr. Yadav. Am I pronouncing that correctly,
sir?
Mr. Yadav. Yes.
Mr. Murphy. Thank you. You are recognized for 5 minutes.
TESTIMONY OF PRASHANT YADAV
Mr. Yadav. Good morning, Mr. Chairman, Ranking Member
DeGette and members of the committee, my name is Prashant
Yadav. I am the Director of the Health Care Research Initiative
at the William Davidson Institute of the University of
Michigan, and I served as a member of the Institute of Medicine
Committee on understanding the global public health problem of
counterfeit, falsified and substandard medicines.
The Food and Drug Administration had commissioned this
study in 2011 to advance what at that time was a stymied public
discourse on the topic of pharmaceutical crime. After
deliberating and hearing public testimony for most of 2012, our
committee released our findings and recommendations last year.
I was also a member of another committee of the Institute of
Medicine, which was on regulatory capacity building in
developing countries. This study was also commissioned by the
FDA Office of International Programs, and it dealt with
questions more broadly of food and drug safety regulations and
globalization. I would like to submit for your records copies
the two mentioned IOM reports as well as the executive
summaries of the two reports and an editorial on this topic.
These documents discuss how improving the quality of medicines
in this country depends to some extent on better medicine
regulation abroad. These reports offer several suggestions as
to how different federal agencies and international
organizations can work together to improve global drug safety.
In my testimony, I will be using language which is
consistent with the IOM report. The members of our committee
chose to be clear that we saw two rough categories of dangerous
medicines. First, we have falsified drugs, those that carry a
false representation of identity or source or both. The other
main category is substandard, meaning the medicines that fail
to meet our national quality standards. We recognized that
often these two categories overlap. But we felt that thinking
about these two categories separately helps us characterize the
causes of the problems and the solutions for them in a precise
manner. We also agreed not to describe the drugs as
counterfeit, because we felt this term tends to hold back
discussion. Many speakers who use the term ``counterfeit'' use
it to imply something more broad than the narrow legal word
``counterfeit.'' The difference in these two meanings can cause
confusion and can alienate generic drug companies, who
sometimes view this as hostility to their products hidden in a
discussion of counterfeit medicines. So our committee agreed
that the problem of trademark infringement was not within our
mandate. We attempted to understand the public health problem
of poor-quality drugs and we limited our discussions to
substandard and falsified, or fake, medicines.
The problem of falsified and fake medicines is undoubtedly
the worst in the world's poorest countries, but poses a risk
for American patients as well. We are living in what the
Economist magazine recently described as a golden age for bad
drugs. Different drugs and drug ingredients are made in
different parts of the world. Final drug formulations may be
packaged and repackaged in different countries many times
before reaching the final patient, and supervising these supply
chains is a monumental task. The committee recommendations were
for the U.S. FDA to share foreign inspections and work towards
mutual recognition of inspections done by other stringent
regulatory agencies. We reasoned that it is simply not good
management to have, for example, Japanese, European, and U.S.
inspectors repeating each other's work when so many factories
in places like China and India go uninspected.
The key challenge is to identify gaps before product safety
emergencies occur. Until recently, the inability to track a
package of medicines from the factory to the patient was one
such gap. Our committee had asked the Congress to authorize the
FDA to establish a mandatory track-and-trace system in the
United States. We were concerned that the FDA had received many
unfunded mandates over the years, so we would also ask the
Congress to allocate the appropriate funds to the agency to
ensure the staffing and the technology that is needed does
exist. This is consistent with the recommendations of the
committee and the new Act, the Drug Quality and Security Act in
November is very much in tune with what the committee had
recommended. I would like to thank the Representatives here
today for your work on that law.
Track-and-trace legislation is going to help but there are
still many gaps in the supply chain. One of them is the
question of Internet pharmacies. The IOM committee discussed
this problem at great length. We reviewed research that states
people buy drugs online for different reasons. Some can be
described as lifestyle libertarians who believe they should be
allowed to self-prescribe, others are bargain hunters who are
looking on the Internet to get deals, and the third category
are people who are genuinely trying to buy drugs for making
sure they can get them with convenience. These customers do not
understand the risk of their choices and do not see any better
options.
So the committee recommended that the National Association
of the Boards of Pharmacy has a program called the Verified
Internet Pharmacy Practice Sites, or VIPPS. That program should
be strengthened and encouraged. That was one of the strong
recommendations from the committee.
One of the key things the committee recommended was to
strengthen the wholesale market in the United States. We felt
that there are three kinds of wholesalers. There are primary
wholesalers, secondary wholesalers and wholesalers who are
regional drug wholesalers, and it is easy for wholesalers to
obtain licenses in one State and engage in commerce without
federal or other States knowing about that.
Mr. Murphy. I will need you to summarize because you have
gone a minute over.
Mr. Yadav. So the committee recommended that FDA should
work with State licensing boards and establish a public
database to share information on wholesale licenses. This will
prevent criminals from licensing in multiple States. On behalf
of my colleagues of the committee, I would like to once again
thank the Representatives for including this provision in the
DQSA law. We also believe that strengthening the drug wholesale
supply chain will set a good example for other countries in the
world.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Yadav follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you.
Mr. Clark, you are recognized for 5 minutes.
TESTIMONY OF JOHN P. CLARK
Mr. Clark. Chairman Murphy, Ranking Member DeGette, members
of the subcommittee, it is a pleasure to appear before you
today to discuss an issue of great importance, the threat that
counterfeit medicines pose to the health and safety of patients
in the United States and around the world.
My name is John Clark, and I am the Chief Security Officer
for Pfizer, Inc., and Vice President of its Global Security
Team. Pfizer is a diversified global health care company and
one of the world's largest biopharmaceutical companies. Our
core business is the discovery, development and marketing of
innovative pharmaceuticals for human health, and we are
committed to ensuring the integrity of those products when they
reach the market.
I am responsible for ensuring that programs are in place to
protect Pfizer's personnel, real and intellectual property,
reputation and, most importantly, the integrity of its
medicines. Prior to joining Pfizer in 2008, I served as Deputy
Assistant Secretary at Immigration and Customs Enforcement,
responsible for the overall management and coordination of the
agency's operations. During my more than 25 years at ICE and
its predecessor agency, U.S. Customs, I held a variety of
investigative, management and executive positions.
A significant aspect of my job at Pfizer is to mitigate the
threat that counterfeit medicines pose to the health and safety
of patients who rely upon Pfizer medicines to live healthier
and happier lives. Counterfeit medicines pose that threat
because of the conditions under which they are manufactured in
unlicensed and unregulated sites, frequently under unsanitary
conditions, and the lack of regulation of their contents. In
many instances, they contain none of the active pharmaceutical
ingredient found in the authentic medicine, or an incorrect
dosage, depriving the patient of the therapeutic benefit of the
medicines prescribed by their physicians. In others, they may
contain toxic ingredients such as heavy metals, arsenic,
pesticides, rat poison, brick dust, floor wax, leaded highway
paint, and even sheetrock or wallboard, all of which we found
in counterfeits.
Counterfeit medicines are a global problem, one from which
no region, country, therapeutic area or pharma company is
immune.
While the true scope of the counterfeit problem is hard to
estimate, we can provide some metrics based on the seizures
reported to us by enforcement authorities and confirmed by our
labs. In reviewing those internal metrics to prepare for
today's hearing, I was struck by how significantly the
landscape had changed since November 2011 when I appeared
before the House Judiciary Committee just about 2 years ago
now.
Since November 2011, authorities have reported to us the
seizure of more than 55 million doses of suspicious Pfizer
medicines. Twenty-eight percent of those seizures--15.5 million
dosages--were confirmed as counterfeit medicines, and we
differentiate--we are very, very conservative in our
statistics, and if we haven't confirmed, it is just reported,
we don't count it as a statistic. So we are usually
underreporting so we don't get accused of exaggerating.
The number of Pfizer medicines targeted by counterfeiters
has increased by 36 percent, from 50 to 68 different Pfizer
medicines now. Counterfeit Pfizer medicines have been confirmed
in six new countries--Armenia, Cameroon, Jamaica, Kosovo,
Maldives, and Saint Lucia--bringing the total to 107 countries
in which counterfeit Pfizer medicines have been seized by
authorities. Counterfeit versions of 26 Pfizer medicines have
been confirmed in the legitimate supply chains of 60 countries,
an increase from 22 medicines in 53 countries in November of
2011.
Seizures recorded during 2013 reveal that while Viagra, a
treatment for erectile dysfunction, remains our most targeted
medicine for counterfeiters, other medicines have attracted
increasing attention with seizures of each of the top five
exceeding 1 million doses. The seizure of almost 3.6 million
counterfeit doses of Viagra represented just 34 percent of the
overall confirmed seizures of Pfizer medicines in 2013, down
from 89 percent in 2012.
For the first time, Lipitor, a treatment for cholesterol,
came a close second, with the seizure of almost 3.1 million
tablets, representing 29 percent of all confirmed dosages
seized.
Closing out the top 5 most counterfeited Pfizer medicines
last year were Xanax, 1.3 million, Ponstan, 1.1 million, and
Centrum, just over 1 million, and again, these are relatively
low probably compared to what was out there but just the ones
we could confirm.
The increased counterfeiting of Xanax is likely linked to
its popularity, particularly on college campuses, as a party
drug often used to decrease anxiety and insomnia. Additionally,
Xanax appears to be preferred by individuals taking crystal
meth. Counterfeit Xanax seizures in 2013 included those seized
from a factory in Texas where 1,000 counterfeit Xanax tablets
and tooling were seized by the Drug Enforcement Administration.
Despite increased breaches in the legitimate supply chain,
the major threat to U.S. patients is the Internet and the many
professional-looking Web sites that promise safe, FDA-approved
branded medicines from countries such as Canada and the U.K. In
2006, Pfizer Global Security launched a robust Internet program
to identify and disrupt rogue online pharmacies dispensing
Pfizer medicines to unsuspecting patients. Although that
program resulted in a takedown of several rogue OLPs and
arrests, it was in essence a whack-a-mole approach. Recognizing
the limitations of that strategy, we sought a broader and more
permanent remedy.
Along these lines, in 2013 we partnered with Microsoft in
an innovative OLP disruption program that attacked the
affiliate networks where they were most vulnerable by
simultaneously disabling domains to disrupt traffic to the
sites and eliminating their ability to process credit card
payments for orders placed. This new approach has proven much
more effective, evidenced by the disruption of two affiliate
networks and the removal of more than 3,300 rogue OLPs from the
Internet just last year.
To protect unsuspecting patients from the risk of obtaining
counterfeit medicines online, we have extended our Internet
monitoring program to Craigslist and Facebook along with other
classified-advertising Web sites and social media outlets. As a
result of those efforts, we have identified several individuals
offering Viagra on Craigslist. Our test purchases confirmed
that these individuals are selling counterfeits. Subsequent
referral of these incidents to local law enforcement resulted
in the arrest of several sellers including a Maryland
housewife. The social-network monitoring also identified
several drop shippers of rogue OLPs who use their access of
counterfeit medicines to advertise independently in Craigslist.
One such referral to police in Toronto resulted in the arrest
of six Craigslist sellers.
Mr. Murphy. Mr. Clark, I have to ask you to wind up.
Mr. Clark. That is it. I will be glad to take questions.
[The prepared statement of Mr. Clark follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Murphy. Thank you. I have to step out for a while, and
Dr. Burgess will take over, but I just want to ask one
clarifying question, Mr. Clark, before I go. If you compare
money counterfeiting to electronic counterfeiting to drug
counterfeiting, tell me about the different ratios and
profitability.
Mr. Clark. We had 3 years ago seen German customs refer to
a study from the University of Bonn that did just that. For a
$1,000 base investment by a counterfeiter, they compared what
they estimated would be the return on investment. They went
through several levels of different commodities. I think cash
was the lowest. For $1,000 invested, they estimated that there
would be a $5,000 return on investment for counterfeiting cash.
I think credit cards were second with $10,000 return. The
second highest level commodity counterfeited for return on
investment was electronics. They estimated for $1,000
investment, the return would be $100,000. The highest on that
list by the University of Bonn was pharmaceutical products. For
$1,000 invested, they estimated that the return on investment
would be $500,000.
Mr. Murphy. Thank you, incredible. I appreciate that.
Mr. Moreau, you are recognized for 5 minutes.
TESTIMONY OF JEAN-LUC MOREAU
Mr. Moreau. Mr. Chairman and members of the subcommittee,
my name is Jean-Luc Moreau and I am the global head of product
security at Novartis International. My primary responsibility
is to protect the company, its products, and most importantly,
the people who rely on Novartis medicines from counterfeits.
Modern counterfeiting is an industrial global business
which in 2010 generated an estimated $75 billion for organized
crime. In 2002, the Pharmaceutical Security Institute recorded
196 product incidents worldwide. In 2012, the same
Pharmaceutical Security Institute recorded 2,018 cases
representing a 10-fold increase in only one decade.
Counterfeit drugs are most of the time extremely dangerous.
For example, the World Trade Organization has estimated that
counterfeit antimalarial drugs kill 100,000 Africans annually.
My own experience tells me that this number is basically
underestimated.
Counterfeit drugs are generally indistinguishable from the
genuine drugs. Some examples are displayed on the monitors.
Russian counterfeiters have gone so far as to add holograms to
the packaging of their fake drugs which say ``protected against
counterfeit.''
Counterfeit drugs are made in clandestine facilities which
are downright filthy. As the pictures on the monitor show,
Novartis products are made in state-of-the-art facilities. By
contrast, as the pictures on the screen demonstrate,
counterfeiters manufacture their illicit products in decrepit
conditions. Counterfeiting operations generally ship and/or
store their fake products in unsanitary and improper
conditions, more examples on the screen.
Counterfeiting today is frequently highly organized,
transnational, and businesslike. Counterfeiters operate
industrial production facilities with the capacity to saturate
markets with fake products. They target low-volume, high-
specialty medicines, as well as high-volume, low-margin
products as over-the-counter drugs or generics. They reach
people directly through the Internet or illicit retailers or
they infiltrate legitimate supply chains, as in many countries.
The scope of sophistication of this modern counterfeiting
is clearly illustrated by the two following examples. The first
example, in May 2006, customs officers at London Heathrow
seized a shipment from Dubai en route to the Bahamas which
contained thousands of packs of eight confirmed counterfeit
drugs from seven pharmaceutical companies, including more than
3,000 packs of a counterfeit Novartis medicine for
hypertension. The counterfeit product had been manufactured in
China, transported by road to Hong Kong, flown to Dubai while
they were stored in a duty-free warehouse before being shipped
to the Bahamas via the U.K. In the Bahamas, an illicit
fulfillment center established by Rx North, an Internet drug
Web site, process orders placed on the Internet by American and
Canadian patients. The fake products were shipped directly to
the Bahamas to customers in the U.S. and Canada.
The second example, Novartis manufactures Coartem, which is
a breakthrough drug for malaria. Novartis has made over 500
million Coartem treatments available without profit in malaria-
endemic countries through programs such as the U.S. President's
Malaria Initiative and the Global Fund to Fight AIDS,
Tuberculosis, and Malaria.
In March 2010, I organized a market survey in three Nigeria
basin countries, Cameroon, Nigeria, and Benin, which concluded
that around 25 percent of our Coartem donated to Eastern
African countries was being stolen and shipped 5,000 miles away
to Western Africa where it was sold on the street not for free
but for an average of $5 per treatment.
This large-scale diversion scheme created a mass-market for
Coartem which attracted an extensive counterfeiting operation.
In July 2012, a container ship from Guangzhou, China, to Luanda
in Angola was seized by customs officers. It contained Hi-fi
speakers hiding 1.5 million treatments of fake Coartem.
Subsequent investigations in Western Africa confirmed that this
counterfeit version of Coartem contained nothing but flour,
cornstarch, dextrose, and an industrial colorant. There is no
question in my mind that the Coartem diversion and
counterfeiting schemes are grievously undercut efforts to
eradicate malaria and have led directly to the deaths of
hundreds of thousands of Africans.
The United States and other countries should develop
comprehensibility of criminal laws to confront counterfeiting,
impose stiffer sanctions for pharmaceutical crimes, and make
the commitment to vigorously enforce those laws.
Thank you.
[The prepared statement of Mr. Moreau follows:]
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Mr. Burgess [presiding]. Mr. Longbottom, you are recognized
for 5 minutes.
STATEMENT OF BRUCE LONGBOTTOM
Mr. Longbottom. Good morning, Mr. Chairman, Madam Ranking
Chairman, and members of the subcommittee. My name is Bruce
Longbottom. I am assistant general counsel for trademarks at
Eli Lilly and Company. We are a global pharmaceutical
manufacturing company based in Indianapolis. And like my
colleagues here, our company also invests heavily to research,
develop, and produce safe and effective medicines which treat
many diseases and save lives.
First, let me thank the chairman, ranking member, and
members of the subcommittee for your focus on this important
issue and for inviting Eli Lilly to testify today about
fighting counterfeit drugs and illegal supply chains. We do
appreciate the attention you are devoting to investigate the
problem of counterfeit medicines, which pose an ongoing risk to
patient safety. And this threat of counterfeit medicines is an
issue that is near and dear to Lilly and to also the heart of
our CEO Dr. John Lechleiter, who has spoken on this on several
occasions.
At Lilly, like the other companies here, we have seen
counterfeit copies of our own branded medicines around the
world and we have seen counterfeiters target a range of
medicines from our medicines for mental illness to our
medicines for cancer as well. Some of the medicines that are
fake may contain over amounts and excess amounts of the API,
the active pharmaceutical ingredients, or perhaps contain the
wrong APIs or none at all. Some counterfeit drugs contain toxic
dangerous ingredients, and we are not alone in this experience,
again, as heard already today. We view this as a global health
threat that we must work diligently to solve with others in
partnership.
We would like to congratulate this committee for its hard
work in passing the Drug Quality Security Act of 2013, or DQSA.
That new law's establishment of a track-and-trace system for
pharmaceuticals will serve greatly to close gaps in the supply
chain for prescription drugs in the traditional supply chain,
which is from the legitimate manufacturer to the wholesaler to
the pharmacies and then to patients.
But while DQSA establishes important requirements for good
guys, I believe today's hearing is to look at the bad guys. And
as such, I will focus my remarks today on the most common way
that counterfeit drugs reach U.S. patient, and that is of
course through the Internet, a topic already mentioned several
times today and rightfully so I would add.
Obviously, more and more of us are becoming more
comfortable with purchasing products online. We are very easily
doing that, and e-commerce is projected to grow at over 10
percent every year. And as more and more Americans do look
online for their medicines, and there have been some examples
even in this hearing this morning of looking online for
medicines, what are we finding? Forty to fifty thousand active
illegal online drug sellers, and 97 percent, according to the
National Association of Boards of Pharmacy do not meet pharmacy
and drug safety standards. So tens of thousands of fake online
pharmacies put patients at risk. Now, is that OK? Of course
not. I think no one here is satisfied with that. We don't want
to stay at that position.
When we interact with a pharmacy, what should we be
expecting as we go to a pharmacy whether in the real world or
online? I think there are two basic things. One is a drug
approved by the FDA and the second is a pharmacist who has been
licensed by their state pharmacy board. So that prescription
medicine has been blessed by the FDA and that pharmacist has
been blessed by the state licensing authority. And I would like
to coin the term if I could the sanctity of the pharmacy. I
think that is the standard that we should work towards whether
in the real world or online.
With regard to the online world, there is no one easy
bullet to take care of the problem. There is no one easy
solution. There are several elements that are critical to
adding towards that solution and there are more details in my
submitted written materials, but just at the very high level,
some of those themes are patient education, stronger laws, more
aggressive enforcement of existing laws, and also voluntary
cooperation by Internet-based companies.
Now, just as the DQSA used one tool primarily to tighten
defenses in the brick-and-mortar supply chain, and that tool
was of course serialization, I believe there are one or more
tools that could also be used to tighten the illegitimate
supply chain, the online supply chain. And one of those tools I
would like to mention is delisting. That is a tool that could
be used to exclude these bad illegal rogue online pharmacies
from natural search results found using search engines. In
other words, if a Web site selling medicines did not sell only
FDA-approved drugs or did not provide those services using a
state licensed pharmacist, you would not find that Web site in
the search results after it was delisted. The online pharmacy
would still be on the Internet, probably hosted in a foreign
country, but would not be found by the patient in the U.S.
doing an Internet search.
If natural search results were cleaned up in this way, that
would be the Internet equivalent, I believe, of what the DQSA
has done to tighten the traditional supply chain.
And there are other tools that could be discussed as well.
Search optimization for the NABP-approved pharmacies may be
another helpful tool to boost those in the search rankings.
The Internet is here to stay. The number of fake online
pharmacies is growing, and Eli Lilly and Company stands
committed to patient safety in both the brick-and-mortar
pharmacies and the Internet-based pharmacies, and I very much
appreciate the opportunity to speak with you today and I am
happy to answer any questions.
Thank you.
[The prepared statement of Mr. Longbottom follows:]
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Mr. Burgess. Ms. Jungman, you are recognized for 5 minutes.
STATEMENT OF ELIZABETH JUNGMAN
Ms. Jungman. Thank you. Chairman Murphy, Ranking Member
DeGette, and members of the subcommittee, thank you for the
opportunity to present testimony. My name is Elizabeth Jungman.
I direct drug safety and innovation work at The Pew Charitable
Trusts.
Mr. Burgess. May I ask, is your mike on?
Ms. Jungman. Pardon me. My name is Elizabeth Jungman. I
direct drug safety and innovation work at The Pew Charitable
Trust, which is an independent, nonpartisan research and policy
organization dedicated to serving the public.
Counterfeit drugs are far more than an intellectual
property problem; they are a public health problem with real
human costs. Counterfeit and other unsafe drugs have entered
our drug supply numerous times over the past few decades. Three
recent incidents of fake cancer drugs are one example. My
testimony for the record and our Web site have others.
I am grateful to Congress for recently enacted two import
laws that have been discussed by other panelists, Title VII of
the FDA Safety and Innovation Act, which focused on upstream
supply chain security; and Title II of the Drug Quality and
Security Act, which laid the groundwork for tightening the
downstream drug distribution system.
My testimony today will focus on next steps, how
policymakers and stakeholders can make full use of these new
tools.
Meaningful penalties for drug counterfeiting and diversion
are important, but the best way to prevent unsafe products from
reaching patients is a tightly closed distribution system. So
that is my focus today.By passing the Drug Quality and Security
Act last year, Congress created a national serialization and
traceability system that will fundamentally change drug
distribution in this country.
Beginning in late 2017, each package of prescription drugs
will bear a unique serial number enabling it to be verified and
eventually allowing for its distribution history to be traced.
The DQSA contains some requirements for companies in the supply
chain to check serial numbers but in most cases only when there
is an existing belief that the product is suspect.
A more powerful use of serial numbers would be as a routine
proactive check. Counterfeiters can be sophisticated but
falsifying a serial number is much harder if that number is
routinely checked against a manufacturer's database.
Pharmacists, physicians, payers, and border agents could use
this important new tool to help stop fake products from
reaching patients.
It is important to underscore that the risks go beyond
counterfeit drugs. In 2009, thieves stole a tractor-trailer
containing at least 120,000 vials of insulin, an injectable
drug that must be refrigerated. After several months, the
stolen drugs were sold to chain drugstores. We don't know how
many patients received compromised medicines, but only a small
percent of the drugs were ever recovered. Regular checking
could have identified them immediately.
Verification should become routine in pharmacies. To
achieve that, the system must be designed to ensure that
verification is practical and efficient. Waivers of the DQSA's
requirements should be rare lest we exempt businesses like the
pharmacist in Chicago indicted last year for substituting
Chinese counterfeits for legitimate products.
Patients can also make use of this new tool. Doctors who
purchased a counterfeit cancer drug last year may not have
known that it was fake. While the DQSA does not require
physicians to check serials, patients deserve this safety
check. Physician societies and payers should consider the
potential for authentication to protect patients.
Proactive verification of serial numbers is not without
precedent. Other countries like Turkey and Italy already use it
to protect their citizens and to prevent fraud. The U.S. is
behind the curve in this case, but our law creates the tools
necessary for similarly robust protections if Congress,
regulators, and payers take action to encourage them.
Payers can also explore the use of serial numbers as a
condition of reimbursement both to ensure product legitimacy
and to reduce fraud. Large-scale fraud against government
programs is well-documented yet preventable through serial
checks. To be fully effective, such an approach would require
another system element not explicitly contemplated by the DQSA:
decommissioning serial numbers so that they cannot be reused.
Serial numbers could also be used by agents at the border.
Spot-checks of incoming products could help determine
legitimacy, and this will complement the progress in regulating
drug imports that was made in the 2012 FDA Safety and
Innovation Act.
The DQSA requires in 10 years an electric interoperable
system for tracing each unit of medicine. There is an
opportunity now to build in strong features that will allow for
more comprehensive automated use in the future. But
stakeholders do not have to wait 10 years to begin using the
DQSA. Starting next year, FDA will stand up a public database
of licensed wholesalers, and all stakeholders will pass
pedigree information. So long before the law is fully
implemented, dispensers can check to ensure that their sources
are legitimate.
The DQSA and the FDA Safety and Innovation Act are
important steps in securing our pharmaceutical supply chain,
but alone they will not solve the problem. Congress,
regulators, border agents, and supply chain stakeholders can
help create a safer drug supply by supporting robust and
implementation of these laws and full use of the tools that
they provide.
Thank you.
[The prepared statement of Ms. Jungman follows:]
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Mr. Burgess. Thank you. And I thank the witnesses, each and
every one of you, for your testimony. And we will now move to
questions. Each Member will be recognized for 5 minutes. I will
begin.
Dr. Crosse and Dr. Yadav, I appreciated your testimony. You
heard my questions to the FDA and to ICE. I mean cost is a big
driver here and people are looking at pharmacy bills that they
may never have seen before. I feel that right over the horizon
this problem is going to crescendo in size.
One of you referenced people who go online because they are
bargain hunters or they are self-prescribing. Self-prescribing
means they are avoiding a doctor visit to get a prescription.
So basically cost is the driver there. Has there been any study
on, say, one of the popular proton pump inhibitors for acid
reflux disease went over-the-counter. Did you see a drop-off in
Internet activity with the purchase of other brands that
remained on patent and were therefore more expensive? Was cost
reflective in the Internet activity?
Ms. Crosse. I am not aware of any studies that have
directly addressed that. We certainly do know that activity has
increased across time in general and the number of sites I
think reflects that. Internet purchases originally were focused
more in the so-called lifestyle drugs. That has moved
increasingly into individuals seeking to save money on their
blood pressure medicine or whatever other medications they may
regularly be on. But I don't know of studies that specifically
looked at that change when something goes from prescription to
over-the-counter.
Mr. Burgess. And, Dr. Yadav, did the Institute of Medicine
do any of that sort of investigative work?
Mr. Yadav. So the short answer is no. I think we looked at
various studies and I think we will submit to the committee
some of the findings which show which type of categories were
being purchased more, what kinds of factors and root causes
were leading to that. But there was no study which showed how
does this change when the product goes from being prescription
to over-the-counter.
Mr. Burgess. Do any of our representatives from the
industry have any experience with that?
Well, Mr. Clark, I just noticed on your Web site some of
the things you have in the pipeline, the Phase III and Phase II
drugs, I mean some pretty exciting stuff already on the
horizon, PCSK9 for lipid control. Is the development of those
products in any way going to be impacted by the fact that the
diversionary activities that you described are going on? Is
that going to have a direct effect on your research and
development side?
Mr. Clark. It could and it is one of the worries we have
had in rolling out just last year some of the newer medicines.
They need a track record to build up success and to prove to
the world how good they are. We went out ahead of several them
to start checking the Internet and the B2B sites to see if in
terms of Eloquest, Xeljanz, a few others that were coming out,
worried that if competed with by counterfeits and there are
reports of they don't work because of the counterfeit effect,
it could indeed actually the reputation of the medicine
themselves and stuff. Fortunately, the ones we have been
looking at so far haven't had that much competition on the
Internet.
Mr. Burgess. How about for any of you does it affect your
R&D budget, the fact that you are obviously losing sales?
Mr. Clark. I can speak for my shop. We have never been held
to task by the company for return on investment for sales. It
is a reputational thing, which obviously has a collateral sales
impact, but it is really a patient health and safety issue for
us.
Mr. Moreau. The very same at Novartis.
Mr. Burgess. And, Mr. Moreau, your description of the
antimalarial drug, I mean the United States taxpayers spent a
lot of money in the PEPFAR program to buy the drug to prevent
the disease to save the children in other countries and human
tragedy because of the counterfeit drugs making it into the
pipeline and the American taxpayers being ripped off. This is
something that just absolutely has to be stopped and we
certainly appreciate your vigilance to that and we will welcome
your input back to the committee.
Mr. Moreau. Yes, Congressman. On a more positive note, I
just want to inform the committee that we have been working, we
are still working very closely with federal agents attached to
USAID on this case, and there are reasons to believe that the
criminal gang responsible for this counterfeiting operation
will one day or another be arrested in China.
Mr. Burgess. All right. Very well. And, Mr. Longbottom, you
heard my description of the little research project I did here
on the committee dais where I put into a search engine a name
of a cheap pharmaceutical project. I got a lot of results, a
lot of hits. And then you talked about delisting and in fact
are those types of activities actually in process where you are
working with the search engines to try to minimize this?
Mr. Moreau. We are currently developing a web monitoring
program, especially here in the states and with the plan to
liaise directly with authorities and exchange information and
intelligence.
Mr. Burgess. All right. Thank you.
Mr. Longbottom. Mr. Chairman, may I answer your question?
Mr. Burgess. Sure.
Mr. Longbottom. Thank you. Yes, we are not currently
working on those tools but I do know that the Center for Safe
Internet Pharmacies, or CSIP, referred to earlier by another
committee member, is at work to develop proposals to work
together, and those are the e-commerce companies, the search
engines, the payment card companies, the domain name
registrars. So it might come out of that group. But wouldn't it
have been nice if had you done the search, the first 35 results
would have been the NABP-certified----
Mr. Burgess. Yes, sir.
Mr. Longbottom [continuing]. Online pharmacies? I think
that is where we really want to move to. I would love to see
that for my family members going online, constituents as well.
I think that is where we are headed.
Mr. Burgess. Absolutely. My time is expired. I recognize
the ranking member for 5 minutes.
Ms. DeGette. Thank you very much, Mr. Chairman.
And I want to thank all of you for coming here today and
working collaboratively with us to try to resolve this very
difficult and international problem.
I am concerned because we recognize this issue of
counterfeit drugs. We have been trying to work on it
assiduously with the track-and-trace legislation, with the FDA,
giving more resources with all of the private companies giving
more resources.
But yet, according to the testimony that I am hearing from
all the witnesses today, the prevalence of these counterfeit
drugs, particularly on the Internet, just continues to grow and
to get more sophisticated. And so what I would like to examine
in just this short period of time I have is what we can really
do to try to bend this curve and to solve the situation.
So I would like to start with you, Dr. Crosse. You
testified, as did the others on the last panel, that the
sentences are really ridiculously low for these federal
offenses, and I agree with that. I think the sentences need to
be increased, but I am trying to figure out, and this is what I
was talking to the chairman about, is how much is increasing
sentences really going to prevent this kind of conduct,
especially as Mr. Moreau and Mr. Longbottom and others have
testified. Some of these people are renegade gangs in foreign
countries.
And so one thing I want to ask you, did the GAO find that
these prosecutors who were able to prosecute people under other
statutes, money laundering, wiretap, et cetera, would there
have been more prosecutions and more convictions if they had
been able to get felony convictions and higher sentences?
Ms. Crosse. We did hear from prosecutors that increasing
the penalties or clarifying what was required to be the
threshold for criminal activity might make this a higher
priority among all of the competing cases----
Ms. DeGette. OK.
Ms. Crosse [continuing]. That they have. If they are having
to pick something that is really difficult and that carries low
penalties, it has a lower priority.
Ms. DeGette. And so even though they have these other
statutes they could charge them, this would help?
Ms. Crosse. Right. They indicated that it would be helpful.
Ms. DeGette. OK. But it alone would not help? We are going
to need to do other things, right?
Ms. Crosse. That is correct.
Ms. DeGette. OK. And what would some of those other things
be?
Ms. Crosse. Well, there have been a number of settlements
that have been undertaken to get at some of the service
providers to these Internet sites. The Google settlement was
mentioned earlier. All that did though was remove the sponsored
links at the top----
Ms. DeGette. Right.
Ms. Crosse [continuing]. Of the page. That doesn't
eliminate those.
Ms. DeGette. So Internet vigilance like Mr. Longbottom and
others have been talking about would be helpful?
Ms. Crosse. That can be helpful. Also the NABP is engaged--
--
Ms. DeGette. Yes.
Ms. Crosse [continuing]. In getting a top-level domain
name, a .pharmacy, where there would be controls in place on
which Web sites could have a .pharmacy extension as opposed to
a .com. That would require educating consumers to go to those
links and not others.
Ms. DeGette. And let's follow up on that, educating
consumers. Mr. Clark, I was actually talking to you yesterday
about this. It seems to me one of the real keys is educating
consumers that they shouldn't be going on these Web sites. Can
you describe for me what kinds of efforts the industry is
taking to do that consumer education?
Mr. Clark. Sure. I know from our experience and my
colleagues have done similarly, we are always working with
media to try and highlight issues, whether it is a case or just
background information, speaking at conferences. We do a lot of
training of law enforcement along the same lines to educate
them because I think it is not only just the consumers. First
and foremost it is the medical community. I mean it is
astounding how doctors and nurses aren't so familiar with this
and law enforcement as well. So there is a huge outreach by
most of the companies to try and get to all of the constituents
within those sectors and stuff to try and raise awareness
because----
Ms. DeGette. And, I am sorry, are you also working with the
various federal agencies to increase this education?
Mr. Clark. Absolutely.
Ms. DeGette. The FDA and the--OK.
Now, I wanted to ask you, Ms. Jungman. By the way, I am the
co-chair of the Diabetes Caucus, so I was horrified to hear
your insulin example. And what you really focused on is what
more can we do? Does Congress need to do anything to help
improve this serial number issue? Because that sounded like a
very intriguing and relatively successful way to help to
identify these counterfeit drugs.
Ms. Jungman. I think that Congress definitely could have a
role here. I think oversight as the system is implemented both
to ensure that all stakeholders are fully participating but
also to be sure that as a system, architecture is built up.
There are ways that the system could be built that are more
robust or just barebones, and I think congressional oversight
could play a real role in ensuring that it is built to have the
functionality that would allow for serial checking in a way
that is automatic and simple for people to use.
Ms. DeGette. Thank you.
Thank you very much, Mr. Chairman. And if you can help
convey with me to Mr. Murphy that we should continue this
oversight, I think that would be great.
Mr. Burgess. I thank the gentlelady.
I would be willing to go for one supplemental question if
you were.
Ms. DeGette. OK. One.
Mr. Burgess. Well, it just so happens I have one. Has the
Ryan Haight Act been effective in reducing the number of
Internet pharmacies selling controlled substances, Dr. Crosse?
Ms. Crosse. DEA tells us that it has been effective in
reducing the number of domestically located Web sites selling
controlled substances. However, they haven't been doing a lot
of looking overseas. They have had a small sample of Web sites
that they looked at and ordered controlled substances, and 40
percent of the Web sites where they placed those orders
actually provided them with controlled substances. They tell
us, though, that they are more likely to be schedule III or
schedule IV, drugs like Vicodin or Xanax, rather than
oxycodone, which is a schedule II substance. So they do believe
it has been effective in pushing the activity offshore.
Mr. Burgess. I recognize the ranking member for an
additional question.
Ms. DeGette. I am fine. I just want to thank the panel.
Mr. Burgess. And to be bipartisan I would join in that
thanks for all the witnesses, all the members who participated
in today's hearing. I remind Members they have 10 business days
to submit questions for the record and I ask all the witnesses
to agree to respond promptly to written questions.
With that, the subcommittee shall stand adjourned. Thank
you.
[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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[The attachment to Mr. Yadav's response has been retained
in committee files and can be found at: http://docs.house.gov/
meetings/if/if02/20140227/101804/hhrg-113-if02-wstate-yadavp-
20140227-sd003.pdf.
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