Anti-Counterfeit Drug Initiative--Public Meeting

PANEL 2

MR. TAYLOR: All right. I want to thank the members of the first panel for their thoughtful comments--we really appreciate it--and call up the members of the second panel. The first speaker will be Mary Ann Wagner from the National Association of Chain Drug Stores. Thank you very much for your thoughtful presentations.

MS. BERNSTEIN: To speed things along, if the panelists for Panel 2 can come up and sit at these two tables in the front, that would be very helpful.

MS. WAGNER: Good morning. My name is Mary Ann Wagner, and I'm Vice President of Pharmacy Regulatory Affairs with the National Association of Chain Drug Stores.

NACDS and its membership consists of 210 retail chain community pharmacy companies. The chain community pharmacy industry is comprised of 20,500 traditional chain drug stores, 8,800 supermarket pharmacies, and nearly 6,300 mass merchant pharmacies. Our pharmacies fill over 70 percent of more than three billion prescriptions dispensed annually in the United States.

We wholeheartedly agree with the FDA when they say there is no magic bullet to solve these very serious counterfeiting problems, but we stand ready to work with the FDA to develop solutions that will work. It is critical to the chain drug industry that the consumer have confidence in the pharmacist with whom they place their trust. It is equally important that our pharmacists have confidence in the integrity of the drugs that they dispense. We depend on the FDA and their scientific expertise to approve only those drugs that are safe and effective for the American consumer. Anything less should not be allowed in our distribution system.

It is a concern that some of the potential options laid out in FDA's interim report would have a counterproductive impact on our industry. In our final report to the FDA, we will point out options that are not realistic or affordable.

NACDS's Leadership Council, which is made up of manufacturers, wholesalers, and retail pharmacy chains, has taken on prescription drug counterfeiting as a priority concern to be addressed by every segment of the drug distribution system. We have formed three working groups to target specific policy issues relative to counterfeiting. We have the Regulatory and Enforcement Measures Group, Business Policies and Practices, and Technology Prevention Measures. We will be looking at both federal and state laws and regulations on drug distribution as well as criminal penalties for counterfeiting. We will examine current business practices and consider potential guidelines for the future. We will study technology solutions that are available today and into the future and consider the costs involved to the drug distribution industry.

Retailers in an effort to keep distribution costs to a minimum and prices to the consumer as reasonable as possible utilize secondary distributors when appropriate. We would not want to see these distributors completely eliminated.

Many of the options that FDA presents have the potential to disrupt a complex and, for the most part, efficient system. The distribution system should be free of disruption, but at the same time safe and effective. We will be looking at the current penalties for counterfeiting and suggesting that they be increased.

State licensing regulations should be tightened up, but the Florida model referred to in the report is not the answer.

Florida has been suggested as the answer for the country; however, Florida had some very serious problems that needed a very targeted solution. Pedigree papers that they are requiring are ineffective because they, too, can be counterfeited.

Our industry, because we cannot maintain such histories down the lot and container, will no longer be able to return overstock, errors, and outdated drugs. It is not realistic to expect distributors to perform inspections on one another. Rather, that should be the responsibility of the entity granting the license.

It was never the intention that chain distribution centers be considered secondary wholesalers, and we hope to correct that in the next legislative session. But that is how the language currently reads.

Repackaging operations are a benefit to pharmacies and the consumer because they reduce costs and are often packaged in very convenient and manageable quantities. One of the options implied direct purchasing for certain products. We realize that there are distribution systems now in place for specialized products, but we feel that any pharmacy willing to abide by necessary guidelines should be allowed to carry specialist products. Likewise, wholesalers should have this ability as well. Paper pedigrees are just not realistic. As we said, they can be counterfeited, and they are also very burdensome to maintain.

The Commissioner has praised unit-of-use packaging. We, too, find such packaging very useful for some products. However, for the majority of prescription products on the market, a quick migration to such a system would be unworkable.

Likewise, the concept of pharmacies using one wholesaler exclusively might be feasible for 95 percent of the products they order, but not for the remaining 5 percent.

We all agree that electronic track and trace with authentication is our dream for the future. There are many business applications that would benefit from this technology, as well as anti-counterfeiting advantages. But we must consider that the technology is not yet ready for full implementation. The tags, readers, and savants, or collection devices, are ready, but we will need the O&S and PML elements to make the system work for us. We strongly believe that the FDA should encourage but not mandate the use of technology to prevent counterfeiting and diversion.

Much needs to be discussed by the industry as this technology emerges. Questions regarding the data, who owns the data, where it is stored, for example, need to be resolved. Standards need to be developed and adopted. The process has begun but completion is a long way off.

When the FDA is ready to implement an alert system on counterfeit products, it should seriously consider chaindrugstore.net as a proven tool that can quickly reach many of the stakeholders. Chaindrugstore.net is a targeted retail pharmacy industry platform that will ensure real-time communication of critical information from the FDA the moment it is released. Education of the pharmacist and of the consumer is crucial when it comes to counterfeiting and recall issues. Chaindrugstore.net could easily relay educational information from the FDA and the manufacturers to the targeted audience. It has always been an embarrassment to corporate headquarters when pharmacists start calling right after the store is open to gain information in order to respond to customers' questions about something they read in the paper that morning. There has to be a better way to get the right information to the right people in a timely manner.

We hope to submit a comprehensive industry report to the FDA in early December. We appreciate the opportunity to discuss these important issues with the FDA before requirements are put in place that would disrupt our industry. We look forward to FDA's final report that we are confident will take into consideration the market-driven forces that are in place today and will be emerging in the coming years. We are eager to achieve a foolproof method of ensuring the integrity of prescription drug products from manufacturer all the way to the patient. But it is important to take a multi-pronged and phased-in approach over an appropriate length of time that will cause the least disruption to the current system.

I thank you very much for your attention today.

[Applause.]

MR. BORSCHOW: Good morning, and thank you for allowing me this opportunity to speak. I'm Jon Borschow, President of Borschow Hospital Medical Supplies, Inc. I'm here today, however, speaking as Chairman of the Healthcare Distribution Management Association. HDMA is a national trade association representing 89 distributors of pharmaceutical and health care products. These distributors constitute nearly 100 percent of the pharmaceutical wholesale distribution market, totaling more than $140 billion in annual sales.

HDMA members are responsible for ensuring that billions of units of medication safely make their way to tens of thousands of retail pharmacies, hospitals, nursing homes, clinics, and other provider sites across the United States. HDMA's mission is to secure the safe and effective distribution of health care products, to create an exchange industry knowledge affecting the future of distribution management, and to implement standards and business processes that produce efficient health care commerce.

With that mission in mind, I am delighted to have this opportunity to highlight HDMA's perspectives on FDA's interim anti-counterfeit report and to tell you about HDMA's ground-breaking work to help fight the public health threat of counterfeit drugs.

HDMA is very pleased to see that the FDA is concerned about state licensure. There's a high degree of variability among the states regarding the type and intensity of oversight they carry out both in issuing a license and in following up after a license is issued. Some states also are too lax when it comes to penalties for counterfeiters. It is essential that all regulatory bodies be cognizant of their responsibility to enforce the law and to protect against the entry of adulterated product in the pharmaceutical supply chain.

Some states have thorough and effective programs for examining the credentials and qualifications of those who wish to become wholesale distributors and for inspecting distribution facilities. Yet other states have licensed hundreds of wholesales to distribute pharmaceuticals, although HDMA's 89 members constitute nearly 100 percent of the wholesale distribution business.

That said, it is clear that stronger licensure and inspection programs are critical to the success of any anti-counterfeit initiative.

HDMA is also pleased that the FDA recognizes that there is no single magic bullet solution to the counterfeit problem and that a multi-pronged, total supply chain strategy is needed to protect the safety of the U.S. pharmaceutical supply.

HDMA has closely studied this problem, and we were in full agreement that this effort cannot be accomplished by one part of the industry alone. Federal regulators enforce anti-counterfeit laws. States serve as the licensing entities that initially approve, inspect, and regulate the firms doing business. And manufacturers control the packaging or other anti-counterfeit characteristics of the drugs they supply.

Counterfeit drugs are a supply chain issue, and we are all invested in solutions. We wholeheartedly agree with the FDA that safeguards are needed in all of the transactions processed in the supply chain. With this in mind, our members have developed a set of voluntary best practices that we call our recommended guidelines for pharmaceutical distribution system integrity. Pharmaceutical wholesalers have been following similar business practices for a number of years, but recognizing our unique position in handling pharmaceutical products, we decided it was time to come together, pool our combined knowledge and experience, and raise the bar even further regarding our own due diligence.

Aside from our guidelines, HDMA does support covert, overt, and forensic packaging features as well as industry adoption of track and trace technologies that uniquely identifies the product units wholesalers ship to providers as part of a complete and effective security strategy.

With this in mind, HDMA's Product Safety Task Force, a broad-based coalition of pharmaceutical supply chain stakeholders, is examining the business requirements needed for the implementation of track and trace technology.

Track and trace technology supports the unique identification of each individual product unit, allowing distributors to easily identify and locate specific items in the supply chain. The technology HDMA believes holds the most promise is radiofrequency identification, or RFID. Using RFID technology, a tiny radiofrequency chip containing essential data in the form of an electronic product code will allow supply chain stakeholders to track every unit of medication in the country on an individual basis. By tying each product unit to a unique ID, any item can be tracked through the entire supply chain with an unalterable electronic pedigree. The EPC chip, which can be thought of as a product's DNA, will be equipped with high-technology security protection that will make it impossible to duplicate or steal the identity of an authentic unit.

Even if criminals develop the technology required to create an exact replica of the EPC, the technology's ability to track product movement from the manufacturer to the patient would detect duplicate drugs in an incorrect location within the supply chain. In addition, EPC has other patient safety features built in. EPC has the ability to constantly monitor the temperature conditions of each unit of medication as it travels through the system to ensure proper storage and handling. The technology also can track product expiration dates, simplify the process of product recalls, and reduce the number of medication errors by uniquely matching the specific product to a specific patient. Further, because the technology represents an opportunity to improve efficiencies, EPC is far more cost-effective than other pedigree solutions.

The technology for case-level implementation of track and trace, as Wal-Mart has mandated, could be accomplished in as soon as six months. Such implementation would allow the industry to perfect the application of the technology and lay the groundwork for expanding track and trace to encompass the individual product units wholesalers ship to providers. Perhaps most importantly, a track and trace technology would take the burden of having to authenticate products off the providers. Providers would merely purchase product through an authenticating distributor with the assurance of product safety.

HDMA is working closely with standards bodies to further the awareness, adoption, and implementation of EPC in health care distribution, and we recommend that this technology and others that improve patient safety be implemented in the shortest possible time frame. In the case of EPC, we are encouraging our manufacturing partners to put this technology in their product packaging and to commit to early adoption. We also have approached other industry trade groups to create broad-based support for our efforts.

HDMA members dedicated to this issue have started working with pharmaceutical manufacturers, packaging suppliers, technology providers, wholesalers, and health care providers to provide a compendium of strategic and tactical information on EPC. HDMA also plans to craft an industry-wide position statement in support of EPC in an effort to continue the momentum behind a safe and efficient supply chain.

HDMA is a strong advocate for ensuring a safe and secure supply chain from would-be counterfeiters. Patient safety is our number one priority. It is with this in mind that we advocate for technology-based anti-counterfeiting solutions, guidelines recommending thorough due diligence of all business partners, member commitments to report suspicious activity to authorities, strong enforcement of state and federal law, and impeccable licensure requirements. With the successful implementation of these technologies and the active efforts of our members, we should be able to build a high enough wall around our pharmaceutical supply chain to prevent any unsafe product from entering our domain.

Thank you for your time.

[Applause.]

MR. TAYLOR: Before we start with the next speaker, it's 10:45. We recognize that we're running behind because we started late in an attempt to make sure everyone was in the room.

Dr. McClellan is here, and he will be speaking at 11 o'clock. However, his window is fairly short. So if we could take a 15-minute break, return back to the room at 11:00, and once he is done speaking we'll resume with the speakers on the second panel and continue through and make adjustments during the day to ensure that we get back on track.

Thank you.

[Recess.]

MR. TAYLOR: All right. Let's resume Panel 2. I understand that Carmen and Larry are going to be reversing order. Is that correct? Okay. So Larry Bostian from the National Consumer League is going to speak, and then Carmen Catizone is going to follow. Thanks, guys, for being so flexible.

MR. BOSTIAN: The National Consumers League, America's oldest consumer advocacy organization, is pleased to speak today about the problem of counterfeit drugs. I'm Larry Bostian, Vice President for Development of the National Consumers League, here on behalf of our President, Linda Golodner.

Many speakers today have talked about the problem from the perspective of the pharmaceutical supply chain. We thank FDA for inviting us to come and offer some thoughts from the consumer perspective.

There are several developments that combine to make the problem of counterfeit drugs. Pharmaceutical research has brought a wide array of drugs to market, offering new treatment options for many illnesses and conditions. The population is aging, and the elderly just take more drugs. Changes in the health care system have placed greater responsibility on individual consumers to manage their own health care, and this makes it vital that they have access to the information and the tools they need to do that wisely. And, finally, we recognize that the cost of prescription drugs places a real strain on many families and can sometimes lead consumers to make the wrong decisions about their health care.

We've been working for more than a hundred years to ensure that consumers have access to safe products. A panel of National Consumers League volunteers staffed a booth at the 1904 St. Louis World Exposition where they demonstrated that canned green beans had been adulterated with green dye. This is before the 1906 Safe Food and Drug Act.

Today, we work in partnership with government, FDA and many other agencies, labor, nonprofits, and business to make sure that drugs are safe and effective and consumers have access to the information they need, in forms they can understand, to choose wisely for themselves and their families.

We also have experience helping consumers deal with fraudulent products and services. Since 1992, NCL has operated the National Fraud Information Center, a toll-free hotline and a website where consumers can get information about telemarketing and Internet fraud. We talk regularly with consumers about fraud, and we reach out through the media to remind consumers to be alert to fraudulent offers. We've been exploring the connection between counterfeit drugs and our expertise in Internet and telemarketing fraud.

Having said all that, we think it's a lot to ask of consumers to be on the lookout for counterfeit drugs in their pharmacies. In our experience, to be successful, consumer education really has to be simple, messages have to be very clear, and consumers need to see and hear these messages through many channels.

Consumers need good, solid general information about this particular issue presented in a way that persuades them that it's serious but doesn't unduly alarm them. The League believes that the FDA and industry have a special obligation to explain the issue to groups that are most at risk. Senior citizens, for example, those with poor vision of reading skills, or poor health literacy need to be able to read and understand any messages that are meant to convey and persuade the public.

Consumers need to be aware of the source of their drugs and how to minimize the risk, as Dr. McClellan mentioned. We encourage consumers, for example, on our website who are looking to buy drugs online to look for the VIPS seal.

As a small nonprofit organization with limited resources--and, believe me, ours are really limited--the National Consumers League example might be useful. When we undertake an education initiative to generate the maximum possible media attention, we often start by commissioning a telephone or online survey of consumers' knowledge and attitudes about a particular health issue. And then our outreach efforts, although we do some work on the Web, are typically pretty low-tech. We'll do a national press release. We'll place new content on our website, nclnet.org, and our fraud websites, fraud.org. We'll often prepare a VNR and B roll for use b local news outlets. We often do radio media tours during morning drive time. We'll do map releases that are distributed through Pennysavers and other small circulation outlets.

We also do outreach to long-lead publications, and we occasionally luck out. I mentioned the National Fraud Information Center. In August--here's the National Enquirer from August 5th--there was a two-page article, "Beware Telemarketing and Internet Scams," that is based entirely on an interview with my colleague, Susan Grant, who runs our Fraud Center. Now, we couldn't buy that kind of exposure, pardon the phrase, but we think that's a very effective way. Parade Magazine and others reach millions and millions of consumers, and as I said, consumers need to be reminded a lot. Consumers are going to need guidance to be able to tell whether a drug might be counterfeit.

At the risk of stating the obvious, messages need to reach consumers where they are. In terms of counterfeit, for example, pharmacies could present color photographs that depict what the genuine drug or package looked like compared to what the counterfeit drug or package looked like so consumers would know what to look for. Many area groceries are introducing scan your own checkout lines, and those screens have tremendous potential for conveying this kind of information.

The checkers at my grocery store have a flip chart that lists in pictures all the different vegetables and fruits so they know what code to push. A flip chart like that while you're waiting in line to pick up your prescription could have a lot of that same kind of information.

Again, this is a pretty low-tech suggestion, but consumers, especially those who have poor health literacy, might take advantage of an outreach technique like that, and that would just reinforce the messages that are coming through the media, public service announcements and so forth.

It's important, especially if the FDA is going to issue an alert about a counterfeit, that consumers know what they should do if they've actually bought a counterfeit drug. It may be important for consumers to know that it's important not to just discontinue the drug, but to consult with a pharmacist or health professional, and they need to know when and how to report it as well.

These days, consumers shoulder a heavy burden. Increasingly, they're responsible for managing their own health, often taking multiple drugs on an ongoing basis. The range of available drugs is large and growing. Many of them are expensive. It's regrettable that on top of all that, consumers have to worry about counterfeit drugs, too, but there we are.

The National Consumers League's bottom line is one shared by everyone here today. Consumers need access to safe and affordable drugs, and we all need to work together to help them.

Thank you very much.

[Applause.]

MR. CATIZONE: Good morning. I want to make sure no one else wants to speak. Are we all set? Okay.

Again, thanks to the FDA for allowing us the opportunity to participate in this public meeting. We'd like to extend our thanks to the task force and the FDA for your efforts to combat counterfeit drugs. NABP and the state boards find the interim report informative and critical to the process of managing this crisis. The partnerships with the State Boards of Pharmacy through federal-state relations of the FDA have developed and maintained to combat this crisis and other crises are extremely important to the State Boards of Pharmacy and will prove even more useful as we embark on this path to deal with counterfeit drugs.

NABP's mission is to represent all the state agencies regulating pharmacies and pharmacists. As indicated in the interim report, we develop model regulations that assist the states in developing their own regulations and practice acts. Our model regs on wholesale distributors serve as the basis for the almost uniform regulatory scheme and structure that's in place among the states. It was also used by the FDA in developing their federal requirements and guidelines under the PDMA.

Currently, NABP is involved in analyzing all the state practice acts to determine what areas need to be changed or what areas don't address the problems that have resulted from this new and emerging area of counterfeit drugs.

Our next steps are to look at what's happened in Nevada and Florida and to see if those changes can address the problem of counterfeit drugs and how our model regulations can or should be amended to incorporate what has occurred in Florida and Nevada.

To achieve this, we have commissioned a task force that will meet at the end of October, and we are inviting in all stakeholders that may have an interest in this area and continue our cooperation with the FDA to review our model regulations and to propose new regulations to the states to address this new and emerging area of counterfeit drugs.

We would hope that a similar approach could be applied as worked with the PDMA and that federal recognition of the state effort would occur, but the actual changes in the standards and guidelines would occur at the state level so that future changes could be made more easily and less cumbersome.

We believe this is the right way to go. We believe the evidence that exists since 1988 to support this is very important. We have a good regulatory system in place that's fairly uniform among the states. The impact on the wholesale industry has been minimal, and the burden on interstate commerce has been almost nil.

So, again, we'd like to employ the same process for this problem, work cooperatively with the FDA, the wholesale industry, and other stakeholders to develop a public and private partnership.

Thank you for the opportunity.

[Applause.]

MR. RICCARDI: Good morning, almost afternoon. My name is Sal Riccardi. I am the President of the Pharmaceutical Distributors Association, also known as PDA, an association representing interests of 6,000 small licensed prescription drug wholesalers operating throughout the United States.

I am also the President and co-owner of Purity Wholesale Grocers. Our pharmaceutical division, Supreme Distributors, has been wholesaling prescription drugs for more than 20 years.

As an industry, PDA members service other wholesalers, hospitals, retail pharmacies, doctors' offices, clinics, emergency response units, military and private dispensaries, and others who are not adequately serviced by the large national and/or regional distributors. All member wholesalers operate under the same state and federal laws as the large national and regional wholesalers. Our presence in the marketplace helps stabilize prices by creating competition.

I am here today to address the shared objective of counterfeit drug detection and prevention and to outline the public and private sector actions regarding wholesale distribution of prescription drugs that the PDA believes reasonably and effectively would help achieve these objectives without unreasonably burdening prescription drug wholesalers and putting them out of their businesses.

First, prescription drug wholesalers are required to be licensed where they have facilities, and if required, in the states into which they sell prescription drugs. State licensure laws vary from filling out a simple one-page form and tendering a nominal fee to criminal background checks, including fingerprints on individuals, physical inspection of in-state facilities and operations system for the common-sense requirements.

Lack of strong uniform requirements for criminal background checks, training and experience, insurance and other common-sense requirements along with weak criminal penalties and other enforcement promotes an environment for criminals to enter into. PDA supports state efforts to enhance wholesaler licensing requirements and increases in state licensing fees necessary to support those requirements, along with stronger and swifter enforcement by state and federal authorities.

Florida and California are two examples of states that have recently tightened licensing requirements. PDA agrees with strengthening licensing schemes, but other requirements that burden interstate commerce--I'm sorry. Let me back up. PDA agrees with strengthening licensing requirement schemes, but these licensing schemes should not seek to impose hodgepodge of pedigree or other requirements that burden interstate commerce by imposing different pedigree or authorized distributor of record requirements in each state or for different drugs when sold within a state.

Second, criminal penalties for knowingly introducing or knowingly distributing counterfeit drugs must be raised. Counterfeit drugs pose a serious danger to the public, so the penalty for knowingly handling these drugs must be heavy. FDA's interim report notes that counterfeiting a label has a larger penalty than counterfeiting the drug itself. That does not make sense, and PDA supports legislation to increase penalties for counterfeiting.

PDA, in conjunction with the Healthcare Distribution Management Association, HDMA, has developed voluntary recommended guidelines for pharmaceutical distribution integrity. Under these guidelines, wholesalers will raise the level of scrutiny of their sources of supply. In doing so, we hope that sources with questionable integrity will be identified and that they may have no customers. Hopefully, they will also be discouraged by our due diligence from trying to enter the marketplace. The FDA is aware that private industry does not have the legal authority to impose mandatory guidelines on the industry participants or punish those that don't follow them.

The PDA believes that the FDA should consider incorporating a number of the guidelines into the present guidelines for state licensure of wholesale prescription drug distributors to become the current GMPs, or good manufacturing practices, for holding prescription drugs. To the extent that it has the regulatory power to do so, we encourage the FDA to explore this possibility.

The PDA opposed implementation of the FDA's 1999 Prescription Drug Marketing Act, PDMA, final rule that would require that pedigree go back to the manufacturer in every instance. But I want to note that the failure to have a final rule does not mean that the PDMA has been ignored. PDA members provide a prescription drug pedigree that goes back to the last authorized distributor of record and will continue to do so. And FDA and state officials have ample power to determine the further prior history from authorized distributors of record who must keep records on their own premises.

PDA opposes the implementation of the 1999 final rule because authorized distributors of record are exempted by the PDMA from providing a pedigree. Ninety percent of the drugs in commerce start at the big three prescription drug wholesalers who are all authorized distributors of record under the PDMA. And, therefore, 90 percent of the drugs in commerce are sold, including the wholesalers, without a pedigree requirement. Implementation of FDA's final rule, as currently written, will, therefore, effectively jeopardize the businesses of over 6,000 small wholesalers who will be faced with the choice of either demanding pedigree from the major wholesalers who are legally exempt from any requirement to provide it, to going out of business because the drugs heretofore have been distributed with a lack of the requisite pedigree, or operating their businesses in violation of law. This, of course, is really no choice at all.

PDA supports the efforts to strengthen the requirements for who may be an authorized distributor of record and voluntarily will be implementing definitions and submitting them to the FDA for your consideration.

But PDMA was not designed to address counterfeiting issues that confront the industry. PDMA is antiquated, but it is the law. Not surprisingly, our position is that the best solution to the counterfeit problem is one that involves mandating that manufacturers incorporate tamper-evident technology into their products to enable wholesalers, dispensers, and consumers alike to identify authentic versus counterfeit products.

In arriving at a solution to prescription drug integrity verification, FDA and manufacturers need to work together to require and utilize technology that can conform integrity at any point in the system--wholesale, retail, and dispenser. And it must be uniform technology that can be utilized in a cost-effective manner throughout the distribution system to the dispenser.

And in the meantime, manufacturers should consider counterfeit deterrence. Overseas and domestic manufacture and sale of United States approved drugs for sale in other countries is the same color and shape and at prices deeply discounted from prices here does not make good sense to counter counterfeit deterrence. The current practice of one color and shape for all is an invitation for smugglers to bring those drugs back into the United States, and we agree with the FDA that smugglers are the avenue to inject drug counterfeits into United States commerce.

Additionally, anti-counterfeit and tampering technologies could be used today and used only for the United States market, and we believe their use as well would achieve a substantial deterrence to smuggling and counterfeiting.

To conclude, PDA supports strengthening state licensing requirements, but there needs to be uniformity with respect to commerce. Easy, logical measures can be implemented by wholesalers that will make entry to the marketplace much more difficult for unscrupulous individuals and the authorized distributor of record can be redefined to include stronger objective parameters. Penalties for counterfeiting can be enhanced. Manufacturers can take logical measures to make their products less susceptible to counterfeiting and smuggling, and the FDA can mandate uniform pharmaceutical integrity verification technology that can be used throughout the distribution chain.

Thank you for your time today.

[Applause.]

MR. TAYLOR: In keeping with the first panel, I'm going to ask the task force members if they have any questions.

I'd also like the task force members, before they ask a question, to also give your name and also identify what part of FDA you're from, and that will help the transcriber as well as others in the audience, including the press, to match a question to a person. So, Bill?

MR. McCONAGHA: I'm Bill McConagha with FDA's Office of Chief Counsel, and I have a question for Mr. Borschow first. And is Mr. Bostian still here or did he--he fled? I don't blame him. So I might then in turn address it to Mr. Catizone.

What I'm curious about, gentlemen, is your view or perception as to the appropriateness or need for strengthened federal oversight by the FDA with respect to this problem. We heard from Ms. Wagner. She suggested that there were certain behaviors that we ought to encourage but not necessarily make mandatory. Mr. Riccardi talked about potentially federal oversight in terms of strengthening GMP and maybe requiring certain things of manufacturers.

I'm curious, each of you in turn, what your own views are as to the role of FDA and federal oversight, mandatory oversight in terms of addressing these issues.

MR. BORSCHOW: Well, we agree very much with the Commissioner that what we need to have and to continue to have is an effective partnership between the government and private enterprise. It has been very successful thus far, and we have been able to maintain a very high integrity in our system.

Certainly, as we stated, we endorse the idea of looking both at the licensing process that goes on and finding ways to improve that to exclude, you know, potential threats through the licensing process. And we also believe that we should work towards, you know, increased penalties, where appropriate, criminal penalties. And these are clearly areas where government in one form or another should intervene.

In addition to that, the work of the FDA in terms of exploring with industry and identifying the necessary process and technology changes has been very effective. We salute the work of the Anti-Counterfeit Task Force, which is, of course, in progress. And we at our association have a task force, a Product Safety Task Force, which is working very closely on this. So that I think that the role of government as a collaborative partner is the one that we really endorse. We don't feel that a specific technology should be mandated but, rather, because of the multi-pronged approach that needs to be addressed, the industry should be encouraged to pursue all of the appropriate methods and technologies, and that FDA in a sense has served as a gathering place and a sponsor of the type of dialogue that can help advance these processes and make them happen much more quickly. In many instances, it's a matter of dissemination of information and developing understanding. Our industry is a large industry, and a great deal of information needs to flow.

So we salute FDA for its initiatives and believe that the work that it's doing is very effective.

MR. CATIZONE: Carmen Catizone with NABP. We believe that the regulatory model that was employed for PDMA has worked quite well, and we'd like to see that model implemented while continuing to deal with counterfeit drugs. And that model basically was for federal legislation to establish the ability of the states to regulate at a much more specific practice of pharmacy type level.

We'd like to continue that as well as identify areas that we think federal legislation needs to be developed or strengthened, and two areas that immediately come to mind probably would deal with the technology issues, because there needs to be uniformity among the technology or technology requirements; and, two, the ability to attain a national injunction relief or national injunction against wholesale distributors that may be operating illegally that would curtail the ability of people to move from state to state to avoid this type of enforcement or regulation.

MR. TAYLOR: Peg?

MS. O'ROURKE: I'm Peg O'Rourke from the Center for Drugs. I have a question for all of the panel members, any or all. We were talking earlier about the electronic pedigree and the electronic trace and track technology. While that is several years away, it sounds like it would eventually evolve into a sort of universal pedigree.

But given that's a distance away, to level the playing field, which this might do, what is your opinion on having a universal pedigree requirement implemented now, even though it would be on paper or a combination of paper and electronic?

MS. WAGNER: Our organization doesn't believe that the technology is really ready yet. We think that certainly is the solution, to have an electronic pedigree all the way from manufacture to patient. But it's our understanding that many of these technologies are not complete yet, so we would hate to see something mandated that would either add costs to the system or decrease efficiencies to the system.

MR. CATIZONE: This is Carmen Catizone, NABP. We think something needs to be done in the interim because the incidence of counterfeiting seems to be increasing. And it's interesting to us and somewhat confusing that people would buy prescription drugs from unknown sources and that the paperwork would not exist for those people to authenticate or verify those products to the other consumers down the line in which they sell those products.

So we would support some system, whether it be paper or a combination of paper and electronic, that provides the documentation that would be needed to at least substantiate the sources of these products and to determine whether or not there's a trail of evidence where counterfeiting could be detected or fraud be detected.

MR. BORSCHOW: Among the voluntary guidelines that our own association has been developing is the issue of, in fact, being able to ascertain the origins of products. And so we're very much attempting to make sure through these guidelines that product is not introduced of an unknown origin.

However, we, on the other hand, believe very strongly that track and trace technology is actually closer, and we believe that an industry initiative can, in fact, make it happen in a much shorter time period than many might believe. We have seen just in the last six to nine months enormous progress in this area, and there's a considerable effort, part of it sponsored by our own association through our Collaborative Commerce Committee and our Product Safety Task Force, which we believe will help to advance that. And we do have a group of industry players and stakeholders, including some of these technology providers, who are working very arduously on making this happen.

As I alluded to in my testimony, we believe that at the simplest level this technology is, in fact, very close to being available and practicable, and I once again remind all of our listeners that both Wal-Mart and the Department of Defense have in unequivocal terms stated that they expect that technology within a matter of on the order of 18 months. So I think that we should not for one moment believe that we're talking about something that is a decade or more away. On the other hand, we do have to understand that we are a large industry and we are talking about many, many tens of thousands of products, and certainly it will take some time for even a fast-paced technology to be completely ubiquitous. And certainly we as an association, through our voluntary guidelines and through our support of FDA's multi-pronged approach, have attempted to address the interim period. But certainly we believe that the sooner that these types of track and trace technologies can be brought into place that we can really create an additional level of security in our system.

MR. RICCARDI: Our association, the PDA, believes that some of the prongs of the multi-pronged approach can happen rather quickly, that being the licensing requirements be increased.

I was able to sit on the ad hoc committee in the State of Florida, and we had a subcommittee in that state specifically focused on licensing. And one of my colleagues here had mentioned earlier that one of the states had over a thousand wholesale licenses given out. And from one of the agency member's mouth to my ears, they said it's basically a rubber-stamp approach, and that's wrong.

That needs to be changed, and that can be changed quickly. I believe that the criminal penalties need to be looked at. The pedigree--and also the third thing would be to increase the definition of what an authorized distributor is and what the requirements are for you to become an authorized distributor.

There's a catch-22 in PDMA. The authorized distributor is not required to pass on pedigree past the authorized distributor. But if we increase the licensing requirements, the criminal penalties, and the definition of who is an ADR, and in short order, I believe that you're going to eliminate a lot of the bad people that may want to enter this environment.

And so I would like to see those things occur and allow the good wholesalers, the ones that operate their businesses every day for many years in the past, not be jeopardized with the requirement of paper pedigree, because if you don't increase the licensing requirements, the criminal penalties, and the AD definition, you're still going to have criminals entering in and falsifying paper pedigree, and that's not the answer.

MR. TAYLOR: Don?

MR. VASBINDER: My name is Don Vasbinder. I work in the Office of Regulatory Affairs. My question is for Mr. Riccardi.

You mentioned applying GMPs to wholesalers, and I was wondering if you could elaborate on that a little bit, what you had in mind, any particular details. And if anybody else wants to comment.

MR. RICCARDI: We intend to supply our written comments as an association, but it has to do with consistency and it has to do with raising the bar. And we will supply that to the FDA task force.

MR. VASBINDER: Okay. Thank you.

MR. BORSCHOW: I'd just like to add something to that. We should know that wholesalers today are one of the most highly--drug wholesalers are one of the most highly regulated industries in the entire nation and, in fact, are subject to a constant and continuing scrutiny, not only from FDA but from a whole other alphabet soup of government and state agencies. And it's fair to say that wholesalers have a pretty respectable level of practices, but as I stated in my testimony, we have very definitely been putting our heads together to try to further enhance those practices through our own voluntary guidelines in response to the evolving threats that we must address.

And so we would place a particular emphasis on that, and at the same time convey the understanding that wholesalers and certainly our association members are very, very carefully scrutinized and have some very stringent practices in place. And the result of that is the fact that, as I stated, we distribute literally billions upon billions of units almost without, you know, any exception in the most correct fashion.

MR. TAYLOR: Thank you.

Ilisa?

MS. BERNSTEIN: I'm Ilisa Bernstein in the Office of the Commissioner, the Office of Policy. I have a question for Carmen.

We've said that it's pretty clear that the state laws need to be strengthened. We're looking at the laws. You said you're looking at the laws and have developed a task force. Can you give us a sense of where the states, the Boards of Pharmacy or the regulatory authorities, what their thoughts are and where you think that they would come down o this?

MR. CATIZONE: As other members of the panel have indicated, although we have more uniformity in this area than in others, there are still some variations. And I think some of the states employ registration processes that may not be as stringent or as significant as licensure processes. And I think the threat of counterfeit drugs has opened their eyes to say we have to take a closer look at this and probably a stronger regulatory approach.

So I believe that the state boards would be in favor of enhanced state regulations to deal with this issue.

rule