Anti-Counterfeit Drug Initiative--Public Meeting

PANEL 1

MS. KIDWELL: Good morning. I'm Carla Kidwell from the Bureau of Engraving and Printing, and we've been asked to say a few words about the technology that we use in our bank notes and in our bank note manufacturing system. So I'm going to talk about that first. I'm going to talk about a few differences between what we do and what FDA does, followed by a little bit on our public education campaign.

First of all, we want to say we have information that's available on our new bank notes which was issued last Thursday, on the 9th of October. We expect our new 50 to come out approximately one year from then, followed by the 100 the following year.

What we know is that we have one to two counterfeits per every 10,000 genuine notes, and it's interesting and you'll see this later in the talk: This $200 note was actually accepted by someone in a Dairy Queen who gave change for $200.

All right. This is our new 20. I'm sure some of you have seen our public education that we've begun, and certainly some of the ads are on the football fields.

For our technology, we like to use layers of technology. So the first piece is the overt, which is available for the public and everyone to use, and we talk about those features and try to educate the public on those features so that they do not accept counterfeits.

We also have covert features. We have detectors, machines that can pick up those features. And then there are forensic features that are available in the laboratory.

What we've determined over the years is that with technology growing at a very rapid rate, we need to change our notes every seven to ten years. And so we had a cycle that started in 1996, and now this one is starting in 2003.

BEP is a manufacturing outfit. We manufacture and secure financials. We control all of those facilities, very high levels of security. Our Fort Worth plant is surrounded by a hundred acres of land; Washington, D.C., like a fortress.

We also are very careful about the suppliers who supply to us, and our security team goes out to those suppliers and assures that they, in fact, meet the security requirements that we have.

We sign nondisclosure agreements with selected vendors when we have these unique features we're including, and the last policy is, in fact, that for the larger denominations, we put in more features of higher level.

All right. So let me just take a minute to run through the features on our new 20. What you have is an embedded thread that you see here. You hold the note up. It's a transmissive feature. Hold the note up to the light, you can see the thread in there. The thread has text on it that says "USA 20" and has an American flag with the 20 in the star portion.

Also, when you hold the note up, you can see the paper watermark, and that watermark is supposed to match the picture that's printed on the note.

And we have optically variable ink. In this case now, depending on the angle, the color changes from copper to green.

For other public features, we tell people to take a look at the engraved portrait. Engraved portraits tend to look much different than offset or what you can scan on a computer.

We ask you to feel the notes, and, in fact, most of the counterfeits are picked up by people who detect a difference in feel. That's very normal. That's what causes people to look at the notes in the first place.

And then if you look at your notes, you'll see distinctive red and blue fibers, and you can see those in the pictures so you can look at those as well.

We have other features that are apparent with a small magnifier. We have microprinting that is in both the offset and intaglio printing, and it's shown here in the slide. And, of course, there's a blown-up picture of the thread with the USA 20 and the 20 in the flag portion. It didn't come out too good.

We have covert features, special inks with varying magnetic properties or spectral properties, special inking patterns, unique fibers and a unique substrate.

We do have some system differences with FDA that we want to point out to everyone. BEP is a manufacturer. We can control what we put in. We can control our suppliers. FDA is a regulator.

We also control all aspects of our process. We write the contracts for our materials. We approve the security requirements at all the supplier sites. We sign the nondisclosure agreements.

The currency itself, once it's packaged, is shipped direct from the BEP to an armored carrier straight to Federal Reserve banks, and we also have each note uniquely marked with a serial number that we can track back through the process and we can determine authenticity with that.

The other piece I wanted to point out because in the report from the committee I saw the packaging issue was very much in the forefront, so I wanted to just say a couple words about our packages.

First, we strap our notes in packs of 100, and we call that a strap. It's a paper strap that goes around it since you can't see the picture. Then we have a shrink wrap film that goes around ten of those straps, and that is called a bundle and that's a thousand notes. Then we put four of those bundles together and shrink wrap it again, and that's 4,000 notes and that's called a brick. And then we take four of those bricks, and we have a 10-mil thick film that goes around those, which is called a cash pack, and that's 16,000 notes.

Still, there's one more layer. We have skids. We put 40 cash packs on those skids, put top boards with straps and seals, and five layers of shrink film that goes around those skids.

So we control the packaging. The packaging is set up so that the Federal Reserve can break down the packages as they do their shipments to commercial banks any way they'd like to break them down.

We also have a product that can be looked at transmissively, something that FDA for the most part can't do with bottles that you would be applying labels to. We can handle our product to determine it, and feel is very important. We have labels in which you can't use the transmissive attributes, and you have the issue of whether you put your anti-counterfeit features in the pills themselves or the liquid or whether, in fact, you put it in the label.

All right. Public education. First of all, the public education campaign for our new 20s and for this whole new series 2003 is a $53 million effort. The first order of business, to find stakeholders: Federal Reserve, commercial banks, retail outlets, gambling casinos, machine vendors, transit authorities, the general public.

We used the vendor that we hired for the public education, went out, used our focus groups to find out what people knew and didn't know about their currency, what the previous education programs had determined to be successful and which were not. And our goal was that 88 percent of the public be educated.

The first education piece was to let everyone know that your notes never go out of style. They might go and look different. They are always accepted, no matter which series.

We had targeted messages for key groups: African American, Hispanic, Asian American markets, news media. We have plans to spend 60 percent of the budget the first year since this is the first note out. We have a number of brochures, and I brought I think about 150 of them, if anybody is interested in looking at the brochures. They're printed up in 25 languages. This is a worldwide education plan. We have articles and photographs in 90 of the U.S.' largest newspapers. We also use trade journals.

In addition, we used direct mail outreach, e-mail and post. We have a database of 28,000 businesses and organizations that represent cash handlers.

We have a website called MoneyFactory.com. The information is downloadable 24/7 in 25 different languages.

We've also used some paid media placement in more than ten countries. What you see up there is the Times Square billboard that was up for our introduction last Thursday, airport, subway, taxi toppers in major cities, and 1,300 prime-time spots over a two-week period to make everyone aware of the change.

We also got some help from some corporate partners which provided us with some free advertising. Wal-Mart did their own education of all of their employees, had special messages throughout the stores. Ace Hardware set up a contest with the winner coming to Washington, D.C., and getting a tour of the BEP. They also set up a wind tunnel, which is probably a lot more exciting than our tour, in which they sent people in to grab as many of the new 20s as they could in the wind tunnel. So people had a lot of fun with that.

And we had a partnership with Pepperidge Farm, and actually, I brought some goldfish today. They're advertising new colorful goldfish, so there's a school contest on here in which you can win cash and those new $20 bills.

We've also gotten a lot of partnership with a number of shows. Our note was displayed on the "Wheel of Fortune" for a week. It's been on--well, you can read the list of some of the programs that we have on, stories that include our new $20 note. And I also brought along for the panel and anyone else who's interested a list of all of these TV shows that will, in fact, feature the 20, and there are quite a number of them, a very large list.

Bottom line that I want to close with is that U.S. currency will change, it will continue to have multiple layers of security, but that it will always maintain that distinctive look and feel that make it uniquely American.

So thank you very much.

[Applause.]

MS. FORTUNATO: Good morning. I'm Sue Fortunato. I represent the Secret Service, and we are also now a part of the Department of Homeland Security. So I wanted to address you and tell you what we are doing with FDA in product counterfeiting cases.

Very briefly, the mission of the Secret Service, as everyone knows, we protect the President, Vice President, families, dignitaries, numerous people, as well as we are in charge of protecting the monetary system of the United States.

The Forensic Services Laboratory is the Secret Service's crime laboratory, and this is where we look at all evidence to determine whether things are genuine or counterfeit and link counterfeit documents together. Particularly, I wanted to point out that we are not a full-scale forensic lab. We're not like "CSI." We don't do DNA. We don't do trace evidence. We are specifically tasked with looking at financial types of documents and threatening types of documents. So that means letters, monetary types of items, credit cards, currency, traveler's checks, even identity documents. These are the types of things that we look at, and as a laboratory we've gotten very, very good at some of the things that we do. And as a result, we open up our laboratory to other federal, state, and other local agencies to be able to use our services.

A few of the questioned documents examinations that we will conduct include looking at handwriting and authorship. Obviously, this comes into play with threat cases as well as financial crimes cases. We look at indentation analysis trying to find information that's been unknowingly indented into documents. We restore altered and erased material. Oftentimes in financial crimes, documents are dummied up after the fact to try and make them look like they were doing genuine business transactions. So we look at those documents also.

The next two items, to determine the age and whether they're genuine or counterfeit, are unique to the Secret Service. There are no other federal agencies that analyze documents to this extent, and for that reason, as I said, we open up our laboratory to other federal agencies, state, and local for criminal types of investigations. And, finally, we do provide investigative leads and courtroom testimony if necessary.

I'm going to skip the stories. We're short on time. But this is an example of a threatening letter. Obviously, we will look at this to try and identify the writer based on suspect writing, as well as when we do get threatening cases, it is important for us to consolidate cases together to try and identify one writer who wrote numerous letters.

This is an example of a financial crimes type of case where we have a document that's dated and it has signatures on it. We'll look at not only the authorship, but we will also look at the document and what comprises that document--the ink, the paper, the ink jet printing, the toner that appears on it--to determine how old that document is.

And, finally, the oldest reason why the Secret Service is in existence is because of counterfeit currency. We were initially founded in 1865 because one-third of the currency in circulation at the time was counterfeit. And so for the last 140 years, we've been looking at not only currency but also all the other types of financial documents.

And as you can see, there are a lot of them. Today we've got traveler's checks and credit cards and birth certificates, as well as identity documents. Nowadays the identity documents go hand in hand with the financial documents because the counterfeiters are creating packages or sets of identification. You can now buy a birth certificate, a driver's license, and a number of business checks, and you're ready to go.

What we do is we look at these documents and compare them to one another, and we try to determine, first of all, if it's genuine or counterfeit; and then, secondly, can we link the counterfeits together? Can we say that multiple items are all the result of the same group of people or the same source? And that's what we do here. This is giving you an example of looking at documents that are printed on paper. Currency is printed on paper, as are traveler's checks and birth certificates. So we're very good at looking at items that are printed on paper.

We're also very good at looking at items that are printed on plastic. It's a completely different type of a substrate, and the printing appears very differently. But what we can do is, as we take a closer look at things, these two items were found in completely different areas of the country. But as we take a close look at them, we can see that not only is the hologram a very crude imitation of an original, but the Visa logo has also got a lot of problems in it as well. And by comparing these two items together, we can say that they are identical, and as a result they came from the same source.

Just to give you a couple of other examples of the typical types of cases that we look at, this was a situation where we had two maps that were being contested. One source showed their map on the left as being very different from the map on the right, and they wanted to know whose was genuine and authentic. Comparing the two, the one on the right you'll see the red circles. Those are areas where there are remnants of that line that originally appeared there. What's happened is someone has taken an image, either a digital image or a photograph of the original, and they've removed those lines, and now they've reprinted it again. But in doing so, they've been fairly sloppy, and this is what we find with a lot of counterfeiters, and this is what we look for forensically.

Another example of a type of case that we've done, Nazi war criminals cases are very popular lately, and this case, we looked at not only the ink, the paper, the typewriting, and determined that everything was legitimate with respect to the date of 1945. Of course, once we render that opinion, they come back and say, well, then, obviously the photo has been altered, can you look at that? So we were able to do that type of examination as well and determine that, no, this is the original photo that appeared here.

And, finally, as a last example of the types of cases that we've been involved in, this is an art theft off of the West Coast. This was 17th and 18th century drawings and paintings that we looked at. And the gallery had said that they had stamped all of their items with a unique marking. And so we set about looking for that mark, and we did find it not only obliterated under black ink, but also under some very thick tape. So we were able to illuminate that original seal and say that, yes, this is originally their product.

So now that I've told you who we are and what we do, let me tell you why we're involved with the FDA. Just like our own cases, the product counterfeiting type cases do affect the monetary system. And I already mentioned we frequently receive criminal cases from outside agencies. Because of our unique capabilities in looking at documents to the extent that we do, we've opened up our services to other agencies. And they are submitted by FDA. We for at least ten years now have had a memorandum of understanding with the FDA to analyze cases of this type, and we have successfully been in business with them for ten years, and we hope to for the next ten and onward.

I'd like to show you some examples of the types of counterfeit products that we've received from the FDA. There are three general categories: one is an altered genuine product, the second is an all-out counterfeit product, and the third is counterfeiting just the shipping containers.

Now, I'm only giving you these examples because that's what we've seen from FDA. I'm sure that there are some others that I may be missing. Before I continue, I also want to let you know that we do not do any evaluation of the drugs themselves or the food products themselves. We don't look at the ingredients to determine their quality or quantity of the ingredients. We simply look at the packaging and the printing that's done on the outsides.

And one last note. I apologize if there are any manufacturers of these particular products in the audience. This is not an indication that your packaging is not secure enough. What it is an indication of is the counterfeiters are attacking the products that they are going to get the most bang for their buck off of. So what you're going to see is these are the expensive products that are out in the market that are being counterfeited.

This is an altered genuine product. What I've done and typically what I do is I open up the box the very first thing when I get it, so it's laid out flat so you can see the whole thing or at least most of it.

On the end of it, it has a lot number and an expiration date. And if you look closely that lot number and expiration data, that blue box, is not registered and it's not aligned with the top black writing. So that was the first thing that tipped off someone at the pharmacy or in the distribution chain.

So we took a look at this, and if we look really closely at it, that's actually a blue box that's been reprinted and it's affixed, it's taped down to this box. And all it is, it's altering the genuine product to say that rather than expiring the year 2000, this product now expired in 2002. So they expanded its life span a little bit. So that's an altered product.

This is a counterfeit product, an entirely counterfeit product. This is Nutramigen, Enfamil. About five years ago, this product was $20 to buy in the supermarkets, and I know from personal experience, I should have bought stock.

[Laughter.]

MS. FORTUNATO: But this product, when it came to us, inside the cans it was not only expired product, but it was also different types of product. It was soy or the regular infant formula that most infants can handle. My daughter decided to go the designer route, so we had to buy this.

This is very expensive. It's also for colicky babies and it's semi-broken down, so it's very expensive to buy.

What the counterfeiters had done is they simply took the products, the soy products and the other types of products, photocopied an original or a genuine Enfamil, Nutramigen label, and simply pasted them around these cans and sold them as Enfamil.

Our Latent Fingerprint Section did do an analysis on these as well, and we were able to find fingerprints on the undersides of the labels identifying a male and his girlfriend as the perpetrators behind this case.

Here's another all-out counterfeit. Now, this one I want to show you a little bit more detail on how it's printed, because this one is printed not by using an ink jet printer or a color copier, which is the easiest way, but by using the same methods that the genuine manufacturers employ, the commercial types of printing processes using offset lithography.

Generally, the genuine is on the top and the counterfeit is on the bottom, or the genuine will be on the left and the counterfeit will be on the right. But the next few slides show a comparison of the two.

In this slide, you'll see that at the top, the genuine is much more--it's a much better quality print. The bottom has got all this stairstepping. And so the counterfeiters aren't as concerned with how nice it looks, just by--they're just interested in mimicking the product.

And here, notice the style of the lettering that they've chosen. It's not even the same as the genuine. The genuine registered trademark, the numeral 6, and even the information at the bottom, it's all different fonts and styles.

And when we get to the vials of that particular product, they've done the same thing. They are not looking at the style or the quality. They're just interested in reproducing the name where it should be very basically.

And here's another comparison of the genuine product versus the counterfeit. The counterfeit is on the bottom. You'll notice that the registered trademark doesn't even hardly show in the lower picture.

The other thing that I wanted to point out with this picture is that the counterfeiters are not--don't pay that much attention to their alignment. If you notice in the bottom slide, the blue and the yellow and the black don't necessarily register very appropriately. And in this slide, the same thing. The green and the black are not in alignment.

Lucky for us the counterfeiter's sloppiness helps us forensically identify them. If you notice, this is a comparison of two counterfeit products, and what we've done in this case is look at all the sloppiness and compare it and be able to identify another product and say that these two are the result of the same operation. If you look in the "l" of "Tablets" at the top and also at the bottom, as well as in the "t" and the "s," there are dots and dashes and different defects that appear. And those appear to us as a printed fingerprint, basically, that allow us to connect things together.

Again, this is another comparison of a counterfeit to another counterfeit, and you can see how truly sloppy they get. Sometimes it's difficult for them to get pictures of a round vial, and so what they do is take a picture, move the vial a little, take another picture, move it again and take another picture, and end up stitching all those imagines together. So that appears to have been what happened here. Right through the "c" and the "r" was maybe one of those areas where they had to stitch two negatives together.

And this is the final slide, just showing you the different defects and how we can identify that product. And these are some of the examples of information that we will give back to the FDA and let them know to look in these areas, these specific areas to see if this is the same product.

And the final example is the counterfeit shipping containers. The shipping containers were sent to our laboratory. They were cardboard boxes. We also received the printing plates that were used to produce them.

What I learned happened in this case is that the genuine product was stolen off the streets, and there were drug addicts that were given money for those products. They took the products and their counterfeit containers, the cardboard boxes that they had produced, and sent them both off to the Institute of the Blind, asked them to repackage the boxes, and then they sold them to retailers, whether they were knowing retailers or unknowing. And then any damaged products in the process of all of this they donated to women and children's shelters. So they certainly have an operation going. It's just that, you know, they were dealing with original stolen product.

So we were able to look at the containers themselves and the printing plates and say that, yes, these plates were used to produce these boxes, and that is the printing operation source.

We're continuing our cooperative effort with FDA to analyze drug products as well as food products, like I said, the labeling and packaging only. And we have also made an offer to the FDA to accommodate them in a database that I'd like to just briefly preview. Our database contains genuine samples as well as counterfeit samples, and it is available on the Internet for law enforcement.

It began in the 1990s. Our latest version was just finished the other day. This year we put $400,000 towards it, and now what we have is all counterfeit and genuine documents, both identity type documents, driver's licenses, identity cards, credit cards, traveler's checks, all kinds of different documents in here, not only the text on them, their numeric information that appears on them, but also graphic images of each one. It's a Web-based application, and it's available through the Internet, but it's a private website that you need an access and a password to get into and then from there you again need another user password and--I'm sorry, user name and password to get into our database as well. So there's two levels of security there.

The enhancements that I'd like to mention are particularly the alerts and the hot sheets. For law enforcement it's fairly obvious, but what that means is that any investigator can go onto this database and pull up either a genuine item or a counterfeit item, such as the new $20. If you wanted to print posters around your office or in your store, you would be able to pull down those images and make a poster and say here are the new security features of this document and be on the lookout, you know, we're going to begin to see this. Or if you're getting hit particularly hard with any kind of a counterfeit, you could post these alerts to say look out for this and look in these areas to see if this is a genuine product or not.

There are a number of different options as far as searching this database, not only from suspect description to where it was passed to how it was made, and then once you find that particular item of interest, it will give you all the information, including additional cases that are linked to that.

Once you click on any particular item, you bring up that item as well as enlarged either security features, such as microprinting, that we would want you to be able to read what it says, or particular areas of interest with a counterfeit to denote here's a misspelling, you know, you can look in this area to see if this is the counterfeit that you may have.

Some of the things that we've shared with FDA as far as anti-counterfeiting techniques include the following, and many of them have already been voiced. It is a multi-layer approach. There is no silver bullet, just as Mr. Taylor had mentioned earlier. We have suggested things to the pharmaceutical industry as well as the infant formula manufacturers, things like increased graphics, unique fonts, and sometimes deliberate mistakes are kind of nice. Sometimes when the counterfeiters are reproducing things, they see that and think that it's a problem and they want to change it and make it look correct. So that can also be used as a security feature.

There are things that you could use such as color, anything other than cyan, yellow magenta, and black, which are what color copiers and color ink jet printers use. So we'd like to try and stay away from those as much as possible. Obviously, they can be used, but should be used in combination with other true colors.

Security features, there are overt and covert types of features that can be used as well as security packaging. All of these things can be implemented at any stage in the distribution chain.

The final item that I'd like to bring out is education, and the BEP has really done a great job with the new 20s and showing you their education program. This is really a very important piece to any kind of security. If the recipients don't know what to look for, you've spent a lot of money for no particular reason. So we try and educate people as much as we can on our end. We're going out and instructing law enforcement on what to look for, and we're giving them this database and allowing them to look up certain things and give this to them as a tool.

And, finally, I just wanted to thank you for your attention, and I wanted to thank FDA for the invitation.

Thank you.

[Applause.]

MR. THIROLF: Good morning. I'm going to go through this as quickly as I can, so hold on to your hats, if you have hats.

OCL has been around for 30 years. We represent FDA, FTC, CPSC, national highway transportation agencies. We've been doing it a long time, and these are my views, not necessarily those of the Department of Justice. This is who I am and my phone number. This is the office. This is where we are in the CFR. The point of contact policy, we are in contact with every U.S. Attorney's Office around the country through their fraud coordinators. Our monograph is on the DOJ Web page.

I thought, first of all, we're dealing with the Food, Drug, and Cosmetic Act. What are the elements of the offense? When these cases are indicted and presented to a trier of fact, jury or judge, we've got to meet the elements of the offense. Rather than give you a long jury instruction, here's the statutory definition. I want to point out one particular point. The violation is bearing the identifying mark of another drug manufacturer. One of the keys to this is being able to find that mark and present it. The Secret Service obviously is critical in being able to show how the bad guys are falsely representing the drug to be the product of that manufacturer.

There are other statutes. We use 18 U.S.C. 2320, which is the trademark statute. We use mail and wire fraud, which has been enhanced. Mail and wire fraud is now a 20-year max. The Sentencing Guideline has been amended. More than 250 victims adds an automatic six to the sentence, and we've gotten 18-year sentences under the mail and wire fraud statutes.

I want to go through this. When Paul asked me to talk about this, I said we ought to at least give a very brief statement about what the history is. And let's go very quickly.

Jamieson-McKames was a drug wholesaler on the edge of the distribution system. They were making some money. Motrin had just come out. Motrin was a very popular, in-demand product. There wasn't enough supply. What did Jamieson-McKames do? They bought 200,000 doses of magnesium salicylate to look like Motrin, and they put Motrin out on the market through their own wholesale operations. The Eighth Circuit Court of Appeals in a very strong opinion from Judge Arnold supported the conviction and the eight-year sentence each of those folks got. In that time, 1981, an eight-year sentence for a Food, Drug, and Cosmetic Act violation was unusual.

The next one I want to talk to you about is Ovulen. Searles' Ovulen product was on the market. It was new, it was effective, it was successful. There wasn't enough of it, so what did Shelly Harwin do? Shelly Harwin went out to his Spanish manufacturer of Ovulen, brought it into the United States, repacked it, sold it through what was his own connections with a fairly on-the-gray-line drug distribution operations, and it was very successful and they made a lot of money.

The problem was Shelly was in trouble with the Federal Government on other fraud issues, was arrested, so his accomplices, Alfonso and Villone, went off and they had to find some Ovulen. They found some in Central America. They sold it. On the counterfeit they made a lot of money.

The next item was they couldn't find any active ingredient, so they went to a Central American manufacturer, and they made an Ovulen look-alike with no active ingredient in it, sold it and made a lot of money. They were caught. Judge Keough, over a two-and-a-half-week trial, heard all the evidence and sentenced them to 26 years in jail, which I think is still the longest food and drug sentence out there.

I'm going to go through these even quicker. Nahdi was a guy who was trying to counterfeit antacid. He got 12 years. He was arrested in England, and there's an international flavor to these cases that follow here. He would never have been caught if we hadn't been able to convince SmithKline to offer a letter of credit which brought him out of hiding and into London. Flavine is an animal antibiotic. Drugs are being counterfeited that just aren't for humans but for animals. Four years' imprisonment. The main guy would not have been caught but for the fact he and his girlfriend went to Paris for a vacation. They got off at Frankfurt. They left Frankfurt. They went to De Gaulle airport. They were arrested at the airport and were extradited to the U.S.

Roussel Uclaf, this relates to--it's not counterfeit in the classical sense, but it's product made where it's not supposed to be made, represented to be Cefaclor that was made in a particular way according to the drug master file. They were convicted, $23 million fine, $10 million forfeiture credited to FDA. Again, that operation was overseas in Italy.

Milstein is a recent prosecution for Eldepryl. Four-year imprisonment. Again, a guy who was operating on the fringes of drug distribution, a wholesaler out of his house, and also involved foreign operations involving Israel and everywhere else.

Look, early communication to FDA is essential. The sooner that FDA can know that there's a problem, the sooner that OCI can begin to look at the issue, the sooner that we can make a judgment on the public health consequences.

Undercover work is essential for industry and OCI to be working closely so that you are able to pursue that undercover lead. These are guys who are hiding and they aren't going to come out.

There is a potential for bioterrorism exploitation, the terrorism section in Main Justice, there are terrorism officers in each U.S. Attorney's Office. Any of that will be closely and very effectively dealt with.

There have been and will continue to be, I submit, public health issues which are going to affect the investigation. If this is a product which can hurt people, the balance between when do we tell the public that this is a problem which affects the company, a victim in this situation, when do we stop the investigation in order to go forward to deal with a public health issue, has been a theme.

The final line is follow the money. It's going to cost millions. Anybody who is going to go into this business in the U.S., in my estimation, who is not a one-time operator is going to be dealing in large quantities of dollars.

How do we decide when we pursue a case? Well, this is a standard you'll hear from every U.S. Attorney's Office. What's the deterrent value? What's the guideline range? The guideline range for counterfeit drugs, I submit, can be very substantial. If they are charged under mail or wire fraud, that's a 20-year max. Does the statute need some attention? I think it does. And over the years, we have been blessed in this country by not having major counterfeit operations. But my fear is that the value of the American pharmaceutical market is so attractive that we have to be on guard for these.

What are DOJ's priorities? I will tell you that for our office, if FDA says this is a priority, it will be done. U.S. Attorney's Offices I think will be responsive when we will be able to show the consequences that these cases have caused. In Jamieson-McKames, in Ovulen, there were situations where people were put at very serious risk.

Can the defendant help the government to prosecute others? We are always looking to go up the chain, and finding the local guy who is dealing out of the back of his car isn't the focus necessarily.

Prosecution I think is essential to deter these folks. There are unscrupulous markets out there. The prescription drug market had a positive influence, but I still submit there are unscrupulous markets which permit these sorts of on-the-edge characters to sell drugs through a network that saves money for the bad guys.

Cooperation is key between FDA and law enforcement and prosecutors. The sooner the criminal focus is there, the sooner you will get results, and I submit you will get outstanding results.

Thanks very much.

[Applause.]

MR. TAYLOR: Is Ms. Hofmeister here? If not, we will open it up for questions from task force members to the panel members. I have one question. This is for Ms. Kidwell. Obviously, you have done a lot of thinking about your outreach, and I notice that some of the shows that you picked have an enormous audience, and I actually saw it at the Michigan-Minnesota football game.

But I guess my questions is: How do you track how many people you are actually reaching? Is it an extrapolation based on the ratings and the reach that you know some of these shows currently get? Or do you monitor the outreach over time to see whether or not your efforts are making a difference? And are you tracking how many people you're actually reaching?

It's something we've been trying to think about ourselves in refining our message and refining our status.

MS. KIDWELL: We use focus groups in the field, and we'll be going back to focus groups to find out how well our message has actually been received due to the public education campaign. As you're talking about this, obviously it's very difficult to find out how many people actually understand what the message is and are people using those features that have been provided them to determine authenticity. And it's always difficult to tell. We see notes and I know my colleague here from the Secret Service sees notes in terms of counterfeit notes that are--the counterfeits are mostly terrible and, really, most of them, if people paid any attention at all, are missing very essential features, whether it's the watermark or the thread, because if they're put on on a computer, which for $20 notes is where most of them are counterfeited, then counterfeits are very, very poor in this country in particular. And the $100 is the most counterfeited note overseas, so what we try to do, again, is keep the information coming in from the Secret Service, from Interpol, to find out what kind of issues we're having over there, whether people appear to have a good understanding of what we've been trying to teach them.

MR. TAYLOR: Any other questions?

MR. McCONAGHA: I have a quick question to address to the panel generally. We saw some very dramatic examples of clear counterfeits in terms of actual product labeling and, in fact, it looked to be product labels, the actual container's unit of use. I'm just curious. In your experience, can you give us a sense in terms of the counterfeits you see as to what layer of packaging, for lack of a better term, you see most of the counterfeit materials appearing? Are we talking about kind of large-scale shipments in which people are counterfeiting the labels, the labeling that might appear on, you know, lot-size packages? Or do you find more typically that you're dealing with unit-of-use distribution vials and that kind of a situation?

MS. FORTUNATO: I think I can only speak based on the different types of cases that we've seen from your agency so far, and they are attacking any portion of that chain that they can get to. We had the example of the cardboard boxes. We've had cases where it's the genuine product in the inside, and then they just counterfeit the label. And then the other was--let me think. Well, it's either just the label--or it's the genuine that they take and then they alter the packaging.

So at any stage that they can get to in the distribution chain, it appears as though they're willing to attack it. I don't know that anything is more vulnerable than anything else. In fact, there's a current case that I'm working that old vials--genuine vials were retrieved from the hospital refuse, and they were collected and then reused with nothing in them but tap water.

So there are a lot of different attacks to the different drugs and products, so I don't know that anything in particular is being attacked.

MR. THIROLF: Basically you'll see the whole range of things over the history of this, but anybody who's in it to sell tens of thousands of doses will counterfeit every piece of the item, from the package insert down to the packing material or the shrink wrap or whatever. Someone who's going to be doing a much smaller item will cut it down, obviously, but anybody who's seriously going to counterfeit large quantities has to do it from the beginning all the way to the end of the process in order to have it salable.

MR. McCONAGHA: And you've seen that, Gene?

MR. THIROLF: Yes.

MS. KAO: My question is for Ms. Kidwell. I wanted to mention that there seemed to be a lot of potential parallels between our public awareness campaigns. We both have to raise awareness among the public that there is potentially a problem, and we have to educate them on how to respond when there is a problem. And all the while we have to reassure them of the integrity of our products out there.

You mentioned a lot of collaborations, a lot of collaborative efforts that you're involved with. I was just wondering if you can tell me a little bit about the dynamics of those collaborations, some lessons learned perhaps on how best for a government agency to collaborate with outside groups. Are you the driving force, or are you merely consultants? Or what have you found to be most productive?

MS. KIDWELL: Well, I think one of the things that we know has helped us greatly is hiring a contractor who, in fact, has the context to allow us to develop these partnerships in the first place. And that becomes absolutely critical if we're trying to get a partnership on a television show and so on, which, of course, is how much of--many of the people in the U.S. are reached. So if you're trying to reach individuals, that's certainly a powerful medium. And I know our lesson learned from before--we've had public education campaigns before. We've never spent this much money before. But what we found out is that just printing up all of these brochures or having articles in newspapers does not reach all of the public that is necessary to reach.

So we also had tried to use just the public service announcements on television so that we wouldn't have to pay out all of this money. And what happened is those spots ran at, you know, 2:00 a.m. or some other really good times when no one is watching. And so what we learned is that we do need to get the message out prime-time, and some of the partnerships and the contacts that we had to make the partnerships that have allowed us to work with a Wal-Mart or an Ace Hardware, I mean, nationwide facilities that reach an awful lot of people. It's been a very good experience for us, and some of these little games that are played, whether it's "Wheel of Fortune"--I mean, that was another one. We got free publicity, basically, a partnership with the game shows where you just get it laid out. And so what was essential for us was having a contractor who had those contacts, knew how to reach those particular groups.

And I'll also say that the other very big success this time--and I think we've done a lot better with this--is targeting to specific groups, whether it's the Asian American community or African American community, and through various media to target different age groups, because it's sometimes also very difficult to reach some of the young people, too. So there have been specific targets there as well.

MR. TAYLOR: Any further questions?

MR. RUDOLPH: This is for Ms. Kidwell. You had mentioned that there were differences in federal oversight between money and drug products when it comes to development and use of anti-counterfeiting technologies in packaging and kind of initial, if you will, distribution of product.

Do you think then there are any implications for the actions that would need to be taken by FDA and by members and participants in the drug distribution chain or in the roles that those different members would play as a consequence?

MS. KIDWELL: Well, I think FDA has very difficult task in front of it, considering, again, you don't control the manufacturing of all drugs--some come from overseas--and you don't have any real control over all of the various stages of repackaging. And certainly what our experience is is that the controls up front are what makes the system work for us. What we know is if you are going to include specific anti-counterfeiting methodologies in there, you know, having control over the manufacturing facilities so that they're not available to anyone and everyone, and to have the packaging so that you know it's consistent. We have rules, when people do open packages in which, for example, in a shortage--and there are sometimes a shortage or overage in some of the notes. It doesn't happen very often, but there are specific rules when someone breaches the packaging that, number one, someone else has to be in the room, someone else has to testify that the package--the original packaging must be kept intact. The Secret Service would be looking at that and so on.

So, you know, the lesson for us has been, you know, very good controls. Doing the security surveys of the plants that manufacture the anti-counterfeiting pieces for us is a crucial piece of the puzzle, and I don't know enough about FDA's regulatory authority, whether you, in fact, could get some additional authority to begin to take over some of those tasks.

MR. TAYLOR: Any other questions?

MR. RUDOLPH: I just have one other. Sorry.

Mr. Thirolf, you had mentioned that the mail and wire fraud statute was pretty good, but that it does need some attention. And I don't mean to put you on the spot, so if you want, you can take the Fifth, if you will. But I wanted to see if you might be able to elaborate on what changes you all thought should be made and whether there were any other either new authorities or changes to existing authorities that should be undertaken.

MR. THIROLF: I've made a career of not taking the Fifth Amendment, so I'm not going to change now.

[Laughter.]

MR. THIROLF: I think there are two points. Obviously, this is an issue which has gained more attention because of the opportunity that the United States market provides for the bad guys. And I think that we are relying on statutory provisions that have been in existence a long time, and I think FDA is the appropriate agency to make some judgments about whether those statutory provisions need some update in terms of bringing those definitions into compliance with the technology, for example.

I also think that we are much more international drug production operation today than we were 20 years ago when Jamieson-McKames was being prosecuted. And I think FDA--and this is my personal opinion. FDA should have some additional authorities to be able to obtain from the foreign manufacturers or distributors the information they need not only for regulatory purposes but for whatever enforcement purposes FDA should pursue.

We have communicated to the House Oversight Committee in the past that giving FDA explicit extraterritorial authority in the statute would be a good idea.

I think that you all at FDA know better than I what sort of tweaking the statute needs to give you the tools you need, and we would be happy to try to work with you and give you what insights we have.

There has been, as you can see, a limited number of these counterfeit cases brought, and I think we learn a little bit each time. And I hope we don't ever have to do a lot of them. That's my hope. And if we do, I think using the tools that we have to get as large a sentence as we can is possible.

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