<DOC> [106th Congress House Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:65846.wais] COUNTERFEIT BULK DRUGS ======================================================================= HEARINGS before the SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS of the COMMITTEE ON COMMERCE HOUSE OF REPRESENTATIVES ONE HUNDRED SIXTH CONGRESS SECOND SESSION __________ JUNE 8 and OCTOBER 3, 2000 __________ Serial No. 106-164 __________ Printed for the use of the Committee on Commerce U.S. GOVERNMENT PRINTING OFFICE 65-846 WASHINGTON : 2000 COMMITTEE ON COMMERCE TOM BLILEY, Virginia, Chairman W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts JOE BARTON, Texas RALPH M. HALL, Texas FRED UPTON, Michigan RICK BOUCHER, Virginia CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey Vice Chairman SHERROD BROWN, Ohio JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee CHRISTOPHER COX, California PETER DEUTSCH, Florida NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois STEVE LARGENT, Oklahoma ANNA G. ESHOO, California RICHARD BURR, North Carolina RON KLINK, Pennsylvania BRIAN P. BILBRAY, California BART STUPAK, Michigan ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York GREG GANSKE, Iowa TOM SAWYER, Ohio CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland TOM A. COBURN, Oklahoma GENE GREEN, Texas RICK LAZIO, New York KAREN McCARTHY, Missouri BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio JAMES E. ROGAN, California DIANA DeGETTE, Colorado JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin HEATHER WILSON, New Mexico BILL LUTHER, Minnesota JOHN B. SHADEGG, Arizona LOIS CAPPS, California CHARLES W. ``CHIP'' PICKERING, Mississippi VITO FOSSELLA, New York ROY BLUNT, Missouri ED BRYANT, Tennessee ROBERT L. EHRLICH, Jr., Maryland James E. Derderian, Chief of Staff James D. Barnette, General Counsel Reid P.F. Stuntz, Minority Staff Director and Chief Counsel ______ Subcommittee on Oversight and Investigations FRED UPTON, Michigan, Chairman JOE BARTON, Texas RON KLINK, Pennsylvania CHRISTOPHER COX, California HENRY A. WAXMAN, California RICHARD BURR, North Carolina BART STUPAK, Michigan Vice Chairman GENE GREEN, Texas BRIAN P. BILBRAY, California KAREN McCARTHY, Missouri ED WHITFIELD, Kentucky TED STRICKLAND, Ohio GREG GANSKE, Iowa DIANA DeGETTE, Colorado ROY BLUNT, Missouri JOHN D. DINGELL, Michigan, ED BRYANT, Tennessee (Ex Officio) TOM BLILEY, Virginia, (Ex Officio) (ii) C O N T E N T S __________ Page Testimony of: Baker, Dennis, Associate Commissioner for Regulatory Affairs, U.S. Food and Drug Administration.......................... 241 Henney, Hon. Jane E., Commissioner; accompanied by Dennis E. Baker, Associate Commissioner, Regulatory Affairs, Food and Drug Administration........................................ 296 Kelly, Hon. Raymond, Commissioner, U.S. Customs Service...... 304 Maher, Patricia L., Deputy Assistant Attorney General, Civil Division, Department of Justice............................ 308 Mehringer, Nikki, Area Quality Control Leader, Eli Lilly..... 361 Taylor, John, Acting Director, Office of Compliance, Center for Drug Evaluation and Research, U.S. Food and Drug Administration............................................. 253 Material submitted for the record by: Pendergast, Mary, memo dated November 13, 1997, to Jon Hunt.. 273 Plaisier, Melinda K., Associate Commissioner for Legislation, Department of Health & Human Services: Letter dated July 25, 2000, to Hon. Fred Upton, enclosing response for the record................................ 274 Letter dated August 10, 2000, to Hon. Fred Upton, enclosing response for the record...................... 276 Letter dated December 11, 2000, to Hon. Fred Upton, enclosing response for the record...................... 373 Reitz, John T., President and CEO, Isotag Technology, Inc., prepared statement of...................................... 272 (iii) COUNTERFEIT BULK DRUGS ---------- THURSDAY, JUNE 8, 2000 House of Representatives, Committee on Commerce, Subcommittee on Oversight and Investigations, Washington, DC. The subcommittee met, pursuant to notice, at 11 a.m., in room 2322, Rayburn House Office Building, Hon. Fred Upton (chairman) presiding. Members present: Representatives Upton, Burr, Bryant, Stupak, and Strickland. Staff present: Alan Slobodin, majority counsel; Anthony Habib, legislative clerk; Chris Knauer, minority investigator; and Brendan Kelsay, minority research analyst/press assistant. Mr. Upton. Good morning, everybody. We have a number of subcommittee meetings and full committee hearings going on, and we expect a number of members coming in the next few minutes, but in the interest of time we will get started. Today we are here to dissect the issue of the influx of counterfeit bulk drugs. There is an increase in concern that drug ingredients made overseas that are either counterfeit, unapproved or poorly made are entering our Nation's health care system and endangering patients' health and even their lives. Here is a case in point. Several years ago, 89 Haitian children died after taking cough medicine made with contaminated glycerin traced to China. We may think that tragic events like this can't happen here in our country with its sophisticated regulatory system, but our committee's investigation reveals that our system does have major flaws, and it could happen here all too easily. Recently, our committee's investigation revealed that FDA had linked the adverse reactions of 155 American patients to gentamicin sulfate made by Long March Pharmaceutical, a Chinese drug company. It may well be that other patients died from unknown impurities in this drug as well. FDA's own forensic tests showed unexplained discrepancies between the chemical fingerprints of the drug taken from Long March at different times. FDA's inspection revealed data integrity problems and other serious deficiencies with Long March. Despite FDA inspections in quality control by the U.S. drug companies that use this material, the suspicious bulk drug still infiltrated our health care system without detection. This is just one example of other instances that have confirmed that counterfeit, substandard drug imports are getting into our prescription drug supply and harming patients. To substantiate our concerns about counterfeit bulk drugs infiltrating our Nation's health care system, I now ask unanimous consent to place FDA correspondence, internal FDA documents and articles on drug counterfeiting into the record documenting the counterfeit bulk drug problem. Without objection, that is done. 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[GRAPHIC] [TIFF OMITTED] T5846.228 [GRAPHIC] [TIFF OMITTED] T5846.229 Mr. Upton. Copies are provided to the witness as well. Some of the FDA internal documents reveal that over the last few years key FDA officials believe counterfeit imported bulk drugs to be associated with deaths and other serious adverse events in American patients. This is the first time many of these documents have come to light. The international community is also increasingly concerned. Just last month, the World Health Organization and international pharmacists and international drug manufacturers publicized their concerns about counterfeit drugs. Some have estimated that 50 to 70 percent of the drugs in some developing countries are counterfeit. It would be wrong to assume that the U.S. is immune to the documented counterfeiting in international pharmaceutical trade. The World Health Organization and some industry analysts estimate that about 5 to 8 percent of drug products shipped to the U.S. are counterfeit, unapproved or substandard. Counterfeit bulk drugs are ingredients in human prescription drugs which are deliberately and fraudulently mislabeled or misbranded with respect to its identity or source. Without knowledge of the source, there is no product history. Without product history, the safety and efficacy of the product cannot be assured because there is no information about impurities, the age, the storage, the manufacturing environment or even the synthesis of the product. It is extremely difficult to detect counterfeit bulk drugs because there is no single chemical test for all impurities that may be in the product. Counterfeit bulk drugs can represent a serious threat to the public health. A bulk quantity of as little as 50 kilograms can be used in the production of millions of tablets or capsules. Therefore, only one counterfeit bulk that contains an impurity or is synthesized improperly could cause immediate death or injury to numerous people. The result of a counterfeit could be that the medication will not be as effective or could produce a long-term disease or injury. For example, these pictures being shown over here to the right show the differences at a microscopic level between the authentic drug and the counterfeit drug. The difference in this case lies in the particle size. Such a difference in the particle size could mean that the drug doesn't get absorbed into the blood stream and therefore doesn't work. There is still much we do not know about the public health threat. The FDA has not made any public health assessment of the issue. Even if the FDA attempted such an assessment, the FDA has no ability to make an assessment with its current data. In its March 5, 1999, letter to Congressman Klink and myself, the FDA stated that it does not collect data to assess the amount of unacceptable or adulterated active pharmaceutical ingredients shipped to the United States from foreign sources. With what information the FDA does have, the FDA has linked counterfeit or unapproved bulk drugs to deaths and other adverse events in the United States. Last year, when FDA's Forensic Chemistry Center conducted a focused, in-depth study of just a handful of Chinese drug imports, evidence was uncovered which led in part to targeted inspections, resulting in an import alert for one plant and warning letters for two other plants. We know we are seeing only the tip of the iceberg. Lured by high prices and potential profits in the United States, counterfeit bulks can get into our prescription drugs in several ways: one, as imported ingredients to the U.S. manufacturers; two, as imported ingredients to pharmaceutical compounders; and three, as source ingredients for Internet pharmacies marketing to the United States. The counterfeiters use sophisticated methods, such as preparing false labeling, containers, seals and certificates of analysis, or using a manufacturing process that differs from the filed manufacturing process. Here are two examples; the first example involves three pictures. The first picture shows a document dated around 1989 from an industry consultant, laying out a scheme to market unapproved Chinese trimethoprim under the approved label of a German company. The second picture shows that the signature from the first document belongs to Dr. Jose Gomes. The third picture shows that Dr. Gomes, in 1999, was the consultant for Long March Pharmaceutical, the firm that made gentamicin sulfate that I talked about a little bit earlier. The second example is a diagram of how a drum of bulk drugs shipped to Australia was counterfeited. A layer of authentic drug on the top, milled sugar in the next layer, followed by a layer of authentic drug, et cetera. The public policy implications are enormous. Public health is threatened by unapproved, substandard or counterfeit bulk drugs. Counterfeits could have direct impact on the integrity of the adverse drug event report system. Counterfeit bulk drugs not only hurt patients but defraud Medicare and Medicaid programs that pay for these drugs as if they are authentic. There is also speculation that an unknown influx of counterfeit unapproved drugs is leading to more drug and chemical allergies and more antibiotic resistance. Even after years of plans and recommendations from internal working groups, the FDA remains largely unable to detect or control imported counterfeit bulk drugs from entering the U.S. The FDA has not worked with the Customs Service to investigate imported counterfeit bulk drugs since 1996 and, as far as I know, does not have any ongoing criminal enforcement action or even a known strategy to deter or prevent crimes connected to counterfeiting bulk drug imports. Instead, the FDA relies on a regulatory system of inspections, import policies and post- marketing surveillance. However, the FDA's testimony on this system is not great. To illustrate this point, here are some direct quotes from the documents. ``The agency is hindered by not having a complete list of foreign facilities manufacturing drugs products for the United States.'' That's not acceptable. Those are my words. ``We still don't have systems that can effectively and efficiently communicate across the agency or readily provide field staff with critical information.'' Again, that's not acceptable. ``The drug listing data base also does not interface with OASIS, which would assist import officers by automatically comparing manufacturers and listed pharmaceutical products to products offered for importation.'' Again, that's not acceptable. ``FDA has identified the need to establish enhanced procedures to better assure that an import alert notice for a product or company will, in fact, prevent the violative products from reaching the U.S. consumer.'' Again, the same response. ``The drug listing does not ensure authentic sources or authentic material, as described in new drug applications, is in fact being offered for admission.'' In addition, the FDA told us that they only have information on 18 percent of the foreign drug manufacturers that ship to the United States. Only 18 percent. The FDA has no information on 623 importing drug firms from China and 409 importing drug firms from India. No information. These kinds of weaknesses and others cause me to conclude that the FDA cannot assure the American people that prescription drugs are free from counterfeits and poorly made, unknown ingredients. The FDA has told this committee that its safety net is being stretched by the increasing global nature by the pharmaceutical commerce. At some point, FDA's safety net will in fact break, and I fear that it already may be broken. It is urgent that the FDA shift to a new model to deal with counterfeit bulk drug imports. I am ready to do more than just hold FDA accountable; I am committed to working for a solution to this serious and dangerous problem. I intend to fully work with Commissioner Henney and the FDA to develop and implement new, effective protections, but the FDA needs to be forthright today about the threat and what it will really take to deal with the problem. I look forward to the testimony and further discussion and action by the Congress, Republicans and Democrats, and the administration. At this point, I yield to my friend and colleague from the great State of Michigan, Mr. Stupak. [The prepared statement of Hon. Fred Upton follows:] PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS Today we're here to dissect the issue of the influx of counterfeit bulk drugs. There is increasing concern that drug ingredients made overseas that are either counterfeit, unapproved, or poorly made are entering our nation's health care system and endangering patients' health and even lives. Here's the case in point. Several years ago, 89 Haitian children died after taking cough medicine made with contaminated glycerin traced to China. We may think that tragic events like this can't happen here in our country, with its sophisticated regulatory system. But our Committee's investigation reveals that our system has major flaws--and, it could happen here--all too easily. Recently, our Committee's investigation revealed that FDA had linked the adverse reactions of 155 American patients to gentamycin sulfate made by Long March Pharmaceutical, a Chinese drug company. It may well be that other patients died from unknown impurities in this drug. FDA's own forensic tests showed unexplained discrepancies between the chemical fingerprints of the drug taken from Long March at different times. FDA's inspection revealed data integrity problems and other serious deficiencies with Long March. Despite FDA inspections and quality control by the U.S. drug companies that used this material, this suspicious bulk drug still infiltrated our healthcare system without detection. This is just one example of other instances that have confirmed that counterfeit, substandard drug imports are getting into our prescription drug supply and harming patients. To substantiate our concerns about counterfeit bulk drugs infiltrating our nation's health care system, I now ask unanimous consent to place FDA correspondence, internal FDA documents, and articles on drug counterfeiting into the record documenting the counterfeit bulk drug problem. Some of the FDA internal documents reveal that over the last few years key FDA officials believe counterfeit imported bulk drugs to be associated with deaths and other serious adverse events in American patients. This is the first time many of these documents have come to light. The international community is also increasingly concerned. Just last month, the World Health Organization, international pharmacists, and international drug manufacturers publicized their concerns about counterfeit drugs. Some have estimated that 50-70% of the drugs in some developing countries are counterfeit. It would be wrong to assume that the United States is immune to the documented counterfeiting in the international pharmaceutical trade. The World Health Organization and some industry analysts estimate about 5-8% of drug products shipped to the U.S. are counterfeit, unapproved or substandard. Counterfeit bulk drugs are ingredients in human prescription drugs which are deliberately and fraudulently mislabeled or misbranded with respect to its identity or source. Without knowledge of the source, there is no product history. Without product history, the safety and efficacy of the product cannot be assured because there is no information about impurities, the age, the storage, the manufacturing environment, or the synthesis of the product. It is extremely difficult to detect counterfeit bulk drugs because there is no single chemical test for all impurities that may be in the product. Counterfeit bulk drugs can represent a serious threat to the public health. A bulk quantity as little as 50 kilograms can be used in the production of millions of tablets or capsules. Therefore, only one counterfeit bulk that contains an impurity or is synthesized improperly could cause immediate death or injury to numerous people. The result of a counterfeit could be that the medication will not be effective or could produce a long term disease or injury. For example, these pictures show the differences at a microscopic level between the authentic drug and the counterfeit drug. The difference in this case lies in the particle size. Such a difference in the particle size could mean that the drug does not get absorbed in the bloodstream and therefore doesn't work. There is still much we do not know about this public health threat. The FDA has not made any public health assessment of this issue. Even if FDA attempted such an assessment, the FDA has no ability to make an assessment with its current data. In its March 5, 1999, letter from Congressman Klink and me, the FDA stated that it does not collect data to assess the amount of unacceptable or adulterated active pharmaceutical ingredients shipped to the U.S. from foreign sources. With what information the FDA does have, the FDA has linked counterfeit or unapproved bulk drugs to deaths and other adverse events in the U.S. Last year when FDA's Forensic Chemistry Center conducted a focused, in- depth study of just a handful of Chinese drug imports, evidence was uncovered which led in part to targeted inspections resulting in an import alert for one plant and warning letters for two other plants. We know we are only seeing the tip of the iceberg. Lured by high prices and potential profits in the U.S., counterfeit bulks can get into our prescription drugs in several ways: (1) as imported ingredients to U.S. manufacturers; (2) as imported ingredients to pharmaceutical compounders; and (3) as source ingredients for interact pharmacies marketing to the U.S. The counterfeiters use sophisticated methods such as preparing false labeling, containers, seals and certificates of analysis, or using a manufacturing process that differs from the filed manufacturing process. Here are two examples. The first example involves three pictures. The first picture shows a document dated around 1989 from an industry consultant laying out a scheme to market unapproved Chinese trimethoprim under the approved label of a German company. The second picture shows that the signature from the first document appears to belong to Dr. Jose Gomes. The third picture shows that Dr. Gomes in 1999 was the consultant for Long March Pharmaceutical, the firm that made the gentamicin sulfate I talked about earlier. The second example is a diagram of how a drum of bulk drug shipped to Australia was counterfeited. A layer of authentic drug on the top, milled sugar in the next layer, followed by a layer of authentic drug, etc. The public policy implications are enormous. The public health is threatened by unapproved, substandard or counterfeit bulk drugs. Counterfeits could have direct impact on the integrity of the adverse drug event report system. Counterfeit bulk drugs not only hurt patients, but defraud Medicare and Medicaid programs that pay for these drugs as if they are authentic. There is also speculation that an unknown influx of counterfeit, unapproved drugs is leading to more drug and chemical allergies and more antibiotic resistance. Even after years of plans and recommendations from internal working groups, the FDA remains largely unable to detect or control imported counterfeit bulk drugs from entering the U.S. The FDA has not even worked with the Customs Service to investigate imported counterfeit bulk drugs since 1996 and does not have any ongoing criminal enforcement action--or even a known strategy--to deter or prevent crimes connected to counterfeiting bulk drug imports. Instead, FDA relies on its regulatory system of inspections, import policies, and postmarketing surveillance. However, the FDA's testimony on this system is devastating. To illustrate this point, here are some direct quotes from FDA documents. ``The Agency is hindered by not having a complete list of foreign facilities manufacturing drugs products for the U.S.'' This is not acceptable, ``[W]e still do not have systems that can effectively and efficiently communicate across the Agency, or readily provide field staff with critical information they need.'' This is not acceptable. ``The Drug Listing database also does not interface with OASIS, which would assist import officers by automatically comparing manufacturers and listed pharmaceutical products to products offered for importation . . .'' This is not acceptable. ``FDA has identified the need to establish enhanced procedures to better assure that an import alert notice for a product or company, will, in fact, prevent the violative products from reaching the U.S. consumer.'' This is not acceptable. ``The drug listing does not ensure authentic sources or authentic material as described in New Drug Applications (NDAs) is in fact being offered for admission.'' This is not acceptable, In addition, the FDA told us they only have information on 18% of the foreign drug manufacturers that ship to the U.S. The FDA has no information on 623 importing drug firms from China and 409 importing drug firms from India. These kinds of weaknesses, and others, cause me to conclude that the FDA cannot assure the American people that prescription drugs are free from counterfeits and poorly made, unknown ingredients. The FDA has told the Committee that its safety net is being stretched by the increasingly global nature of pharmaceutical commerce. At some point the FDA's safety net will break, and I fear it may already be broken. It is urgent that the FDA shift to a new model to deal with counterfeit bulk drug imports. I am ready to do more than just hold FDA accountable. I am committed to working for a solution to this serious and dangerous problem. I fully intend to work with Commissioner Henney and the FDA to develop and implement new, effective protections. But the FDA needs to be forthright today about the threat and what it will really take to deal with the problem. I look forward to the testimony, further discussion, and action. Mr. Stupak. Thank you, Mr. Chairman. I want to thank you for holding this hearing, and I will be brief. You certainly in your outline--in your testimony, it was outlined that we cannot tolerate the sale of illegal and potentially adulterated pharmaceuticals in the market. Obviously, patient safety is compromised when drugs are imported that are manufactured without quality controls and inspections. I am interested to hear, Mr. Baker, about the Food and Drug Administration's attempts to prevent and punish illegal bulk drug sales. In addition, I am interested to learn what the FDA is doing to combat illegal compounding and radiological diagnostics. We need to understand what FDA's plan is for--what its plan is for enforcing current law. If the FDA feels it needs more resources, then they need to request them and they have to tell us what exactly they need. Otherwise, there is no excuse for the FDA not performing its mission. As I listened to your testimony, Mr. Chairman, on the bulk sale of drugs here, I am concerned about what is happening on the Internet. As you know, Mr. Klink and I have been working on the On-line Pharmacy Consumer Protection Act, and we have been working with the administration to come up with a bill that can be acceptable to both sides because we feel it is a huge problem. So now you take these counterfeit bulk drugs--and you say we know about 18 percent of them. How many more and are they being sold on the Internet? In fact, I have no reason to think they are not being sold over the Internet. I think this hearing has so much more we can explore, and I think it will be a very, very interesting hearing. So I thank you for holding this hearing, Mr. Chairman. Mr. Chairman, I am going to close with that, but before that, I would like to ask unanimous consent to place Mr. Dingell's statement into the record. He is currently at a meeting on the patients' bill of rights. Otherwise, he would be here, because I know Mr. Dingell is very interested in counterfeit bulk drug sales. So with unanimous consent I would submit his statement forward, please. Mr. Upton. Without objection, his statement will be made a part of the record, and all members of the subcommittee's statements, in fact, will be made a part of the record. Mr. Stupak. I yield back the balance of my time. Mr. Upton. Thank you. [The prepared statement of Hon. John D. Dingell follows:] PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. Chairman, I have long been concerned about counterfeit, substandard, misbranded, and adulterated drugs entering this country from abroad. Previous investigations conducted by this Subcommittee more than a decade ago ultimately led to the passage of the Prescription Drug Marketing Act, which added measures to protect consumers from potentially dangerous foreign drug sources. But protecting consumers from questionable and dangerous drug products manufactured abroad remains a formidable challenge. I remain concerned that the Food and Drug Administration (FDA) has yet to develop a suitable framework, in the face of potentially greater risks, for protecting the public. The Agency remains alarmingly behind in foreign inspections of firms sending drug products into the United States. And it still lacks the ability to track and measure the counterfeiting problem. The FDA is supposed to inspect firms for Current Good Manufacturing Practices (CGMPs) before they are approved to ship a drug product into the United States. Nevertheless, just last week FDA reported to us that approximately 4,600 foreign drug firms have shipped to the U.S., but have never been inspected by the FDA. Cause for added concern is the fact that firms in two countries with historic drug counterfeiting problems, China and India, are prominent on that list. According to FDA's records, 623 firms from China that have shipped drug product to the U.S. have never been inspected by the FDA. The figure for India is 409. To make matters worse, the problem of tracking dubious manufacturers seems to be getting worse, not better. FDA still lacks the basic information technology to allow it to efficiently communicate with the Agency's many other databases to provide staff with mission- critical information. A workable system for tracking who sends what and when to this country, and whether their manufacturing practices are acceptable, should already have been implemented. Commissioner Henney should immediately determine the Agency's information technology requirements for such a system and implement the system as soon as practicable. I also remain troubled that the FDA still lacks the ability to gather information about counterfeit, substandard, or even adulterated materials on a real-time basis. It is my understanding that, in recent staff discussions with the Agency, FDA officials agreed that it might be useful to require manufacturers to report immediately to the FDA if they discover any counterfeit bulk in their manufacturing processes. Currently, there is no such requirement, and that unnecessarily leaves other manufacturers and consumers at some risk. The implementation of such a requirement should allow FDA to develop a ``real-time'' database that could not only warn other companies if a particular product from a particular supplier is in question, but also allow the Agency to better understand and address this problem. Mr. Chairman, I believe that drug counterfeiting is a very real problem that will likely grow worse in the future. With the introduction of now hundreds of Internet sites selling prescription drugs with almost no regulatory framework in place, the environment and the incentive for using fake bulk drugs, making fake drugs and selling them directly to consumers is obvious. FDA lacks a credible framework for addressing these public health risks, and that is very worrisome. Mr. Upton. Mr. Burr. Mr. Burr. Thank you, Mr. Chairman. Let me take this opportunity to welcome our colleague, Mr. Stupak, back. We have missed him, and I am sure that his participation in this will help to enlighten this issue. Mr. Baker, let me welcome you. Let me suggest to you that the way to get started with this committee is to fulfill the requirements of the rules of the committee. Your testimony was turned in at 3 p.m. yesterday. The committee rules require those who testify to submit their testimony, I think, 48 hours in advance, so that members actually have an opportunity to read it, to study it, to understand what it is that Federal agencies are trying to do, understand, engage their level of passion and commitment to the issues. I think you have done a very good job of trying to lay out what the scenario is at the FDA. It would have been better, quite honestly, if the Commissioner were here. I am sorry that there was a conflict and that she had a week of travel; but clearly, if she got back yesterday, she could have also submitted testimony at 3 p.m. the day before the hearing. So I don't see that there is a tremendous amount of advantage, but I look optimistically at your testimony and the opportunity to go through some questions with you. Let me just read one part of your statement here. You say, ``It is important to distinguish between counterfeit drugs and products that are contaminated or otherwise improperly manufactured. While each of these conditions may''--may--``pose a threat to public health, counterfeiting is quite different and a much more rare occurrence in the drug manufacturing industry. The FDA Act states that a counterfeit drug,'' and you go into a very specific definition. If your intent is to come here and to debate what the specific definition of counterfeit or threat is to the drug market in this country, I hope you will change before we start. We are not here to debate definitions. We are here because, one, a problem exists; two, the FDA agrees a problem exists; three, the FDA has not done everything within its power to solve the problem. For that reason, there is an appropriate role for the Oversight and Investigation Subcommittee to play in the solution of this problem. Let me go on in your testimony, if I can, to import alerts. Page 22, near the end, ``While counterfeit drugs continue to be an issue of concern, it was determined that there was no specific need for a Commissioner's Office initiative.'' That tells me that the level of concern about the issue is not as great at the end of your testimony as it was at the beginning of your testimony. I hope that you will have an opportunity to set the record straight on what the level of commitment at the Food and Drug Administration is on solving this issue of counterfeiting or contamination, this issue of a public health question to an agency that I quite honestly have spent a tremendous amount of time trying to make sure that the gold standard that the American people expect, that the FDA employees have worked aggressively to maintain, is maintained in every piece of legislation that goes out of this institution. I certainly hope that we will continue to do that and that you will enlighten us on what we can do legislatively to make sure that everything possible is done at the FDA to assure the safety and efficacy of everything that goes into pharmaceuticals. Mr. Chairman, I thank you and I yield back. Mr. Upton. Thank you. Mr. Bryant. Mr. Bryant. Thank you, Mr. Chairman. I might first thank you for having this hearing and thank our witness, our distinguished witness, for being here today. I look forward to his testimony. As you explained, there are many competing factors for our time, and we may be in and out a little bit during the hearing, but I do appreciate your coming today. I think this is a good subject for a hearing and I want to commend our chairman for having this. I would echo his remarks, as well as my friend from Michigan, Mr. Stupak's remarks, as well as Mr. Burr's remarks; and would add that as I understand, in reading from some of the preparatory materials for this hearing, the issue that we are concerned with today and we would like to hear from you is: Does the use of counterfeit, unapproved bulk drugs pose a threat to the safety and efficacy of other finished drugs? Mr. Burr sort of touched on that, and maybe what I hear him saying is his impression that the FDA does not consider this to be a significant problem. Maybe I misunderstood what he said, but I think that was his construction of what your statement says. But if there is a legitimate threat out there, what does the FDA do in its regulatory system to ensure that that does not happen? And second, does the FDA have any initiative, anything to put forward today to us, to explain what you are doing to ensure that U.S. prescription drug supplies are free from counterfeit or unapproved bulk drugs? I think those are the issues. Is there a problem? And if you agree there is a problem, what are you doing about it? As I read other materials--our chairman mentioned some of the statistics that are involved here; and I know, like all agencies, or I suspect, you will plead that there are not enough people to go around and FDA needs more people to help enforce this. Nevertheless some of the statistics are mentioned here. Again our chairman has mentioned some of them already, but I will mention a couple more. There are approximately 310 points of entry in the United States, but in fiscal year 2000, the FDA has only 68 full-time equivalents in the field allocated to human drugs. They mentioned the 4,600 foreign drug manufacturers who have never been inspected by the FDA. Only about 18 percent of the total number of foreign drug manufacturers are shipping to the U.S. at this time--in 1998, I should say--that the FDA has information on. The tracking system, foreign inspection force, does not include reports which relate to manufacturing violations with a product from a country, and so on. These are generally admissions, I think the FDA has made in the letter to Chairman Bliley. One final comment in regard to all of this, and I say this as a former U.S. Attorney--and I know Bart Stupak is a former law enforcement officer and probably has seen this: It is a phenomenon out there among our investigative agencies, called TURF. And I found that as a U.S. attorney, who sort of helped run investigations with the idea that we would gather facts from the FBI and the DEA and all of those investigators out there in our office and help prosecute the bad guys. But I found this concept of turf battles. In reading through these materials, I see where the FDA-- and I would like maybe to hear from you if this is true or not--the FDA has not worked with the Customs Service to investigate imported counterfeit bulk sales or bulk drugs since 1996 and does not have any ongoing criminal enforcement action or strategy, for that matter. I think this gets into something else, but again the issue of whether you are working cooperatively with other agencies that have a similar jurisdiction and a similar goal to prevent this type of conduct from happening. Again, realizing that we don't call it turf battles, but that is what it is, I would like to know why the FDA is not working with Customs and maybe any other agency that would have, again, similar jurisdiction that would help by combining resources, and maybe even a task force or something like that, to stop this. I guess in the end, as I close, we have got to agree, first, if there is a significant problem or not; and that is what I would like to first hear, too. With that, I would yield back my time. Mr. Upton. Thank you. [Additional statement submitted for the record follows:] PREPARED STATEMENT OF HON. TOM BLILEY, CHAIRMAN, COMMITTEE ON COMMERCE Mr. Chairman, this hearing is of vital importance. On June 23, 1999, at a hospital in Los Angeles, a 10-year old boy was given a dose of an antibiotic called gentamicin sulfate. After he finished getting this dose, he got unexpected side effects of chills, shaking, and 102 degree fever. The drug he took was made of ingredients that came from a bulk drug plant in China called Long March Pharmaceutical. This 10-year old boy was just one of what turned out to be 155 American patients in 1998 and 1999 who suffered from these reactions that were linked to the Long March ingredient. Some of these reactions were life-threatening. While none of the 155 patients died from these reactions, there are other patients who may have died from unknown impurities in counterfeit or substandard gentamicin. Whatever was wrong with this drug ingredient, it slipped through the FDA and the U.S. drug companies. Could the FDA have prevented the gentamicin problem? The FDA years ago had tips about counterfeit gentamicin and had opportunities to prevent the gentamicin problem. In 1994, FDA investigated counterfeit bulk gentamicin sulfate, but dropped the investigation because the suspicious lots were no longer available. Nothing was done on the regulatory side, not even taking samples of gentamicin sulfate from various U.S. firms to test for impurities or counterfeiting. Based on a 1996 memo from one of its criminal investigators, the FDA had information from a case involving Long March-labelled counterfeit drugs for animals that told them that counterfeit gentamicin sulfate for humans was being sold in the U.S. In addition, FDA had recommendations in 1996 to deter, detect, or interdict counterfeit gentamicin sulfate and other counterfeit bulk drugs. Many of these key recommendations were not implemented. Lack of FDA action left American patients vulnerable to imported bulk drugs like the Long March gentamicin. The FDA's record on controlling counterfeit bulk drugs so far is a record of failure. That is an outrage. As far back as 1991, the FDA had evidence from its field force that suggested widespread availability of counterfeit bulk drugs in both human and animal drug industries. In 1996, then-FDA Commissioner David Kessler established a counterfeit bulk drug initiative and a working group to deal with this issue. A year later, the FDA disbanded the Commissioner's working group and downgraded the priority of counterfeit bulk drugs. Since the FDA has downgraded the priority of counterfeit bulk drugs, international authorities including the World Health Organization (WHO) last month have recognized the growing problem of counterfeit drugs. While the FDA has taken some small steps in improving some of its systems, much remains to be done. As the Committee's investigation has revealed, the FDA's regulatory system used to protect Americans from counterfeit or substandard drug ingredients has significant holes. For example, many times FDA will allow drug products into our country not based on proof of authenticity, but merely on the representations of an international broker, who could in fact be the counterfeiter. FDA has only partial information, if that, on the original source to determine authenticity. The FDA's own people acknowledge that the import alert system is broken and that using drug listings for admitting drug imports has had a dismal record. The FDA admits it has information on only 18 percent of the foreign drug manufacturers shipping to the U.S. The FDA admits there are about 4,600 foreign drug manufacturers that have shipped to the U.S. since October 1997 but have never been inspected by the FDA, including 623 in China and 409 in India. At the time of entry at the ports, the inspectors do not have the ability to know where the drug shipment is going in the U.S. and what will really happen to it. What has been truly disappointing has been FDA's apparent lack of interest in using the authority and resources the Congress gave the FDA specifically to investigate counterfeit bulk drugs. In 1993 the FDA's Office of Criminal Investigations was created specifically to give the FDA the capability to investigate counterfeit drugs. By statute, FDA has special enforcement powers related to investigating counterfeit drugs. But what has been the record? How has the FDA used this authority? In May 1996, one of FDA's criminal investigators wrote a memorandum to his supervisors at the FDA's Office of Criminal Investigations about evidence from a criminal investigation showing the threat of counterfeit bulk drugs imported into the USA. But his supervisors did nothing to follow-up on the investigative leads or to implement or suggest improvements in criminal investigations of counterfeit bulks. In its June 2, 2000 letter to me, the FDA admits in the area of counterfeit bulk drugs the Office of Criminal Investigations has no open investigations, has not initiated even one investigation, and has not worked with any other federal agency investigating counterfeit bulk drugs. There is no criminal investigative strategy included in the FDA's draft 1999 Work Plan on counterfeit drugs. None. Ladies and gentlemen, bulk-drug counterfeiting and the acts that perpetuate the fraud are federal crimes. These crimes threaten the public health and the integrity of the pharmaceutical industry, place law-abiding bulk suppliers at a competitive disadvantage, and victimize U.S. drug companies. Just last month, the WHO, international pharmacists, and international drug manufacturers issued public statements about the major problem of drug counterfeiting. It seems that imported drug counterfeits are increasingly recognized as a major problem. In some of its statements to the Committee, the FDA assumes there must be no major problem even though it has not conducted a public health assessment of the counterfeit bulk drug issue and has little quantifiable information on the subject. However, the FDA told Committee staff that they had learned from an investigation about 10 years ago that Americans had died from counterfeit bulk antiseizure medicine. The FDA told staff as well that there are public health concerns with introducing counterfeit and unapproved bulk drugs into our medicines. This is why FDA has in place regulations and inspections to deal with bulk drug ingredients. Mr. Upton. Our witness today is Dennis Baker, Associate Commissioner for Regulatory Affairs at the Food and Drug Administration. Mr. Baker, welcome. As you know, we have a long-standing tradition of taking testimony under oath. Do you have any objection to that? Mr. Baker. None whatsoever, sir. Mr. Upton. Committee rules also allow you to have counsel, if you wish to have counsel represent you as well. Do you wish to have counsel? Mr. Baker. No, I do not. Mr. Upton. If you would stand and raise your right hand. [Witness sworn.] Mr. Upton. You are now under oath and your testimony is made a part of the record in its entirety, and the time is yours. Thank you. TESTIMONY OF DENNIS BAKER, ASSOCIATE COMMISSIONER FOR REGULATORY AFFAIRS, U.S. FOOD AND DRUG ADMINISTRATION Mr. Baker. Thank you, Mr. Chairman, and good morning, Mr. Chairman, and members of the committee. I am Dennis Baker, Associate Commissioner for Regulatory Affairs at the U.S. Food and Drug Administration. Mr. Upton. If you could just put the mike a little closer. Mr. Baker. Is that better? Mr. Upton. That's better. Mr. Baker. Thank you. With me today, I have Mr. John Taylor. He is Acting Director of our Office of Compliance at the Center for Drug Evaluation and Research within FDA. Together, our offices are responsible for regulating the importation of foreign drugs. I appreciate this opportunity. I am rather new to FDA. I have been on board about a year now. I came on board from the State of Texas, so I have had some eye-opening experiences, as you might guess, and coming here today is another eye-opening experience. But what we are here today about is imported counterfeit bulk drugs, and the Agency's actions to protect the American public from the risks of those drugs. I want to preface my remarks by noting that while we take very seriously the counterfeiting of drug products, we still believe the overall quality of drug products in the country to be very high. The public, we think, can be confident that the drug products they use are safe and effective. Although FDA takes many steps to protect American consumers and patients against unsafe drugs, we recognize that more can be done and should be done. There is room for improvement in our abilities both to quantify the potential for the entry of counterfeit bulk into the U.S. market and, when warranted, to strengthen our regulatory or enforcement activity. In this testimony, I will highlight FDA's efforts to ensure that imported bulk drugs meet the requirements of the Food, Drug and Cosmetic Act. More detail on FDA's programs and activities in this area is provided in my written statement, and I request that it be included in the record. Mr. Upton. Yes. Mr. Baker. Simply put, the Food, Drug and Cosmetic Act defines a counterfeit drug, as we mentioned earlier, as a drug that bears a false identification of its manufacturer, processor, packer or distributor. The definition applies to active pharmaceutical ingredients, APIs, as well as finished dosage forms that are deliberately and fraudulently mislabeled or misbranded with respect to their identity and source. Counterfeit APIs pose a real or potential health hazard because their manufacturer is often unknown, which makes it impossible to establish an accurate product history. As a result, the safety, quality and efficacy of the product cannot be assured. Central to FDA's system of protection for the integrity of prescription and nonprescription drugs are the standards for safety and effectiveness in manufacturing that are established by the Center for Drug Evaluation and Research. It is important to note that a key element of this system of protection is the responsibility that a drug manufacturer has to test and validate the safety, purity and consistency of the APIs it uses in the manufacture of its products. Some of the strategies employed by FDA to maintain these standards include the rigorous scientific evaluation of all marketing applications for new innovator and generic drug products and monitoring the quality of APIs in finished dosage forms manufactured in and imported into the United States; collecting and evaluating information on adverse events associated with marketed products; and conducting inspections to ensure that manufacturers produce high-quality pharmaceutical products. Over the last decade, FDA has taken a close look at the issue of counterfeiting, and we have engaged in wide-ranging discussions on whether our regulatory enforcement programs were up to the task or needed reworking. Let me emphasize that many of our discussions in the earlier part of the decade were based on the fact that our information resources were far less capable than what we have today. Although there is still room for improvement, and I would say much improvement, most of the information systems in use today were established during the 1990's in response to our need for better information. The task before us now is to better integrate the various information resources into a unified environment, a unified information technology (IT) environment. We fully recognize that we have been working from a collection of independently developed data bases, all of which contain critical information, but they clearly need to be integrated; they have to be linked. This unified environment will make better information available to the field, where we must make quick decisions on the admissibility of products, and it will allow us to reconcile the data now contained in our various existing systems. We have a program of technology upgrades in place. Those upgrades have already resulted in the roll-out of the FACTS system which incorporates data from the OASIS import registry and the COMSTAT compliance information system. In an effort to begin to address the weakness in IT available to import inspectors, a pilot was initiated in the Philadelphia district to provide import inspectors with access to CDER's EES system, which tracks drug applications. This allows the import inspectors to increase the probability of confirming authentic sources of APIs. The goal is to ultimately have access to a single data base that includes all the information needed and houses a true foreign establishment inventory. The FDA has also restructured its foreign inspection program in order to better target those firms and products that have the most potential for problems, including counterfeiting. While the bulk of our foreign plant inspections are still in support of new drug applications, we have instituted a tiered inspection system based on potential risk to the consumer. In spite of our best strategies, however, resource limitations will prevent us from conducting universal foreign drug inspections. Now, that being said, could we do a better job with the resources we have? Certainly. FDA has also revised the sampling of products under the drug product surveillance program, and these samples are analyzed by our Forensic Chemistry Center. Since 1998 we have been focusing on collecting a greater number of samples of targeted APIs to determine if a product is authentic and meets specifications. Building this data base for API information will be helpful to our field inspectors in identifying possible counterfeit APIs. Currently, this data base contains information on approximately 400 to 500 APIs. Another aspect of our program emphasizes a stronger cooperative effort with foreign governments and industry. Mr. Chairman, FDA is alert to the fact that our protections against counterfeit drugs are in need of improvement. Building and maintaining a strong regulatory framework and providing the tools to ensure the integrity of imports is a complex and resource-intensive undertaking that requires flexibility in response to the constant growth and changes of the global market. While our agency has done much in recent years to meet these demands, clearly more can be done. Today, I would like to announce five additional new initiatives we are undertaking to further improve this system. Just last January, I allocated funds to the Forensic Chemistry Center for analytical work in assessment of APIs gathered through targeted inspections of importers. The FCC API data base will be made available electronically to all field inspectors by January 2001. While the Philadelphia pilot does not fix the entire IT problem, in the interim, it clearly provides a benefit to our field force. By the end of the year, we will expand this pilot nationwide so all of our field force has access to the EES data, a real-time reading of the data. Exporters to the U.S. are required by FDA to provide the name of the foreign manufacturer upon entry to the U.S. This information has been inconsistently provided by importers and the agency has not enforced this requirement. Effective immediately, we are going to put all importers on notice that this information must be accurately provided and the entry of their products into the U.S. will be contingent upon it. At the suggestion of Mr. Dingell and Mr. Klink, we considered requiring domestic manufacturers to provide information to FDA when they discover that bulk materials they receive are substandard, ineffective or appear not to be from the approved source. We did consider this idea. We believe it will provide us with useful information, and we are looking at regulatory approaches for implementing this requirement. A vigorous and effective system requires sufficient resources that provide the necessary expertise, scientific methodologies, tools for testing and integrated information systems. We are committed to ensure the Agency has what it needs. We look forward to working further with the committee as we strive to provide the American public with the protections it expects and deserves. This concludes my testimony, and we will be happy to answer any questions you may have. [The prepared statement of Dennis E. Baker follows:] PREPARED STATEMENT OF DENNIS E. BAKER, ASSOCIATE COMMISSIONER FOR REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION Good morning, Mr. Chairman, and Members of the Committee. I am Dennis E. Baker, Associate Commissioner for Regulatory Affairs (ACRA) at the United States (U.S.) Food and Drug Administration (FDA or the Agency). With me today is my colleague, John M. Taylor, Acting Director, Office of Compliance, Center for Drug Evaluation and Research (CDER). I am pleased to come before the Committee to discuss your concerns about imported counterfeit bulk drugs and the Agency's actions designed to protect the American public from the possible risks that such drugs may pose. It is important to note that the overall quality of drug products in this country is very high. However, FDA takes very seriously allegations regarding the counterfeiting or adulteration of drug products. We recognize that more can be done to quantify the scope of the problem counterfeit bulk drugs may pose in the U.S. market, and strengthen our regulatory or enforcement activity, when warranted. In this testimony, I will describe efforts the Agency has taken to ensure that imported bulk drugs meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act. ``Bulk drugs'' are active or inactive ingredients used in the manufacture of finished dosage drug products. While safety issues clearly apply to all products that are classified as bulk drugs, at the Committee's request, this testimony will generally focus on issues related to the importation from foreign sources of active pharmaceutical ingredients (APIs), which was the subject of Chairman Bliley's May 8, 2000, letter to the Agency. It is important to distinguish between counterfeit drug products and products that are contaminated or otherwise improperly manufactured. While each of these conditions may pose a threat to public health, counterfeiting is a quite different, and much more rare, occurrence in the drug manufacturing industry. The FD&C Act states that a counterfeit drug is: ``A drug which, or the container or labeling of which, without authorization, bears the trademark, trade name, or other identifying mark, imprint, or device, or any likeness thereof, of a drug manufacturer, processor, packer, or distributor other than the person or persons who in fact manufactured, processed, packed, or distributed such drug and which thereby falsely purports or is represented to be the product of, or to have been packed or distributed by, such other drug manufacturer, processor, packer, or distributor.'' More simply stated, a drug that identifies itself as the product of a drug manufacturer, processor, packer, or distributor other than the actual manufacturer, processor, packer, or distributor of such drug is counterfeit under the FD&C Act. This definition applies to active pharmaceutical ingredients, intermediate pharmaceuticals, and finished dosage forms that are deliberately and fraudulently mislabeled or misbranded with respect to their identity and source. Counterfeiting can apply to innovator or generic products. Counterfeit APIs pose a real or potential health hazard because their manufacturer is often unknown. The fact that the manufacturer is unknown means that there is no product history. Therefore, the safety and efficacy of the product cannot be assured, the impurity profile is unknown and the age, storage, manufacturing environment, and/or the synthesis of the product cannot be determined. Moreover, the failure to have a product history means that the results of research and development and the clinical trials done by legitimate pharmaceutical product manufacturers are negated. The participants in illegal counterfeiting activity may include manufacturers of API pharmaceuticals, manufacturers and repackers who relabel and substitute API products in the distribution chain, importers, brokers, domestic agents, and purchasing agents either acting alone or in concert with a corporate unit. There are certain products that especially lend themselves to counterfeiting. In general, very expensive chemicals that are purchased in small quantities or less expensive chemicals that are purchased in very large quantities are particularly vulnerable to counterfeiting. I. THE REGULATION OF ACTIVE PHARMACEUTICAL INGREDIENTS FDA is responsible for the safety and quality of domestic and imported pharmaceutical products. Specifically, FDA's CDER establishes standards for the safety, effectiveness and manufacture of prescription and over-the-counter (OTC) drugs. In addition, FDA's human drug program applies premarket review, postmarket surveillance, education, research and other strategies to ensure that all drug products are safe and effective and that information on the proper uses of the drug products is available to all users. The strategies employed by FDA include: <bullet> regulating the testing of investigational new drugs (INDs); <bullet> evaluating the data in new drug applications (NDAs) for marketing new drugs and abbreviated new drug applications (ANDAs) for marketing generic drugs; <bullet> monitoring the quality of API and finished dosage drug products manufactured in and imported into the U.S. through post market surveillance programs; <bullet> collecting and evaluating information on adverse effects associated with the use of marketed products; <bullet> regulating the advertising and promotion of prescription drugs; <bullet> establishing and monitoring standards for use, labeling and composition of both prescription and OTC drugs; <bullet> conducting inspections to ensure that manufacturers produce safe, pure and high quality pharmaceutical products; and <bullet> evaluating the conditions under which drugs are manufactured, packed, tested and held. FDA's human drug program also disseminates timely and accurate product information to the medical community and the public regarding new drugs and their uses, identifies drugs with the potential for abuse, and makes recommendations to the Drug Enforcement Administration (DEA) for drug classification and control. Foreign manufactured drugs imported into the U. S.--both bulk and finished products--fit into the Agency's regulatory framework through new and generic drug evaluations, drug quality assurance, inspections, postmarketing surveillance and adverse drug event reporting programs. New Drug Evaluation/Generic Drug Evaluation The goal of the new and generic drug approval process is to ensure that 1) new drugs brought to market are safe and effective as labeled for their intended use, and 2) generic drugs approved for marketing are safe, effective, and manufactured in a way that ensures their continued safety, efficacy, and bioequivalence. Personnel from the Office of Regulatory Affairs (ORA), sometimes accompanied by chemistry or other professional staff from CDER, conduct pre-approval and post-approval inspections of the facilities manufacturing drug products that are identified by drug sponsors in their applications. FDA's Pre-approval Inspections Program (PAI) provides for the investigator to verify the accuracy and authenticity of data submitted by firms in support of the approval of their new or abbreviated new drug applications and to assess the firm's compliance with current good manufacturing practices (cGMP). The program covers both domestic and foreign manufacturers of both finished dosage form products and APIs. A drug manufacturer is responsible for testing and validating the safety, purity and consistency of the APIs it uses in the manufacture of its products. In fact, all such manufacturers are required to disclose the source of their APIs in their applications, and both domestic and foreign API manufacturers must be in compliance with cGMPs prior to the approval of those applications. Drug Master Files (DMFs) are established to allow producers of active ingredients and other formulation materials to submit confidential commercial information directly to FDA. Therefore, these bulk drug inspections are considered to be pre-approval inspections and include inspectional verification of the information submitted to the DMF by the bulk drug manufacturer. The DMF contains manufacturing information pertinent to the formulation material. It is referenced by an applicant for a finished dosage form and is considered part of the application. Foreign and domestic bulk manufacturers are reevaluated periodically for cGMP compliance, either during pre-approval inspections for a different product, or by a routine drug process cGMP inspection under the API program. Drug Quality Assurance Program Without proper process validation and control, marketed drugs may be deficient in many ways such as being subpotent, superpotent, or contaminated with other drugs or microorganisms. CDER is responsible for conducting postmarketing assurance monitoring of the overall manufacturing quality of drugs and maintaining drug establishment registration and drug products listing. In conjunction with ORA, CDER must also ensure that the manufacturing, processing, packing, and holding of drugs are such that the highest quality products will be marketed. FDA inspections and product analyses are conducted to ensure that firms are validating their manufacturing processes. Comprehensive cGMP evaluations of drug products or dosage form are conducted. These inspections include domestic and foreign API and finished dosage form manufacturers. In addition, CDER initiates drug sampling surveys that involve the collection and analysis of imported bulk drug substances and finished products that are then analyzed by Agency field labs for quality and forensic laboratories for evidence of counterfeiting. Selection of drug products for FDA sampling and testing under the Drug Product Survey Program is based on the following criteria: therapeutic significance; emerging problems; impurities; stability concerns; results of previous drug surveys; economic importance; and compliance history of the firm. Foreign active pharmaceutical ingredients have been added as sampling/ testing targets. CDER strives to obtain voluntary support from the pharmaceutical industry whenever possible, informing firms of problems with their products or manufacturing processes so that correction may be made as expeditiously as possible, but takes regulatory action when necessary to effect the required changes. Postmarketing Surveillance and Epidemiology FDA employs other surveillance programs, including drug listing review of imports and the Drug Quality Reporting System under MedWatch. ORA is establishing a library of authentic bulk drug substances to use in investigations to identify counterfeit drugs. II. FOREIGN INSPECTION WORKING GROUP The continuing increase in international trade has turned the world into a global marketplace. The number of API and finished drug products manufactured abroad for the U.S. market is growing. It has been reported that as much as 80 percent of the APIs used to manufacture and produce prescription drugs in this country is imported from other countries. Therefore, over the last decade, FDA has substantially increased its worldwide inspectional and import monitoring operations, but the rapid expansion of the world market will continue to challenge our ability to direct appropriate levels of resources and operations to the foreign arena. FDA must continually recalculate its enforcement tools to ensure that the American public is protected from adulterated and unsafe products entering the U.S. market. To keep pace, FDA has stepped up its inspectional and import- monitoring activities since the early 1990s, however, the Agency recognized that it needed to do more. In 1995, the FDA formed a Foreign Inspection Working Group (FIWG), comprised of representatives from all parts of the Agency, in an effort to evaluate the Agency's current foreign inspection program and related import product monitoring. The working group devoted months to understanding and identifying FDA's strengths and weaknesses in its foreign inspection program. The FIWG issued a summary report in June 1997. This evaluation cuts across Agency program areas, however, I will focus on the drug program and how it relates to bulk drugs, the findings, and the Agency's subsequent actions over the past three years. Inspection Planning Prior to Fiscal Year (FY) 1997, FDA's foreign inspection program in large part focused on pre-approval inspections. In the early 1990s, foreign inspections resulted in a higher percentage of foreign manufacturers with significant GMP problems relative to domestic facilities. These findings indicated a need for more post-approval surveillance coverage to help assure that imported drug products are produced in accordance with cGMPs. CDER addressed this issue by structuring its foreign post-approval inspection scheduling using a risk-based strategy that allows it to more effectively utilize limited resources. Specifically, assignments are still primarily application driven, in that all foreign inspections of firms that are part of an application are conducted during the course of the application review. Additional post-marketing surveillance inspections are scheduled based on risk as assigned by a four-tiered system: <bullet> Tier 1--firms needing reinspection due to a previous finding of ``official action indicated''; <bullet> Tier II--firms manufacturing sterile bulk or finished dosage products; <bullet> Tier III--firms with a higher number of applications and firms manufacturing bulk drugs for use in injectable dosage forms; and <bullet> Tier IV--all other firms. The tiered system has had the beneficial effect of focusing our limited resources on the firms that pose the highest risk to the American consumer. We have maintained a level of inspecting about 250 foreign firms per year for cGMP compliance and pre-approval acceptance. The inspections performed have been in the Tier I and Tier II categories. The negative consequence, however, is that by continually emphasizing these high-risk firms we are not able to get to the Tier III and Tier IV firms, thereby lengthening the gap between inspections. CDER has recognized this problem and has identified and provided to ORA a priority list of 24 firms in China and 32 firms in India that have not been inspected but, according to the Operational and Administrative System for Import Support (OASIS) data, have shipped product in the last two years into the U.S. ORA is working these firms into inspection planning as resources permit and travel plans make opportunities available. For example, inspections of these priority firms can be added to pre-approval inspection trips. Official Establishment Inventory The Agency's Official Establishment Inventory (OEI) is a compilation of firms FDA has inspected, firms that have shipped products to the U.S., as indicated by the OASIS database, and firms that have listed as part of the Agency's drug listing program. FDA has completed evaluations of entry data from OASIS and is using this information to supplement the inventory of firms in the OEI. This is an ongoing process. FDA recognizes that there are weaknesses in this data, due in part to the fact that the OASIS system is user-driven. The Agency is using broker evaluations in part to increase the integrity of the submitted data and eventually included in the OEI. The Agency is hindered by not having a complete list of foreign facilities manufacturing drug products for the U.S. market. This finding indicates a need to improve the Agency's information database on foreign firms exporting drug products to the U.S. The Food and Drug Administration Modernization Act (FDAMA) of 1997, requires the registration of foreign establishments. Once we have completed the rulemaking process and put the technology in place to implement this requirement, the Agency will have available to it a comprehensive listing of foreign establishments exporting drugs to the U.S. Having a complete OEI, however, is only one step. We also must have the information technology to be able to more fully utilize the data we already have to the Agency's benefit. Therefore, FDA has begun a process of upgrading its hardware and software systems to move beyond the fragmented and independent systems of the past into an integrated information environment where data is more readily available and more easily manipulated to provide information and analyses that has not been possible before. The Agency recognizes while we have made great strides in improving our information technology, we still do not have systems that can effectively and efficiently communicate across the Agency, or readily provide field staff with critical information they need. FDA is implementing the upgrade of our information technology systems to utilize wide area network (WAN) technology, which will support the availability of much more information to inspection officers. We are evaluating both the technology, as well as the cost, or further integrating our various sources of data into unified databases. The OASIS system uses information input by filers (Custom House Brokers and importing firms) to facilitate the screening and/or inspection of imported products that are subject to FDA regulation. OASIS began as a pilot program in the Seattle District in 1992. It interfaced with the U.S. Customs Service Automated Commercial System (ACS), screened entries (using ACS) and provided the initial operational support to FDA users. The interface with ACS and the screening subset of the system (known as EEPS) was implemented nationally by June 1995, and use of the OASIS system by industry became mandatory in December 1996. The baseline of the current version of OASIS with full basic operational functionality was implemented nationally by October 1997. The system has undergone continuous improvement of operational support. A major change in September 1999, moved screening from ACS to OASIS and expanded screening to cover all data elements. As a user-driven system, OASIS depends upon import brokers to provide complete and accurate information. While the OASIS system provides the majority of the information it was designed to provide, it only contains 2 years worth of data, and does not electronically interface with other systems which contain additional information which would be of value to our field staff. One of FDA's major upgrades in information technology is the establishment over the last year of the Field Accomplishment and Tracking System (FACTS), which performs a number of functions, including the ability to request, manage and report on inspections and other field assignments such as sample collections and analyses, and compliance cases. FACTS incorporates data from the Compliance Status Information System (COMSTAT) system, described below, as well as OASIS, and will eventually provide the resident environment for the foreign OEI. We also are actively working on integrating the Establishment Evaluation System (EES), which provides information on inspection requests and outcomes to compliance officers, drug reviewers and field personnel, with the FACTS database. COMSTAT provides the compliance status of foreign manufacturers based on the results of cGMP inspections. COMSTAT data is shared with other Federal agencies and foreign inspectorates to ensure that pharmaceutical products purchased or cleared for import meet acceptable standards. Ideally, this data should be readily available to FDA's import inspectors making admissibility decisions. COMSTAT does not include the drug listing identification number FDA assigns to each manufacturer in the Drug Listing database, which lists the products of drug firms registered with CDER. FDA is pursuing the linkage of information in the Drug Listing database with COMSTAT so that we can easily match foreign manufacturers who have ``listed'' with their compliance status. The Drug Listing database also does not interface with OASIS, which would assist import officers by automatically comparing manufacturers and listed pharmaceutical products to products offered for importation, and this is another area where we are working on establishing a linkage. Finally, we are also actively working on connecting the current EES with the import data available in OASIS, as described more fully later with regard to a pilot project in our Philadelphia District. Import Alerts FDA has identified the need to establish enhanced procedures to better assure that an import alert notice for a product or company will, in fact, prevent the violative products from reaching the U.S. consumer. We have begun this process by making import alerts available to interested parties on FDA's Internet site. International Information Exchange The Agency needs to strengthen and improve communication with the public health and regulatory components of foreign governments. FDA foreign inspections are ``pre-announced,'' because FDA must obtain permission to enter the foreign country. Therefore, it is difficult for FDA to assure that the firm is operating under normal conditions during the inspection. Establishing strong relationships with the foreign governments will facilitate both access to the country and a fair and frank exchange of information regarding the regulatory status of facilities in that country. The Agency has negotiated a Mutual Recognition Agreement (MRA) with the European Union. This agreement involves an upfront investment of resources on the part of FDA that should result in expanded inspectional coverage of foreign firms by foreign inspectional body counterparts. On a parallel track, FDA has a number of Memoranda of Understanding (MOUs) with foreign countries to obtain inspectional information that will supplement what FDA is already doing. Sampling Evidence of product quality problems has not been identified during current surveillance sampling activity. We will continue to target high-risk drug products for sampling. III. COUNTERFEIT DRUG INITIATIVE In 1995, the Agency began a closer examination of the issue of counterfeit drugs. For just over 2 years a cross-cutting group reviewed both the Agency's knowledge of the extent of counterfeiting and the adequacy of the systems in place to handle it when it occurred. While the work of this group is certainly related to the work of the FIWG as described above, the findings and observations were specific to counterfeit drugs. Meetings with Representatives from Foreign Governments and Industry The Agency has and continues to strengthen its international collaborative efforts with other inspectorates outside the MRA process. We have given priority to Canada, Australia, and Mexico for more development and have worked with Latin American countries on educational efforts, for example, the University of Puerto Rico project. These efforts also include a semiannual scientific exchange meeting with representatives from the United Kingdom, Germany, Canada, Australia, and the Netherlands. The Agency has met with pharmaceutical industry representatives from innovator and generic drug companies to discuss the importance of sharing information that they may have regarding counterfeit drug products. Discussions are held regarding the most productive ways to enhance cooperation by exchanging information and providing assistance during future investigations. Companies that produce high demand products that tend to be counterfeited often do not elaborate on the actions they are taking to combat the counterfeiting problem. While such secrecy is understandable, sharing such information would create efficiencies for both the Agency and the industry in efforts to combat counterfeiting. In addition, in 1997, the Office of Criminal Investigations (OCI) began to coordinate international efforts aimed at identifying, investigating, and prosecuting pharmaceutical crime through liaison with international efforts that had been formed by the Forensic Chemistry Center. In 1998, OCI formally established a liaison with its international counterparts within the Medicines Control Agency (MCA) in the United Kingdom, and the German National Police, Bundeskriminalamt (BKA). This collaborative effort of sharing criminal intelligence has now grown into the Permanent Forum on International Pharmaceutical Crime (PFIFC). This working group is an international enforcement forum aimed at exchanging intelligence and ideas to foster mutual cooperation in combating pharmaceutical crime. The following countries have representatives on this forum: USA, United Kingdom, the Republic of Ireland, Northern Ireland, Spain, Germany, Canada, Singapore, Brazil, Belgium, South Africa, the World Health Organization, and the World Customs Organization. The PFIPC meets once a year and facilitates ongoing dialogue among member nations throughout the year. Postmarket Sampling of Imported Products As we noted above, a key element of post-marketing surveillance is the Drug Product Surveillance program. While this program provides the Agency with valuable information about the quality of drugs marketed in this country through sampling and analysis of imported and domestic drug products, the volume of imports dictates that only a small fraction of the entries are examined. That said, there is concern that the current sampling strategy is not using the Agency's resources most effectively. Increased sampling and testing of foreign produced bulk pharmaceutical chemicals and finished dosage forms have revealed very few problems. Two changes have been made to our sampling strategy as a means to address these concerns. 1. The sampling of APIs for analysis by the Forensic Chemistry Center (FCC) to detect counterfeits was revised in 1998. The sampling now calls for the collection of five batches per year for each of the last 5 years (25 samples total) for each source of API at each finished dosage manufacturer. In the past, we received a few samples each of a large number of different drugs that was a kind of ``shotgun'' approach, hoping for a random hit. The new program is more focused and more likely to detect counterfeits, however, of necessity, only a few drugs can be addressed each year. Three drugs were selected for sampling in FY 1998, five drugs were selected for FY 1999, and three are targeted for FY 2000. 2. CDER's compliance program now directs FDA investigators as part of its inspection assignment at a foreign API manufacturer to ask the manufacturer to provide the FCC authentic samples of its APIs, labeling, certificates of analysis, container information, batch numbering information, size, and amounts of API produced and shipped to the U.S. The authentic information is entered into the API database and used for comparison to suspect samples. Increased Training for FDA Import Inspectors FDA inspectors and investigators need accessible information to help them determine the authenticity of pharmaceutical products. The Agency recognizes the need to provide training to investigators and inspectors on conducting effective API inspections while providing specific information on issues involving counterfeit and unapproved sources of drugs as well as poor cGMP compliance. Intensive training sessions will be conducted in July 2000, with U.S. Customs Service officers collaborating with FDA to provide the training. These sessions will focus on U.S. Customs Service laws and regulations, enforcement techniques that can be used at U.S. ports of entry, and a U.S. Customs Service strategic problem solving-program that targets willful violators. While not totally focused on bulk drug imports, this additional training will be highly applicable to field activity in this area. Drug Listing The Drug Registration and Listing System provides information on foreign pharmaceutical manufacturers, based on the statutory requirement that they list the drug products that they ship into the U.S. However, anyone can obtain a drug labeler code and therefore submit a drug listing form. The drug listing does not ensure that authentic sources or authentic material as described in NDAs is in fact being offered for admission. To begin to address the weaknesses in the current system, a pilot program was initiated in the Philadelphia District to provide import inspectors with access to additional databases. Using CDER's EES, which tracks drug applications, inspectors increase the probability of confirming authentic sourcing of APIs. The pilot was set-up in cooperation with CDER, who donated a stand-alone computer to provide the import inspector access to the EES and IND databases and other inspection databases. The system allows inspectors to retrieve additional important data in about three to four minutes on any API entry. The Philadelphia District Office is a relatively small API importing area compared to New York or Los Angeles. Nonetheless, this pilot has enabled Philadelphia to verify information on API entries on- line, and has resulted in approximately 50 less telephone calls to CDER seeking this information. Based on the success of this pilot program, the Agency is planning to expand this pilot program in stages until it provides nationwide EES access to all import inspectors. Enhancing Analytical and Forensic Methodology to Analyze APIs It has been observed that counterfeiters are becoming more sophisticated with respect to the counterfeiting of labeling, containers, seals, and documents. Therefore, to detect counterfeit APIs it will be necessary to conduct forensic analysis of the API. The FCC continues to improve its ability to detect counterfeit APIs by enhancing its expertise, forensic methodologies, and instrumentation. Numerous APIs have been collected and chemically fingerprinted. Last year, based in part on these types of analyses, special targeted inspections were conducted in China, which resulted in one firm being placed on import alert and warning letters being issued to two others. Develop a Strategy for Inspection of U.S. Import Agents and Brokers The Agency is currently inspecting these facilities on a ``for cause'' basis in response to leads it receives about specific importers. A proposal to begin inspecting these facilities on a routine basis is in the FY 2001 workplan. In addition, FDA has already established a broker/filer evaluation program to audit the integrity of data submitted by customs brokers. These programs have encouraged import filer compliance, and FDA is hopeful that planned enhancements to these programs will provide additional intelligence and subsequently increase enforcement actions in the areas of counterfeit and unapproved drugs. Targeted Collection and Testing of Selected Imported APIs As described above in the discussion of FIWG actions, despite increased sampling and testing of foreign produced bulk pharmaceutical chemicals and finished dosage forms, very few problems have been detected. Changes have been made to our sampling strategy as a means to address these concerns. Import Alerts The sheer volume of imported products precludes the Agency from physically examining every entry into the U. S. Therefore, other tools must be used to help control the entry of products where historical data suggests products are likely to be violative. One approach the Agency has taken is to use Import Alerts as a means to disseminate information to interested parties regarding problems with imported products. Import alerts have been made available on FDA's website. These alerts can be used to identify problem commodities, problem shippers, or problem importers, in addition to providing guidance for import coverage. An alert may cover an individual manufacturer, supplier or a particular product from an entire country. As a follow-up to an inspection, import alerts may also issue where it is determined that a manufacturer is in violation of cGMPs and the firm's status is determined to require ceasing distribution in the U. S. These products can be detained without physical examination or analysis because there is a violation of the FD&C Act. The counterfeit drug initiative working group was disbanded last year. While counterfeit drugs continue to be an issue of concern, it was determined there was no specific need for a Commissioner's Office initiative and that ORA and the Centers are the appropriate components to manage the potential for counterfeit products as part of their on- going workload. Challenges Building and maintaining a strong the regulatory framework and tools to address the entries from foreign countries is complex, and the Agency needs to have the flexibility to change as the global market changes. A healthy regulatory and enforcement system requires significant staff and resources, staff expertise, scientific methodologies and the tools to conduct testing, information systems, and access to information via established networks with both other countries and the industry. While FDA has done much in the past few years to address both the general challenges in having a strong and viable foreign inspection program and the specific tools needed to combat counterfeit drugs, clearly more can be done. We look forward to working with you as we continue to strive to provide the protection the American public expects and deserves. I would be happy to answer any questions you might have. Mr. Upton. Well, thank you. As you may know, we are now going to have questions, and I am going to try to keep strict time with our questions. I am sure we will do a couple of rounds, 5 minutes apiece, and we will alternate between sides, Republican and Democrat. The clock is now running. As you talked about in your statement--I guess the thing that grabbed me the most in your statement was that a number of us in the Congress, particularly this committee, have asked for more action taken. It seems as though a basic instinct would be that if, in fact, one of our domestic pharmaceutical industries, if they actually came upon tainted compounds coming into the country, that the first, the very first thing that you all ought to be required to do is to, in fact, go after the source, inspect it and take corrective action, whatever it may be, so that it never happens again. Admittedly, the task is large: thousands of companies around the world sending tons of stuff into this country, without even an inspector, at virtually every port; the documentation coming in so that you don't even know necessarily that it is going to a pharmaceutical company, but instead it is a supplier--it is a middleman, it is going to some warehouse and not necessarily being traced beyond that. But your statement at the end, that Mr. Dingell and Mr. Klink--and I would add Mr. Upton and Mr. Burr and Mr. Bliley and others--would think that one of your first requirements would be that if one of those pharmaceutical companies identified a bad supply coming in, you ought to have the requirement to be notified so that you can go find the source. Now, that's been out there for, what, a year? Why wouldn't that be an immediate source of review, particularly in light of your comment today, which I have a copy of, which you probably read in the Wall Street Journal. It says the FDA was taken aback by numbers; the Commerce Committee had specifically asked the Agency to check its computer records for the number of foreign drug manufacturers that hadn't been inspected. When the answer came back as 4,600, FDA officials conceded that they were surprised, and then you are quoted as saying, ``Surprised is probably an understatement. Concerned, definitely, and we are on it.'' Well, if you are on it, you should make it incumbent upon our manufacturers to say they have got some bad stuff, can you do something about it. Yet you haven't even taken up the first step, marching down the field, of saying you have got a requirement to tell us where it is coming from. Knowing that your staff is limited to do inspections in other countries--and, you know, you look at the numbers that I cited in my testimony, India and China and other places as well; and we showed documents of bad things happening--why isn't that the first thing that would come to your mind? Mr. Baker. It is difficult to explain why that wouldn't come to mind. It probably is because we look at the overall bulk product from the standpoint of contaminants and so forth: Is there some reason for rejection by the manufacturer other than counterfeiting? Mr. Upton. That ought to be your first line of defense. If Merck or Pharmacia--Upjohn or any major company, with all the different things that they do and they are certainly committed toward safety from top to bottom, they ought to be your front- line defense in terms of what is going on. To not even require them to notify you when something comes in--you know, the pictures that I showed earlier on of the counterfeit supply and the one that's traditional. Let's say that was an epilepsy drug and one of them works and one of them doesn't. One of them is going to an individual who will have a seizure and perhaps die and the other one is going to be okay. I mean, these are life-and-death decisions, and we have to trust you all to make sure that it is done right. We see this sad case of what happened in Haiti. My sense is that we have got some other problems that have occurred in this country, maybe not--without the headlines, maybe we don't know, but someone has got to have that Good Housekeeping Seal of Approval which you have. To me, the most basic thing is when someone is suspected of sending something in, that somebody is on top of it. Mr. Taylor. Mr. Chairman, I agree with everything that you have said. Mr. Upton. I have to swear you in now. You should have probably stood up when we did this in the beginning. But if you would identify yourself again for the record. Mr. Taylor. My name is John Taylor and I am the Acting Director of the Office of Compliance at the Center for Drug Evaluation and Research. Mr. Upton. If you would stand, I will swear you in. [Witness sworn.] Mr. Upton. You are now sworn in as well. Just in a minute, time is gone, but if you would give an answer and then we will continue to rotate. TESTIMONY OF JOHN TAYLOR, ACTING DIRECTOR, OFFICE OF COMPLIANCE, CENTER FOR DRUG EVALUATION AND RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION Mr. Taylor. Okay. Right now, as a part of the GMP regulations--those are the quality control and quality assurance regulations that dictate how pharmaceutical products are supposed to be manufactured to ensure their safety and efficacy--the manufacturer is supposed to determine whether or not the bulk product they are getting is from the approved supplier. So they are supposed to have in their files information regarding the bulk products that they are getting. If they run an analysis and it determines that there are impurities or that the product is subpotent, that information is supposed to be in their files; and as a part of our GMP inspections, we are looking at that and have access to this. Mr. Upton. I know you have access to it. The question is, if you have got the red flag that's up there, why aren't they required to tell you, so that you can take action like that, to go after them to make sure it doesn't happen again versus, oh, it is--you know, it is the third year of our inspection process, and here we are, and maybe we find it and maybe we don't, and--you know? Mr. Taylor. I agree with you. That's the reason why I think it is a good idea because it gives us the opportunity on a real-time basis to have information regarding whether or not a product that is received is of poor quality; and instead of waiting between our regulatory inspections to discover that information, this gives us an opportunity to do regulatory follow-up right away, whether it be civil or criminal. So I think it is a very good idea. Mr. Upton. Well, why can't we get it done? This has been before you. Again, I know Mr. Dingell is not here, but it has been before you for more than a year. He is not exactly a silent individual. He usually carries a big stick. Mr. Taylor. I do think we should follow up and we should follow up on it quickly. I know the idea was brought up before. I apologize for the fact that we did not run with it, but we think it is a good idea, and we are prepared to run with it and offer it. What we want to do is find the right place in the regulations where it should fit. But that's something we think is a good idea and will help us. Mr. Upton. Mr. Stupak. Mr. Stupak. Thank you, Mr. Chairman. Mr. Baker, if I may, if you would bear with me for a minute, I would like to ask you a question or two, and I appreciate your help in fully understanding this issue and a related issue. First, I understand the tremendous strain that the implementation of the 1997 FDA Modernization Act has put on the resources of the FDA. However, this issue before the committee disturbs all of us here today. When I couple this issue with the other information I have been given on another potential drug safety concern, I am perplexed. Mr. Baker, are you aware that some pharmacies are importing nonpharmaceutical-grade radioisotopes and illegally manufacturing and selling radioactive diagnostic drugs under the guise of the practice of pharmacy? Are you aware of that going on? Mr. Baker. I will defer to Mr. Taylor on that. We do have information on that, yes, sir. Mr. Taylor. Yes, sir. Mr. Stupak. How have you responded then to the concerns of the legitimate manufacturers whose FDA-approved drugs are being copied by these pharmacies, since they have brought this problem to your attention about a year ago? Mr. Taylor. Well, my response would be, the Modernization Act obviously carved out some exceptions for compounding. For example, the fact that you don't have to register as a manufacturing facility, you don't have to follow GMPs; but that same exception was not carved out for radiopharmaceuticals. Mr. Stupak. So there is no exception for them? Mr. Taylor. Right. As a result, radiopharmaceutical manufacturers still have to register with the Agency. Mr. Stupak. Right. Mr. Taylor. And still have to follow good manufacturing practices. Mr. Stupak. You admitted a year ago they brought this to your attention, right? I have some letters here from June 1999, August 1999, May 12, 2000 to a Lana Ogram. Have you succeeded her in that office now? Mr. Taylor. Well, she actually works for me. Mr. Stupak. Okay. In the Office of Compliance, right? Mr. Taylor. Yes. Mr. Stupak. So they work for you. So if it is your policy then to ensure that patients are protected from potentially unsafe and ineffective drugs, why has no one responded in the last year to the concerns brought forth by these manufacturers? Mr. Taylor. Well, sir, I have been there 6 weeks, and when I first arrived, I realized that these letters were before the office. And we are preparing responses, not only to letters that we have received from manufacturers about radiopharmaceuticals, but also letters we have received from compounders seeking clarification on our policy. Mr. Stupak. I realize you have been there for 6 weeks. You said this lady, Lana---- Mr. Taylor. Lana Ogram. Mr. Stupak. [continuing] Ogram works for you, right? Mr. Taylor. Yes. Mr. Stupak. So has she followed up with these people? Mr. Taylor. Well, I know that we have drafted responses that are now before our attorneys and are ready to go out. She has spoken to some of these people. We have actually done, quite frankly, some investigatory follow-up to investigate some of the allegations that are in the letter, and some of that is actually ongoing right now. Mr. Stupak. Okay. Mr. Taylor. So we think there will be further steps in the future. Mr. Stupak. If you would, after this hearing sometime, and in the real near future, could you get with us? Because I would like to follow up more on this detail. Mr. Taylor. Sure. Mr. Stupak. If you are doing something, we want to know what it is, so we can get back to these folks. I want to follow up that part of it. I am really interested in this very serious allegation here. They use the radioisotopes, I am sure you know, for very serious illnesses and diseases and for detection, and I just want to make sure we are doing all we can so those who are faced with a serious injury are getting the best possible coverage. Mr. Taylor. Sure. Mr. Stupak. Mr. Baker, if I can jump back to you then, in June 2 correspondence to this committee, you reported that--and I am quoting--``The number of foreign drug manufacturers that have shipped to the U.S. but have never been inspected by the FDA is approximately 4,600.'' You go on to say, in a quote again, ``The number of such firms located in China is 623 and the number located in India is 409.'' Mr. Baker, isn't there evidence that both China and India have had significant problems with drug counterfeiting in the past? Mr. Baker. Yes. Mr. Stupak. Okay. What can you tell us about the 623 firms located in China that are apparently shipping or have shipped to the U.S., but have never been inspected? Mr. Baker. Right now, we are going through the entire 4,600 list. That's one of the things that I instructed the staff to do. I wanted answers, and I wanted answers right away. We should have some basic information on anyone that is shipping into the country. One of the things we are dealing with here is, a lot of these APIs may have been entered and then they would be in the system as entered from an API source, but it goes to a nonpharmaceutical source. So we are looking at the issues associated with those entries right now. Mr. Stupak. Okay. Do you know if any of the 623 Chinese firms mentioned above are tier 2 or tier 3 firms? Do you know? Mr. Baker. Yes, they may be, certainly. Mr. Stupak. Okay. Do we know if they meet all the current good manufacturing practices? Mr. Baker. No, we don't. Mr. Stupak. We don't know that. Okay. So we should be concerned then, without that knowledge, about products some of these companies are shipping here to the U.S. then, right? Mr. Baker. Yes, sir. Mr. Stupak. Okay. What about the Indian firms, the 409, are they tier 2, tier 3? Mr. Baker. Yes, sir, I am sure they are. Mr. Stupak. Again, we don't know if they are--the current good manufacturing practices, we don't know if they follow that standard? Mr. Baker. That's correct, sir. Mr. Stupak. Okay. You indicated in your statement that you appreciate the support of Congress, and then trying to do your investigation, and I mentioned in my opening statement that--what are the resources you need? If we are not providing you sufficient resources, what exactly do you need to really get at this issue? I am hearing here this morning already that letters are about a year old; they are not being answered; attorneys are looking at them; we don't know if these Chinese or Indian firms are following. What do you need specifically to really enforce this, to correct some of these problems? Mr. Baker. A combination of things. Obviously, part of the solution would be the FTEs to do a better job of inspecting. It is also having that comprehensive and linked computer system to adequately assess data to make sure that we are able to quantify information that's coming in. We are trying to pull it now from several independent data bases. It is not an efficient system. Then, obviously, we need a targeted approach to criminal investigations, both through our Forensic Chemistry Center and our Office of Criminal Investigations. Mr. Stupak. Can I ask you one more--if I may, Mr. Chairman? Do you know now if any of this material is being sold through some of the Internet Web sites to U.S. citizens that's already counterfeited drugs or are substandard drugs? Mr. Baker. I am not aware of that, no, sir. Mr. Stupak. Okay. Have you done a review of it, a screening? Mr. Baker. We have done some purchasing of products offered on the Internet, and we have done some analytical work associated with those products. Thus far, the products have proven to be mostly from domestic suppliers. But then, given the scope of the Internet, the number of places potentially offered and our ability to analyze, I wouldn't rule out that being a problem; just simply, we haven't uncovered it at this point. Mr. Stupak. You said they were from U.S. products, but when we had our hearing on the Internet sales, most of the Web sites are from other countries. Very few are from the U.S. So have you checked any of the Web sites that are located---- Mr. Baker. We have been checking Web sites, yes, sir. Mr. Stupak. Because most of those are not U.S. products; they are other countries. Thank you, Mr. Chairman. Mr. Upton. Mr. Burr. Mr. Burr. Mr. Baker, does the FDA believe that Americans have died or been injured because of counterfeit or unapproved bulk ingredients? Mr. Baker. We have information that there were certainly injuries associated with counterfeit products, yes, sir. Mr. Burr. Is that answer yes? Mr. Baker. Yes, sir. Mr. Burr. Mr. Taylor, you work in what capacity at the FDA? Mr. Taylor. I am the Acting Director of the Office of Compliance. Mr. Burr. Would the Office of Compliance come under the Office of Regulatory Affairs? Mr. Taylor. No. I report to the Director of the Center that approves drugs; I report to Dr. Woodcock. We are peers. We are a sister organization of Mr. Baker. Mr. Burr. Okay. Mr. Baker, I understand that on Monday you met with the committee staff. Mr. Baker. That's right. Mr. Burr. At that meeting, the staff presented you with a confidential report on counterfeit and fraudulent practices in the bulk drug industry. You said, if I understood them correctly, you had never seen that document; is that correct? Mr. Baker. Yes, sir. Mr. Burr. Well, my understanding is that the Office of Criminal Investigation, which reports to you, had a copy of this report, but didn't share it with you, even in your preparation for this hearing. Is that correct? Mr. Baker. I did have it in preparing for this particular hearing today. Mr. Burr. Why wasn't it shared with you if they report to you and you are in charge of this? Mr. Baker. The information was shared with me. I didn't recognize the document as it was presented to me. The basic information was shared with me in February 2000. At that point, I allocated funds to do some targeted inspections and analytical work associated with APIs and importers. Mr. Burr. Is there a communications problem at the FDA? Mr. Baker. No, sir, I don't believe so. I think we have got good communications across the various programs. Mr. Burr. Let me ask you about a memorandum that we entered into the record. It was a memorandum from Carl Nielsen. I believe he is the Director of Import Operations. I believe you appointed him. Is that correct? Mr. Baker. Yes, sir, that's correct. Mr. Burr. It was a memo from him to Frank Forgon? Mr. Baker. Forgione. Mr. Burr. Forgione. Excuse me. This is on counterfeit imported human Rx bulk drugs. In this memo, Mr. Nielsen states, ``It appears there have been deaths associated with the use of generic prescription drugs made from counterfeit bulk drugs supplied by Flavine.'' Is that the documentation that you were referring to when you said the FDA believed that, in fact, Americans had died? Mr. Baker. That actually was referring to that documentation and then to adverse events that have been associated with some of them. Mr. Burr. So is there more than this memo that would suggest that there is a health problem? Mr. Baker. I don't know that I can answer that without looking at a number of documents to see what we have. Mr. Burr. Well, I would hope that your staff, in preparation for this hearing, would have at least shared with you the documents that existed that might deal with deaths that had occurred from contamination or counterfeiting of drugs. You believe that that is taking place? Mr. Baker. Well, we have certainly investigated a number of deaths and injuries associated with counterfeit drugs and allegations of counterfeit drugs, yes, sir. Mr. Burr. He also observed in this memo--let me read it, and I quote--''There is, in effect, little or no FDA control of bulk drugs coming into this country, and there is currently no ongoing enforcement action to serve as a meaningful deterrence to the trafficking and use of counterfeit or unapproved bulk drugs.'' Have you read that statement? Mr. Baker. Yes, sir. Mr. Burr. Is that the case? Mr. Baker. At this time, we do not have a specific enforcement action going on. We do have investigations open. Mr. Burr. Can you share with me what the date of this memorandum was? Mr. Baker. August 1996, I believe. Mr. Burr. May 15. Of what year? Mr. Baker. I am sorry, 1996. Mr. Burr. Okay. It has been 4 years since this revelation was made at the FDA. How long should we wait? Mr. Baker. I don't think we should wait. We have to be proactive, and that's what we are attempting to do now is, be proactive and identify---- Mr. Burr. How long have you been in your capacity? Mr. Baker. About a year. Mr. Burr. About a year? Mr. Baker. Yes, sir. Mr. Burr. So I can't date back to 1996 and ask you from 1996 to a year ago why something didn't happen. That is unfair. But clearly the FDA, in their own memoranda, knew in 1996, May 15, that they had a problem; they had a problem and they had deaths. What has happened since you have been there that assures this committee that this is not continuing? Mr. Baker. Our ongoing efforts to improve the overall processes. Mr. Burr. What are those efforts? What are those improvements? Mr. Baker. Well, some of them we just covered in my testimony. Mr. Burr. Those are in response, I believe, to the fact that Congress now has this on their front burner, that John Dingell and Bart Stupak and Ron Klink and Fred Upton and Tom Bliley are concerned with this and we have come up with a series of things that we are going to run to the Hill and present. This is 1996, Mr. Baker. Mr. Baker. Yes, sir. Mr. Burr. What initiatives happened before Congress got interested in the deaths of Americans and the counterfeit of drugs and the contamination of bulk drugs coming into the country? Mr. Baker. Well, one of the initiatives that occurred before I knew this was going on was in February of 2000 when I directed the funding of the initiative out of our Forensic Chemistry Center to do specific, targeted inspections and sampling and analytical work at specific import sites. Mr. Burr. I hope you understand my frustration. Mr. Baker. Yes, sir, I surely do. Mr. Burr. And this is today's news article, and the chairman has already referred to it, when your quote is, ``Surprise is probably an understatement,'' surprise that there are so many entities out there that are uninspected. Gosh, 4 years ago; a year ago you came in, we are still in the mode where we are surprised? I am hopeful that through this hearing you will understand the urgency of a solution to this problem. Mr. Baker. Yes, sir. Mr. Burr. Mr. Chairman, I yield back. Mr. Upton. Mr. Strickland. Mr. Strickland. Thank you, Mr. Chairman. Mr. Baker, much of the inability to detail precisely who these foreign firms are, when they were last inspected, whether they are manufacturing in accordance with current good manufacturing practices and so on, is because of an information technology problem. The FDA has a multitude of data bases that don't properly interact with each other; is that correct? Mr. Baker. Yes, sir, that is correct. Mr. Strickland. Isn't that mainly the problem with the OASIS system, or are there other systems who are at fault here? Mr. Baker. There are several systems that interact, that we use information from, in order to make assessment of products. In addition to the OASIS system, which is the entry system for FDA, where we actually have items come in on a screen and our people look at the items for approval of entry into the United States, we have a FACTS data base which is our data base which covers foreign establishments and domestic establishment inventory. That latest upgrade came on-line last September. We are developing the data base there. The OASIS system feeds information into the FACTS system; as an example, whenever a firm offers a new product for entry into the United States, it automatically updates FACTS with the information that this is a new manufacturer, and it creates an FEI, Federal Establishment Number, there. Mr. Strickland. Okay. The FDA obviously has had problems for years with these foreign inspection data bases. You have apparently been telling this subcommittee--I am fairly new to this subcommittee, but I think you have been telling this subcommittee for years that the problem is soon to be fixed. So I guess a fair question to ask you would be, when is it going to be fixed? Mr. Baker. We are making efforts at this time to go to a Windows-based environment. I have been advised that that will be in place by the end of 2001. That way we will be able to work better across the data bases structurally. In addition to that, I have asked--I beg your pardon? Mr. Strickland. I am sitting here thinking, when you said the end of 2001, I am thinking we could plan, execute, carry out, conclude a war in that length of time. It just seems like an unreasonable period of time. Is it impossible for you to accomplish this sooner than the end of 2001? Mr. Baker. Well, our Chief Information Officer basically drives the structure of the information systems within FDA. I don't have a good answer for you why it would take that length of time. Mr. Strickland. I would like to yield to my colleague. Mr. Stupak. On this IT problem---- Mr. Baker. Yes, sir. Mr. Stupak. On this IT problem, can you get back to this committee within a month and tell us formally what you are going to do and how it is going to be fixed and what needs to be done to fix it? Mr. Baker. Yes, sir. Mr. Stupak. This has been going on for some time. I certainly agree with my colleague here that the end of 2001 just doesn't seem right. I would think that within 30 days you could come back to this committee, under the chairmanship of Mr. Upton, and tell us exactly what you are going to do, what has to be done, how we do it--and hopefully it is not going to be 2001--in writing. Mr. Baker. Very definitely, yes. Mr. Stupak. Thanks for yielding. Mr. Strickland. Yes. And if you can't do it, you need to come back and tell us you can't do it and why you can't do it. That seems to be a fair request on our part. Mr. Baker. Yes, sir. Mr. Strickland. Mr. Baker, does the FDA have a timetable-- well, the 2001, that's your current timetable, the end of 2001? Mr. Baker. That's for the overall architecture of the system to be completed and carried out across the Agency, on the wide area network. Mr. Strickland. That's the architecture. That doesn't mean---- Mr. Baker. Individually, it doesn't---- Mr. Strickland. I assume architectural plans, but does that mean that there would be--even under your current plans, that this would be accomplished by the end of 2001? Mr. Baker. I have been advised that it is due to be accomplished by the end of 2001. That doesn't mean we can't do some things with our current systems, which is what I am proposing here today, and the information I gave you in some of my oral testimony of things we are going to do--we are going to do immediately. Mr. Strickland. Mr. Baker, what percentage of the bulk raw material used to manufacture these drugs globally would you consider to be counterfeit? Mr. Baker. I don't know that I can quantify that, the amount that may be counterfeit, of a global nature. I have seen reports from WHO and others that indicate it could be quite high, 50 to 70 percent. Mr. Strickland. Fifty to 70 percent? And then there may be other of these drugs that are substandard, or in other ways adulterated; is that correct? Mr. Baker. Yes, sir. Mr. Strickland. Which countries are the most problematic when it comes to selling these substandard counterfeit bulk ingredients? Mr. Baker. There are quite a few countries that have been discussed. Specifically, we have had problems with China and India, in fact. Mr. Strickland. So you would say China and India would be near the top of the list if you were making a judgment on that? Mr. Baker. Certainly they would be on the list, yes, sir. Mr. Strickland. What countries are the most problematic, in your judgment, when it comes to selling substandard or counterfeit finished products, not the bulk materials, but the finished products? Mr. Baker. I don't know that I would have a good answer for you there because the capability in any number of countries is such that they can market counterfeit drugs. It is an ongoing problem. We even see it from Mexico. Mr. Strickland. One final question, Mr. Baker, and perhaps this has already been asked; I am not sure. But in your judgment, should the FDA require that all U.S. firms that import raw pharmaceutical ingredients certify in writing that each of their sources meets current good manufacturing practice requirements; and, if not, why not? Mr. Baker. Right now, we do require that they provide a certificate of analysis or they have ongoing records, laboratory records, to indicate that the product meets the standards for manufacturing in accordance with the approval of their product. Mr. Strickland. But you have told us that you can't know for sure if these firms meet current good manufacturing practice requirements. Apparently, that is a particular standard that is a recognized standard. Would it not make sense to require these firms to provide you with assurance in writing that the materials they are using have been manufactured under these conditions? Mr. Baker. That may be helpful. I will defer to Mr. Taylor here, but I will say that they are required to, by laboratory analysis, demonstrate that the products are meeting a standard of purity there. Mr. Strickland. But not necessarily meeting the standard of current good manufacturing practices? Is that right? Mr. Taylor. Well, I just want to expand on his answer. For prescription drugs, as a part of the approval process, when an approval packet is submitted to the Agency, one of the pieces of information that also must be submitted is the name of the supplier of the bulk product, essentially the active pharmaceutical ingredient. When that information is provided to the Agency, the Agency is then required to go to that facility and inspect to determine whether or not they are in compliance with good manufacturing practices. If they are not, then not only does the approval not move forward, they are not allowed to import that product into the United States. That's for prescription drugs. Now, obviously we have talked today about the fact that there are some facilities that we don't know about and we have to do a better job with that; and some of those facilities might be supplying materials for over-the-counter products, which would not fall within this preapproval rubric. But my point is that they are supposed to be in compliance with GMPs. They are supposed to provide that information to the Agency about the compliance with GMPs so that we can go out and make sure that their statements are correct. Mr. Strickland. Thank you, Mr. Chairman. Mr. Upton. Mr. Bryant. Mr. Bryant. Thank you, Mr. Chairman. And we are going to have to be subject to leave here and vote, and I want to be very brief in my questioning. Understanding that you have only been in your position a year, I mentioned in my opening statement my concern about not--since 1996, not coordinating with Customs. And perhaps you could, if you don't know the answer as to why that's not ongoing, you could later file a letter as an exhibit to your testimony with an explanation as to why that's not being done; and hopefully, maybe, some indication that your office might reconsider that. Is that fair? Mr. Baker. Yes, sir. Mr. Bryant. Now, in your position, are you the person that has the authority to control the agents out in the field, the ones at the places of entry in this country and wherever else you have investigators trying to work on this problem of counterfeit bulk drug imports? Mr. Baker. Yes, sir. Mr. Bryant. You are the person responsible? Mr. Baker. Yes, sir, the field operations report to me. Mr. Bryant. Now, where does Mr. Taylor fit into this with you? If you could be brief. Mr. Taylor. Sure. I head the Office of Compliance within the Center for Drugs. The Center for Drugs is a sister agency within FDA, and we help ORA determine whether or not a specific manufacturer or a specific product is in compliance with Federal law. Mr. Bryant. Okay. Now, Mr. Baker, is your job 100 percent dedicated to this particular problem, or do you have other responsibilities in the area of regulation? Mr. Baker. We regulate all foods, drugs, medical devices and cosmetics, and the attendant problems associated with those. So we cover the spectrum. Mr. Bryant. Do you have somebody in your office whose job it is to be 100 percent dedicated to this particular problem of importing counterfeit bulk drugs? Mr. Baker. No, sir. Mr. Bryant. Where I am going with this is trying to find within the scheme, the chain of command, who can come in here and we can complain to. We have got a lot of responsibilities and we cover the land up here. We expect people like you, or whoever in your office is in charge of this problem, dedicating 100 percent of their time and assets to that to do a better job in this situation; and it is not happening. So every year or two we have to drag you folks in and gripe and moan at you; and then nothing seems to happen, particularly in this case, since we are going back to 1996. I am just wondering, if that was my job, 100 percent of the time, to make sure that we have enough agents out there at the ports and doing these inspections and operating the computers so that the data bases can come together and maybe working with other agencies like the Customs to do this, that's who I want to know. Whose job is it to do that? Because obviously they are not doing a good job. And if we could get those people motivated, maybe we wouldn't have to do this, you know, devote our time to this oversight. Mr. Baker. We do have a Director of Import Operations. That's Mr. Carl Nielsen, as they mentioned earlier, and that covers our import activities. Our foreign inspections are covered another component within ORA. There is ongoing communication between those. Mr. Bryant. I would like to know if Mr. Nielsen is concerned with the fact that of the 310 points of entry we have only got 68 full-time equivalents in the field. And I am sure that--at the 68 that are covered, I am sure we have several at one location, so probably more than---- Mr. Baker. Actually, sir, that's the way they set it out, based on funding. We have about 254 people in the field reviewing all FDA-regulated products. About a quarter of their time is spent reviewing drug imports, and so that's where the 68 came out as an FTE figure. We actually have about 254 people in the field. Mr. Bryant. I am going to read you a couple of quick questions because my time is running out, and we have got a vote. You can again late-file your answer to these. Would you favor assigning agents from the Office of Criminal Investigations or other FDA personnel to post in Asia and Europe for the primary purpose of gathering information in support of this counterfeit drug initiative? Second, has the FDA considered a joint FDA industry effort to develop a program to eliminate counterfeit bulk drugs? Third, would you favor developing new systems within the FDA to identify counterfeit drugs and other unapproved or illegal drugs that enter the country? Fourthly, does the FDA favor exploring new technologies to help ensure the safety and security of our drug supply, such as tagants and drugs on containers or labels. And finally, this is important, what in your opinion can this committee or Congress do to approve your ability, the FDA's ability, to further assess the problem and investigate, interdict and control counterfeit drugs? If you could maybe get a copy of this testimony and answer those specific questions, as well as this issue of the Customs, I would appreciate it very much. Mr. Baker. Yes, sir. Mr. Upton. I would just note that we do have about 5 minutes left in the vote, so we will temporarily adjourn here and we will come back at 12:45. [Brief recess.] Mr. Upton. Welcome back. We are not expecting a vote for a couple of hours, but I don't expect this subcommittee hearing to go on for a couple hours more either. So I think we will be okay in terms of the timing. I know a couple of members are on both sides of the lanes here, and again we have other subcommittees within our committee meeting, and many of us are on multiple committees. And we have an important piece of legislation on the floor; I know that I have an amendment that will be up a little bit later this evening as well. Mr. Baker, I don't know if you saw this article a couple of weeks ago, it was in Dickinson's FDA Webview. There is an article entitled ``Counterfeit Bulk Drugs Not a Health Issue for United States, FDA Says.'' The article went on to say that ``Counterfeit bulk drugs entering the U.S. are not a public health problem for this country, FDA Center for Drug Evaluation and Research Director Janet Woodcock told FDA Webview yesterday.'' The article went on to further say that Woodcock said that ``Counterfeit APIs have a low priority at FDA because U.S. manufacturers have not expressed heightened concern about them and finished dosage form makers are the ones responsible for assuring the integrity of drugs sold in the United States.'' All of that being in quotes. What is your reaction to the statements attributed to Ms. Woodcock? Are they accurate? Mr. Baker. Well, Mr. Chairman, I would have to say, obviously we believe there is a counterfeit problem, both in this world and potentially within this country. We have had problems quantifying that, obviously. What I think Dr. Woodcock was speaking to was simply the controls within the domestic supply whereby the manufacturers are doing heightened testing and certificates of analysis associated with the products. So I don't believe she was saying that coming into the country, that this may not be a problem. I think she was saying--addressing the domestic supply. Mr. Upton. Now, you all, as I understand, agreed to spend some money to investigate this; is that right? Mr. Baker. Yes, sir. Mr. Upton. How much money was that that you---- Mr. Baker. The recent one was $59,000 for purchasing of products for analytical work. Mr. Upton. Tell me exactly what the money was to be used for. I mean, what was the money supposed to do? Mr. Baker. We are going to be targeting specific importers, particularly those that have a heightened profile for importing and distributing counterfeit product, plus targeting and sampling for analysis and analyzing product that would fit the profile of a potentially counterfeited drug. Mr. Upton. Are you going to look at India and China as part of that? Mr. Baker. Yes, sir. Their products would be some of those that would be looked at, yes, sir. Mr. Upton. All right. When you begin to look into those two, and I think it was Mr. Stupak who raised the large number of firms over there that, in fact, there are no inspections. Are you having trouble with the governments of those two countries? What is the access to those facilities like? Mr. Baker. We have been provided access to the facilities that we have asked to inspect. We do go through the process of notifying the foreign government, establishing the travel, and then conducting the inspections. Mr. Upton. Have you ever been denied access? Is there a case where you have been denied access to look at some of those firms? Mr. Baker. I am not certain. I would have to check. I am not aware of it, though. It is no. I am told it is no. Mr. Upton. It has never happened. According to the June 1998 gold sheet, William Grosse, quality assurance director at Eli Lilly, spoke about the growing threat of counterfeit bulks at the meeting of the Drug Information Association. He said, ``sooner or later, we are going to have a catastrophe'' in the United States. He mentioned that the sale of counterfeit products worldwide is increasing at a rapid rate. He cited figures suggesting that 40 to 60 percent of drug products sold in Malaysia and Indonesia, 25 sold in Mexico and 78 percent sold in the United States are counterfeit. He went on to say that manufacturers are collecting a lot of information on the problem but do not have a very good place to take it. That sort of goes back to my initial question at the beginning. In light of that article, is Dr. Woodcock's assertion that U.S. manufacturers have not expressed a heightened concern an accurate one? Mr. Baker. They have expressed the concerns to us about the overall counterfeit situation. We do have ongoing dialog with their security chiefs, and we have routine meetings to discuss issues associated with counterfeiting and other problems in the drug industry. Mr. Upton. Has there been an outcry by the pharmaceutical industry that they would like to have you all regulate or get an announcement, some notification, information, when, in fact, they suspect that they have received tainted compounds? Mr. Taylor. Not that I know of, Mr. Chairman. Mr. Upton. You know, we thought on this panel that it is a wise idea. I am just wondering if they have voiced such support independently as well. Mr. Taylor. No, sir, and even though I think it is a good idea, I am not sure how that good idea will be received. When we put the idea out, we are going to have to do so as a part of rulemaking, and that will give industry and others an opportunity to comment. But I have not heard anything as of this date as to whether or not industry likes that idea. Mr. Upton. Okay. Mr. Strickland. Mr. Strickland. Thank you, sir. Mr. Baker, how often is the FDA supposed to be inspecting foreign firms that export drugs or drug products to the U.S. for GMP practices? Mr. Baker. Well, it would be great if we could impose the same standard on them that we do on our own domestic suppliers. The reality of our inspections, is that they are driven by the application process, that is, to get a drug approved, and then we go to the tiered process after that as a follow-up surveillance, or going in for cause. Mr. Strickland. What is the practice for our own domestic firms? Mr. Baker. We try to get in there at least every 2 years, more often for cause. Mr. Strickland. Two years? Mr. Baker. Yes, sir. Mr. Strickland. Now, it has been confirmed with your staff that there are several incidents where firms, these foreign firms that export to us, haven't been inspected by an FDA official in at least 7 years. Why is that? Mr. Baker. Quite honestly, sir, a good bit of it has to do with the resources available to do the overseas inspections. Mr. Strickland. Do you think 7 years is too long? Mr. Baker. Yes, sir. Mr. Strickland. What if a foreign firm makes significant changes in their practices during this extended intervening period of time between inspections; how would the FDA know such changes have occurred if it doesn't inspect more frequently? It wouldn't, would it? Mr. Baker. No, we may not. They are obligated to tell us about any changes in the processes, and hopefully, if it is an API firm, the final dosage manufacturer will be notified and they will know about any changes. Mr. Strickland. What are the implications of these infrequent inspections on public health? Mr. Baker. Well, again, that's hard to quantify, but it certainly would be an at-risk situation. Mr. Strickland. So we can reasonably conclude that because these inspections are not occurring, that American citizens who purchase products which may be made from these imported goods are at risk; is that a reasonable conclusion? Mr. Taylor. I am not sure we can draw that conclusion. Mr. Strickland. Do you conclude that they are not at risk? Mr. Taylor. No, I cannot conclude that, either. I think that by not having regular inspections at a shorter interval, obviously it does not serve the same deterrent effect as if we were in there over and over again, but I am not sure I could draw the conclusion that negatively---- Mr. Strickland. Well, if there aren't health and safety implications to the inspection process, why have an inspection process? And if the inspection process is not occurring in a timely manner, it seems very reasonable to be able to say here today that American citizens are being placed at risk due to a lack of inspection. Is that--I am not trying to be unreasonable. Mr. Taylor. Right. Mr. Strickland. But I don't want us to be fuzzy about our conclusions when we don't have to be. Mr. Baker. The potential is there, yes, sir. Mr. Taylor. That's right, and that's why we have those regulations in place in the first place. Mr. Strickland. The FDA has clearly defined its resource limitations in the area of conducting these GMD inspections on foreign firms. What are the limitations, in your judgment, and specifically, and if you could be as candid as possible, what do you need in order to do an adequate job, what resources? If you can name an estimated amount of money or a number of inspectors, what is it specifically that you need that would enable you to come before us a year from now, and we would all be very pleased with what had happened in the intervening 12 months? Mr. Baker. Fine. Right now we have 175 FTEs that are available to do foreign drug inspections, that are drug inspectors available for foreign drug inspections. I would like to add that they also have domestic responsibilities, so they have to cover the domestic side as well. We are pulling personnel out of the domestic side any time we do these foreign inspections. That's one issue. Having the IT available, which we have discussed earlier, where we can get meaningful data and have it real-time available to our inspectors is another issue. When I came on board here a year ago, we didn't even have all of our investigators equipped with laptop computers, which they are now. Mr. Strickland. Mr. Baker, I don't see why you just don't, if necessary, contract with some firm that has the expertise necessary to do this, bring them in and in perhaps 2 months, that seems like a reasonable period of time, have this IT problem solved. It just seems that this is a problem that doesn't need to drag on and on and on. Mr. Baker. Absolutely. I totally agree. Mr. Strickland. I want to ask you, sir, if you would provide to us, and Mr. Chairman, I would like your support on this request, if I could have it. It seems reasonable that we would ask for a formal plan within 2 months as to how you plan to accomplish this, and in that plan, you lay out your problems and lay out your lack of resources, if there is a lack of resources. That seems like a reasonable request from us, and I would like for you to agree today to do that. Mr. Baker. We will do that, yes, sir. Mr. Strickland. One final question, Mr. Chairman. I am intrigued by the problems with China and India, especially that have been noted here. Do you know that if China was a part of the World Trade Organization, that our ability to prohibit them from sending in these materials into our country would be inhibited--that our enforcement ability would be inhibited because of their membership in the World Trade Organization, if we could keep that from happening simply because their firms did not meet FDA inspection or approval or standard? Could you answer that for me. Mr. Baker. I don't know if I can. I don't know what the impact is of them entering the WTO and the problems associated with GMPs. I don't know. I am not a trade lawyer. Mr. Taylor. I don't know the answer, either, but we certainly can get back to you with an answer. Mr. Baker. Yes, certainly. Mr. Strickland. If you would, I would find that very helpful, and one further question. Why don't we just decide that if a country is engaging in these practices, or foreign firms in these countries are engaging in these practices and they are identified, that we just simply say we are not going to allow business with you in the future? Mr. Baker. Well, there are Customs laws and there are also, of course, the FDA laws that drive appeal rights and everything else associated with entering products into the country, and importers, like anyone else, would have their day in court. So it would be a difficult situation to stop it out of hand. I don't know that anybody has the authority just to make that declaration. Mr. Strickland. Well, I fear that China's involvement in the WTO may make the ability to regulate and enforce even more difficult. So if you would get back with me on that issue, I would appreciate it. Mr. Taylor. Certainly. Mr. Baker. Sure. Mr. Strickland. Thank you, Mr. Chairman. Mr. Upton. Thank you. Mr. Baker, in the letter that was sent to Chairman Bliley May 31, the FDA says, at this time there are neither specific allegations concerning bulk counterfeit drugs nor any concern of a systematic problem. I want to just refer again to some of these letters, which I think you have a copy of. Maybe you can turn them around. You will see the same, just so that Mr. Baker can see them. This is a fairly clear case, I think you can see, of a firm trying to repackage, actually the other letter you will see it has the same signature, but they are actually trying to show the original source of these compounds to be from West Germany, which, of course, would have been prior to 1990--instead of coming in from China. In light of the poor inspection in China, and this being a problem, I just find it difficult to believe that you weren't aware of any systematic problem, and that this should not have been--or this should have been referred to the IG or to somebody who actually could have begun to look into this. I mean, we are frustrated on this panel, Republicans and Democrats alike, with trying to make sure that, in fact, there is a safety net out there. You all have that responsibility. Yet, there are literally thousands of companies that we don't know about. We saw the well-publicized deaths, the 89 deaths in Haiti; your admission that, in fact, we have had problems in this country, and just some basic investigatory tools that ought to be utilized, it just seems, haven't been done. That's our frustration up here. I know I speak for Republicans as well as Democrats when I say that. We want to make sure that you have the tools, that you have the FTEs, full-time equivalents, the people that are in power. We want the pharmaceutical companies to be able to tell you with 100 percent certainty whether, in fact, the material they are getting is safe or not, and not only the big players, the Eli Lillys, the Mercks, the Pharmacias, the Upjohns, but the generics, too. They make billions of pills for a variety of different medicines--whether it be aspirin or a number of other things, particularly when the patents expire. It seems as though there has been ample evidence, whether it is the materials here or others, that, in fact, the FDA should have acted on, should have promulgated some regulations, should have been able to get some feedback, particularly in light of the fact that you admit that there are problems that are out there. That's what frustrates us. Mr. Baker. Well, we have taken the situation seriously. We have initially trained, we have completely trained 30 FTEs, specifically in the area of counterfeiting, and we are taking that training out beyond that 30. In addition, in July, we are going to be doing Customs training with our staff, and the Customs Service is going to be instructing on their laws. We are going to do some strategic problem-solving and a number of other things so that our people are better able to work jointly with Customs and can use authorities vested in Customs law to get at some of these various counterfeit issues here. So we are taking it very seriously. I can tell you we also have some frustration and we will move forward with these things. Mr. Upton. Now we have more port of entries for these products than we have inspectors looking out for it, is that right? Mr. Baker. Yes, sir, that is true. In the instance of APIs, though, we have about 90 percent of them going into roughly 8 to 10 ports. So we are able to concentrate some resources to deal with APIs in certain areas, but it doesn't solve the overall situation, and as you are aware, we do get APIs in all of those ports, although maybe not in large numbers. Mr. Upton. As I understand it, as these products come in from overseas, they are not necessarily saying they are going to Merck or Pharmacia or Upjohn. It is going to ABC warehouse, you know ABC trucking firm--I mean, it is going to some, I almost want to say ``generic,'' I won't, but perhaps some nonpharmaceutical name and once it is there, it is gone, right? I mean, you can't really track it, is that right? Mr. Baker. It makes it most difficult, yes, Mr. Chairman. In fact, we are dialoguing right now to see what our regulatory authority is to require the identification of the ultimate consignee. That is something we are looking at to see if we do have the regulatory authority to do it. Mr. Upton. Could you let us know? When do you expect to come up with a conclusion to that question? Mr. Baker. I hope to have it within the next 3 or 4 weeks. Mr. Upton. I think we would like to know what that answer will be. Mr. Baker. We will be happy to inform you, yes. Mr. Upton. Where can we be helpful? What roadblocks do you see? I mean, are there some other things that have been identified that we have not touched on today? Mr. Baker. No, we have done a pretty good job of touching on things today. Mr. Upton. Yes. This was something I was going to ask. What about the ability to get criminal records from law enforcement agencies from across the land, across the ocean, from foreign law enforcement authorities on Custom brokers? Do you have that authority? Mr. Baker. We have had good working relationships with a number of the foreign entities and have been able to get records, but obviously you can't always get records, depending on the country. Mr. Taylor. Yes. I believe our experience is varied, depending on what country we are dealing with. So there have been instances where it has been difficult to get that information in the past. Mr. Upton. What countries have been particularly difficult? Mr. Taylor. Well, at one point in time, and this has improved dramatically, so this isn't the case today, when we were investigating Flavine several years back, we had problems with the German authorities sharing information with us. But our relationship with them is strong today, and that's no longer the case, and we used that case as a good stepping stone to building a better relationship. Mr. Upton. Going back to the problem with the Haitians' deaths, what was the FDA's reaction to those 89 deaths? Was there any tracking here in terms of those same substance coming from China that may have tainted our supply at all? Was there any red flag that went up right away? Mr. Taylor. Sir, I apologize. I don't know. I wasn't intimately involved. Mr. Upton. You weren't there. Mr. Baker. I was in the State of Texas. I can tell you that there was quite a bit of investigative activity at the Federal and State levels when that occurred, to ensure that we didn't have product in our markets, but I was not at the FDA at that time. Mr. Taylor. I was just informed that we did put an import alert in place and we followed up on the shipments. The import alert was put in place so that the product could not continue to come in from China, and there was other follow-up to trace the shipments of the product itself at that time. Mr. Upton. Was any found? Mr. Taylor. Apparently, the answer is yes. Mr. Upton. I knew the answer. And what happened? Mr. Taylor. It was destroyed, apparently. Mr. Upton. So it could have happened here? Mr. Baker. Yes. Mr. Taylor. It is possible, yes. Mr. Upton. Do you know--and I don't know the answer to this. Do you know how much was found? How many shipments? What the size of the product was? And where was it found? Where in the pipeline was it? Mr. Baker. One in California and on the East Coast. There were two shipments that we found that were basically in the pipeline at the time. Mr. Upton. I mean, I just can't imagine a greater nightmare for a family, you know, to find out that something that they might buy over-the-counter or prescribed by their physician, usually an individual of great trust, just to find out that it was tainted, and, you know, may cause some serious illness or even death. That's why this subcommittee feels very strongly that we want protection, and it has got to be perfect. When we are able to identify, whether it be documents like this or stories of what has happened in other countries and by chance, thank God, find them before they impact Americans, that you have the tools to protect us all. Again, it goes back to the pharmaceutical companies don't want to have a tainted product out there. No way. I would like to think that the Agency would, in fact, deliver on what is a request by a number of us here to make sure that that communication channel is wide open, and that when there are serious threats or uncovering of evidence to suggest that a certain firm or a certain plant anyplace in the world is delivering a product that's less than adequate, that you have the tools to go right away to make sure that it is stopped, that there are consequences for that firm as well as perhaps individuals, and that we have an Iron Curtain of preventing that stuff from getting into the mainstream. That's your role and from up here on this dais we want to make sure that you have the tools to do that. So I would suggest your message back to the people that work for you and the people that you work for is that that message be heard loud and clear when you get back to your office this afternoon. This is something that I think we want to continue to follow up on, and whether it be July or September, to have another hearing to find out exactly what is going on. And that we do a job as well listening to some of the pharmaceutical firms and others to find out how we can better help you make sure what happened in Haiti, and has happened in the United States--maybe we have discovered it, maybe we haven't--the system is in place so that we don't have any questions. I guess one last question here. We have got an e-mail that was dated November 1997 from then-Deputy Commissioner Mary Pendergast concerning an international drug trader called Helm. I don't know if you are familiar with that. Do we have that that we can share with them? I don't know if you are familiar with this offhand. She writes, and I quote here, that ``Helm Voss are notorious in other parts of the world for not telling the truth about what they are shipping. ``Apparently several countries around the world have blacklisted them because of adverse health consequences resulting from their products about which they have lied or concealed the truth. Apparently, they are big''--this is all quoted. ``Apparently they are big into switching labels and the like.'' Do you know if the FDA has ever looked into that e-mail or the allegations as to whether it is true or accurate or not? Mr. Baker. Mr. Chairman, I am familiar with the Helm issue. I am not familiar with the details of the case. I wasn't anticipating testifying on that. Mr. Upton. Would you be able to respond---- Mr. Baker. Yes, sir. Mr. Upton. [continuing] in writing back to the committee within a week or so and we will share it with both sides? Mr. Taylor. Absolutely. Mr. Baker. That will not be a problem. Mr. Upton. Here is a copy of the e-mail for you. I think that will be helpful. Again, I appreciate you coming up today. Next time we would like to have your testimony so I can take it home a night or two before the hearing. I want to compliment the staff on both sides for making sure that we were prepared and have been able to walk through this, and the members that were here today, and we look forward to having you again---- Mr. Baker. Mr. Chairman. Mr. Upton. [continuing] to talk about the progress, Dr. Henney--and to talk about the progress that's been made from today knowing some of the details that we were alerted to. Do you have a closing statement that you would like to make? Mr. Baker. Mr. Chairman, I would like to thank you and thank the committee for having us here today and for listening. There are a number of issues clearly that have to be resolved. There are problems. We fully acknowledge that. The one thing I do is solve problems. That's part of my job. I am here today because I am the new guy on the block and these people report to me. And I am prepared to take the hits for that. We will correct these problems to the extent we can, and you will know what our problem areas are and what our resource needs are. It's our duty to let you know. Mr. Upton. Well, we want to make sure that you succeed. It will require some follow-up. Thank you. [Whereupon, at 1:20 p.m., the subcommittee was adjourned.] [Additional material submitted for the record follows:] PREPARED STATEMENT OF JOHN T. RIETZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ISOTAG TECHNOLOGY, INC. Mr. Chairman: My name is John Rietz and I am President and CEO of Isotag Technology Inc., with offices in Texas, Florida, and New Mexico. Thank you for the opportunity to submit this statement for the record and I commend you for convening this important hearing. ISOTAG Technology, Inc. provides the world's leading covert identification products and services. Our patented technology, which was originally developed at the Los Alamos National Laboratory (LANL), offers economic solutions for anti-counterfeiting, anti-diversion, product liability protection and quality and process control management. ISOTAG's unique combination of technology, detection, data management, decision support, and enforcement will effectively and conclusively solve the counterfeiting of bulk drugs. We believe that our comprehensive, complete solution offers the best assurances for the purity of medicines taken by all Americans. ISOTAG's products and services include: 1. Molecular Tagging--ISOTAG provides a unique, covert molecular fingerprint, introduced during the drug manufacturing process, which provides forensic proof of authenticity and purity. 2. Inviable Inks--ISOTAG recently acquired invisible ink technology, which was developed by Eastman Chemical Company, called Clircode. This patented technology operates in the Infrared area of the spectrum, which overcomes some of the inherent problems associated with invisible UV inks. Clircode can be applied at multiple points in the drug distribution process such as packaging, boxes, labels or holograms and are detected via hand-held readers and cameras. Clircode, in conjunction with the molecular ISOTAG, provides cost- effective and complete protection against all potential counterfeiters and diverters. I would be most pleased to present our state-of-the-art technology and a proposal providing a solution to the current bulk drug counterfeiting problem to the committee at your convenience. Additionally, we would be pleased to make a presentation to the appropriate officials at the Food and Drug Administration to assist in their efforts to stop the flow of counterfeit drugs coming across our borders. In conclusion Mr. Chairman, I want to thank you again for the opportunity to participate in this important hearing. I would be pleased to respond to any questions you might have as you continue in your efforts to protect the health of all Americans. [GRAPHIC] [TIFF OMITTED] T5846.230 Department of Health & Human Services Food and Drug Administration July 25, 2000 The Honorable Fred Upton Chairman Subcommittee on Oversight and Investigations Committee on Commerce House of Representatives Washington, D.C. 20515-6115 Dear Mr. Chairman: Thank you for your interest in the safety of pharmaceutical drugs in the United States (U.S.). This is in follow-up to the Subcommittee's June 8, 2000, hearing on counterfeit bulk drugs. Mr. Dennis Baker, Associate Commissioner for Regulatory Affairs at the Food and Drug Administration (FDA or Agency) was asked to provide information for the record. We have restated the questions in the order they were asked, followed by our response. 1. Mr. Stupak--Provide information on the status of actions taken regarding the importation of non-pharmaceutical grade radioisotopes and the manufacturing and sale of radioactive diagnostic drugs under the guise of the practice of pharmacy. FDA has been evaluating how to treat the compounding of radiopharmaceuticals in light of statutory changes mandated by the Food and Drug Administration Modernization Act of 1997 (FDAMA), Public Law 105-115. Specifically, FDAMA added a new Section 503A to the to the Federal Food, Drug, and Cosmetic Act (the Act) which creates exemptions for compounded products from certain provisions of the Act. Section 503A(e)(2), however, provides that Section 503A does not apply to radiopharmaceuticals. We expect to issue responses to a number of inquiries on this matter very soon, and we will, at that time, be able to provide the Committee with more detailed information regarding our enforcement policy. 2. Mr. Bryant--Why is FDA not working with the Customs Service on counterfeits and will FDA reconsider that position? FDA has worked with the U.S. Customs Service (USCS or Customs) on specific counterfeit drug investigations in the past, and will continue do so in the future when warranted. The Flavine counterfeit investigation and prosecution, completed in 1996, was a long-term joint investigation worked by FDA's Office of Criminal Investigations (OCI) and Customs. The reason OCI has not worked with Customs on counterfeit bulk drugs since 1996 is because no substantive information identifying a counterfeit bulk drug entering the U.S. has been brought to the attention of OCI or Customs since that time. OCI has a cooperative working relationship with Customs, including a Memorandum of Understanding with Customs providing for all OCI agents to be cross-designated as Customs officers. OCI currently is working a number of on-going investigations with Customs involving unapproved and counterfeit finished human drugs and adulterated or misbranded medical devices and foods. The Customs Service in recent testimony before the Committee on May 25, 2000, stated, ``Customs also has several ongoing investigations involving U.S. persons operating foreign pharmaceutical websites. All of these investigations are being worked jointly with the FDA's OCI. The Customs Office of Investigations has a great working relationship with FDA investigators.'' OCI is willing to work with Customs on a criminal investigative task force, if warranted. However, the establishment of a task force is predicated on identifying a large number of specific criminal violations that are occurring and the need to respond to those violations with the resources of a number of agencies. A good example of this is the USCS High Intensity Drug Trafficking Area Task Force at the Dulles International Mail Facility where OCI is represented. In the case of counterfeit bulk drugs, no large number of specific criminal violations has been identified. Accordingly, FDA has concluded that a joint standing task force with Customs for counterfeit bulk drug investigations is not warranted at this time. If credible new information regarding counterfeit bulk drugs is obtained, criminal investigations will be initiated in the appropriate venue and worked jointly with Customs. The Committee should be assured that when information is received concerning suspect counterfeit activity, OCI will work closely with Customs and other law enforcement agencies to conduct a thorough investigation, and OCI will provide FDA officials with any information developed regarding possible public health implications. FDA also is providing additional training to its import inspection cadre that includes an effort to improve our effectiveness in working with Customs' field personnel. During the period of June 19 through July 14, 2000, approximately 80 FDA field and supervisory staff involved with imports each received 36 hours of advanced training, including instruction from Customs personnel on that agency's statutory authority, regulations and operating procedures. Another 40 staff is receiving the training during the week beginning July 24, 2000. The training included strategic problem-solving exercises in working with Customs personnel to jointly address problems encountered in the field regarding the importation of counterfeit bulk drugs. 3. Mr. Bryant--Please respond to the following five questions. A. Does FDA favor posting OCI agents in Europe and Asia regarding counterfeits? The permanent posting of one or more OCI agents overseas has been considered a number of times over the last decade, but the Agency has, in each instance, concluded that the large additional expense would outweigh the potential benefits. FDA has requested funding in its FY 2001 budget that would be partially used to support a criminal investigator assigned to Interpol. This would support and facilitate OCI's criminal investigations and provide the Agency with a point of contact for international police intelligence information related to terrorism. B. Does the Agency favor a joint FDA/industry effort regarding counterfeits? Yes, we do. FDA already meets with the security directors of the various pharmaceutical manufacturers to discuss ways to more productively cooperate through the exchange of information and the provision of information relevant to investigations. FDA believes our relationship with industry on the issue of counterfeiting should be improved, and the Agency will enhance our relationship with top management of the pharmaceutical industry, particularly those individuals who oversee the security and regulatory affairs departments. This was an agenda item for the most recent meeting of the Field Drug Committee, which is a group of senior Office of Regulatory Affairs and Center for Drug Evaluation and Research managers who make decisions related to FDA's drug inspection program. FDA has already met with top officials of Johnson & Johnson, DuPont Pharmaceuticals and representatives of CEFIC (the European Bulk Drug Industry). We will also meet with the New Jersey Health Counsel, which consists of top officials of the pharmaceutical industry in New Jersey, on July 27, 2000, to discuss our anti-counterfeiting initiative and encourage their cooperation in this effort. As noted in Mr. Baker's testimony of June 8, 2000, manufacturers are already required to test and validate the safety, purity and consistency of the active pharmaceutical ingredients used in their products. We are exploring some new actions that manufacturing firms might be able to take in order to better detect counterfeits. C. Do you favor developing new systems in FDA to identify counterfeit drugs and other unapproved or illegal drug that enter the country? Yes, we do, and the Agency has already begun this process. FDA has begun to implement certain recommendations in the 1999 Draft Plan, such as evaluating a trace-back procedure for bulk products and a procedure for the submission of information from industry regarding suspicions that bulk products are counterfeit, substandard, or from outside approved sources. In addition, FDA has re-established an Agency-wide Working Group on counterfeit bulk drugs, in order to further refine FDA's strategy on bulk drug importation and to develop additional systems to prevent, deter and interdict the importation of counterfeit drugs. D. Submit plan on implementation of new technologies such as taggants. The new Working Group on counterfeits, described above, is considering this issue and the possible use of taggants or similar technologies will be discussed with industry as part of our joint FDA/ industry efforts described above. E. What can the Committee and Congress do to help FDA? FDA is making a full assessment of its needs and areas for improvement in handling counterfeit bulk drugs. We will submit a detailed plan of action to the Committee, as requested by Chairman Upton, in the near future. As requested, we will address our resource and/or legislative needs in detail at that time. 4. Mr. Strickland--Provide information on whether allowing China into the World Trade Organization (WTO) would hamper FDA's ability to regulate counterfeit drug products from that country. FDA's laws and regulations apply to covered imported products without regard to the products' country of origin or the status of the importing country as a member of the WTO or any other international organization. China's accession to the WTO Agreement would not change the application of FDA's requirements to products originating in China. 5. Mr. Upton--Respond to the issues raised in the November 13, 1997, e-mail from Mary Pendergast, former Deputy FDA Commissioner, regarding the Helm import company. The referenced e-mail was written during the time period following the 1996 contamination of glycerin used in medications distributed in Haiti, in which FDA assisted the Haitian government and conducted investigations in Europe and China to determine the source of the suspect glycerin. The e-mail from Ms. Pendergast to the Commissioner of Food and Drugs expressed concern about the part that Helm/Vos played in the glycerin incident. The 1996 investigation in Haiti disclosed that the suspect glycerin (contaminated with diethylene glycol (DEG)) used in production of liquid acetaminophen was shipped from China to the Vos warehouse in the Netherlands and then to Haiti. In July 1996, FDA completed an investigation at the Vos facility in Europe and at a European trader, who purchased the glycerin from China. Information concerning these investigations was provided to the appropriate European authorities for further investigation of the incident. In September 1996, FDA conducted an investigation at Helm New York, Piscataway, New Jersey, in follow-up to the glycerin problem in Europe and Haiti. The investigation disclosed that Helm New York handled limited quantities of glycerin and a private laboratory had tested the latest lot of glycerin received by the establishment. Since September 1996, other investigations have been completed at the Helm New York facility to address issues concerning the establishment's importation of active pharmaceutical ingredients. In 1997, FDA completed investigations in China in an attempt to determine the source of the glycerin and cause of the contamination with DEG. The investigations disclosed that the glycerin shipped to Haiti had been manufactured in China. We were unable to determine the point at which the contamination of the glycerin with diethylene glycol had occurred. During the investigations, we obtained a copy of a telefax from the European trader to the Chinese trader who handled the glycerin, which stated that the purity of the glycerin in the suspect lot was ``53.9% instead of 98% min.'' FDA has taken other steps to insure the safety of imported glycerin used by finished dosage form pharmaceutical manufacturers including issuing an import alert for glycerin from China and investigating entries of imported glycerin from sources other than China. We continue to periodically monitor glycerin exported to the U.S. 6. Mr. Upton--Does FDA believe it has the authority to require importers to identify the ultimate consignee. Yes, FDA believes it has the authority to require importers to identify the ultimate consignee. We are now evaluating how best to establish such a requirement without placing an unnecessary burden on industry or inhibiting trade. Thank you for making this information a part of the public record. We look forward to working with the Committee on our mutual goal of protecting the American public from the importation of counterfeit or otherwise dangerous drug products from abroad. Sincerely, Melinda K. Plaisier Associate Commissioner for Legislation cc: The Honorable Ron Klink Ranking Minority Member Subcommittee on Oversight and Investigations Committee on Commerce House of Representatives ______ Department of Health & Human Services Public Health Service August 10, 2000 The Honorable Fred Upton Chairman Subcommittee on Oversight and Investigations Committee on Commerce House of Representatives Washington, D.C. 20515-6116 Dear Mr. Chairman: This letter is in response to the Subcommittee's June 8, 2000, hearing, regarding counterfeit bulk drugs. As discussed at the hearing, the Food and Drug Administration (FDA or the Agency) was asked to- report back to Subcommittee with a plan to improve the detection and interdiction on imported counterfeit and substandard Active Pharmaceutical Ingredients (APIs). Directly following the hearing, the Agency re-established a Counterfeit Drug Working Group (Working Group) to explore issues of imported counterfeit and substandard drugs, FDA's import operations and foreign drug inspection program. over the past two months the Working Group had numerous meetings to devise a workable plan to assess the extent of the counterfeit drug problem in the United States (U.S.). The Agency also has contracted with a private firm to assess the status of FDA's import Information Technology (IT) and to explore the most efficient way of connecting databases to share information more readily with FDA's field inspectors. Since the June 8 hearing, the Working Group has had under development a plan for detecting these products to better ensure that the public is protected from potentially hazardous drug products. The report will outline the Agency's plans for better handling imported counterfeit and substandard APIs and finished drugs. The plan also will outline FDA's training program for import inspectors on counterfeit drugs as well as the initial use of the Establishment Evaluation System (EES) database by import inspectors. These latter programs have been developed since the Subcommittee hearing. The additional resources, personnel and funding that FDA believes is necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs are under review by the Working Group. Because the scope of this evaluation needs to encompasses both the Agency's domestic and foreign operations, as well as the operations of various FDA Centers, parts of this analysis are preliminary in nature. The Agency looks forward to providing more specific information on our funding needs relating to personnel and technology in the future, once a complete assessment is made and appropriate review has occurred. A. PROBLEM STATEMENT AND SUMMARY OF ACTIONS The increase in international trade has had an impact on the ability of FDA to cope with the volume of regulated products, including APIs. As Mr. Dennis E. Baker, Associate Commissioner for Regulatory Affairs (ORA), stated at the June 8 hearing, while FDA believes that the quality of drugs in this country is high, the Agency takes very seriously any allegations regarding the counterfeiting or adulteration of drug products. The Agency realizes that more can be done to help ensure that imported APIs and finished drug products meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act. Diminishing or flat-lined resources, coupled with the increasing volume of APIs from overseas, have stretched personnel and resources so thinly that FDA has been struggling to fulfill the program mandates in these areas. Policing the global drug marketplace to deter or interdict imported substandard drugs is a daunting task, given the resources made available to FDA. In response to this challenge, the Agency has developed a risk- based approach to foreign drug inspection. The Center for Drug Evaluation and Research (CDER) developed a four-tiered approach to perform surveillance inspections of firms that FDA has not been able to inspect. At the present time FDA is only able to inspect Tier I (Official Action Indicated, or OAI, inspection follow-up) and Tier II (sterile bulks, finished drugs and aerosols) firms. The required pre- approval inspections are being conducted in accordance with the Agency's mandate under the Prescription Drug User Fee Act. Resources are the primary factor limiting the Agency's ability to undertake additional inspections. The Working Group is looking at these issues and discussing how to best utilize current resources and what it would cost, as discussed in the June 8 hearing, to perform the inspections in all tiers of the CDER risk-based system. As stated previously, a Working Group has been re-established to explore the issues raised in the June 8 hearing. The Working Group consists of representatives from many Agency programs. These include the Office of Criminal Investigations (OCI), the Division of Import Operations and Policy (DIOP), the Office of Enforcement, the Forensic Chemistry Center (FCC), the Division of Federal-State Relations (DFSR) and the Division of Information Systems, and, Division of Emergency and Investigational Operations, all of which are components of ORA, and the Offices of Compliance within the Center for Drug Evaluation and Research (CDER) and the Center for Veterinary Medicine (CVM). The Working Group is in the process of assessing the effectiveness of the regulatory tools, compliance programs, staffing and procedures that already exist within the current statutory construct to monitor imported APIs. The Agency already has implemented the following actions: <bullet> FDA has contracted with a private IT contractor to assist the Agency in examining its existing technology and data. FDA has charged the firm with recommending ways to integrate its systems and expedite the availability of important data to the consumer safety officers and inspectors that are responsible for monitoring imports at the nation's ports of entry. <bullet> As mandated in the Food and Drug Administration Modernization Act of 1997, FDA has drafted a final rule requiring foreign establishments whose products are imported or offered for import into the U.S. to register with FDA and to identify a U.S. agent. once in place, the rule will provide for the collection of information needed to establish an accurate Official Establishment Inventory for foreign drug firms. <bullet> ORA's DIOP has engaged their counterparts at U.S. Customs Service (Customs) to assist in putting Customs house brokers and importers on notice that they must declare the proper manufacturer of their imported products. Accurate information will assist FDA with the difficult task of finding imported counterfeit or unapproved APIs and preventing their use in finished drug products. <bullet> ORA has developed a plan to establish a cadre of expert investigators and chemists that would be stationed in strategic high volume API import locations across the country. This plan will require more resources. <bullet> FDA has extended access to the EES database to the three FDA Districts handling the vast majority of imported APIs. Training for FDA import inspectors already has been accomplished and accounts have been established. The Working Group is studying many other suggestions and proposals that have been put forward. The initiatives noted above, which will be discussed in greater detail, represent a significant first effort at improving our foreign inspections, drug surveillance, and import operations to better protect the American public from the threat of imported counterfeit APIs. B. AGENCY INITIATIVES CURRENTLY UNDERWAY In June and July 2000, FDA conducted three Import Enforcement training courses for FDA import personnel including Compliance Officers, Consumer Safety Officers, and Consumer Safety Inspectors. Approximately forty students attended each one-week course representing in total about half of all persons assigned to field import operations. FDA and Customs attorneys jointly developed the course curriculum at the request of FDA's Division for Import Operations and Policy. The instruction course included training in Strategic Problem Solving (SPS), a Customs training module developed specifically to facilitate the targeting, investigation and prosecution of willful violators. Each course included a facilitated workshop after the pattern of SPS. In each class, two of the problems involved specific imported API counterfeiting fact patterns. Facilitated brainstorming by the field personnel focusing on the imported counterfeit API threat produced numerous ideas for strategies in detecting, preventing and interdicting counterfeit imported APIs. The Working Group is assessing these proposals for viability. FDA's FCC and Customs have agreed to explore methods to better leverage their respective resources in the investigation and analysis of suspect counterfeit products. The FCC is hosting the first meeting in their forensic laboratory on August 10, 2000, to demonstrate FDA's current forensic capabilities and strategies. The two Agencies will explore better means to coordinate their efforts by granting access to analytical data and equipment and cross training in methodologies and emerging forensic techniques. The FCC will interface directly with Customs' laboratories to share information on analytical procedures FDA's forensic experts use to detect unapproved and counterfeit APIs. The Working Group has placed a high priority on developing with Customs a unified approach for interdicting counterfeit drugs. Under FDA's Compliance Program 56002F, ``APIs'', FDA requests information relating to API characterization at the conclusion of current good manufacturing practices (CGMP) inspections. The FCC collates this information into a database for the development of a library of authentic APIs. These data will be used as one tool for identifying suspect counterfeit APIs during FDA's operations. The Working Group is currently assessing the most practical means for making FCC's data readily available for FDA personnel during import entry examinations and foreign and domestic drug inspections. The FCC has scheduled additional API targeted inspections at various importers and finished dosage manufacturers throughout the U.S. Additional hands-on training is planned for investigators in other strategic locations. In February 2000, the FCC briefed Mr. Baker of the potential threat of imported counterfeit APIs. Consequently, Mr. Baker authorized and funded FCC's efforts to conduct targeted API inspections at the importer and domestic finished dosage manufacturer levels. With these funding increases the FCC conducted six targeted API inspections. Three of these are importers of foreign APIs, two are domestic finished dosage manufacturers and one is a domestic animal drug manufacturer. The FCC inspectors are now reviewing imported API documents and samples of product, labeling, packaging schemes and certificates of analyses. At each of these inspections, the FCC worked with local FDA district drug investigators to detect suspect API shipments through product and records examinations. Based on unverified data from the Operational and Administrative System for Import Support (OASIS) that was originally supplied by Customs house brokers when various drug entries were filed, there are approximately 4600 firms that appear to be non-inspected foreign drug manufacturers. The Agency is reviewing the OASIS data to develop an import alert for foreign establishments that appear to have exported to the U.S. an API that is normally used to manufacture a finished dosage form which requires an approved application. A preliminary assessment by FDA's CDER, Office of Compliance, thus far, has identified forty-six firms in China and Hong Kong and eleven firms in India that appear to have exported to the U.S. in 1999. These firms have never been inspected by FDA and appear to be exporting a misbranded drug to the U.S. The Agency is developing an import alert for these firms and expects to be able to add to this list as the OASIS data is further evaluated. The final phase of the analysis of the OASIS data will be to identify firms FDA has not inspected but which are referenced in approved human and animal drug applications. The human drug firms will be evaluated using a risk-based analysis stratified into one of four tiers, incorporated into FDA's surveillance list, and subsequently scheduled for inspection. Previously, Philadelphia District Office participated in a pilot that involved an evaluation of imported APIs by cross-referencing drug manufacturing data submitted by importers with CDER's EES database. EES contains information tracking new drug applications (NDAs) and animal new drug applications (ANDAs) and relates those applications to approved sources raw materials, including APIs. FDA is extending the EES pilot. This represents new information previously unavailable to import inspectors. Field access to EES combined with a proposed new use of labeling exemptions under Title 21, Code of Federal Regulations (CFR) part 201 could result in the development of a monitoring, surveillance and enforcement model for all APIs and other drug components. On July 10, 2000, FDA trained investigators and compliance officers from New York, New Orleans and San Juan District Offices (DO) in the use of EES as a supplemental tool for evaluating the admissibility of APIs from foreign sources for use in manufacturing an NDA or ANDA. The trainees have received EES accounts and are familiarizing themselves with the use of the database in evaluating Customs entry data and providing additional training in their home districts to other import personnel. This EES training is an extension of the pilot to the three districts that handle the largest proportion of API Customs entries. The Working Group anticipates combining EES with other strategies could result in: (1) a marked increase in the prevention of non-drug manufacturing file referenced APIs being used in the manufacture of application drugs, (2) a procedure for tracking APIs and drug components from port to end-user destination to deter diversion within U.S. market, (3) an increase in opportunity for field exams of APIs upon entry for evaluation of authenticity, (4) the development of leads for OCI and ``for cause,'' foreign producer, importer, and domestic end-user inspections, and (5) the development of intelligence on international distribution channels of counterfeit and unapproved drugs. The Agency has placed the import industry on notice regarding the requirement to supply the Agency with accurate data regarding the identity and location of the manufacturer of imported drugs. Upon review of the notices made to the community over the last several years it became apparent that these requirements had been made clear to importers and brokers through notices issued on January 29, 1999, and March 24, 2000. Recently, the Agency again posted an updated version of its requirements on the Internet with links to and from FDA's import operations pages. Additionally, on July 28, 2000, a Customs Automated Broker Interface (ABI) Administrative message was issued to all filers with a reference to the Internet site containing these requirements and a physical mailing address where a filer may request a hard copy from the Agency. A copy of the July 28, 2000, ABI notification is enclosed. C. ADDITIONAL STRATEGIES AND IDEAS FOR HANDLING IMPORTED COUNTERFEIT AND UNAPPROVED DRUGS/APIS The Agency has been developing and implementing strategies for assessing the scope of the threat of imported counterfeit APIs to the U.S. consumers. The Working Group has identified three major operational components for evaluation: foreign inspections, domestic inspections and import operations. In order for FDA to ensure the integrity of APIs from place of manufacture to place of use and sale in the U.S., and to assure those drugs are manufactured and held in conformance with good manufacturing practices (GMPs), information from these three components must be integrated and made readily available. Furthermore, when the Agency intends to conduct a foreign inspection, relevant data obtained from the Agency's domestic operations must be available to the foreign domestic operations must be available to the foreign inspectors for verification or development of additional evidence where suspect activity has been identified. These interfaces require a more comprehensive and integrated use of IT to increase the speed and accessibility of relevant data. An additional evaluation by the Agency is underway to determine how the industry could participate in combating the potential threat of counterfeit drugs internationally and domestically. 1. IT Proposals and Solutions. On July 1, 2000, ORA engaged the services of an IT contractor to assess the Agency's overall IT needs and to propose changes which will accomplish the following goals. The IT contractor was charged with determining the information that FDA import inspectors need to fully assess admissibility of all FDA regulated commodities. The contractor consulted with import inspectors and compliance officers with expertise in FDA and Customs laws and regulations, GMPs and IT import applications. The contractor has used a comprehensive data gathering and assessment framework to analyze the functional process, infrastructure, and IT systems used by ORA to support import operations. The data gathering involved a workshop with the import operations staff, onsite visits to relevant FDA centers and to a DO, system demonstrations, interviews with system and infrastructure managers, and review of documentation on ORA operations provided by FDA. Analysis involved an iterative approach to development of processes, issues and recommendations. Each iteration consisted of a team analysis, followed by a group session to compare and validate each team's assessment. To identify the most appropriate technology, the contractor conducted extensive technology scanning, arranged for vendor presentations, reviewed FDA plans and discussed possibilities with FDA staff. The contractor also was charged with developing strategies for converting information currently on paper into an electronic format form. This information is necessary for the import inspector to make a more efficient admissibility decision. The contractor was asked to develop short and long term proposals for integrating the FDA's databases and for creating a secure electronic environment in which large amounts of data may be securely transmitted and accessed by authorized Agency personnel. These proposals are to take into account anticipated growth of the regulated industry, the dramatic increase of cross-center products entering interstate commerce, and the need for flexibility to maximize the Agency's enforcement and surveillance efforts. Finally, the contractor has been charged with assisting the Agency in assessing the viability of countermeasure technology to detect and deter import violations. The Agency expects a final report from the contractor in August 2000. 2. Joint Industry/Agency Efforts. Members of the Working Group conferred with the FDA's Field Drug Committee (FDC) on counterfeit API issues. The FDC historically has maintained networks with drug industry personnel and trade associations and has utilized these relationships for furthering the important message of health and safety through consistency in GMP compliance. The FDC has agreed to assist the Working Group in developing avenues through which industry could join forces with the Agency in combating counterfeits in the market place. Beyond this initial approach through the FDC, the Agency is exploring additional routes for encouraging and receiving intelligence on counterfeit drugs in the world market. Historical experience in prior counterfeit API investigations has demonstrated that foreign API manufacturers whose products are being counterfeited can provide substantial assistance in developing tests for authenticity and intelligence regarding suspected counterfeiting operations. The Agency is aware that intelligence gathering from the trade is a critical element to successfully identifying suspect counterfeits in the market. In connection with the IT contractor's evaluations, the Agency may be able, with appropriate funding, to establish a secure Internet environment to encourage manufacturers to provide confidential and sensitive information to the Agency. Depending upon the intelligence received, the Agency may be able to identify sources of counterfeits or substandard products or evidence of other related criminal activity. 3. Foreign Inspection Component. Since 1990, the Agency has shifted resources from domestic to foreign programs to increase presence in the foreign drug manufacturing market place recognizing the shift in global markets. For the Fiscal Year (FY) 2001 foreign work plan, the Agency will focus on the manufacturers that have not been inspected as identified through the analysis of unverified OASIS data. Resources necessary to fully implement the four-tiered inspection system are being evaluated by the Working Group and will be provided when available. The foreign drug inspection program for the current FY is on track for accomplishing approximately 450 foreign inspections. This represents more foreign inspections than the Agency has ever accomplished in a single year. Because the program continues to be primarily application driven, the priorities associated with the product approval process have impacted on our ability to conduct drug surveillance inspections. For FY 2001, ORA is projecting approximately 500 foreign drug inspections. This projection includes substantial increases in drug surveillance inspections, which should result in increased coverage of firms in tiers three and four. The Agency is attempting to accomplish this increase through reallocation of existing resources. This will result, however, in a reduction in domestic inspection programs. Due to resource restrictions, the Working Group is examining other avenues for developing evidence that a foreign firm is complying with GMPs. Although there is no true substitute for a physical GMP inspection, there may be critical production or validation records which, through an Agency review, may provide a minimum level of assurance that the firm is aware of and making efforts to comply with GMPS. The Working Group is examining modification of the procedures for submitting Drug Master Files. For instance, under current Agency regulations, validation of a drug manufacturer's process is not required for obtaining an approval, however, it is required prior to shipment in interstate commerce. Under the current paradigm, due to inadequate resources, the Agency often cannot verify a foreign manufacturer's validation records prior to the first shipment to the U.S. Requiring the production of such records in conjunction with or prior to shipment of drugs to the U.S. may permit the Agency to review the firm's validation. Overall such a review may assist the Agency in focusing its resources toward firms that appear to lack adequate control and validation systems. Such a program could be extended to the importation of over-the-counter drugs under the same authority. Compelling the production of such GMP required documents for imported drugs may require FDA rule making. Such a program would assist the Agency in leveraging its human resources to complement foreign inspections, 4. Domestic Inspection Component. The Working Group has identified a need for integrating the foreign and domestic inspection programs together with the Agency's import operations. For instance, the Working Group is recommending the use of ``Process Mapping'' or ``System Re-engineering'' within ORA to identify areas of internal procedural overlap and disconnects that may contribute to the lack of information exchange among these inspection programs. The IT contractor is expected to assist in assessing the viability of an integrated data system which will permit access and data submission based upon personnel role definitions. Current instructions for performing domestic finished dosage manufacturer GMPs have not focused on authenticity of warehouse API stock. The inspector will generally track a randomly selected API or other raw material from receipt through quarantine and quality control testing, into production, verifying that proper batch numbers are recorded throughout the process. Assuming that this review demonstrates no discrepancies, these aspects of the manufacturing processes are presumed to be within the limits of GMPs. Therefore, the Working Group is evaluating the need to add components to and modify domestic inspection procedures to provide comprehensive coverage of APIs during inspections of end users. 5. Import Operations Component. FDA's DIOP is responsible for providing policy guidance to the field relating to import procedures, overseeing the development and operation of the Agency's Import Alert system, and for maintaining the Agency's OASIS system. The Working Group is reviewing DIOP's procedural and system operations and is assessing the Agency's personnel and equipment needs to better monitor U.S. ports of entry. During the June 8 hearings, Customs designated over 300 ports of entry. OASIS data indicates that approximately 100 ports have seen entries of APIs. FDA has a notable presence in over 40 ports. The ports where FDA conducts the bulk of its work represent those through which the vast majority of drugs enter. The Working Group is considering whether current FDA or Customs authority would sustain a restriction on which ports of entries certain commodities, such as drugs, may be offered for import based upon a health and safety assessment. Other approaches might be available to accomplish a similar effect. For instance a proposal to restrict entry of certain commodities to certain times of the workday or week rather than by geographical criteria. The Working Group reviewed Import Alert 68-09, which covers over 50 veterinary APIs. Although this alert was originally issued in 1993, it remained largely unutilized due to inadequacies in FDA's product coding system. Consequently, CVM, CDER and ORA components are reviewing a Working Group proposal to merge all human and animal drugs into a common ``drug'' FDA product code. This will align the CVM product code system with CDER's system enabling criteria to be set in OASIS to make CVM import alerts more effective. Because many APIs have application in both human and animal drug industries, the Working Group is considering consolidating human import APIs into Import Alert 68-09. 6. Possible new use of drug labeling requirements. The Working Group is examining the development of a new use of the drug labeling requirements found at 21 CFR Part 201. CVM's Import Alert 68-09 currently addresses imported API drug labeling noting ``[b]ulk new animal drug substances labeled for further manufacturing or processing, which do not bear any indications for veterinary use, may be misbranded under section 502(f)(1) [of the FD&C Act] if they are intended for veterinary use or for further processing as animal drugs.'' The Import Alert continues ``21 CFR 201.122 exempts a drug from adequate directions for use when labeled for further manufacturing and processing and when used to manufacture a new animal drug, which is covered by an approved application. ``. . . 21 CFR 201.150 exempts a drug, which is intended to be further processed or manufactured, from adequate directions when it is shipped under the terms of a written agreement which, if followed, will assure the finished product is not adulterated or misbranded.'' This Import Alert was revised on July 12, 2000, and has been the basis of Working Group discussions for extension of the drug labeling regulations to control imported APIs and drug ingredients generally. 7. Proposal for assessing the existence or extent of imported counterfeit and substandard drugs. ORA has proposed a plan for assessing the extent of the potential threat that imported counterfeit and unapproved APIs may pose to the health of the unsuspecting American consumer. This plan would require an increase in ORA's current staff, equipment and supplies for forensic analyses, and operational funds for domestic and foreign inspections that would target imported APIs. The plan could generate leads for criminal and civil enforcement actions and provide concrete factual and analytical data upon which the Agency could plan its next course of action. The proposal consists of establishing a team of experts to detect counterfeit and substandard APIs. This specialized team would be stationed in strategic locations identified by high import or manufacturing activities. They would conduct focused API inspections of domestic and foreign manufacturers, importers, and conduct forensic analyses of resulting samples. The overall resource requirement for this plan includes additional full-time equivalents and funding for equipment, domestic travel and operational costs. Foreign inspection costs would increase these funding needs. ORA is assessing the viability of the proposal. 8. Possible International Collaboration. The Working Group is investigating whether collaborations with foreign governments could increase the Agency's ability to verify the existence and the compliance status of manufacturers, shippers, repackers or relabelers of drugs of other countries. Such collaboration would involve counterpart foreign government agencies authenticating the source and quality of APIs imported into the U.S. 9. Possible Security Measures. The Working Group is engaged in discussions with the Customs' Applied Technology Division which has considerable experience in tracking shipments within U.S. commerce to verify and document cargo diversion. The Working Group will evaluate the currently available technology in terms of levels of surveillance capabilities, cost of equipment and implementation. The Working Group has asked the IT contractor to explore low cost security devices for use by foreign manufacturers such as chemical taggants in labeling, glue, ink or packaging materials to detect suspect counterfeit drugs. The Agency is considering a wide array of available technology including encrypted bar code technology in labeling and Certificates of Analysis containing manufacturing information already submitted by the foreign manufacturer through a secure web-based environment. Other possible solutions include radio frequency tags for detection during examinations at ports of entry. The Working Group will continue its assessment of the extent of the counterfeit drug problem in the U.S. The strategies outlined above will be further developed and enhanced. Additionally, other potential strategies will be examined. Thank you for your continued interest in these important issues. We hope this information is helpful, please contact us if you have further concerns or questions. Sincerely, Melinda K. Plaisier Associate Commissioner for Legislation Enclosure cc: The Honorable Ron Klink Ranking Minority Member Subcommittee on Oversight and Investigations Committee on Commerce The Honorable Thomas J. Bliley, Jr. Chairman, Committee on Commerce The Honorable John D. Dingell Ranking Minority Member Committee on Commerce [GRAPHIC] [TIFF OMITTED] T5846.231 [GRAPHIC] [TIFF OMITTED] T5846.232 [GRAPHIC] [TIFF OMITTED] T5846.233 [GRAPHIC] [TIFF OMITTED] T5846.234 COUNTERFEIT BULK DRUGS AND RELATED CONCERNS ---------- TUESDAY, OCTOBER 3, 2000 House of Representatives, Committee on Commerce, Subcommittee on Oversight and Investigations, Washington, DC. The subcommittee met, pursuant to notice, at 10:05 a.m., in room 2322, Rayburn House Office Building, Hon. Fred Upton (chairman) presiding. Members present: Representatives Upton, Cox, Burr, Bryant, Bliley (ex officio), Waxman, Strickland, and Dingell (ex officio). Also present: Representative Coburn. Staff present: Alan Slobodin, majority counsel; Anthony Habib, legislative clerk; and Chris Knauer, minority counsel. Mr. Upton. Good morning, everyone. Today the subcommittee continues its oversight and investigation of counterfeit bulk drugs and other issues related to imported drugs. On June 8 of this year this subcommittee held a hearing on FDA's failure to take adequate actions concerning imported bulk drugs. Several key findings emerged from that hearing. One, for the first time the FDA publicly disclosed that it knew 4 years ago that the deaths of Americans were in fact linked to a counterfeit bulk drug. Two, in 1996 the FDA and Centers for Disease Control determined that 89 Haitian children died from taking cough medicine made with poisonous antifreeze traced to China but labeled as glycerine. The FDA's follow-up investigation of the Haitian cough medicine case uncovered shipments of suspected glycerine that made their way into the United States. The FDA linked toxic adverse reactions to 155 American patients on an antibiotic called gentamicin sulfate made by a Chinese bulk manufacturer, Long March Pharmaceutical. Even with a system of safeguards such as FDA inspections and manufacture testing, the Long March bulk drugs still reached and harmed unsuspecting American patients. The FDA had little or no information on about 4,600 firms that had shipped bulk drugs into this country, including 623 from China and 409 in India. This lack of information showed the inadequacies in FDA's information systems and the real risks of uninspected firms shipping counterfeit or substandard drugs into the U.S. . Since the June 8 hearing there have been more key findings in developments on the counterfeit drug import front. Because of the committee's investigation the FDA magazine so far identified at least 46 firms in China and 11 firms in India that appear to have exported misbranded drugs to the United States in 1999 and have never been inspected. The FDA recently advised committee staff that as many as 242 firms worldwide appear to have shipped misbranded drugs to the United States in 1999 and yet have never been inspected. In July committee staff visited the port of Laredo, Texas and on the U.S.-Mexican border to learn about the U.S. Customs Service and FDA controls of commercial and personal imports of prescription drugs. The staff visit showed the lack of controls over Mexican pharmacies and the wide availability of suspicious counterfeit or substandard prescription drugs imported from Mexico. Last month committee investigators accompanied Dennis Baker, FDA's Associate Commissioner for Regulatory Affairs, to China and India to observe FDA inspections of bulk drug firms and to gather additional information on issues related to the counterfeit drugs. Here are some of the important findings from that trip: Committee staff obtained evidence that Chinese firms are secretly manufacturing drugs that are still under U.S. patent. The firms market these violative drugs using secret price lists. In another interesting counterfeiting example a Chinese pharmaceutical company is marketing products allegedly as food, but these products actually contain the active ingredients of Viagra. It is difficult to track counterfeiting in China because counterfeiting factories use a day shift for making a legitimate drug and sometimes a night shift for the counterfeit version. Some local government authorities are complicit in the counterfeiting and thwart operations that could expose these practices. Chinese government authorities who are not corrupt often lack the resources to investigate. Another difficulty is the inability to track product flow because distribution in China is very complicated. Two developments that make China a bigger time bomb of drug counterfeiting are these: China's joining the WTO and Internet sales. But India may be the biggest counterfeiting problem because of the lack of patent laws and the lack of centralized regulatory control of the pharmaceutical industry. According to FDA inspectors, the plants in China and India visited by the committee staff seem to be representative of most of the drug plants inspected in China and India. But if that is so, these plants use outdated technology and procedures no longer used in the West. In addition, it is difficult to believe that these plants can remain compliant since these plants are normally operating outside of U.S. regulations when they manufacture for their domestic market and are not pressured by environmental or other safety laws such as firms here in the United States. There are major obstacles to FDA foreign inspections being able to assure the same safety standards as domestic inspections. Unlike domestic inspections, FDA foreign inspections in China and India cannot use samples of microbiological testing because the samples would lose their integrity by being shipped for testing to a U.S. lab. Unfortunately, no field testing is available. Even when an FDA inspection teams includes a Mandarin speaking FDA inspector, the language barrier remains a major problem in China because there are difficulties in translating technical terms and the firm's interpreter can sometimes lack that scientific knowledge. Where the firm's interpreter has scientific training, these interpreters sometimes tend to go beyond interpreting and suggest answers or provide leading questions to employees. Also, FDA inspection teams try to work efficiently and split up to look at different parts of the firm. As a result FDA inspectors often are still relying on the firm's interpreter even when another FDA inspector on the team in fact knows the language. Beyond some of the new information obtained by the committee there has been another important development: Legislation on an appropriations bill that would change FDA laws to ease reimportation of U.S.-made prescription drugs. Much of the debate has focused on safety. These concerns are a reflection of the investigative work of this subcommittee in the 1980's, and today. This subcommittee will continue its oversight work to ensure that the FDA can control the current flow of drug imports and that the FDA not implement schemes that would in any way jeopardize the safety requirements of drug imports. Last, since the June 8 hearing the FDA has reported back to the subcommittee on actions and strategies to improve its scrutiny of imported drugs. The Department of Justice has reported back to Chairman Bliley on proposals to strengthen investigation and prosecution of crimes involving counterfeit drug imports. We will hear in some detail at this hearing about these actions, plans and proposals from the FDA and the Department of Justice. We talked a lot at the June 8 hearing about what was wrong with the FDA. Today I want to mention something right with the FDA. His name is Dennis Baker, and he is FDA's Associate Commissioner for Regulatory Affairs. He has had a very tough job, testified for FDA at the June 8 hearing. But from what I have been told by staff, he I know is a dedicated public servant who is genuinely committed to improving the FDA. And Dr. Henney, I hope you will send a strong and loud message of support for him and for the upgrading of information technology that he seeks and that the FDA badly needs. Welcome, today's distinguished witnesses. We are particularly honored that Raymond Kelly, U.S. Customs Service Commissioner, is joining us today. Certainly I want to extend a very warm welcome to the FDA Commissioner, Dr. Jane Henney, who is making her first appearance before this subcommittee. I look forward to discussing these vital issues and working with you to find effective solutions. I yield to-- -- Mr. Coburn. Mr. Chairman, as a member of the full committee and a former member of the O&I Subcommittee, I would ask unanimous consent to participate in this hearing. Mr. Upton. Is there any objection to that? Hearing none, the gentleman is allowed. Mr. Dingell. I'll defer to the chairman. Mr. Upton. Mr. Bliley, the chairman of the full committee. Chairman Bliley. Thank you, Mr. Chairman. You held a hearing last summer on imported counterfeit drugs and today we will look at some very serious questions about FDA's ability to assure that all drugs manufactured here or abroad meet safety requirements. Congress is about to enact permanent changes to the Food, Drug and Cosmetic Act as part of the agricultural appropriations bill. I regret that these kind of policy changes are being made without action in the Commerce Committee. Relaxing the laws governing the importation and reimportation of prescription drugs into the United States will have far-reaching consequences, some potentially dangerous. Unfortunately, a full vetting of this issue has not occurred. I am very concerned that the Congress is legislating changes to a public health law that may be unwise and may erode the gold standard that exists for the quality and efficacy of drugs consumed by Americans. I think all my colleagues in the administration would agree it is completely unacceptable to have two safety standards for the drugs that Americans consume, one for the drugs made here and a lower one for imports. When it comes to safety, there should be no compromises. This committee has been vigilant on drug safety. Imported or reimported drugs should meet the same rigorous standards. Avoiding this double standard is important because in many cases drug imports can not be assumed as safe as U.S. drugs. Under my authority investigators from this committee last month went with the FDA to China and India to see firsthand the bulk drug plants and the problems with inspecting them. While China and India have a wealth of human labor and scientific talent, these drug plants lack resources and systems to assure safety. The plants that the staff observed had major problems meeting such basic safety requirements as clean water, good ventilation, and methods to avoid contamination. In the opinion of the investigators and the FDA inspectors, these kinds of plants could not exist in the United States because they would be unable to compete. Beyond these plant visits, investigators also obtained information and evidence related to fraud and counterfeiting that are a reality in the international pharmaceutical trade. FDA already cannot assure against the double standard because of weak import controls and inadequate information systems. Prompted by this committee's investigation, the FDA has reviewed its records on drug imports and found that 242 firms may have shipped misbranded drugs to the United States in 1999 and have never been inspected. The total of 242 includes at least 46 firms from China and 11 from India. FDA must upgrade its enforcement and information systems to assure the safety of imported drugs. In addition to these improvements, there must be effective criminal enforcement against fake drug imports. After the June 8 hearing, I wrote to Attorney General Janet Reno about the Justice Department's view on improving ways to investigate and prosecute crimes related to counterfeit drug imports. In response to my request, the Department has suggested some legislative proposals such as requiring certain records as part of a foreign drug inspection and ensuring extraterritorial application of the Food, Drug and Cosmetic Act. These proposals seem reasonable in concept and I support them. I would be pleased to have the committee work with the FDA and the Justice Department on developing legislative language. As the reimportation of prescription drugs is eased, this committee has worked and will continue to work to strengthen protections for consumers against imports of fake drugs. Today's hearing to get more information on the problem and on proposed solutions and action is yet one more example of this committee working to protect consumers. I welcome today's witnesses and look forward to the testimony. Mr. Upton. Thank you, Mr. Chairman. Mr. Dingell. Mr. Dingell. Mr. Chairman, I thank you. I have a longer statement which I ask to be inserted in the record. Mr. Upton. Without objection, all members of the subcommittee will be allowed to introduce and offer their statements in their entirety. Mr. Dingell. Mr. Chairman, it is amazing to me how many times this Congress must relearn the same lesson, how little we profit from it and what messes we get ourselves into by failing to address the real underlying problem. I know there is a tremendous drive to allow reimportation of drugs or to allow importation of drugs and pharmaceuticals and other things in a more expedited easy fashion. This I think is in good part because my colleagues to some degree on both sides of the aisle, but mostly on the majority side, have found that the people are fed up with the fact that a lot of Americans are, (A) paying too much and, (B) that our senior citizens are not able to get prescription pharmaceuticals because they simply cannot afford them, and of course with some of the witchcraft that is coming forward on the other side of the aisle about how we are going to pay for prescription pharmaceuticals by enriching HMOs means that my colleagues on that side have urgent need of something to shelter them against public criticism. In the 99th Congress, this committee looked at reimportation of prescription pharmaceuticals. We had a long bipartisan report. We found a number of things. We found, for example, shipments of fake pharmaceuticals. We found unsafe packaged pharmaceuticals. We found counterfeits. We found adulterated antibiotics from places like China. We found prescription pharmaceuticals that had been repackaged under unsafe conditions that had been stored under unsafe and under conditions which created deterioration of the prescription pharmaceuticals and which put Americans at risk. So we passed the basic legislation to which we are inquiring today, the PDMA, which required that the prescription pharmaceuticals be imported through licensed manufacturers. That was because the Congress was, quite frankly, too stupid and too tight to properly fund these programs and because OMB saw to it that Food and Drug didn't have the money that they needed to do the job and didn't have the resources and the number of people. Now, with a growing trade in prescription pharmaceuticals from places like China, we are going to expand the amount that comes in. The chairman just made, I thought, a very sapient observation in which he pointed out that there is desperate need to see to it that Food and Drug has the resources to do the job that they have to. We aren't seeing to it with that situation, and I intend to ask a few questions about it. Now if you think that you are limiting this only to subjects like prescription pharmaceuticals and things which will come in, you are entirely in error, because we are talking about aerosol inhalers, we are talking about pre-mixed- injection solutions, we are talking about ointments and creams, auto injectors, power inhalers, topical gels, injection solutions, inhalation solutions, pediatric solutions, capsules, prefilled syringes, and a wide array of other things, including syrups and nasal sprays. Now, if you are talking about having Food and Drug catch somebody at the border when they have the array of shipments that they have in, you are going to find that, (A) they can't do it and, (B) they can't paw through to find out whether these substances are in fact safe, whether they are deteriorated, whether they are manufactured under good manufacturing conditions as required by our law or whether they are doing other things. In short, you are setting yourself up, if you pass legislation easing reimportation or easing importation, to a situation where you are looking at a fine calamity and some fine killings of Americans and making Americans ill because you are not doing the job that you should in terms of seeing to it that Food and Drug has the resources to address these problems now. I would just call to your attention one little thing, where Food and Drug some years back had a scare over Chilean grapes. They pulled the whole Food and Drug administrative and enforcement mechanism and they sent them to the ports to look and see what was going on. They found, I think, three grapes that had cyanide in them. But the result of this mess was that there was a prodigious lack of enforcement of all parts of the foods and drug law because they didn't have either the people or the resources without this particular scare to do the job that they needed to do. So I look forward with a great deal of interest to what we uncover today. I intend to ask about the resources and to try and recall for the benefit of those who have not learned this lesson, as I had to learn it back in the 99th Congress, about what happens when you turn loose an agency without proper resources, charge them with protecting the American people and then find that they cannot do the job that they have to do. I think that this is particularly subject to criticism when we do this in order to avoid criticism for failing to pass proper legislation to address the problems of our senior citizens and having prescription pharmaceuticals made available to them at a reasonable cost. In any event, this will be an interesting hearing. We will try and see to it that it is lively and that all participate. In the meantime if anybody has got any loose time I have an excellent statement which deals with these matters and other matters in greater detail, which I hope will be helpful to the Chair, to the committee and to the Congress in terms of understanding the mess in which we are injecting ourselves. Thank you, Mr. Chairman. [The prepared statement of Hon. John D. Dingell follows:] PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN Mr. Chairman, I have long been concerned about counterfeit, substandard, misbranded, and adulterated drugs entering this country from abroad. Previous investigations conducted by this Subcommittee more than a decade ago ultimately led to the passage of the Prescription Drug Marketing Act (PDMA), which added measures to protect consumers from potentially dangerous foreign drug sources. But protecting consumers from questionable and dangerous drug products manufactured abroad remains a formidable challenge. I remain concerned that the Food and Drug Administration (FDA) has yet to develop a suitable framework for protecting the public in the face of potentially greater risks. The agency still remains alarmingly behind in inspecting those firms that send drug products here, and it still lacks the ability to track and measure the global counterfeiting problem. What is more troubling is that significant new responsibilities could soon be placed on an agency that is already underfunded and struggling to meet its current mandate. Mr. Chairman, FDA is supposed to inspect firms for Current Good Manufacturing Practices (CGMPs) before they are approved to ship a drug product into the United States. Yet at the last hearing, it was disclosed that approximately 4,600 foreign drug firms may have shipped products to the U.S., yet were never inspected by the agency. FDA now tells us that the figure is lower, but they still cannot tell us what it is. That inability does not instill confidence. The lack of this kind of information stems from the agency's reliance on an incomplete and outdated information technology system called OASIS. We have asked the agency to address the shortcomings of this system for years, but FDA has failed. While FDA is again trying to fix this system by hiring yet another outside contractor, the fact remains that the agency still cannot efficiently generate data critical to its foreign inspection efforts. A workable system for tracking who sends what and when to this country, and whether such firms meet U.S. good manufacturing practice requirements, must be implemented, and soon. Commissioner Henney should immediately determine the agency's information technology requirements, and then finish the job. Meanwhile, as FDA continues to struggle with this problem, new inspection demands are piling up. Although we cannot determine the exact size of the foreign inspection backlog, we know that one exists and it appears considerable. What is worse is that in the coming years increased inspection demands will only grow. For example, staff was told that next year, as many as 10 to 15 new facilities requiring an FDA inspection could emerge in China alone. For this single country, FDA would have to significantly increase its inspection efforts from the previous year, which would represent a significant resource expense to the agency. Multiply this across the globe and the ensuing problem becomes obvious. How will we expect the FDA to keep pace with such demand when it is already falling behind? Further, if the agency cannot keep up, what will the effect be on the safety of the nation's drug supply? These are critical questions that must be asked and properly addressed. What is also important is that we ask these questions in the context of the larger debate now taking place regarding drug pricing. That is because the outcome of that debate could have profound consequences on how the agency does its job, and how it allocates resources. While it is known that I have a number of safety concerns regarding most of the re-import proposals, I also have concerns that we are on the verge of asking an already overstretched agency to do significantly more. I remain skeptical whether we will adequately fund FDA, or even if it is technically prepared and capable of doing the job. I cannot think of a time when FDA was not struggling for resources, nor do I recall that the agency did a particularly good job at stopping adulterated and counterfeit material from reaching our shores before the Prescription Drug Marketing Act went into effect. Policing the world's drug supply is an expensive endeavor. Yet, while we agree that foreign inspections are a critical component to safeguarding the nation's health, we still do not adequately fund them. Why? If we are going to hold the FDA responsible for being the world's drug cop, shouldn't we provide it with the necessary resources to do the job competently? Let me conclude by saying that I believe that drug counterfeiting is a very real problem that will likely only grow worse in the future. The world's drug supply is every bit as vulnerable to dangerous counterfeiting today as when I first began the investigation more than 15 years ago that ultimately led to the Prescription Drug Marketing Act. And while I have a great deal of respect for my friends at the FDA that continually protect us from that threat, I do believe the agency is slipping behind in meeting its mandate. I would think long and hard about whether, in the near future, we want the agency to take on even greater responsibilities, before we have first addressed what is now broken. I look forward to hearing from today's witnesses, and with that, I yield back. Mr. Upton. Thank you. Recognize the vice chair of the subcommittee, Mr. Burr. Mr. Burr. Thank you, Mr. Chairman. Welcome, Commissioner Henney. Mr. Chairman, before I make my written remarks, let me associate with the chairman of the committee and the ranking member of the committee with the concern that I personally hold after a 2\1/2\-year commitment through the FDAMA legislation at a time where we worked aggressively, every member of this committee, to protect the gold standard that we recognize existed at the Food and Drug Administration and the dismay that we go through today with an effort to open up the market to a flow of drugs in a way that we can't, I believe, fulfill the commitment to meet the same standard. It is somewhat of an amazement that it bypassed this committee, that the effort is stuck into an appropriations bill and that individuals responsible within this government for the safety and efficacy of our pharmaceuticals have been supportive of this effort for reimportation and importation. I have tried to stay focused on this hearing because it deals with counterfeit drugs. It is somewhat ironic that we would highlight the problem that exists in America and at the same time walk into another room and talk about how to expand the risk to us of a current problem. After reviewing Commissioner Henney's testimony, I am pleased to see that the FDA listened to several of our suggestions at the June 8 hearing and has moved forward with some important initiatives. However, several statements in the testimony do raise some questions. One, given that the importers were notified on January 29, 1999, March 24, 2000, July 20, 2000 and July 28, 2000, that they must provide the FDA with the identity and location of the drug import manufacturers, it concerns me that you have not provided us with any compliance data on the requirement today. The first notice was given over 20 months ago. Two, as one of the authors of FDAMA, it disheartens me to see that a final rule on a requirement included in FDAMA has just been sent for approval to the Office of Management and Budget. It is very important for foreign establishments whose products are imported or offered for import into the U.S. to register with the FDA and identify a U.S. agent. It should not have taken FDA 3 years to issue a rule on this part of the FDAMA legislation. You state that the Office of Criminal Investigations is working on a number of ongoing investigations with Customs involving unapproved and counterfeit finished human drugs. I am curious to know how many investigations are included in a number after all the years the FDA just spoke about the potential threat posed by counterfeit drugs. Four, the Prescription Drug User Fee Act requires preapproval inspections of manufacturing facilities. Why are there by FDA's count 242 uninspected foreign manufacturers that are exporting products to the United States of America? The bottom line in this issue is consumer safety. It should be as it relates to the debate on counterfeit drugs, it should be as it relates to any debate about a stream or flow of pharmaceuticals, be them finished or bulk, to this country and I hope that never changes. I thank the chairman. I yield back. Mr. Upton. Thank you. Mr. Bryant. Mr. Bryant. Thank you, Mr. Chairman. I too, as my colleague from North Carolina did, wish to associate myself with the remarks of our chairman of the full committee as well as the ranking member in terms of the concern that we all have regarding the availability of prescription drugs to our population as well, and specifically to our senior citizens. I would differ with those on the committee who raise complaint about this Congress passing for the first time ever a prescription drug benefit for our senior citizens, something again that has never happened. And while it may not be the perfect bill, and rarely do we initially pass a perfect bill out of the House, it is a good start. It goes a long way down the road in providing universal coverage. It is a voluntary bill, one that doesn't make you get into the program if you don't want to, one that provides very good access to this benefit and at the same time provides a catastrophic type coverage for people out there who have extremely large bills. I think, importantly, it offers this, to coin a Washington phrase, sooner than later, this is something our senior citizens in particular don't need to wait years to begin receiving this type of benefit. I would specifically thank our chairman of this subcommittee, Mr. Upton, for a very timely hearing. I think in terms of providing an opportunity to have the FDA in at this time as well as Customs and Justice to talk about the importation issue is a wonderful opportunity, given several things, the Internet and sales and things like that that are just overwhelming Congress in so many ways. The Internet itself, sales of prescription drugs and other things would be one of those, but so many other times I think that the Internet and the technology that is emerging, particularly in the pharmaceutical industry, are overwhelming Congress's ability to keep up and enact legislation and to regulate to the extent those are necessary. Just deciding whether we need to regulate or legislate sometimes is a difficult decision itself. But I do look forward to the testimony of this very distinguished panel. Obviously the issue of the day is the importation and even the legislation that my colleague in North Carolina referred to, the riders to the agriculture appropriation bills that permit this. The legislation that protects the safety and the efficacy of drugs was put in place for a reason. There is a concern now, again with the rising cost of drugs, that we look at ways to lower those costs. This was one of the things that has been passed out of the House, but again not without controversy. I do look forward to the statements from the panelists on those opinions. And given the events of the last week with the approval of the drug RU-486, I am sure that might come out in some examination, because that obviously has very broad implications, too, in this arena of reimporting drugs into the country and the safety, which I think we all agree is foremost in the minds of all the people in this room today as well as I suspect in Washington also. With that said, I would be happy to give back my time, but again my appreciation for your very timely hearing today. Mr. Upton. Thank you. Mr. Waxman. Mr. Waxman. I have no opening statement. I welcome our witnesses. I look forward to their testimony. I will reserve all my comments until we get into questions. But I also want to commend the FDA for its decision last week on RU-486 and so many other things where I think it is doing a good job. You should hear sometimes from us and we acknowledge that. Mr. Upton. Well thank you. At this point we are prepared to have the first panel testify. We are honored to have the Honorable Jane Henney, Commissioner of the Food and Drug Administration, with us today; the Honorable Raymond Kelly, Commissioner of the U.S. Customs Service; and Ms. Patricia Maher, Deputy Assistant Attorney General, Civil Division, from the Department of Justice. Welcome. As you may know, your statements in their entirety are made as part of the record. We would appreciate it if you might be able to summarize that in about 5 minutes or so. And as you may know, testimony before in subcommittee traditionally has always been under oath. And do any of you have objection to us taking your testimony under oath? Ms. Henney. I don't have objection to taking it under oath, but I would like to affirm rather than swear, affirm rather than swear as you give the oath. Mr. Upton. Okay. Mr. Dingell. That is proper. Mr. Upton. Do any of you wish to be represented by counsel as well? If not, if you would stand. [Witnesses sworn.] Mr. Upton. You are now under oath, and, Dr. Henney, we will start with you. Thank you and welcome. TESTIMONY OF HON. JANE E. HENNEY, COMMISSIONER, FOOD AND DRUG ADMINISTRATION; ACCOMPANIED BY DENNIS E. BAKER, ASSOCIATE COMMISSIONER, REGULATORY AFFAIRS; HON. RAYMOND KELLY, COMMISSIONER, U.S. CUSTOMS SERVICE; AND PATRICIA L. MAHER, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF JUSTICE Ms. Henney. Thank you. Good morning, Mr. Chairman, members of the committee. I am Jane Henney, Commissioner of Food and Drugs. I appreciate the opportunity to be here today to discuss our efforts to detect and prevent the introduction of counterfeit bulk drugs into the drug supply of the United States and specifically to report on our actions since your hearing on this matter in June. A more comprehensive report of these activities is in my statement, and I appreciate your placing that in the record. FDA believes that the quality of drugs in this country is high, but we must take very seriously any allegations regarding the counterfeiting or adulteration of drug products. The agency agrees with the committee's assessment that more can and should be done to help ensure that imported bulk drugs or active pharmaceutical ingredients in finished products meet the requirements of the Federal Food, Drug and Cosmetic Act. The agency has been developing and implementing additional strategies for assessing the scope of the threat of imported counterfeits and moving forward with activities already under way. Let me begin by providing the committee with an update on the five initiatives FDA announced at the time of the June hearing. No. 1, additional funds were allocated to the Forensic Chemistry Center for sampling, analytical work and assessments of APIs gathered through targeted inspections of importers. With these funding increases, the Forensic Center has conducted 20 targeted API inspections, including 9 at importers of foreign APIs, 10 at domestic finish dose manufacturers, and one at a domestic animal drug manufacturer. The Forensic Center inspectors are now analyzing the information obtained during these inspections to determine whether additional follow-up by district officers, investigators or our Office of Criminal Investigations is warranted. Two, make the Forensic Center API data base available electronically to all field investigators by January 2001. This, as you recall, is a data base that currently contains information or fingerprints on 330 APIs that have been collected and chemically analyzed by the Forensic Center. This information is one important tool that FDA can use to more quickly identify whether or not a product is authentic or counterfeit. The technology necessary to make the Forensic Center's API data base available to all of our field and port and drug inspectors is being developed and planned. We do expect to have the system in place by January 2001. Three, expand the Philadelphia pilot nationwide by the end of 2000. The Philadelphia pilot, as you will recall, allowed inspectors to retrieve additional drug approval data from the Establishment Evaluation System, or EES, data base maintained by the Center for Drug Evaluation and Research in about 3 to 4 minutes on any API entry. Rapid access to this information increases the probability of confirming authentic sourcing of APIs. The pilot was a success and access to this system has been expanded to three FDA districts handling the vast majority of APIs, New York, New Orleans, and the San Juan district offices. Currently we are completing plans for the additional technology upgrades in the training for field personnel necessary to expand the program to the rest of our districts, which we will complete early next year. Four, put all importers on notice that they are required to provide the name of the foreign manufacturer upon entry into the U.S. and that the entry of their products into the U.S. will be contingent upon it. The agency has placed the import industry on notice regarding the existing requirement to provide FDA with accurate data regarding the identity and location of the manufacturer of imported drugs. On July 20 of this year, we posted an updated version of these requirements on the Internet with links to and from FDA's import operations pages. And on July 28 a Customs systems administrative message was issued to all files with a reference to this Internet site containing these requirements. Compliance with this requirement is assessed as the agency carries out routine filer evaluation. Customs has informed FDA that these types of reporting failures may be the basis for Customs civil actions. This information will be useful to the agency in better defining and identifying a universe of foreign manufacturers shipping to the U.S. Five, require domestic manufacturers to provide information to FDA when they discover that the bulk materials they receive are substandard, ineffective or appear not to be from the approved source. As you may know, the committee proposed this idea to the agency last year. We are proceeding with efforts to develop a proposed regulation that would establish this requirement. I would be pleased to also note actions that we have under way or other actions we have taken, including foreign registration. We have cleared and forwarded to OMB the final rule requiring foreign establishments whose products are imported or offered for import into the U.S. to register with FDA and to identify a U.S. Agent. This rule will be effective 6 months after the publication of the final rule, and it will provide us the collection of information needed to establish an accurate official established inventory. We have reestablished our working group and this group has spent 3 months exploring a full range of issues regarding imported counterfeit and substandard drugs. On the important issue of information technology needs assessment, it was one of the greatest concerns at the June hearing, for the agency does lack a well-integrated IT system, particularly with respect to regulation of drug imports, but as it relates to our other information systems as well. We have had a contractor undertake a study. Their report has recently been received by the agency and we are currently reviewing both their recommendations and their resource estimates. We have also begun very aggressive cross-training with the U.S. Customs Service in June and July. We've conducted three import enforcement training courses for our own personnel. This is a course that has been jointly developed by FDA and Customs, who have developed the course and teach it. And it focuses on the interplay between FDA and Customs enforcement measures, strategic problem solving, administrative procedures and international agreements, and one-half of the training is in Customs law and regulation. We are extending this course to additional field personnel and we will be joined by other members of the Customs Service as well. The other cooperative efforts we have with Customs include our memorandum of understanding with a cross-designation of our OCI agents as Customs officers and we are working on a number of ongoing investigations with Customs regarding unapproved and counterfeit finished human drugs, medical devices, and foods. We have also had very aggressive discussions with Customs' Applied Technology branch about the use of countermeasures to detect counterfeits and track shipments when warranted. We have also been active in the international arena, which I would be glad to spend time discussing with you if you would like in the questions and answers. And we are also working with Customs on the leveraging of science and technology. We have met to explore methods to better leverage our respective resources in this manner. We had hosted at the Forensic Center a meeting on August 10 with Customs officials to look at ways to use analytical data and equipment and cross-train in methodology and emerging forensic techniques. With respect to an import alert, we have been working with the issue of identifying foreign API manufacturers shipping to the U.S. who have not been inspected. As many members have cited, this data has enabled us to produce a list of 242 manufacturers in 36 countries that appear to have exported to the U.S. in 1999 but have not been inspected. Today we have issued an import alert for these uninspected foreign drug establishments. We have also had additional strategies for handling imported counterfeit unapproved drugs and APIs under consideration, which I will be happy to discuss during the questions and answers. Mr. Chairman, in June you asked us what additional resources, personnel and funding may be necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs. The agency has long recognized that we need additional resources in the area of post-market surveillance, which would encompass many of the activities I've discussed. In just the past 2 years, fiscal year 1999 and fiscal year 2000, the President's budget included $25.8 million and $39.3 million, respectively, for post-market surveillance activities. Neither of these requests was funded. The lack of new funding and absence of increase for our core operations reduces the numbers of FTEs available to perform the agency's critical post-marketing activities. At this time only preliminary estimates have been made of these resource requirements, as the scope of this evaluation needs to encompass both the agency's domestic and foreign operations as well as the operations of the various FDA centers. Once we have assessed these needs, we will look forward to working with you and the other Members of Congress to assure FDA has the tools it needs to do our job for the American public. Mr. Chairman and members of the committee, I want to assure you that all of us at FDA remain concerned about any possibility that counterfeit or otherwise unsafe drugs may find their way into the American drug supply. We will remain vigilant as we refine and improve our programs and procedures that we use to ensure the availability of safety medications for consumers. We appreciate your continued interest in these issues, and I will be happy to answer questions. [The prepared statement of Hon. Jane E. Henney follows:] PREPARED STATEMENT OF HON. JANE E. HENNEY, COMMISSIONER OF FOOD AND DRUGS INTRODUCTION Mr. Chairman and Members of the Committee, I am Jane E. Henney, M.D., Commissioner of Food and Drugs, Food and Drug Administration (FDA or the Agency). I appreciate the opportunity to be here today to discuss our efforts to detect and prevent the introduction of counterfeit bulk drugs into the drug supply of the United States (U.S.), and specifically, to report on our actions since your hearing on this matter in June. As we stated in our testimony at your June 8 hearing, FDA believes that the authenticity and quality of drugs in this country is high, but we must take very seriously any allegations regarding the counterfeiting or adulteration of drug products. The Agency agrees with the Committee's assessment that more can and should be done to help ensure that imported bulk drugs or Active Pharmaceutical Ingredients (APIs) and finished drug products meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act. Since June 8, the Agency has been developing and implementing additional strategies for assessing the scope of the threat of imported counterfeit APIs to U.S. consumers and responding appropriately to that threat. The growth in international trade over the past few decades has had a substantial impact on the ability of FDA to cope with the volume of regulated products, including APIs. Despite an increase in overall Agency funding in recent years, those increases have been allocated to new initiatives, and the Agency's core operations have not received commensurate increases. Field personnel and resources have been stretched so thin that FDA has been struggling to fulfill many of our program mandates. The increasing number of APIs from overseas makes policing the global drug marketplace to deter or interdict imported substandard drugs a daunting task. We have looked for additional ways in which we can use our own resources wisely, as well as leverage with others to increase our effectiveness. On June 8, you asked FDA for a plan to improve our ability to detect and interdict imported counterfeit and substandard APIs. We forwarded a preliminary report to you, Mr. Chairman, on August 10, 2000, which outlined the Agency's plans and additional ideas under consideration for better handling imported counterfeit and substandard APIs and finished drugs. Let me begin by providing the Committee with an update on the five initiatives FDA announced at the June hearing. 1. In February 2000, additional funds were allocated to the Forensic Chemistry Center (FCC) by the Office of Regulatory Affairs for sampling, analytical work and assessments of APIs gathered through targeted inspections of importers. With these funding increases, the FCC has conducted 20 targeted API inspections, including nine at importers of foreign APIs, ten at domestic finished dosage manufacturers and one at a domestic animal drug manufacturer. The FCC inspectors are now reviewing imported API documents and samples of product, labeling, packaging schemes and certificates of analyses obtained during these inspections. Information derived by these analyses will be used to help determine whether additional follow-up by district office investigators or the Office of Criminal Investigations is needed and to support any enforcement actions that may be warranted. At each of these inspections, the FCC worked with local FDA district drug investigators to detect suspect API shipments through product and records examinations. This activity also provided an opportunity for FCC staff to train field investigators and raise the awareness of District Investigation Branches to the problem of counterfeit API's. Additional hands-on training is planned for investigators in other strategic locations. 2. Make the FCC API database available electronically to all field inspectors by January 2001. This database currently contains information or ``fingerprints'' on 330 API's that have been collected and chemically analyzed by FCC. This information is one important tool which FDA can use to more quickly identify whether or not a product is authentic or counterfeit.The technology necessary to make FCC's API database available electronically on a real-time, searchable basis to field import and drug inspectors is being developed, and training for field personnel is being planned. We expect to have this system in place by January 2001. 3. Expand the Philadelphia pilot nationwide by the end of 2000. A pilot program was begun in the Philadelphia District office in 1997, to evaluate the value of providing drug approval information to import field personnel. The pilot provided import inspectors in the Philadelphia District with access to information contained in the Establishment Evaluation System (EES) database maintained by the Center for Drug Evaluation and Research (CDER). EES tracks information related to the approval process for drug applications. The program allows inspectors to retrieve additional important data in about three to four minutes on any API entry, which increases the probability of confirming authentic sourcing of APIs. In light of this success, access to the EES system has been expanded to the three FDA Districts handling the vast majority of APIs--New York, New Orleans and San Juan District Offices. Training for these inspectors has been completed and accounts have been established. The system has been up and running for approximately two months, and our inspectors in these districts report that the EES information is very useful in helping to assure that the declared destinations of imported APIs are appropriate. Currently, we are completing plans for the additional technology upgrades and training for field personnel necessary to expand the program to the rest of our districts, which we plan to complete early next year. 4. Put all importers on notice that they are required to provide the name of the foreign manufacturer upon entry into the U.S., and that the entry of their products into the U.S. will be contingent upon it. The Agency has placed the import industry on notice regarding the existing requirement to provide FDA with accurate data regarding the identity and location of the manufacturer of imported drugs. These requirements were previously made clear to importers and brokers through notices issued on January 29, 1999, and March 24, 2000. However, this requirement was not being fully met. Therefore, on July 20, 2000, the Agency again posted an updated version of its requirements on the Internet with links to and from FDA's import operations pages. On July 28, 2000, a U.S. Customs Service (Customs) Automated Broker Interface (ABI) system administrative message was issued to all filers with a reference to the Internet site containing these requirements and a physical mailing address where a filer may request a hard copy from the Agency. A copy of the July 28, ABI notification was provided in FDA's August 10, letter to the Subcommittee. Compliance with this requirement is assessed as the Agency carries out routine filer evaluations and is one of the factors considered in providing continued electronic filing privileges on Operational and Administrative System for Import Support (OASIS). Customs has informed FDA that these types of reporting failure may be the basis for Customs civil actions. This information will be useful to the Agency in better defining and identifying the universe of foreign manufacturers shipping to the U.S. 5. Require domestic manufacturers to provide information to FDA when they discover that the bulk materials they receive are substandard, ineffective, or appear not to be from the approved source. As you know, the Committee proposed this idea to the Agency last year. We stated in June that we agreed this is a promising approach, and FDA is examining what would be required to develop a proposed regulation that would establish this requirement. Agency Examination of Imported Counterfeit Bulk Drugs Immediately following the June 8 hearing, FDA established a Counterfeit Drug Working Group (Working Group) which has spent the past three months exploring the full range of issues concerning imported counterfeit and substandard drugs. The Working Group has looked carefully at FDA's import operations and our foreign drug inspection program, and has been developing a plan to better assess the extent of the counterfeit drug problem in the U.S. The Working Group also has been examining ways the Agency can more readily detect these products to better ensure that the public is protected from potentially hazardous drugs. FDA's Counterfeit Drug Working Group consists of representatives from many Agency components, including: the Office of Criminal Investigations (OCI), the Division of Import Operations and Policy (DIOP), the Office of Enforcement, the Forensic Chemistry Center (FCC), the Division of Federal-State Relations (DFSR), the Division of Information Systems (DIS), and the Division of Emergency and Investigational Operations (DEIO), all of which are components of the Office of Regulatory Affairs (ORA), as well as the Offices of Compliance within the Center for Drug Evaluation and Research (CDER) and the Center for Veterinary Medicine (CVM), and the Office of Chief Counsel (OCC). While FDA is still in the process of assessing the effectiveness of the regulatory tools, compliance programs, staffing and procedures that already exist within the current statutory construct to monitor imported APIs, the Agency already has implemented a number of program initiatives, including the following actions. Foreign Registration--FDA has cleared and forwarded to the Office of Management and Budget (OMB) a final rule requiring foreign establishments whose products are imported or offered for import into the U.S. to register with FDA and to identify a U.S. agent. As you know, this requirement was mandated in the Food and Drug Administration Modernization Act of 1997. It will provide for the collection of information needed to establish an accurate Official Establishment Inventory for foreign drug firms. Information Technology Needs Assessment (IT)--As you know, one of the issues of great concern at the June hearing was the Agency's lack of a well-integrated IT system for the regulation of drug imports. We acknowledged that FDA has been working with several independently developed databases of critical information that need to be integrated. We also understand the Committee's frustration that this problem has not yet been remedied. In early July, FDA engaged the services of a private IT contractor to assess the Agency's IT needs for drug imports and to propose changes to accomplish the goals described below. The contractor was charged with determining what information FDA import inspectors need to fully assess the admissibility of all FDA regulated commodities. The contractor consulted with import inspectors and compliance officers with expertise in FDA and Customs laws and regulations, good manufacturing practices, and IT import applications. The contractors' report was recently received by the Agency, and we are currently reviewing both the recommendations and the estimated resource requirements. Cross-training with U.S. Customs Service--In June and July 2000, FDA conducted three Import Enforcement training courses for FDA import personnel including Compliance Officers, Consumer Safety Officers, and Consumer Safety Inspectors. A total of 120 students attended one-week courses representing in total about half of all persons assigned to field import operations. FDA and Customs jointly developed the curriculum and taught the course. The course included training in Strategic Problem Solving (SPS), a Customs training module developed specifically to facilitate the targeting, investigation and prosecution of willful violators. Each course included a facilitated workshop after the pattern of SPS. In each class, students analyzed and provided recommendations for specific imported API counterfeiting fact patterns. These facilitated brainstorming sessions by the field personnel focused on the imported counterfeit API threat and produced numerous ideas for strategies in detecting, preventing, and interdicting counterfeit imported APIs. The Working Group is assessing these proposals for viability. This training course is being extended to additional field personnel in three sessions that began this week. Other Cooperative Efforts with Customs--FDA's OCI has a close working relationship with Customs, including a Memorandum of Understanding providing for all OCI agents to be cross-designated as Customs Officers. OCI currently is working a number of on-going investigations with Customs involving unapproved and counterfeit finished human drugs, and adulterated and misbranded medical devices and foods. OCI and Customs cooperated in a joint operation targeting the Internet sales of unapproved pharmaceuticals by Thailand-based organizations. In cooperation with Thai authorities, Customs arranged for the consolidation and diversion of international mail deliveries of these products to JFK Airport, where FDA personnel were assigned exclusively for review and processing of these entries. In the period February to August 2000, approximately 300 such shipments were reviewed, found to be non-admissible, and returned to Customs for forfeiture. FDA has also had discussions with Customs' Applied Technology branch and we will be meeting with them this month to explore the use of countermeasure devices to detect counterfeits and track shipments where warranted. International Collaboration--OCI, through liaison with their international law enforcement counterparts and other regulatory agencies, is a key Agency component in cooperative international efforts aimed at identifying, investigating and prosecuting drug crime. OCI participates in the Permanent Forum on International Pharmaceutical Crime (PFIPC), an international enforcement forum aimed at exchanging information and ideas on combating pharmaceutical crime. PFIPC works in conjunction with a Forensic Group that provides scientific expertise. OCI also maintains contact with their counterparts at the World Health Organization, the World Customs Organization, Interpol, and FDA's counterparts such countries as the United Kingdom, Germany, Spain and Australia. Additionally, the FCC participates in the International Laboratory Forum on Counterfeit Medicines. Forensic Chemistry Center Initiatives--The FCC and Customs have agreed to explore methods to better leverage their respective resources in the investigation and analysis of suspect counterfeit products. The FCC hosted the first meeting in their forensic laboratory on August 10, 2000, and demonstrated FDA's current forensic capabilities and strategies. The two agencies will explore ways to grant access to analytical data and equipment and cross training in methodologies and emerging forensic techniques. The FCC will interface directly with Customs' laboratories to share information on analytical procedures FDA's forensic experts use to detect unapproved and counterfeit APIs. FDA has placed a high priority on developing with Customs a unified approach for interdicting counterfeit drugs. Review of Data on Uninspected Firms--In response to a request from Chairman Bliley earlier this year, FDA produced a report based on unverified data from OASIS, which identified listings for approximately 4,600 firms that appeared to be non-inspected foreign drug manufacturers. It should be noted that the OASIS data was input by Customs house brokers at the time that drug entries were filed. This number of 4,600 ``uninspected firms'' was the subject of great concern at the June hearing. As explained in our previous testimony, that number was the best estimate we were able to provide on short notice, and was derived by comparing raw data input by import brokers into OASIS with a known list of inspected firms. FDA has reviewed the OASIS data and manually cross-checked it with other information sources to weed out duplicates and incorrect entries and establish a much more accurate list of uninspected foreign drug manufacturers that appear to have exported to the U.S. an API that is normally used to manufacture a finished dosage form which requires an approved application. So far, the review of this data has enabled us to produce a much more reliable list of 242 foreign API manufacturers, in 36 countries, that appear to have exported to the U.S. in 1999, but have not been inspected, according to the EES database. The Agency is developing an import alert for these uninspected foreign drug establishments. The 242 identified firms include forty-six firms in China and Hong Kong and eleven firms in India. The final phase of the analysis of the OASIS data will be to identify firms FDA has not inspected but which are referenced in approved human and animal drug applications. The human drug firms will be evaluated using a risk-based analysis stratified into one of four tiers, incorporated into FDA's surveillance list, and subsequently scheduled for inspection. Additional Strategies for Handling Imported Counterfeit, Unapproved Drugs and APIs Joint Industry/Agency Efforts--Members of the Working Group conferred with the FDA's Field Drug Committee (FDC) on counterfeit API issues. The FDC historically has maintained networks with drug industry personnel and trade associations and has utilized these relationships for furthering the important message of health and safety through consistency in the Good Manufacturing Practice compliance. The FDC will assist in developing avenues through which industry could join forces with the Agency in combating counterfeits in the market place. Beyond this initial approach through the FDC, the Agency is exploring additional routes for encouraging and receiving intelligence on counterfeit drugs in the world market. Historical experience in prior counterfeit API investigations has demonstrated that foreign API manufacturers whose products are being counterfeited can provide substantial assistance in developing tests for authenticity and intelligence regarding suspected counterfeiting operations. The Agency is aware that intelligence gathering from the trade is a critical element to successfully identifying suspect counterfeits in the market. Foreign Inspection Component--When faced with the challenge of a steadily increasing volume of needed foreign inspections, coupled with limited resources, a risk-based approach to foreign drug inspection was developed. CDER established a four-tiered approach to prioritizing and performing surveillance inspections of firms that FDA had not previously been able to inspect. At the present resource level, however, FDA is only able to inspect firms in Tier I (Official Action Indicated, or OAI, inspection follow-up) and Tier II (sterile bulks, finished drugs and aerosols). It should be noted that pre-approval inspections are required by the Prescription Drug User Fee Act and most are conducted in accordance with the Act's mandate. Thus, resources are the primary factor limiting the Agency's ability to undertake additional inspections. As I am sure your Committee staff reported back to you after their trip to China and India to observe foreign inspections, foreign inspections are extremely resource intensive-- requiring not only highly trained investigative and scientific personnel, but linguistically and culturally competent staff, as well. The time needed to conduct a foreign inspection is also magnified by travel requirements. The Agency is reassessing these issues and discussing how to best utilize our current resources given current constraints. We hold fast to the belief that there is no substitute for an eyes and hands-on inspection. Even with these limitations, I would hasten to note that since 1990, the Agency has shifted resources from domestic to foreign programs to increase our presence in the foreign drug manufacturing marketplace, recognizing the shift in global markets. The foreign drug inspection program for the current fiscal year is on track for accomplishing approximately 450 inspections in all foreign drug program areas. This represents more foreign inspections than the Agency has ever completed in a single year. The program continues to be primarily application driven, and the priorities associated with the product approval process do impact our ability to conduct drug surveillance inspections. For fiscal year (FY) 2001, ORA is projecting approximately 550 foreign inspections associated with its foreign drug work plan in all program areas. The FY 2001 foreign work plan focuses on manufacturers that have not been inspected, as identified through the analysis of OASIS data discussed previously. This includes substantial increases in drug surveillance inspections, which would result in increased coverage of firms in Tiers III and IV. However, to accomplish this increase, a reallocation of existing resources would need to occur by reducing our domestic inspection program. Import Operations Component--FDA's DIOP is responsible for providing policy guidance to the field relating to import procedures, overseeing the development and operation of the Agency's Import Alert system, and for maintaining the Agency's OASIS system. Customs has identified over 300 designated ports of entry. OASIS data indicates that approximately 175 ports have seen entries of APIs. FDA has a notable presence in over 40 ports. The ports where FDA conducts the bulk of its work represent those through which the vast majority of drugs enter. The Working Group is reviewing DIOP's procedural and system operations and is assessing the Agency's personnel and equipment needs to better monitor U.S. ports of entry. Security Measures--FDA is engaged in discussions with the Customs' Applied Technology Division, which has considerable experience in tracking shipments within U.S. commerce to verify and document cargo diversion. We will evaluate the currently available technology in terms of levels of surveillance capabilities, cost of equipment and implementation. Additionally, we have asked the IT contractor to explore the possible use of low cost security devices by foreign manufacturers such as chemical taggants in labeling, glue, ink or packaging materials to detect suspect counterfeit drugs. Other possible solutions include radio frequency tags for detection during examinations at ports of entry. The Agency is considering a wide array of available technology, including encrypted bar code technology in labeling and Certificates of Analysis containing manufacturing information already submitted by the foreign manufacturer through a secure web-based environment. Mr. Chairman, in June you asked us what additional resources, personnel and funding may be necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs. The Agency has long recognized that we need additional resources in the area of post-marketing surveillance, which would encompass many of the activities I have just discussed. In just the last two years--FY 1999 and FY 2000--the President's budget included $25.8 million and $39.3 million, respectively, for post-marketing surveillance activities, none of which was funded. The lack of new funding, coupled with an absence of increases for core operations, reduces the number of FTEs available to perform the Agency's critical post-market activities. At this time, only preliminary estimates have been made of these resource requirements, as the scope of this evaluation needs to encompass both the Agency's domestic and foreign operations, as well as the operations of various FDA Centers. We look forward to providing more specific information on our funding needs relating to personnel and technology in the future, once a complete assessment is made and appropriate review has occurred. FDA will continue its assessment of the extent of the counterfeit drug problem in the U.S. Over the coming weeks, the strategies outlined above will be further developed and enhanced, and other potential strategies will be considered. While the Agency has already made a good deal of progress, we have much work remaining. conclusion Mr. Chairman, I want to assure you that all of us at FDA remain strongly concerned about any possibility that counterfeit or otherwise unsafe drugs may find their way into the American drug supply. We will remain vigilant as we refine and improve the programs and procedures that we use to ensure the availability of safe medications for consumers. We appreciate the continued interest of the Subcommittee in these important issues. Thank you again for the opportunity to discuss these issues with you, and I will be happy to answer any questions. Mr. Upton. Thank you. Mr. Kelly. TESTIMONY OF HON. RAYMOND KELLY Mr. Kelly. Thank you, Mr. Chairman, members of the committee, for the opportunity to testify today. The Customs Service is an agency of almost 20,000 employees stationed at 301 ports of entry and 165 other locations across the country. Many know Customs as the Federal Government's primary drug interdiction agency. One of our greatest challenges is sifting illegal narcotics from the $1 trillion in trade and half a billion travelers we process each year. But the scope of Customs' responsibilities goes well beyond drug interdiction to include money laundering, copyright and trademark infringement, the import and export of weapons of mass destruction, prohibited technologies, forced child labor investigations, child pornography and criminal exploitation of the Internet. We also enforce over 400 regulations for 40 other Federal agencies at our borders, including the laws that prohibits the importation of counterfeit pharmaceutical products. As we are all aware, legislation is currently pending to allow the U.S. pharmacists and wholesalers to reimport American manufactured, FDA approved drugs from abroad. This morning, I'd like to discuss our concerns about the potential resource implications for our agency. Customs has experienced a significant spike in investigations and seizures of counterfeit pharmaceuticals over the last few years. One factor in this development is the Internet. We consider the problem serious enough to make it a top priority of Customs' CyberSmuggling Center, which is our new state-of-the-art facility devoted to combating Internet crime. Part of the mission of the center is to search for foreign companies marketing prohibited or unsafe drugs to U.S. consumers. That information is passed on to our Office of Investigations, which has successfully concluded a number of counterfeit pharmaceutical cases in recent years. Prescription drugs are most commonly sent through U.S. mail. Customs inspectors staff 14 international mail branches at various postal facilities across the United States to deal with these shipments. To state that finding counterfeit drugs hidden amongst hundreds of millions of parcels is like finding needles in a hay stack would be an understatement. In fact, finding any form of contraband in postal shipments presents a massive challenge. Our limited resources require a risk management approach, through which we utilize advance intelligence, records of past seizures, and other factors to zero in on packages that present the most significant threat. Customs laboratories also play a critical part in our investigations. Their expertise in analyzing everything from textiles to foreign oil, to food products to determine point of origin and composition is world- renowned. We maintain fully equipped labs at the following locations: New York, Chicago, Savannah, New Orleans, Los Angeles, San Francisco and San Juan. In addition, we have three mobile labs that deploy at any point along our borders. We are confident in the forensic capability of our labs to find discrepancies in shipments of bulk and finished pharmaceuticals. But where we do require assistance specifically from the Food and Drug Administration is in determining effective national standards for interdiction of these products. These standards will be critical especially in light of the pending legislation. To that end, Customs initiated a request to the FDA last January for further guidance on detaining suspect pharmaceuticals. In addition, we formed a joint task force with FDA in August to examine shipments of online drug purchases. The task force's work will include the set-up of a pilot examination program in Los Angeles beginning on October 23. We've asked the FDA to develop interim guidelines to cover the illegal shipments we are taking in now for both online and bulk pharmaceuticals. Customs has already begun examining shipments of pharmaceuticals as part of Operation Safeguard, our ongoing enforcement program with FDA. The first phase began September 25 at the Customs mail facilities in Oakland, California and here in Washington at Dulles Airport. So far we've detained 200 shipments. To give the members an example, our seizures included a 3000-tablet shipment of Prozac with an expiration date of 1980. In addition, our Office of Investigations maintains a close relationship with its FDA counterpart. We have a memorandum of understanding, as the Commissioner mentioned, in place with the FDA at our field locations that cross-designates their special agents as Customs officers. Customs has also provided training to FDA officials on import enforcement. We will continue do so throughout the course of the next fiscal year. Mr. Chairman, our biggest concern in the face of new legislation is obtaining adequate resources to enforce it. From an overall Customs perspective, a spiraling volume of goods at our borders has put immense pressure on our ability to facilitate international trade while enforcing our Nation's laws. We've taken many steps to address anticipated challenges, including refinement of our targeting approach and development of a Resource Allocation Model to project future staffing needs across the country. Though this study has not been finally approved by OMB and the Treasury Department, once it is it will allow flexibility in building in new resource needs like the one we are discussing today. We just received the resource package FDA has developed and we are reviewing it right now. That analysis and the development of the national standards I referred to will help us greatly in determining our own requirements. Customs encounters many travelers in our borders returning from trips expressly for the purpose of purchasing drugs. We are very familiar with the lengths to which our citizens will go to obtain savings on health costs. I should note that for the public's information implementation of the Medicine Equity and Safety Act would not affect individuals who travel across our northern and southern borders to obtain prescription drugs. They would continue to be subject to existing laws that apply to such purchases. Nor would online purchases by consumers be impacted. They too would be regulated according to current guidelines. Mr. Chairman, I want to thank you and the members of the committee for considering the Customs Service in your discussions of the importation of pharmaceuticals. This is an issue that speaks directly to our mission. We will continue to make every effort possible to work with the Congress and our fellow inspection agencies to address the health and safety concerns of the American people. Thank you. [The prepared statement of Hon. Raymond Kelly follows:] PREPARED STATEMENT OF HON. RAYMOND KELLY, COMMISSIONER, U.S. CUSTOMS SERVICE Mr. Chairman, members of the committee, thank you for this opportunity to testify. As Commissioner of U.S. Customs, I oversee an agency of 20,000 employees stationed at 301 ports of entry across the country. Many know Customs as the federal government's leading drug interdiction agency. One of our greatest challenges is sifting illegal narcotics from the 1 trillion dollars in trade and half a billion travelers we process each year. But the scope of Customs responsibilities goes well beyond drug interdiction to include: money laundering; copyright and trademark infringement; the import and export of weapons of mass destruction and prohibited technologies; forced child labor investigations; child pornography; and criminal exploitation of the Internet. We also enforce over 400 regulations for 40 other federal agencies at our borders, including the laws that prohibit the importation of counterfeit pharmaceutical products, the topic I am here to discuss with you today. As you are all aware, legislation is currently pending to allow U.S. pharmacists and wholesalers to re-import American manufactured, FDA approved drugs from abroad. This is an effort to lower prescription drug costs for consumers. This morning I would like to discuss the bill and its impact on our agency. Customs has experienced a significant spike in its investigations and seizures of counterfeit pharmaceuticals over the last few years. One factor in this development is the Internet. We consider the problem serious enough to make it a top priority of Customs' Cybersmuggling Center, our new, state-of-the-art facility devoted to combating Internet crime. Part of the mission of the Center is to search for foreign companies marketing prohibited or unsafe drugs to U.S. consumers. That information is passed on to our Office of Investigations, which has successfully concluded a number of counterfeit pharmaceutical cases in recent years. Prescription drugs are most commonly sent through U.S. mail. Customs Inspectors staff fourteen international mail branches at various postal facilities across the United States to deal with these shipments. To state that finding counterfeit drugs hidden amongst hundreds of millions of parcels is like finding needles in a haystack would be an understatement. In fact, finding any form of contraband in postal shipments presents a massive challenge. Our limited resources require a risk management approach, through which we utilize advance intelligence, records of past seizures, and other factors to zero in on packages that present the most significant threat. Customs laboratories also play a critical part in our investigations. Their expertise in analyzing everything from textiles, to foreign oil, to food products to determine point of origin and composition is world-renowned. We maintain fully-equipped labs at the following locations: New York; Chicago; Savannah; New Orleans; Los Angeles; San Francisco and San Juan. In addition, we have three mobile labs to deploy at any point along our borders. We're confident in the forensic capability of our labs to find discrepancies in shipments of bulk and finished pharmaceuticals. But where we do require assistance, specifically from the Food and Drug Administration, is in determining effective national standards for interdiction of these products. These standards will be critical especially in light of the pending legislation. To that end, Customs initiated a request to the FDA last January for further guidance on detaining suspect pharmaceuticals. In addition, we formed a joint task force in August to examine shipments of on-line drug purchases. The task force's work will include the set- up of a pilot examination program in Los Angeles beginning on October 23rd. In the meantime, I've urged the FDA to develop interim guidelines to cover the illegal shipments we're taking in now. Customs has already begun examining shipments of pharmaceuticals as part of ``Operation Safeguard.'' The first phase of this operation began September 25th, at the Customs mail facilities in Oakland, California and here in Washington, at Dulles Airport. So far, we've detained 200 shipments. To give the members an example, our seizures included a three thousand-tab shipment of Prozac with an expiration date of 1980 on it. In addition, our Office of Investigations maintains a close relationship with its FDA counterpart. We have a Memorandum of Understanding in place with the FDA at our field locations that cross- designates their special agents as Customs officers. Customs has also provided training to FDA officials on import enforcement. We'll continue to do so throughout the course of the next fiscal year. Mr. Chairman, our biggest challenge in the face of the new legislation is keeping pace with the spiraling volume of goods at our borders while also enforcing our nation's laws. We've taken many steps to address anticipated challenges, including refinement of our targeting approach and development of a strong resource allocation plan. We recently received the resource projections FDA has developed for its own needs under the new legislation and we're reviewing it now. That analysis, and the development of the national standards I just referred to, will help us greatly in determining our own requirements. I should note for the public's information that implementation of the Medicine Equity and Safety Act would not affect individuals who travel across our northern and southern borders to obtain prescription drugs. They would continue to be subject to existing laws that apply to such purchases. Nor would on-line purchases by consumers be impacted. They too would be regulated according to current guidelines. Mr. Chairman, I want to thank you and the members of the Committee for considering the Customs Service in your discussions of the importation of bulk pharmaceuticals. This is an issue that speaks directly to our mission. We will continue to make every effort possible to work with the Congress and our fellow inspection agencies to address the health and safety concerns of the American people. I'd be happy to take any questions you have. Mr. Upton. Thank you. Ms. Maher. TESTIMONY OF PATRICIA L. MAHER Ms. Maher. Mr. Chairman and members of the committee, good morning. My name is Patricia Maher. I am a Deputy Assistant Attorney General in the Civil Division of the Department of justice. In that capacity one of my responsibilities is to oversee the Office of Consumer Litigation, the Civil Division's office that handles civil and criminal cases brought under a number of Federal consumer protection statutes, including the Federal Food, Drug and Cosmetic Act. This morning I will speak to you about our experience prosecuting traffickers of counterfeit pharmaceutical products that are manufactured outside of the United States. I will also offer some ideas regarding additional tools that would be helpful to combat this problem. Prosecutions of the type I will be discussing are both important and difficult. They are important because the targets in these cases introduce drugs of unknown safety and efficacy into the United States. Successful prosecutions signal to traffickers around the world that tainting the drug supply of the United States will not be tolerated. But these cases are difficult because much of the evidence of unlawful activity is located overseas and thus is more difficult to obtain than evidence located within our borders. While we have been successful in overcoming these hurdles and obtaining convictions, we need your help to eliminate obstacles that slow investigations and create questions regarding the applicability of the act to the behavior that is at issue in these cases. The Food, Drug and Cosmetic Act defines a counterfeit drug to include a drug which without authorization bears an identifying mark of another drug manufacturer that did not manufacture the drug. Under the act the term ``drug'' includes both finished drug products and components of drug products that are referred to as bulk pharmaceuticals or active pharmaceutical ingredients. In the pharmaceutical industry the term ``counterfeit drug'' is generally used to refer to a compound that is not made by the authorized manufacturer but is presented to the consumer as if it were. Counterfeit drugs pose a number of potential public health issues. They may contain a less potent ingredient than claimed, ingredients other than those listed or no active ingredient at all, which makes them less effective and possibly toxic to unknowing consumers. The World Health Organization has estimated that as much of 10 percent of the world's supply of branded medicines are counterfeit, with the level rising to 50 percent in some developing countries. Prosecutions are necessary to reach counterfeit operations that fall outside the regulatory system where the drugs are going to be introduced into the United States. Prosecutions for importation of counterfeit products have relied primarily on evidence gathered domestically, whether the defendants are citizens of this country or foreign nationals. In my written testimony I provided two examples of successful prosecutions of drug counterfeiters. One involved a ring of traffickers importing millions of counterfeit birth control pills from Spain and Guatemala. The other case involved a company called Flavine International, which imported counterfeit antibiotics from China. There are unique challenges when groups acting outside the United States import counterfeit pharmaceutical products. Even when extraterritorial jurisdiction exists over crimes committed abroad, principles of sovereignty limit what measures we can take unilaterally to investigate and prosecute such crimes. FDA currently has the authority to conduct inspections abroad. Letters rogatory are the customary method of obtaining assistance from abroad in the absence of a treaty or executive agreement. In order to improve our ability to investigate and pursue evidence and defendants abroad, the Department has supported extradition treaties to obtain the return of defendants and mutual legal assistance requests to obtain documents, witness testimony, or other evidence. Of course, even when extradition treaties and mutual legal assistance procedures are in plates with the foreign jurisdiction, they may not always ensure that we will be able to obtain all of the international law enforcement cooperation we would like in every case. As I have explained in greater detail in my written testimony, extradition treaties do not ensure that defendants will be returned to the United States for prosecution if they are from countries that will not extradite their own citizens, or the underlying conduct is not a crime in the requested State. Moreover, while we may seek to obtain the statements or deposition testimony of foreign witnesses unwilling to come to the United States through the traditional letters rogatory method or through our increasing number of mutual legal assistance treaties, in the best of circumstances this can be a time consuming process. In the worst of circumstances, legal privileges or other foreign law requirements may completely frustrate our efforts. Despite their limitations, however, modern international extradition treaties and MLATs remain among the more effective mechanisms available for obtaining the international cooperation we need. We ask that Congress continue to support our efforts to expand the network of such agreements. Certain measures could be taken that would make clear that foreign manufacturers or distributors of pharmaceuticals in the United States are subject to the same obligations and protections that apply to domestic companies. These proposals would also aid in the prosecution of producers or traffickers of counterfeit pharmaceuticals who know that their products will be used in the United States. First, we believe that foreign countries should be encouraged to cooperate with the United States and, where appropriate, to prosecute manufacturers and distributors of counterfeit drugs in their own courts. We ask Congress to review carefully proposals that might deny or restrict FDA's authority to inspect foreign establishments. Other possible measures include amending the Food, Drug and Cosmetic Act to make explicit what is now implicit, that foreign companies and individuals who manufacture and distribute drugs and drug components for use in the United States are subject to the act, making cooperation by foreign firms a condition of FDA approval of drug applications by those firms so that the approval under the act would be conditioned on the manufacturer's agreement to make documents and witnesses available in criminal investigations in the United States. Finally, Congress could require foreign exporters of drug products to provide original certificates of analysis establishing the integrity and authenticity of the drugs or drug components that would have to be filled out by each manufacturer involved in the production of the drug product shipped. The Department recommends these actions and policies to provide additional tools for the detection and prosecution of those who traffic in counterfeit pharmaceutical products. We will work with FDA, Customs, Congress and industry to implement measures of this type to aid prosecutions in this area. Where counterfeiting activity is uncovered we are committed to prosecuting such cases. Thank you. I would be happy to answer any questions. [The prepared statement of Patricia L. Maher follows:] PREPARED STATEMENT OF PATRICIA L. MAHER, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE Mr. Chairman and Members of the Subcommittee: Good morning. My name is Patricia L. Maher. I am a Deputy Assistant Attorney General in the Civil Division of the Department of Justice. In that capacity, one of my responsibilities is to oversee the Office of Consumer Litigation (OCL)--the Civil Division's office that handles civil and criminal cases brought under a number of federal consumer protection statutes including the Federal Food, Drug, and Cosmetic Act (FDCA). This morning, at your invitation, I will speak to you about our experience prosecuting traffickers of counterfeit pharmaceutical products that are manufactured outside of the United States. At your request, I will also offer some ideas regarding additional tools that would be helpful to combat this problem. Prosecutions of the type I will be discussing are both important and difficult. They are important because the targets in these cases introduce drugs of unknown safety and efficacy into the United States. Successful prosecutions signal to traffickers the world over that tainting the drug supply in the United States will not be tolerated. The cases are difficult because much of the evidence of unlawful activity is located overseas, and thus is more difficult to obtain than evidence located within our borders. While we have been successful in overcoming these hurdles and obtaining convictions, we need your help to eliminate obstacles that slow investigations and create questions regarding the applicability of the FDCA to the behavior that is at issue in these cases. In that connection, we will work and consult with FDA regarding needed changes in the Food, Drug and Cosmetic Act, such as those described in this testimony. As evidence of U.S. law enforcement's commitment to combat the threat posed by counterfeit pharmaceuticals, the Department of Justice, FBI, and Customs Service hosted last month the first meeting of law enforcement experts of the G-8 countries to address intellectual property crimes. Under the auspices of the Senior Law Enforcement Experts on Transnational Organized Crime (Lyon Group), representatives from all G-8 countries discussed mechanisms for improved cooperation and information-sharing in responding to a variety of intellectual property crimes, including trafficking in counterfeit pharmaceuticals. I. THE DANGER POSED BY THE IMPORTATION OF COUNTERFEIT PHARMACEUTICAL PRODUCTS The FDCA defines a counterfeit drug to include a drug which, without authorization, bears an identifying mark of another drug manufacturer that did not manufacture the drug. (21 U.S.C. Sec. 321(g)(2).) Under the FDCA, the term ``drug'' includes both finished drug products and components of drug products that are referred to as ``bulk'' pharmaceuticals or active pharmaceutical ingredients. In the pharmaceutical industry, the term ``counterfeit drug'' is generally used to refer to a compound that is not made by the authorized manufacturer, but is presented to the consumer as if it were. There are also drug products that are manufactured in whole or in part by unauthorized factories or facilities, and then shipped with the complicity of the authorized manufacturer under its name and trademark. These drugs may not technically fit the legal definition of ``counterfeit drug'' if the authorized manufacturer has approved the use of its own trademark and the like. Nonetheless, these drugs involve the marketing of a product where the identity of the true manufacturer is misrepresented to, or withheld from, consumers and the Food and Drug Administration (FDA) and the drug is misbranded under the FDCA. As a consequence, some or all of the process of manufacturing the drug could fall outside the supervision of the FDA and could render the drug adulterated or misbranded. Because such drugs also involve a false representation about their true place of manufacture, they can be referred to as misbranded or adulterated. Counterfeit drugs pose a number of potential public health issues. The World Health Organization (WHO) has found that the majority of counterfeit drugs reported to the organization contain a less potent active ingredient than claimed, ingredients other than those listed, or no active ingredient at all, which makes them less effective and possibly toxic to unknowing consumers. WHO has estimated that as much as ten percent of the world's supply of branded medicines are counterfeit, with the level rising to fifty percent in some developing countries. Even where the product in question contains the represented amount of the drug's active ingredient, it can pose hazards. The effectiveness of drugs depend on a long chain of factors that include measures in quality control, distribution, and inventory control. The FDCA requires that all drugs in this country be manufactured under pursuant to the good manufacturing practice regulations to ensure the consistent safety and efficacy of the drug product. The scope of the problem in the United States should be substantially less than it is in the rest of the world. Several legal provisions help to assure that imported products comply with legal requirements. Drug companies in this country are required to sample and test bulk drugs, whether obtained domestically or internationally, that will be used in finished drug products, as well as to examine the labeling of any such shipments. (See 21 C.F.R. Sec. 211.84.) These measures help to assure that bogus drugs will be detected if they are sold to a legitimate finished dosage manufacturer in the United States. Misbranded versions of a number of drug products have appeared in the United States, nevertheless. The potential for an increase in such traffic exists because of the increasingly global nature of the pharmaceutical business. Moreover, the ease with which counterfeit products can be distributed by ``pharmacies'' that appear on the Internet makes this an issue that affects consumers directly. II. OBTAINING ASSISTANCE FROM FOREIGN GOVERNMENTS AND PROSECUTING CONDUCT OCCURRING OUTSIDE THE UNITED STATES A. The Need for Credible Criminal Deterrence Underlying the FDCA's statutory scheme to protect the public health is the requirement that regulated businesses deal truthfully with the FDA. Most businesses do so. Because the FDA and our national scheme for drug safety rely on information supplied by regulated businesses, it is necessary to take strong action against those that provide false information to the FDA. The means for punishing fraudulent conduct are contained in the criminal provisions of the FDCA. The general provisions of the criminal code that prohibit false statements to government agencies also apply to false statements made regarding pharmaceuticals. The importation of counterfeit drugs very often involves fraud on the FDA and purchasing customers about the true source or nature of the drug. This is classic felony conduct under the FDCA. Counterfeiting products can yield huge profits and is a longstanding practice in some areas around the globe. Furthermore, the incentive to mislead FDA about the source of a product's manufacture may exist even where the product contains the same active ingredients. The market for pharmaceutical drugs in the United States is substantial, and it is only open to drug products that are properly approved. Because proper approval is rigorous and demanding, there is a strong economic incentive to mislead FDA to obtain market access without the full expense of proper testing and evaluation. Similarly, there is a strong economic incentive to get FDA approval before other companies, and to maximize the output of a drug before other companies obtain approval for a competing version of the drug. One way for a drug manufacturer to maximize output within such a window is to obtain drug components or drug products from other, non-approved, facilities without notifying customers or the FDA. Prosecutions are necessary to reach counterfeit operations that fall outside the regulatory system, where the drugs are going to be introduced into the United States. The operations of some drug counterfeiters are much the same as those of the narcotics trade, crossing many borders and involving the use of clandestine facilities. In such circumstances, FDA's regulatory measures and controls are less likely to uncover the activity and impose a punishment sufficient to act as a deterrent. B. Previous Experience in Obtaining Evidence Abroad in Prosecutions Involving the Importation of Counterfeit Pharmaceutical Products Prosecutions for importation of counterfeit products have relied primarily on evidence gathered domestically, whether the defendants are citizens of this country or foreign nationals. For example, the 1987 prosecution of a ring importing millions of counterfeit birth control pills from Spain and Guatemala was based entirely on evidence gathered in the United States. Similarly, the Flavine International case, which involved a group importing counterfeit antibiotics from China, also was based primarily on evidence gathered within the United States. I will elaborate on these examples of our experience prosecuting importation of counterfeit pharmaceuticals. 1. Example: the prosecution of importers of counterfeit birth control pills--In the mid 1980s, approximately two million counterfeit birth control pills were imported as part of a drug diversion scheme. A large number of the pills contained subpotent estrogen or no estrogen. The case began when a group of traffickers acting both inside and outside the United States began importing, repacking, and distributing counterfeit birth control pills that had been manufactured in Barcelona, Spain. The tablets were similar in appearance and composition to genuine Ovulen-21 tablets made by Searle. These pills were shipped from Spain to intermediary countries, and then smuggled into the United States and sold. The proceeds of the sales, including over $200,000 profits, were deposited in a Panamanian bank account. Having made a substantial profit on the counterfeit Ovulen, the defendants next solicited a small company in Guatemala to make counterfeit pills that again would appear to be genuine, but in this case would have no active ingredient at all. The Guatemalan company shipped 12,000 cycles of the pill to the United States in August 1984. FDA learned of the counterfeit birth control pills in October 1984. The government gathered evidence from witnesses in the United States, including some of the traffickers who decided to cooperate. An Indictment filed in the Southern District of Florida in February 1987 charged six defendants who resided in the United States. All defendants were convicted either after pleading guilty or going to trial. The defendants were sentenced to terms of imprisonment of up to twenty-four years. 2. Example: the prosecution of counterfeit antibiotics from China-- The prosecution of a New Jersey corporation, Flavine International, Inc. (Flavine), its owner who was a German national, and other company managers was based on the substitution of an unapproved foreign product for an FDA-approved foreign product. The investigation, which was conducted by the United States Customs Service and the FDA, revealed that on numerous occasions from August 1985 through November 1991, the defendants solicited and received orders from drug manufacturers in the United States for bulk antibiotics that are FDA-approved for use in the United States. The drugs included oxytetracycline, gentamicin sulfate, and sulfamethazine. The drugs were sold for use in animal and human drugs. To fill these orders, defendants bought drugs from an unapproved overseas manufacturer, falsely declaring their origin. Once the unapproved products arrived in the United States, the defendants, when necessary, had the product repacked in new containers that more closely resembled those of the approved manufacturer. Defendants removed labels from containers and affixed fraudulent labels to containers in order to falsify the origin and manufacturer of the drug product. They also replaced the manufacturers' certificates of analysis with fraudulent certificates of analysis that falsely claimed that the drugs were made by an approved manufacturer. These acts were performed without the authorization of the approved manufacturer whose name was used. In April 1997, Flavine was fined a total of $925,000, and its owner was sentenced to two years in prison and fined a total of $75,000 for illegally importing counterfeit pharmaceuticals from China and laundering money in a kickback scheme. C. Obtaining and Developing Evidence of Conduct Abroad There are unique challenges when groups acting outside the United States import counterfeit pharmaceutical products. Even in those circumstances in which extraterritorial jurisdiction exists over crimes committed abroad, principles of sovereignty limit what measures we can take unilaterally to investigate and prosecute such crimes. In some cases, law enforcement agencies in the United States, such as the Customs Service and the Food and Drug Administration (FDA), may make requests of law enforcement agencies abroad informally or through Interpol. State ethics rules, however, may effectively prevent contact with employees of corporations under investigation through such informal contacts. This occurs because federal law now requires Department of Justice attorneys to comply with state ethics rules. Such rules (see Model Rule 4.2) often can effectively bar contacts with employees of corporations unless corporate counsel authorizes the communication. FDA also currently has the authority to conduct inspections abroad. (See 21 U.S.C. Sec. 374.) Letters rogatory are the customary method of obtaining assistance from abroad in the absence of a treaty or executive agreement. (See 28 U.S.C. Sec. 1781.) In order to improve our ability to investigate and pursue evidence and defendants abroad, the Department has supported extradition treaties to obtain the return of defendants, and mutual legal assistance requests to obtain documents, witness testimony, or other evidence. Of course even when extradition treaties and mutual legal assistance procedures are in place with a foreign jurisdiction, they may not always ensure that we will be able to obtain all of the international law enforcement cooperation we would like in every case. For example, even our most modern extradition treaties require that an offense for which extradition is sought be a crime in both the requesting and the requested state (the ``dual criminality'' principle). Thus, to the extent that some foreign countries have to date not criminalized the counterfeiting of pharmaceuticals, the extradition of persons from such countries wanted for prosecution in the United States may not be possible. In addition, some older extradition treaties do not clearly cover offenses that are perpetrated in a foreign country yet take effect in the United States; and despite our continuing efforts, some countries still refuse to extradite their own nationals. Moreover, while we may seek to obtain the statements or deposition testimony of foreign witnesses unwilling to come to the United States (through the traditional ``letters rogatory'' method, or through our increasing number of mutual legal assistance treaties (MLATs)), in the best of circumstances this can be a time consuming process. In the worst of circumstances, legal privileges or other foreign law requirements may completely frustrate our efforts. Despite their limitations, however, modern international extradition treaties and MLATs remain among the more effective mechanisms available for obtaining the international cooperation we need. We ask that Congress continue to support our efforts to expand the network of such agreements. D. Jurisdictional Questions Among the considerations in obtaining evidence and pursuing prosecutions in these cases is the extraterritorial application of the FDCA. Congress has the power to address the problem of counterfeit pharmaceutical imports even when it involves conduct occurring overseas that has an impact in the United States. Amending the FDCA to make the extraterritorial application of the FDCA to persons affecting the United States by their actions abroad explicit instead of implicit would aid the investigation of criminal cases in these situations. Such an approach would be consistent with the international law principles that United States courts apply. Indeed, international law principles have expanded to permit jurisdiction upon a mere showing of intent to produce effects in this country, without requiring proof of an overt act or actual effect within the United States. Although cases involving intended but unrealized effects are rare, international law does not preclude jurisdiction in such instances, subject to the principle of reasonableness. Thus, we believe that foreign manufacturers of pharmaceutical bulk materials who know that the product will be used in the United States are subject to the jurisdiction of the United States and the FDCA. The FDCA prohibits the introduction into interstate commerce of adulterated or misbranded drugs (21 U.S.C. Sec. 331(a)), and defines ``interstate commerce'' to include commerce between ``any State or Territory and any place outside thereof,'' (21 U.S.C. Sec. 321(b)). In construing Title VII of the Civil Rights Act of 1964, which had a similarly broad statement of application, a divided Supreme Court found that such language falls short of demonstrating the affirmative legislative intent required to extend the protections of American law beyond our territorial borders. That decision, EEOC v. Arabian American Oil Co., ultimately was superseded by statute. In this opinion, however, the Supreme Court specifically named the FDCA as a statute with ``boilerplate'' language that could be insufficient to convey a legislative intent to apply extraterritorially. (See Arabian American Oil Co., 499 U.S. at 251.) The Controlled Substances Act, by contrast, contains explicit language creating jurisdiction in the United States for manufacturing or distributing drugs abroad, where the intent is to introduce unlawful drugs into the United States. (See 21 U.S.C. Sec. 959.) III. PROPOSALS FOR IMPROVING THE PROSPECTS FOR CRIMINAL PROSECUTIONS INVOLVING COUNTERFEIT PHARMACEUTICAL PRODUCTS We believe that prosecutions of counterfeit drug producers and traffickers would be greatly aided by amending the FDCA to make explicit what is now implicit--that foreign companies and individuals who manufacture or distribute drugs and drug components for use in the United States are subject to the FDCA. The application of such a law, however, will necessarily be limited by due process considerations. Second, we would ask that Congress review carefully treaties that might deny FDA full authority to inspect foreign establishments. The Department supports FDA retaining its current legal authority to inspect foreign establishments even where FDA has entered into agreements with foreign regulatory agencies to have those agencies conduct the inspections. In addition, the approval to manufacture and/ or distribute drugs and drug components in the United States could be conditioned on the manufacturer's or distributor's agreement to make documents and witnesses available in criminal investigations in the United States. FDA currently has the right to inspect drug manufacturers (see 21 U.S.C. Sec. 374), but this section does not explicitly provide the FDA authority to secure interviews with witnesses or any method by which the production of documents can be compelled independent of an inspection. As previously mentioned, it is difficult to obtain testimony of witnesses regarding conduct occurring outside the United States. Clarifying FDA authority as outlined above would make foreign establishments subject to the same obligations, privileges, rights, and protections that apply to domestic firms. Currently, during FDA's regulatory investigations of foreign firms, only certain production records and personnel are made available to inspectors. (See 21 U.S.C. Sec. 374.) An explicit requirement that a company must provide such cooperation could authorize FDA to withhold or deny approval of drug applications, and to withdraw a firm's existing approved applications, if FDA finds that the foreign firm is not cooperating in an investigation. This would be analogous to FDA's existing authority to refuse the new drug application of an applicant that has submitted false data to the agency. (See Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities; Final Policy, 56 Fed. Reg. 46191 (1991).) Foreign businesses choosing to market pharmaceutical products in this country should not be able to gain better treatment than domestic firms because of their location outside of the country. Third, the Department requests that the Congress consider legislation requiring foreign exporters of drug products to provide original certificates of analysis establishing the integrity and authenticity of the drugs or drug components filled out by each manufacturer involved in the production of the shipment of a drug product. Such a change would depart only slightly from current practice. The FDCA provides that a drug is misbranded if its labeling is false or misleading. (See 21 U.S.C. Sec. 352(a).) In addition, the regulations establish that the appearance of a name on a drug product label, without qualification, is a representation that the company is the sole manufacturer. (See 21 C.F.R. Sec. 201.1(h)(2).) If a manufacturer performs more than half of the operations, it meets its obligations if it states that certain manufacturing operations have been performed by other firms. (See id. at Sec. 201.1(c)(1).) A simple means of ensuring authenticity of drug components could be accomplished by a minimal expansion of these requirements to apply to foreign firms. Finally, we believe that foreign countries should be encouraged to cooperate with the United States and, where appropriate, to prosecute manufacturers and distributors of counterfeit drugs in their own courts. Where foreign nations can prosecute such conduct, it is in the United States' interest to help such prosecutions go forward. Increased cooperation with foreign authorities could also facilitate the detection of such criminal activity. The Department recommends these actions and policies to provide additional tools for the detection and prosecution of those who traffic in counterfeit pharmaceutical products. Where such activity is uncovered, we are committed to prosecuting such cases. Mr. Chairman and members of the Subcommittee, thank you for the opportunity to testify before the Subcommittee. I look forward to answering your questions. Mr. Upton. Thank you very much. The Chair, in talking to a number of members on both sides of the aisle, had a request that we go to a 10-minute question period instead of the normal 5. I need to make that formally. Does anyone have an objection to do that? If not, that will be the course of the day, and I will first recognize the chairman of the full committee, Mr. Bliley, for 10 minutes. Chairman Bliley. I thank you, Mr. Chairman. Dr. Henney, as you know, the language approved in the Senate-passed agricultural appropriations bill required that regulations provide the Secretary of HHS a reasonable assurance that imported drugs are safe and effective. But drugs currently manufactured for consumption by Americans must meet rigorous standards for safety and efficacy as put forth in section 505 of the Food, Drug, and Cosmetic Act. What is the administration's position regarding the standards which should be applied to drugs that are reimported or imported from foreign manufacturing facilities into the U.S.? Would you agree with me that reimported or imported drugs should be required to meet the same standards as drugs manufactured for U.S. consumption? Ms. Henney. Mr. Chairman, I believe that both the administration, the Secretary as well, as Mr. Lew in his communications with the committee has made clear their position with respect to this bill, there is very strong opposition to the amendments as proposed by Mr. Crowley and Coburn. However, the discussion I believe is focused, as you know, particularly on the amendments offered by Mr. Jeffords to our Senate appropriations bill. I think there is one thing that we have stressed very strongly, and that is the general support for the framework or paradigm that might be put in place, but it will be totally unworkable unless the FDA is funded to support the initiative in question, and certainly we would expect that the kind of affirmation of the system of safety would at least be equivalent to what we have now. Chairman Bliley. I think I got it straight. It was a nice long statement, but are you saying that then you agree with me that it should meet the same standard of safety and efficacy as drugs manufactured in the United States? Ms. Henney. I believe what I am saying, Mr. Chairman, is that there should be no lowering of the safety net that now protects the American citizens. Chairman Bliley. Well, do you believe the Senate language that only requires a reasonable assurance of safety and efficacy meets that standard? Ms. Henney. Mr. Chairman, I don't believe that I have undertaken a thorough analysis from the legal perspective of what that reasonableness standard might mean. I think it is very clear that all of us concerned with the kinds of medications that people take in this country want them to meet at least the standard of safety that we now have in place for our citizens. Chairman Bliley. In other words, they should comply with section 505, right? Ms. Henney. Mr. Chairman, I believe that the safety standards of this country with respect to prescription drugs have always been to be safe and effective for their intended use. I think that that standard should apply no matter where the drug comes from. Chairman Bliley. Thank you, Mr. Chairman. I've got to leave for another meeting. I will try to get back. Mr. Burr [presiding]. I thank the chairman. As we play musical chairs, the chairman would recognize the gentleman from Michigan. Mr. Dingell. Mr. Chairman, I thank you. Commissioner and Mr. Kelly, what would you need in the way of resources to properly enforce our current laws at the ports of entry? That is an answer you are not prepared to give this morning. So will you please submit it for the record. Mr. Kelly. Yes, sir. [The following was received for the record:] The Food and Drug Administration (FDA or the Agency) is not prepared to articulate a specific resource need at this time. However, as you know, the Agency acknowledges that it lacks sufficient resources to conduct comprehensive coverage at all U.S. borders. In response to the Committee's questions posed on June 8, 2000, FDA began re-evaluating its use of the limited resources available for import operations by developing a resource model. FDA is re-evaluating its current operations to determine where procedures should be updated and revised to better address dynamic industry shifts and make better use of current resources. Any useful resource model would depend upon this current operation evaluation which is still on going. Nevertheless, the ratio comparisons described below may be useful in created a base line for resource discussions. As discussed more fully later, we have implemented an import alert that focuses on certain active pharmaceutical ingredients (APIs) that do not appear to have been manufactured at facilities identified as an FDA approved sources in an application. We will need to evaluate the results of the Import Alert, including the results of inspections at the dosage form manufacturers and investigations of all intermediaries involved with the product, in order to more fully understand the magnitude of the actual and potential importation of unapproved APIs. The results of these investigations will provide important information relevant to determining additional resources requirements. Mr. Dingell. Second of all, Mr. Kelly, does your agency enforce Food and Drug laws at the port of entry? Mr. Kelly. Yes, sir, we do, along, as I said with my prepared remarks, with the rules and regulations, the laws of 40 agencies. Mr. Dingell. Now, Dr. Henney, at how many of the ports of entry do you have Food and Drug people to approve admission of drugs and prescription pharmaceuticals? Ms. Henney. Well, Mr. Dingell, I think that while we have-- -- Mr. Dingell. Just how many, please? I have limited time. Ms. Henney. I don't know a precise number. Mr. Dingell. Would you please submit that for the record? Ms. Henney. I would be pleased to submit it for the record. [The following was received for the record:] The U.S. Customs Service (Customs) recognizes approximately 301 ``ports of entry.'' FDA maintains district offices or resident posts in the metropolitan areas adjacent to 94 of these ports, although only 37 offices or resident posts include staff involved with import operations. The other 57 offices or resident posts are for the most part small resident posts whose responsibilities are limited to domestic products. FDA receives notification of the entry of FDA-regulated products, either through Customs' ACS system, or through paper entry documents collected by Customs at all ports of entry, even those at which FDA staff are not always present. Even if the product is ``conditionally'' released by Customs without FDA examination, it is not released into commerce until FDA reviews the entry documentation. If FDA decides to collect a sample or otherwise examine the product after the product has left the port area, Customs can (under the terms of the importer's entry bond) order the product redelivered for FDA examination. Mr. Dingell. Now you are behind, Dr. Henney, in your foreign inspections. You have some, I heard the figure, 4600 plants not inspected. You've given us the number of 272, is that correct? Is that a hard number or not? Ms. Henney. 242. To the best of our ability, yes, that is a firm---- Mr. Dingell. And the number does grow. How long will it take you to complete the inspections of those 242? How much will each of the inspections cost you? Ms. Henney. I will be glad to submit that figure for the record. I don't have it off the top---- [The following was received for the record:] It is expected that very few, if any, of the 242 firms FDA has identified will require a physical inspection. The goal in identifying these firms was to identify any firms that appear to be improperly shipping APIs into the U.S. and to determine, based on additional information, whether any of the APIs were in fact being shipped for a legitimate purpose. The 242 firms described in FDA's testimony were identified by comparing 1999 data from the OASIS database with information in CDER's Establishment Evaluation System (EES) to determine if U.S. dosage form manufacturing firms appear to have received an API from a source not named in their approved application. After electronic comparison and further manual comparisons, this search revealed that 242 foreign firms, which, at this time, do not appear to be approved suppliers for application products, shipped an API to various U.S. firms. The 242 firms were incorporated into an import alert that issued on October 3, 2000 (IA #6666). These firms will be prevented from importing the specified APIs into the U.S. unless they can provide documentation that the dosage form manufacturer consignee holds an approval for the use of that API in a finished human drug product or documentation establishing that the API is intended for an authorized use (e.g., for a non-application product). If a firm can show that the API is used in an approved human drug product, then a pre-approval inspection would have been performed, and CDER will search the paper inspection records pre-dating the EES system to confirm the pre-approval or other inspection of the API manufacturer. In other cases, investigations at the domestic firms/consignees are being conducted to determine if APIs from unapproved sources were used to manufacture finished drug products. While there is no definition of exactly what each investigation will require, our past experience indicates an average of 20 hours is needed for each investigation. We estimate that the average cost is $130.00 per hour per investigator, not including travel costs, administrative and support time. Mr. Dingell. How much does an inspection cost of a foreign plant? Ms. Henney. It really depends on the location of the plant, the number of inspectors you have to take along, whether have you to hire translators. There is a varying amount. Mr. Dingell. So the answer is you don't know? Ms. Henney. I don't know a precise figure but I will be glad to submit it. [The following was received for the record:] The chart below provides information on the costs of foreign human drug process inspections conducted by the Office of Regulatory Affairs (ORA). It uses the fiscal year (FY) 2001 Agency estimated cost of $112,000 per FTE, and travel costs and inspection times approved by ORA as of October 23, 2000. This information can be used to estimate costs for inspections but does not include an estimate of CDER costs pertaining to the regulatory outcomes of inspections. Each ORA foreign Drug Process inspection requires 2 people at 60 direct hours each. The estimate includes all direct time and travel costs and includes all other indirect costs as well. The total cost for a single inspection is estimated at approximately $23,000 per inspection. HUMAN DRUG PROCESS INSPECTIONS (FY 2001 Costs 65846 $112,000 per FTE) ---------------------------------------------------------------------------------------------------------------- Salary & Hours per FTE per Operating Travel Total Inspection Inspection Cost ($) Cost ($) Cost ($) ---------------------------------------------------------------------------------------------------------------- Lead Consumer Safety Officer (CSO)....................... 60 0.0645 7,224 2,500 9,724 2nd CSO or Laboratory Analyst.......................... 60 0.0645 7,224 2,500 9,724 Subtotal Direct inspection Cost.......................... 120 0.1290 14,448 5,000 19,448 ORA indirect (support) Cost (.125 FTE)................. 0.0161 1,806 1,806 Total ORA Cost/Foreign GMP Inspection.................... 0.1451 16,254 5,000 21,254 CDER Inspection Report Review.......................... 0.0160 1,792 11,792 TOTAL FOREIGN INSPECTION COST............................ 23,046 ---------------------------------------------------------------------------------------------------------------- Mr. Dingell. I don't mean to be rude to you, but I've got a lot of questions and a limited amount of time. You have to cooperate. Isn't it true that FDA has still not developed a specific timeframe for how frequently the agency should be inspecting foreign firms that ship to the U.S. for good manufacturing practices? Ms. Henney. I believe what we would like to have as our goal is to be able to inspect them as we do our domestic plants, which is typically on an every 2-year cycle. Our resources have not allowed that. Mr. Dingell. How much resources will it take you to have the resources you need to inspect those every 2 years? Ms. Henney. I will be glad to submit that exact figure for the record. [The following was received for the record:] Based on CDER's drug listing data, we estimate that there are now approximately 1,900 foreign firms that may be offering drugs for entry to the U.S. market. If these firms were inspected every two years (at 950 inspections per year), our annual projected costs for inspections, trip planning and evaluation of findings would be approximately $23 million. The table below describes the calculations arriving at this amount, but does not include the cost of any necessary equipment. This represents only a calculation of direct inspection resources. The actual costs to support a sustained program of offshore inspections worldwide would require inspection organization enhancements and personnel management adjustments. For example, currently we accomplish foreign inspections with inspectors based at field offices in U.S. These inspectors are needed to inspect the domestic industry and travel for foreign inspections part-time. A program of two-year foreign inspections would likely require the restructuring of inspector stationing. PROJECTED ANNUAL INSPECTIONS COST ------------------------------------------------------------------------ Activity Explanation Cost ------------------------------------------------------------------------ 950 inspections x 0.1451 FTE per inspec. = 138 FTE ORA Inspectors..................... 138 FTE x $112,000 $15,456,000 FTE cost. ORA travel planning................ 10 FTE x $112,000 FTE 1,120,000 cost =. Travel............................. 950 inspections x 4,750,000 $5,000 per inspection. gxl950 reports x 0.016 FTE per review = 15.2 FTE. CDER review........................ 15.2 FTE x $112,000 1,702,400 FTE cost =. TOTAL.............................. ..................... $23,028,400 ------------------------------------------------------------------------ Mr. Dingell. How many plants abroad have you been able to inspect more than once or meet the 2-year requirement that you are supposed to? You are going to have to submit that for the record, too. But I do want to know the answer. [The following was received for the record:] As of October 1, 2000, FDA has conducted 1,507 inspections of the 900 foreign facilities in the CDER database of all firms inspected since October 1, 1994. Four hundred and ten (4 1 0) of the 900 facilities have had multiple inspections in this six-year time period. Two hundred and seventy-five (275) have been inspected twice, 87 have been inspected three times, and 48 have been inspected four or more times in the last six years. Mr. Dingell. Now, Commissioner Henney, isn't it also the case that many foreign firms that ship drug products to the United States haven't received a GMP inspection from FDA in as many as 6 to 8 years or longer? Just yes or no. Ms. Henney. It is very dependent upon whether they have an active NDA---- Mr. Dingell. The answer then is you don't know or the answer to the question is yes or no? Which, please? Ms. Henney. It is not a yes or no answer. It is very dependent on an active NDA or have a drug that is undergoing approval. Mr. Dingell. I am talking about good manufacturing practices investigations. Ms. Henney. Good manufacturing investigations are highly dependent on whether they have an application under approval or they have active NDAs. Mr. Dingell. Without the 2-year inspection you don't have the vaguest idea of whether or not they are complying with the requirements of good manufacturing practices, do you? Ms. Henney. I think that would be fair to say, that we don't know what goes on in the interval. Mr. Dingell. Commissioner, isn't it also the case that because FDA has not visited such facilities that it is possible that GMP conditions may have worsened since the--in such facilities since the last FDA inspection? Ms. Henney. That could always be the case. Mr. Dingell. Particularly in countries like China or in some of the new developing countries that are exporting to the United States, isn't that so? Ms. Henney. I don't know that we see a higher rate there but, yes, that could be. Mr. Dingell. Now, commissioner, isn't it also true that FDA's attempts to catch up on the backlog of foreign inspections will require additional moneys and resources be made available to enable FDA, first, to catch up and, second, to meet its schedule, isn't that right? Ms. Henney. Absolutely. Mr. Dingell. Of course the number of these plants is going to increase, is it not? Ms. Henney. Yes, it will. Mr. Dingell. China will have as many as 10 to 15 new facilities that are going to require FDA inspections. I am informed that is in the $15,000 and $30,000 range; is that true or false? Ms. Henney. I think that is a reasonable approximation of what an inspection there costs. Mr. Dingell. Now, Commissioner, isn't it generally the case that much of the current backlog in foreign inspections is directly attributable to the lack of sufficient resources? Ms. Henney. Yes. Mr. Dingell. The Congress has not been giving you either the money or the personnel you need to do these things, isn't that so? Ms. Henney. Not for the past several years. Mr. Dingell. Is it also the case as the agency attempts to inspect foreign firms overseas it risks understaffing its domestic inspections? Ms. Henney. That is of great concern to me. Mr. Dingell. Isn't it the case that over the past 2 years FDA always had insufficient resources in the area of foreign inspections? Ms. Henney. We've had insufficient resources in terms of our overall post-marketing surveillance. Mr. Dingell. Now, Commissioner, isn't it the case that conducting proper foreign inspections of facilities who send drug products to the United States to determine that they meet current good manufacturing practices is a vital function in ensuring the safety of the Nation's drug supply? Ms. Henney. It is a critical element. Mr. Dingell. Now, Commissioner, if FDA is falling behind in their foreign GMP inspections and many plants overseas have not been recently inspected, how much money would it take to get FDA to a point where it is satisfied that it knows the internal GMP conditions of all plants shipping drug products to the United States are in fact complying with our laws and in fact are safe? Ms. Henney. I will be glad to submit that for the record, sir. [The following was received for the record:] Ideally, a biennial inspection should be conducted to acquire the information needed to determine compliance with CGMP requirements. Therefore, our best projection of the annual cost to ensure manufacturing quality of imported drugs is $23 million, as described in the answer to question #5. Mr. Dingell. I think you are going to have to. Now, Commissioner, in your testimony you say that as many as 242 manufacturers in 36 countries appear to have exported to the United States but have not been inspected. That is a reliable number, is it? Ms. Henney. Yes, to the best of our ability, it is a hard number. Mr. Dingell. It is possible, however, that the number is larger, is it not? Ms. Henney. We have---- Mr. Dingell. Because you really have a big problem there in terms of keeping your data and information on these kinds of activities current, isn't that right? Ms. Henney. Yes, but that data has been processed---- Mr. Dingell. With all respect, I've got to get through my questions. Commissioner, would you acknowledge that there is a rather serious problem with counterfeiting in both bulk drug ingredients as well as finished products in other parts of the world? Ms. Henney. I think any time you have a product like this that is very profitable, it opens itself up for counterfeiting efforts. Mr. Dingell. You are not able to inspect at all ports of entry nor are you able to inspect all mail entries and things of that kind, isn't that right? Ms. Henney. Yes, because of our resources. Mr. Dingell. That is true also with regard to your agency, is it not, Mr. Kelly? Mr. Kelly. Yes, sir. Mr. Dingell. Now, Commissioner, if a shipment of finished products were to contain 10 percent counterfeit material and 90 percent legitimate material, isn't it true that a batch test might have some limitations in detecting the counterfeit part of the shipment? Ms. Henney. Yes, it would depend---- Mr. Dingell. Would you indicate whether you agree with that statement, Mr. Kelly? Mr. Kelly. As far as batch testing is concerned? Mr. Dingell. Yes. You are going to have a hard time if you've got part good and partly counterfeit or part deteriorated, you are going do have trouble telling which is good and if you only batch test or if you only do some subject to sampling, you are going to have trouble knowing what the real facts are with regard to that shipment, isn't that right? Mr. Kelly. Yes. Mr. Dingell. Now, Commissioner, does batch testing give you 100 percent reliability that the product coming into United States does not have counterfeit product mixed into it? Ms. Henney. I think it would depend on the degree to--the percentage the---- Mr. Dingell. The answer simply is no, unless you inspect it all, isn't that right? Ms. Henney. That would give you greater assurance, yes. Mr. Dingell. Commissioner, does batch testing give you 90 percent reliability that a product coming into the U.S. doesn't have counterfeit product mixed into it or 80 percent or 70 percent? Can you give us an idea what the figure is or do you wish to submit that? Ms. Henney. I would prefer to submit it for the record, sir. [The following was received for the record:] Quality testing of each batch of bulk drugs would provide some valuable information on potency, purity and other specifications. A counterfeit bulk drug, however, might also meet these specifications and such testing could not be relied upon to detect certain counterfeit products. A program that includes chemical fingerprint testing and evaluation of labeling, containers, seals, certificates of analysis, shipping records and covert markings will be more useful in detecting and deterring shipments of counterfeit bulk drugs. It is not possible at this time to determine the statistical probability of detecting counterfeit drugs using these samples and analytical techniques. Mr. Dingell. I want you to understand, Commissioner, these are friendly questions. I have been a critic of the fact that the Congress has not funded your agency for a long time. So I don't want you to engage in any defensive behavior here. I think we have to do something to see to it you can protect the people. I am not satisfied that the effort now ongoing in the Congress is going to enable us to have assurances on that matter. Commissioner, isn't it the case that certain products are inherently difficult to repackage or relabel, such as sterile injection solutions, auto injectors, ointments, and prefilled syringes? Ms. Henney. Yes, those are some of the most difficult. Mr. Dingell. So--and what--how do you know whether the repackagers abroad are repackaging safely in cleanly and adequate circumstances or they are repackaging pharmaceuticals that in fact meet all the Food and Drug standards, including being current on their efficacy and not having passed their expiration date? Ms. Henney. That is one of our greatest challenges in this whole area. Mr. Dingell. How many of these repackagers do you investigate? Ms. Henney. I would be glad to submit---- [The following was received for the record:] Sixteen foreign facilities classified as drug repackagers have been inspected since October 1, 1994. Mr. Dingell. How many of them are there and how often do you get around to visit them? If you'll submit that for the record, too. [The following was received for the record:] There are approximately 102 foreign facilities identified as repackagers in the current CDER drug registration and listing database. Drug repackagers have been included in the tier of facilities generally scheduled for routine surveillance once every six years under the system currently applied to target and assign foreign inspections. Some of these facilities will be inspected more frequently if they are covered by a pre- approval inspection of if they are classified as violative. Mr. Dingell. Commissioner, it is my understanding that drug packaging, drug labels, holograms, and even shipping records are often easily copied by counterfeiters and that the sophistication of the efforts of counterfeiters make it extremely difficult to determine faked items from the real items, is that true? Ms. Henney. We have a better chance to catch them with those, but they can get one step ahead of us, yes. Mr. Dingell. Mr. Kelly, do you agree with that statement? Mr. Kelly. Yes, sir. Mr. Dingell. Commissioner Henney, what percentage of bulk raw materials used to manufacture globally is considered counterfeit? I believe you gave us some figures earlier. Would you like to do that again, please? Ms. Henney. I think that to our best estimate and knowledge it is probably in the 5 to 7 percent range. Mr. Dingell. Now you have a problem not only with the fact that it is--that these are counterfeit but also that they might be deteriorated, contaminated, adulterated, filthy, full of foreign or deleterious or other hazardous additions to the mix, is that not so? Ms. Henney. Yes. Mr. Dingell. Mr. Chairman, I think I've taken all the time I am entitled to. I thank you for your curtesy. Mr. Burr. The gentleman's time has expired, but the Chair would notify the gentleman to stick around with us. Mr. Dingell. I thank you. Commissioner Henney and Mr. Kelly, I want to thank you. I did not mean to be discourteous. Our time, as you know, is limited. We have a great deal that we have to do to get a proper record here. Mr. Burr. The Chair would take this opportunity to recognize himself for the purposes of questions. Again welcome to all our witnesses. Commissioner, let me ask you what standard do we currently use to determine whether a drug that is coming into this country, imported into this country, has met our standards? Do we use section 505 of the Food Drug Cosmetic Act? Ms. Henney. Yes, that is primarily the standard we rely on. Mr. Burr. So we currently use that standard for all drugs that are imported into this country. Now, Mr. Kelly, is that the understanding that the Customs agency has? Mr. Kelly. Yes, sir, that is our understanding. Mr. Burr. I need you to pull that mike closer for her purposes when we move to you. General Maher, let me ask you, is the Justice Department clear on the standard that we use for approving drugs for import into this country? Ms. Maher. We wouldn't be doing the testing. Mr. Burr. What part would you play in the determination of drugs coming into this country or reimported into this country? Ms. Maher. I am not sure I understand the question. We don't play a role in determining---- Mr. Burr. Do you play a role as it relates to patent protection? Is the U.S. code something that comes under your jurisdiction? Ms. Maher. It does not come specifically under my jurisdiction. Mr. Burr. But under the Justice Department? Ms. Maher. Yes. Mr. Burr. Are you familiar with title 35, section 271 of the U.S. Code? Ms. Maher. I am not. Mr. Burr. Let me basically tell you what that says. And just get--I've got the code here in case you want to read it for yourself. But what that code says, ``whoever without authority makes use of, offers to sell or sells any patented invention within the United States or imports into the United States any patented invention during the term of the patent therefore infringes on the patent.'' Is that your understanding of the law? Ms. Maher. As I said, I am not familiar with that provision but---- Mr. Burr. Given what that provision says, would it then be a patent infringement for a manufacturer to produce in this country for export, not for the purposes of reimporting into this country, and a third party reimports into this country without the explicit consent of the manufacturer; have they infringed on the manufacturer's patent? Ms. Maher. I would assume so if there is not a license agreement. Mr. Burr. If there is not a license agreement that specifically allows them to reimport into this country. That isn't limited just to drugs, isn't it? Ms. Maher. No, I don't believe so. Mr. Burr. That is a general patent protection we have in this country. It is not only stated in the U.S. Code, it to some degree is codified in the North American Free Trade Agreement and in the world Trade Agreement, World Trade Organization as it relates to the TRIPS agreement, where we negotiate intellectual property. So if in fact the FDA for any reason looked at the Justice Department and said as it relates to a patent infringement we want you to sort of wink, turn your head and not enforce this, would that be a precedent in court for other industries as they took to a court a patent infringement against them that you hadn't enforced this one? Ms. Maher. I don't think a lack of prosecution can ever be offered as precedent, that somehow it undermines another prosecution. There is always--there are always decisions that have to be made about which cases to bring. The fact that one case isn't brought doesn't undermine a prosecution if the facts and circumstances warrant it in another case. Mr. Burr. Mr. Kelly, has Customs ever stopped a product because of a patent infringement? Mr. Kelly. Yes, we do, and it is usually a result of a what you might call a patent lookout where the patent holder would put us on alert as to the possibility of violation. Mr. Burr. Were you aware before the last hearing we had that it was a patent infringement for the reimportation of pharmaceuticals? Mr. Kelly. No, sir, but I wasn't at the last hearing either. Mr. Burr. Hopefully somebody briefed you relative to the line of questions that took place and that was one of them. I think Customs acknowledged that they were not aware that there was a patent violation that existed, whether it is in bulk, API or whether it is in personal use. In fact, it is a patent infringement because it is not specifically or explicitly said that it could be reimported. Commissioner, let me ask you if I could, given that you use the 505 standard for the current importation of drugs, and let me reask Chairman Bliley's question, do you anticipate that if there's legislation that moves through this institution this year that the FDA would demand section 505 be met before any reimportation language was supported by the FDA? Ms. Henney. Well, section 505 is really the basic safety standard. Mr. Burr. I think we can get by with a yes or no, given the limited amount of time. Ms. Henney. That all drug approvals must meet. As I tried to indicate to Chairman Bliley, I believe that same standard would apply. Mr. Burr. So section 505 should apply to any reimportation, yes or no? Ms. Henney. I think we would have that expectation, yes. Mr. Burr. As you know, a couple of months ago five drug companies joined in the United Nations initiative to provide AIDS drugs to a number of Africa nations at significantly discounted prices. First question, do you have an opinion regarding the impact legalizing reimportation will have on drug manufacturers who either donate or sell drugs in foreign countries below market prices? Ms. Henney. I don't. Mr. Burr. Have you stopped to think about it at all? Ms. Henney. That is not something I've given consideration to, no. Mr. Burr. Do you believe that if we lift the reimportation ban that in fact we may actually discourage manufacturers from participating in these types of programs because we've opened up a new market for a drug that meets the 505 standard, designated for some type indigency program, whether it is in Africa, Asia, and potentially it is more profitable for those countries to reimport those drugs to the United States? Should that be a concern to the FDA? Ms. Henney. We have not been asked to consider that question. So I would only be given---- Mr. Burr. Would you supply for this committee a statement from the FDA, a written statement on that? Ms. Henney. I will be happy to. [The following was received for the record:] The legislation, as enacted (section 745 of P.L. 106-387), provides in new section 804 (k) of the Federal Food, Drug, and Cosmetic Act (FD&C) Act that the authority to reimport pharmaceutical products does not apply to drugs donated to charitable organizations or a foreign country. This provision should ensure that donated drugs would be used for their intended purpose rather than being resold in the United States. Mr. Burr. Thank you very much. Commissioner, let me just point out a few things in your testimony if I could. Do we all acknowledge that the growth in international trade over the past few decades has had a substantial impact on the ability of the FDA to cope with the volume of regulated products coming into this country? That is out of your statement. Ms. Henney. I think there are two issues there. Yes, we are seeing an overwhelming exponential increase in the number of regulated products coming into this country, approximately 14 percent I believe just this past year. Mr. Burr. You've asked for---- Ms. Henney. It did stretch our resources tremendously. Mr. Burr. You've asked for $23 million to fund any effort that might deal with reimportation. Can you break down for me how those $23 million are spent, how much would be enforcement, how many would be inspection? Ms. Henney. Yes, I will be glad to supply that for the record. [The following was received for the record:] The President has not yet requested the $23 million, as required by the statute. However, the enclosed chart reflects FDA's estimated cost to fully implement the Medicine Equity and Drug Safety Act of 2000. As you can see, the $23 million for the first year included funding to begin to build the system called for in the bill. Specifically, $2.52 million will go toward beginning to build the Forensic Chemistry Center's drug database; $9.55 million will be used to purchase laboratory equipment and ramp up our laboratory capability; $5.50 million will be used to begin needed information technology upgrades; $5 million will go towards establishing appropriate accreditation capabilities; and $.56 million will be needed for regulation development. [GRAPHIC] [TIFF OMITTED] T5846.235 Mr. Burr. Thank you. I appreciate that very much. Also in your testimony, this is in item 3, excuse me, item 4, put all importers on notice they are required to provide the name of foreign manufacturers. As I stated earlier, the FDA has a long history of sending notices out for their acknowledgment, sign-up, licensing, whatever we want to call it. What's your assessment? Have only the honest people registered? Is that the difficulty? Ms. Henney. Well, I think there are many factors in this. And some of it has to do with time and knowledge and a number of other things. We have put the importers on notice again and we are working with Customs right now to make this a condition of entry. So I think that there will be a much more aggressive step taken for not being compliant with this notice. Mr. Burr. On page 10 of your testimony you state that the FDA's OCI has a close working relationship with Customs, including a memorandum of understanding providing for all OCI agents to be cross-designated as Customs officers. How many total OCI agents are there at FDA? Ms. Henney. Approximately 150. Mr. Burr. Can you tell me of the 150 agents which are now cross-designated as Customs officers? Ms. Henney. I will be glad to supply the exact number for the record, but I believe nearly all of them are. There are a few I believe, perhaps in Miami, that aren't but they actively work these cases. [The following was received for the record:] As you know, the Office of Criminal Investigations (OCI) was established in March 1992 with the selection of a Director. At that time there were no criminal investigators employed by the FDA. In May 1993 FDA and Customs signed an MOU concerning the cross designation of OCI special agents as Customs officers. As a new criminal investigative agency that would be working a number of joint investigations with the Customs it was apparent that our field agents should quickly develop a close working relationship with Customs agents. Therefore, the main purpose of establishing the MOU for cross designation was to achieve a close working relationship and coordination between OCI and Customs. That close working relationship was established and OCI and Customs have in the past and are presently working together on a number of joint investigations. Cross designation requires a block of training by Customs field offices and a renewal every six months of the cross designation status. OCI currently has a total of 133 special agents and supervisors. Eleven of those agents/supervisors are assigned to OCI headquarters and 122 agents/supervisors are assigned to field offices. Of the 122 agents/ supervisors, 77 are crossdesignated as Customs officers. In some cases the initial training or renewals requested by OCI have not taken place for a variety of reasons. Since we have already established a close working relationship with Customs field offices some field supervisors in Customs do not feel cross designation status is necessary for all OCI agents. They conclude that the status should be accorded for a specific reason or investigation, if necessary, citing the time and expense to cross designate agents. Also the language of the MOU states, ``The U.S. Customs Service agrees: to designate certain special agents of the Food and Drug Administration, Office of Criminal Investigations as Customs Officers''. After years of working with and establishing an excellent cooperative working relationship with Customs field offices, it is FDA's belief that it is not necessary for all OCI agents to be cross-designated as Customs Officers. OCI investigates numerous import-related cases in virtually every district in the U.S. and Puerto Rico. To our knowledge, the absence of cross-designation has never been a factor or an impediment to any OCI import related case in any district. OCI's relationship with Customs is such that if it was determined that cross-designation was necessary to assure any import investigation was enhanced, OCI would seek it and we are confident that Customs would be responsive. Mr. Burr. Let me say that according to the information from the U.S. Customs Service that there are presently 15 FDA cross- designated agents in Baltimore, 14 in Los Angeles and 12 in Chicago. That is a total of 41. None of these are in the high volume API districts that you stated. Why aren't all OCI agents cross-designated and why aren't any OCI agents cross-designated in the high volume API areas? Ms. Henney. Well, Mr. Chairman, your information differs a little bit with mine and so I will be glad to supply a fuller answer for the record. Because it has been my understanding---- Mr. Burr. Is that your understanding, Mr. Kelly? I mean these are Customs documents. Mr. Kelly. My understanding it is the number is about 50. My understanding also is that we do have a close working relationship, close---- Mr. Burr. Are any of those 50 designated in the high volume API districts? Mr. Kelly. In the locations that you mentioned. Mr. Burr. Chicago, Baltimore and Los Angeles, which were none of the cities that were mentioned earlier that were high volume. Mr. Kelly. My understanding is we have a closer working relationship than we had in 1993 when that memorandum of understanding was signed and that we are working in those higher volume ports, even though there is not an official cross-designation working together. Mr. Burr. The Chair's time has expired. At this time the Chair would recognize the gentleman from California, Mr. Waxman. Mr. Waxman. Thank you very much, Mr. Chairman. As you know, Commissioner Henney, the House and the Senate both passed drug reimportation language by wide margins as part of the agriculture appropriations bill. Draft compromise language has been circulated and many of us are concerned that the compromise as drafted contains loopholes that the drug companies will exploit to eviscerate the original intent of the proposal. I and my colleagues Congressman Sanders, Berry, and Crowley wrote to the agriculture appropriations conferees expressing our concerns about the draft language. I would like to ask you about some of the issues we raised in our letter. The letter indicates that the current language appears to allow drug manufacturers to discriminate against U.S. pharmacists and wholesalers. For example, the companies could require their foreign distributors not to sell to U.S. pharmacists or wholesalers and could enforce these requirements by inserting restrictive provisions in their contracts. Isn't that correct? Ms. Henney. Mr. Waxman, that issue, if it exists, I think could be a real one, but I think that the implications in terms of trade restriction or trade restraints are really better answered by other agencies. We've got a lot of legal advisers. Mr. Waxman. I wasn't really asking before whether this would stand up under NAFTA or GATT or anything else. I am just asking you if the drug companies had a contract with their foreign purchaser not to turn around and sell it and that contract were upheld, that would be a problem, wouldn't it, for importation of drugs into the United States? Ms. Henney. One would think it would. Mr. Waxman. And it would allow, I believe, drug companies themselves or their intermediaries to discriminate against U.S. pharmacies or wholesalers because they could insert these clauses into the contracts with the foreign distributors, which make it illegal then to sell to U.S. pharmacists or wholesalers. And under the current draft of this language in the agricultural appropriations bill, this type of restrictive contract, as I read it, would be perfectly legal. Of course, if we try to challenge it on a trade basis, that could take years before we see any result. We may not win it. Is there any reason to believe the drug companies would take actions like trying to get these special provisions in contracts with their purchasers abroad? Ms. Henney. I don't know that I have any evidence of that. But if that would happen, I would think it would certainly be something that should be addressed now if Jeffords is expected to work. Mr. Waxman. In fact I believe these restricted practices are commonplace. I agree with you if we are going to face this problem, we ought to correct it now. If we don't address this loophole, this legislation won't go very far in addressing the high cost of prescription drugs for seniors in the U.S.; and if the language is left as is, it will allow the drug companies to evade the intent of the law. Another loophole I am concerned with deals with labeling. Drugs must bear the FDA-approved labels. In cases of brand name drugs, the copyright of these labels belongs to the manufacturer. The manufacturer could frustrate the intent of this legislation by using foreign labels that are different than U.S. labels and then refuse to allow reimporters to use the FDA-approved label. Do you think the drug manufacturers could thwart the intent of the law simply by changing labels, their foreign labels? Ms. Henney. We at the FDA did raise this labeling issue to Senator Jeffords soon after it passed on our appropriations bill. We assumed that it was an oversight, but there is nothing in the bill, as you note, that requires the manufacturer to give the approved label to the importer. Without this requirement, then the importer wouldn't have access to that approved label and it couldn't be imported because it would be essentially misbranded. It is likely an issue dealing with copyrights, trademarks and the like, and again it is another thing that needs to be fixed if Jeffords is expected to work. Mr. Waxman. I would think that it is quite simple for the drug companies to use this tactic. Currently labels for the drugs used overseas do not always use the FDA-approved label. If this problem isn't addressed, as you pointed out, drug companies will have an enormous tool to block reimportation of drugs and undermine the intent of the law. It seems to me that there are simple solutions. Prescription drug manufacturers could be required to provide importers with authorization to use approved labeling and manufacturers could be prohibited from discriminating against U.S. pharmacies and wholesalers. Would you support such an effort to eliminate these loopholes? Ms. Henney. I think they must be worked out if the law is going to work. Mr. Waxman. Thank you. Mr. Chairman, I yield back the balance of my time. Mr. Upton. Thank you. I appreciated your testimony this morning and particularly, Dr. Henney, I was delighted to see the statement in your testimony, I think it was point four, that indicated that the FDA would require manufacturers to notify FDA when they receive poor quality bulk drugs. This was an issue that we took up in our hearing earlier this spring, and as we have proceeded to other things like Firestone, notification to a Federal agency I think is very, very important. How quickly and under what parameters do you see this happening? What timeframe? Ms. Henney. I think we certainly need to engage in a very thorough discussion and dialog with the industry on this matter. It clearly would require rulemaking and notice and comment. Rulemaking could take us several months. Mr. Upton. But you expect to see this happen by the early part of next year? Ms. Henney. I think we will begin engaging in these discussions. I don't believe that we could be to a final rule by the first of the year. Mr. Upton. I have a question that I would like to sort of set out. In a letter back in July to me, July 25, the FDA wrote, ``OCI is willing to work with Customs on a criminal investigative task force if warranted. However, the establishment of a task force is predicated on identifying a large number of specific criminal violations that are occurring and the need to respond to those violations with the resources of a number of agencies.'' It goes on to say, ``In the case of counterfeit bulk drugs, no large number of specific criminal violations has been identified. Accordingly, FDA has concluded that a joint standing task force with Customs for counterfeit bulk drug investigations is not warranted at this time.'' Now, a letter that I think the Department of Justice sent to Chairman Bliley a week or 2 ago indicated that in fact an interagency cooperative such as a task force can be an important component of law enforcement, and facilitates the investigation by using each agency's area of expertise. Where exactly are we in the field of things trying to get all three agencies to work together and in fact develop an interagency task force? Does your language back in July still stand based on what the Department of Justice sent us and as a former OMBite, where was the clearance process? Ms. Henney. I think with respect to the working groups or task forces that are meeting, whether or not it is a standing task force or not may be the term of art we are all debating about. We clearly are engaged in fairly frequent discussions with a number of parts of Customs with respect to the counterfeit issue both in terms, as I mentioned before, of our laboratory efforts, our importation efforts, our civil actions as well as criminal actions. We simply don't have at this point a standing criminal task force, but we do have a working group that is engaged in fairly frequent meetings. In fact, I attended one in August. Mr. Upton. Ms. Maher? Ms. Maher. Well, looking at the letter you referred to, and we said that in the Department's view interagency working groups and task forces are effective and can be useful, is the language you quoted, in law enforcement in identifying and in working on particular cases with Customs and FDA. But I don't think that there is any conflict with what the Commissioner has said that we are not currently participating in such a task force. Mr. Upton. Do you know how many foreign firms appear to have shipped misbranded products in 1999? Is there any idea? Do you have some list? Ms. Henney. I don't think that we have a list, no. Mr. Upton. The FDA indicated that it was developing intelligence on international distribution channels of counterfeit and unapproved drugs. Exactly how is that being done? Is it through the Office of Criminal Investigations? Are they working closely with Customs? Ms. Henney. Mr. Chairman, with your indulgence I would like the person that you gave such worthy praise to before to answer that question. The head of our field operations, Mr. Dennis Baker. If anybody can live in reflective glory, I was very glad that I hired him when I first came on board. Mr. Upton. Welcome back. Mr. Baker. Thank you. Mr. Upton. I have to quickly swear you in. [Witness sworn.] Mr. Upton. You are under oath as well. Thank you. Mr. Baker. Mr. Chairman, we have several ways and venues of developing intelligence. We have international working groups where we do have international partners that our Office of Criminal Investigations works with to identify potential counterfeiting operations and distribution throughout the world. We also evaluate foreign inspections. As an example, our staff are now securing information on all manufacturing that occurs in establishments overseas, not just information on what is being distributed. Mr. Upton. Let me stop you right there. In the hearing that we had earlier this summer, we talked a little bit about the glycerin I indicated in my statement, the glycerin which was contaminated in Haiti, which caused a good number of deaths there. As I recall from that testimony, in fact we traced that back and we found some of that product, at least the raw material, had been identified as coming in and was in the United States and had not been used and it was caught in the nick of time. Now, did that come from China? Where did that material come from? It came from China. Was any attempt ever made? Whatever happened to the investigation? Here is a substance that caused deaths for sure. Whatever happened to the investigation of where it came from? Did they identify the source where it came from? Was there some tracking? Mr. Baker. They did identify the import source into the United States and they did quite a bit of leg work. I would have to pull the files to refresh my memory on it. That was some time ago. We did find it in distribution channels in the United States. Mr. Upton. Was that case ever referred to the Department of Justice? Mr. Baker. Insofar as the importer? Mr. Upton. Correct. Mr. Baker. I would have to go back and look at the files to see what the disposition was. Mr. Upton. Here is a clear case for what Dr. Henney was indicating in her testimony of requiring the manufacturer--if this had been a U.S. firm, to in fact pass that along directly so that we could take some type of action and make sure that it didn't happen again and in fact identify the source, whether it be FDA inspectors that would go there or have the authority to look out for that company's particular products as they entered the States. Do you know more based on that note that was handed to you there? Mr. Baker. We did meet with the Chinese embassy to disclose information that we learned from the Haitian event. In essence, we passed along our information to the Chinese authorities for use against the manufacturer of the product in China. Mr. Upton. Do you know if any follow-up happened? Mr. Baker. I would have to check to see what the follow-up was. Mr. Upton. I would appreciate that for the record. Mr. Baker. I will be happy to supply that. [The following was received for the record:] On October 28, 1999, Agency representatives from the Division of Emergency and Investigational Operations, Division of Field Science, and Office of International Programs, met with representatives from the Chinese Embassy to disclose the results of the Agency's investigation into the 1996 incident in Haiti that killed 88 children caused by contaminated glycerin used in a drug product. After the Haitian tragedy, FDA issued an Import Alert for glycerin exported from all countries. FDA began investigating this incident per the request of the World Health Organization. The Agency's findings revealed that the glycerin used in Haiti was contaminated with approximately 24 to 26% diethylene glycol (DEG). The Agency also concluded that the contaminated glycerin, labeled as ``pharmaceutical grade'', originated from a firm in China. The Agency was not able, however, to identify the firm in China that caused the contamination. In an effort to bring closure to this issue, to alert Chinese officials to the Agency's findings, and to allow Chinese officials to continue this investigation, the Agency requested the meeting to disclose the results of its investigation. Embassy officials indicated that they would report back to the Chinese government and initiate a follow-up. FDA officials also offered to assist the Chinese government in their efforts. To date, the Agency has not received any requests for assistance. Mr. Upton. Okay, I think that completes my questions at this point. Mr. Bryant. Mr. Bryant. Thank you, Mr. Chairman. Dr. Henney, let me ask you a question about what the administration's position would be on reimportation or importation of drugs which are identified in the Controlled Substances Act as drugs which have the potential for addiction or abuse? Ms. Henney. I'm sorry, I heard the first part of your question but not the last part. Mr. Bryant. What is the position of the administration and FDA on the reimportation of drugs that are listed on the controlled substances list, those that are addictive and can be used in an abusive way? Ms. Henney. Are you--let me just ask a point of clarification, Mr. Bryant. Are you speaking of the reimportation bill currently being considered or are you talking about personal reimportation of scheduled products? Mr. Bryant. The former. Ms. Henney. The former. I don't think that the position as outlined by the administration distinguishes between scheduled products versus prescription drugs. It is really drugs that are manufactured, are under prescription that could be reimported. So I assume that the authors of the legislation mean all products that can be obtained under a prescription and of course some of those are drugs that can be abused. Mr. Bryant. I am concerned and I think a number of questions have been asked between the Customs and FDA of the efforts of the joint investigations, cross designations of FDA's OCI, and folks with Customs. Coming from a limited law enforcement background as a former U.S. attorney, and I think I pointed this out in the last hearing, back in June, of the turf battles that go on among investigators, Federal and State investigators. I want to be careful that both of you, and I am sure that Justice would agree, that everyone work together on this in a cooperative fashion so we can make sure whatever we do in Congress works with whatever laws you enforce now are enforced and there are not problems with jealousies among agencies. I think you testified that 150, most of whom are cross- designated, I am concerned about the location and we don't want to micromanage, but Director Kelly, Mr. Kelly, what is your view on the placing of these--I know that you have folks out there, but the placing of these OCI agents particularly among the high traffic areas, the high volume areas? Mr. Kelly. Congressman, I am led to believe by our people that we are working more closely now with the FDA than ever before. In 1993 there was a memorandum of understanding that allowed for this cross-designation and there were some issues in 1993 that I think all reports have been resolved. We don't necessarily need this cross-designation because we are working so closely at many of these ports. There certainly is no resistance on our part to expand the cross-designation. The number is about 50, as Congressman Burr mentioned before. If more cross-designation is needed, we will do two. All of the feedback that I have received is that we are working closely and cooperatively as far as investigations. We do have a task force of sorts in the San Diego area doing Internet investigations right now. Mr. Bryant. Would you explain to me in your testimony, maybe on your website, in our preparation materials the indications are that there are something like 358 ports of entry and 20 customs centers in addition to that which you operate, and the issue I would ask you to explain to me, are some of these limited in terms of commercial trade and if we pass this legislation that we are talking about where it would likely increase the importation of drugs and all of the problems that need enforcement, how will that affect those commercial sites and can we close down some of those given the assets that you have, and will you be forced to try to shut down some of these commercial entries to offset that? Mr. Kelly. We have 301 ports of entry. The overarching supervision are 20 customs centers. Some ports, yes, are strictly trade. For instance, Otai Mesa in California is 10 miles from San Ysidro, it is passenger car, but Otai Mesa is all vehicle traffic. We would--we simply don't know the volume that will be generated by this piece of legislation. I could not make an intelligent statement whether or not we would be forced to close. That certainly would be a very drastic measure to close a port of entry. We would resist that tremendously. Mr. Bryant. We are sort of on both sides of this. We don't want to impair our legitimate businesses but we don't want these counterfeit drugs coming in either. You guys are where the rubber meets the road. Let me go back to a question, if I can find it very quickly here, to Dr. Henney. Dr. Henney, in terms of the foreign drug plants, our committee here has obtained evidence of some Chinese firms that readily ignore patent laws and distribute these drug products. Are we aware of the distribution of such drug products outside of China that violate our patent laws? Ms. Henney. Mr. Bryant, I am going to have to submit that response for the record. I don't know that I can give you a full and complete answer to what extent we are knowledgeable about that. [The following was received for the record:] FDA is not aware of evidence that Chinese firms are manufacturing and distributing pharmaceuticals in violation of U.S. patent laws. Mr. Bryant. Mr. Kelly, do you have any information on that? Mr. Kelly. No, sir. Mr. Bryant. This committee has obtained reports of firms that are counterfeiting drug products still under the U.S. patent laws. These firms do manufacture other products that are exported to the United States and it seems to me that the FDA would find these reports relevant to assessing the integrity of these firms, and I assume that the FDA would like to have these reports that the committee has found. Ms. Henney. We would appreciate that. Mr. Bryant. Dr. Henney, let me ask you a question here. The FDA seems to be saying that it doesn't want individual citizens to bring drugs approved for the U.S. market from Mexico for their personal use because the agency can't assure the safety and effectiveness of these drugs, but as long as a wholesaler- importer provides documentation about testing products obtained in Mexico, this somehow is dispositive. So while it is not safe and effective if it is brought into the United States by an individual, it seems to be safe and effective if brought in by a commercial operator whose products will be available to not just one person but thousands of other folks, and we are going to know that the drug is safe and effective by virtue of the paperwork being provided by the very person whose business interests are affected by this. This is at best illogical, and at worst this is downright dangerous. What is it specifically about the pending importation proposal which has changed the FDA's mind and reversed the agency's clear and heretofore unambiguous position about assuring the safety and effectiveness of these imported drugs? Did you follow all of that? Ms. Henney. I tried to. Mr. Bryant, I think there are a number of issues embedded in your question. I think first and foremost, the pending legislation which the administration has made comment on was initiated by the Congress. It clearly does apply to importers, and the importer might be a pharmacist, and we feel that if that is to take place, that our current method of assuring a safety system would have to be nurtured with a new system that we would need to put in place to make sure that the safety issues remain strong. And that is why we are saying that we cannot accomplish this piece of legislation without full funding to support a new safety system on our part in terms of authenticating what is coming in and making sure that it does meet safety standards. However, this piece of pending legislation does not deal with personal importation and the personal importation policy. So we have not made comment in that regard. I think it is important to keep in context that the personal importation policy when it was initiated by the agency many years ago was a policy built out of compassion, that there was an overriding concern about people's ability to get product that might be available in another country that was not available here, and it was particularly done at the time of the AIDS crisis when there were no treatments available here and possibly available in some other countries. And we opened it up by policy to allow an individual to bring a personal amount of product into this country, or if they were coming in from a country and had already been prescribed a medication in another country that may not have been available here. I think that policy has extended over time, and it is now one that people are relying on because of the price issue. We have tried to be understanding of that matter. We do have concerns about it and that is why we try to tell citizens that go into other countries to purchase products perhaps at lower cost, that they do that at some risk in terms of their safety, but we have chosen by enforcement discretion not to enforce the law in terms of their personal desire to purchase that product. But they need to be aware of the safety risk they put themselves at. Mr. Bryant. To be clear in my own mind, let me ask that each one of you and probably a close simple yes or no answer might apply. You might have to explain a little bit. Do the three agencies, for lack of a better word, that you represent, each one of you, what is your position on this bill that would--these riders, the Crowley and the Coburn and I guess Jeffords over in the Senate, what is the position? Do you favor the passage of this that I understand would allow the importation of bulk drugs from other countries, large numbers, rather than simply the personal use situation? Do you support this type of legislation? And each of you answer yes or no. Ms. Henney. Mr. Bryant, I believe the administration has made itself very clear in terms of strong opposition to both the Crowley and Coburn amendment on the issue of strong safety concerns that those amendments would represent. On the matter of Jeffords, I think from the FDA's part, the original Jeffords, and I am given to understand that this has been opened up for a lot of discussion, and I don't know its current state of play, but if we looked at the language as originally embodied in Jeffords, we believed that it was a new system, it could be a workable system, and from our part we could only do it if fully funded. I think a number of other issues have arisen during the course of discussion, but I don't know the current language of Jeffords as it now stands, so I couldn't comment on that. Mr. Kelly. Trade has essentially doubled in the last 6 years, and obviously the volume comes right through the Customs Service. We don't have a position on the bill. Obviously we do what we have to do. Clearly we are strapped for resources now. So this legislation certainly has the potential of adding to the volume that Customs has to deal with. All I ask is consideration for the Customs Service as far as resources are concerned. We have a resource allocation model that we had a consultant do for us, and it is an excellent piece of work. It is workload driven. What we would want to do is take information from the FDA and put it into our resource allocation model and come out with a figure, what do we need to effectively enforce this piece of legislation. So our concern is resource driven, what do we need to do our job as far as this piece of legislation is concerned. Ms. Maher. Mr. Bryant, the Department of Justice has not commented on the bill and the Office of Consumer Litigation, which I oversee, is certainly not the only component which would have views on that. If the Department were to provide views, we would have to solicit views from divisions such as the Criminal Division and the Office of International Affairs, and so forth. We can do that, but that has not been done to date. Mr. Bryant. Thank you. I yield back the balance of my time. Mr. Upton. Mr. Cox. Mr. Cox. Thank you, Mr. Chairman. Thank you for joining us. I would like to ask about the letter that the FDA sent to the committee addressed to Chairman Bliley and copied to the ranking member, Mr. Dingell. I wonder if you can distribute a copy of that letter to the members and the witnesses. This letter concerns the production of documents to the committee concerning the criminal case that is described in Ms. Maher's testimony involving the prosecution of counterfeit antibiotics from the People's Republic of China. According to the letter of August 29, the FDA may have violated grand jury secrecy rules by disclosing information which is subject to the grand jury rule 6(e) of the Federal Rules of Criminal Procedure. The letter is unusual in that it is not signed by a lawyer, nor does it reference any petition to the court concerning the use of the material within FDA by anyone other than an attorney for the government. I am assuming, and I will have to ask you this question, that the signatory on the letter, Melinda K. Plaisier, is not an attorney for the government; is that correct? Ms. Henney. That's correct. She is head of our legislative office. Mr. Cox. I take it that you are a medical doctor and not an attorney for the government? Ms. Henney. Yes, I am a physician. Mr. Cox. Rule 6(e) of the Federal Rules of Criminal Procedure requires that this information be handled by attorneys for the government, and it would have to be segregated within FDA, presumably stamped secret, and other precautions would have to be taken so that this information could be kept secret within the confines of the law. It appears that that did not occur. Do you know why? Ms. Henney. Mr. Cox, this matter came to our attention a few months ago, I believe a few days before the committee received this letter, we saw during the course of looking at materials that had been provided to the committee that some 6(e) documents inadvertently may have been transmitted in response to a request before the agency from the committee. Mr. Cox. I need to stop you because I don't understand how that can happen. I don't understand how that information could have been in the possession of anyone not an attorney for the government. Ms. Henney. That is what we are investigating ourselves right now, how it happened. Mr. Cox. How can you conclude that it is inadvertent then? Ms. Henney. Well, it was inadvertent in that it got transmitted to the committee and we are exploring how it happened, not only the transmittal to the committee but how it happened that the 6(e) documents were outside the confines of a secure situation within the agency. Mr. Cox. The people who transmitted this information and who reviewed it for transmittal in the first instance apparently were not attorneys for the government and were not on the grand jury list? Ms. Henney. That's correct. Mr. Cox. So at least facially we have a potential criminal violation. Was there a notification to the Inspector General? Ms. Henney. We have notified the Inspector General, but it is under investigation by our internal investigations group. Mr. Cox. Is that normal for a potential criminal violation? Ms. Henney. Yes. Mr. Cox. That the IG would not handle it? Ms. Henney. Within the agency we have an internal affairs operation. They work closely with the IG of the Department, but they are able to undertake investigations within the agency. Mr. Cox. My understanding of your MOU is that in fact it would be normal for the IG to handle that; is that correct? Ms. Henney. Under the memorandum of understanding as I know it, we notify the IG of any matter like this and they take it under consideration as to whether they want to handle solely the investigation or they work with us in the investigation. We have notified them of that and we have not heard whether they will be entering this particular investigation or not. Mr. Cox. I am attempting to find a copy of it, and I just reviewed it recently and it strikes me that it is abnormal for the IG not to do this. Ms. Henney. As I recall, when this particular memorandum of understanding was entered into with the IG, it was at a time when the agency felt a need to have its own internal affairs unit. We were long delayed in terms of waiting for the IG because of the number of cases that they had under investigation through the whole department, and thus this arrangement was developed through this memorandum of understanding. It is that which we have relied on. Mr. Cox. Does the Office of Internal Affairs comprise non- FDA employees? Ms. Henney. No. Mr. Cox. They are people that work for the FDA. Have any of them worked for the Office of Criminal Investigations? Ms. Henney. They are credentialed as essentially criminal investigators, but they do not report to that office. Mr. Cox. Have any of the people who presently work there formally been in the Office of Criminal Investigations? Ms. Henney. I don't know that. Mr. Cox. The concern is that what we have if we handle it as it is being handled is the people conducting the investigation essentially investigating their colleagues. There isn't the same arm's length arrangement that you would have if you had the IG conducting the investigation. I wonder if the MOU seems on its face, as it does to me having read it, to put this in the lap normally of the IG and the decision was made not to do that. Ms. Henney. The decision was to give this to the Office of Internal Affairs. They would make their normal contacts with the IG and develop the plan for the investigation of the matter. Mr. Cox. This has been going on for months. Where does it stand now? Ms. Henney. I have not received a report on the status. Mr. Cox. The Office of Internal Investigations doesn't have the power itself to convene a grand jury? Ms. Henney. No. Mr. Cox. Or to even get testimony under oath as the IG could. Isn't that right? Ms. Henney. I do not know the extent of their authorities in that regard. Mr. Cox. Can they subpoena documents? Ms. Henney. I don't know, Mr. Cox. Mr. Cox. Are you at all involved in the decision whether to conduct the investigation through the IG or through the Office of Internal Investigation? Ms. Henney. I was involved in the decision that said we needed to investigate this matter thoroughly. Mr. Cox. You did not opine on it going to the IG or Internal Affairs? Ms. Henney. I did not make a designation as to which should, and I think what we have normally done when we have matters within the agency that need exploration is to turn first to our Internal Affairs, and then they consult with their colleagues in the IG as to how it will be conducted. Mr. Cox. Why have you not been briefed on the status of the investigation? Ms. Henney. I am normally briefed on the status of the investigation when the investigators feel that they are at a point where they need to be having me make a decision or need to transmit critical information. Mr. Cox. Is your inference from the passage of a month and some since at least we were provided and presumably the FDA was on notice that it is a complex investigation and that is why it is taking a long time or that there is nothing worth paying attention to? Ms. Henney. I don't know what all might be involved in the investigation at this point. Mr. Cox. I raise this because it is rather clear that in the one criminal matter that we have seen--and this is the only one to my knowledge, the only criminal case that FDA has brought for the importation of bulk pharmaceuticals? Ms. Henney. I believe that is correct. I don't know that for a fact. Mr. Cox. It seems that we have a rather serious internal problem within FDA concerning the handling of the documents. They appear not to have been marked properly. They are being handled by people who are not on the grand jury list. They are not apparently in the office where they belong. Do you know the answer to the question of which office these things came from? Ms. Henney. We do not know at this point the different transmission points within the agency. That is what they are exploring right now. Mr. Cox. Do you believe that in any way the misconduct or mishandling of documents here is related to a lack of funding to the FDA? Ms. Henney. I think we will have to make those judgments once we see the completion of the investigation. Mr. Cox. I will say that it strikes me as extremely improbable that that could be the case. Rather this seems to be a clear case of people not following the rules, and I would hope that it would get some serious attention because I have never seen a letter like the one that came to the committee just--let me ask this: Has the FDA or the Department of Justice made application to the District court that had jurisdiction over this matter where the guilty plea was entered, and so on, that would permit the people who have handled this information within FDA to do so? Ms. Henney. I need the thrust of your question again, please. Mr. Cox. Even though I realize, Ms. Maher, you are with the Civil Division, do you know the answer to that question? Ms. Maher. I don't know the answer to that question. I just notice that the letter was copied to the Assistant U.S. Attorney in New Jersey. Frankly, this is the first time I have seen the letter, and I wasn't aware of the issue and I don't have any information on it. But that doesn't mean that the U.S. Attorney's office isn't--hasn't made some kind of application. I just don't know the answer to the question. Mr. Cox. Okay. These are very serious matters. It is a crime, and it seems to me, or at least according to 6(e), handling documents in this way is subject to serious criminal penalties. It doesn't seem to be being handled internally with that gravity, and I would hope that would change. The way that it came to the attention of the committee is highly unusual. I don't think that the committee has ever received a letter like this, not only during my 12 years in Congress, but at all because it is so facially irregular. To the extent that you haven't been briefed on it, I would assume that this would be a good time and perhaps you can get back to us. Is that acceptable? Ms. Henney. Yes. [The following was received for the record:] As you know, FDA's Office of Internal Affairs began the preliminary investigation of this matter in September and in accord with our MOU with the Department of Health and Human Services Office of the Inspector General (OIG) notified them. Subsequently, on October 4, the OIG notified the Agency that they would assume the lead on this investigation. Dr. Henney, Commissioner of Food and Drugs, was briefed on this status subsequent to the hearing. Since the OIG now has the lead, FDA expects no further briefing until the investigation is completed. Mr. Cox. Thank you. Thank you, Mr. Chairman. Mr. Upton. Before I yield to Dr. Coburn, I have been asked by the minority to put two letters into the record by unanimous consent that they, I guess, referred to in their questions. So without objection that is now done. [The following was received for the record:] [GRAPHIC] [TIFF OMITTED] T5846.236 [GRAPHIC] [TIFF OMITTED] T5846.237 [GRAPHIC] [TIFF OMITTED] T5846.238 [GRAPHIC] [TIFF OMITTED] T5846.239 [GRAPHIC] [TIFF OMITTED] T5846.240 [GRAPHIC] [TIFF OMITTED] T5846.241 Mr. Cox. Mr. Chairman, I would ask also by unanimous consent that we include the letter that we just had discussion on for clarity purpose. Mr. Upton. Without objection, so ordered. [The following was received for the record:] Department of Health & Human Services Food and Drug Administration August 29, 2000 The Honorable Thomas Bliley Chairman, Committee on Commerce House of Representatives Washington, D.C. 20515-6115 Dear Mr. Chairman: This letter is in follow-up to a telephone conversation I had with Mr. Alan Slobodin, Senior Counsel, of your staff on August 25, 2000. I called Mr. Slobodin to advise him that it recently came to our attention that the Food and Drug Administration (the Agency) may have inadvertently disclosed documents related to a closed grand jury investigation in a document production responsive to your letter of August 4, 1998, requesting information about counterfeit bulk drugs. Specifically, documents provided to the Committee on the following dates, included documents that may be subject to Rule 6(e) of the Federal Rules of Criminal Procedure: October 14, 1998 Boxes 1 and 2; October 29, 1998 Box 3 of 4; December 29, 1999; January 20, 1999. We respectfully request that if the Committee is finished with these documents, please return them to the Agency. We will be happy to arrange for a courier to pick them up. If the Committee has further need of the documents, we respectfully request that you take precautions to not further disclose, make no copies, and advise us when you are finished so we may arrange to have them returned to the Agency. We apologize for any inconvenience this may have created. Please let us know when the Agency may retrieve these documents. Sincerely Melinda K. Plaisier Associate Commissioner for Legislation cc: The Honorable John D. Dingell Ranking Minority Member Committee on Commerce House of Representatives Mr. Richard Schechter Assistant U.S. Attorney Department of Justice Mr. Upton. Dr. Coburn. Mr. Coburn. Thank you, Mr. Chairman. Dr. Henney, you have been through a controversial period of time where you approved a drug that Mr. Waxman is happy with and I am unhappy with, and my purpose is not to berate you in that decision, but I have some questions about that process that I think are important for the FDA, and implicit in past drug approvals and future drug approvals, and I just wanted to ask you some questions about that if I might. If you don't know the answer, that is fine. I would like you to get back to me with the answer. Also, I sent you a letter on September 6 asking some specific questions that I have not heard any answer from, and this was prior to the release of that approval. The basis of my question is this: With the approval of RU- 486, it by itself will not accomplish the purpose under which it was approved by the FDA. It is a recognized medical fact that it has to be used in combination with some other drug with which to do that. The other drug that is used in that is a drug that is produced by G.D. Searle Company, which they have disallowed and disavowed that they want that drug used for that. My question to you is: Coming with implicit approval of RU- 486, will the FDA hold harmless every practitioner in the off- label use for Cytotech for every purpose outside of the approved use and every other drug that might be utilized in combination with other approved drugs, and have you set a precedent which will diminish the power of the FDA? Ms. Henney. With respect to the treatment plan that you reference, Mr. Coburn, Dr. Coburn, I think that the treatment plan in order to accomplish the early termination of pregnancy really does require the two products; and in that regard we have been engaged in discussions with Searle about changing the label to reflect that treatment plan on the label. In terms of---- Mr. Coburn. Could I interrupt you there? Have you ever in the history of the FDA gone to a manufacturer when they have expressed a desire that they don't want a label change and recommended to them that a label and nonapplication by them be changed because the FDA wants a change? Has that ever happened before in the history of the Food and Drug Administration? Ms. Henney. I don't know the full history of the Food and Drug Administration, so I don't know the answer to your question. I do know that it is quite common in my own field where a drug in and of itself is not the whole treatment, but requires the use of many other drugs to really complete an effective treatment plan, that that has been done in those kinds of situations. And that has been done in those kinds of situations. Mr. Coburn. But the FDA has, in fact, asked other manufacturers to change their labeling request to make a treatment plan, and that would be your testimony, that the FDA has done that in the past? Ms. Henney. I don't know that there has been a formal request of that to be reflected on the label. There is certainly an acknowledgment, as we have approved different products, that they are a part of a treatment plan, not effective in and of themselves to the degree the treatment plan provides. Mr. Coburn. In regards to Cytotec, Searle sent a letter out to all practitioners throughout the United States, all providers, stating, No. 1, they don't want this drug used for this, that it's dangerous for this; and in statements made to the press they stated, in fact, that this letter was written jointly with the help of the Food and Drug Administration. Is that a true statement? Ms. Henney. I think there are two issues there. There were essentially two letters in question. One--and we certainly were very much engaged with their writing of the language in the letter that tells practitioners and women really that if they are taking Cytotech and wish to remain pregnant, that there are side effects potentially of birth defects. However, for the termination of pregnancy, that is a different issue and a different letter under question. And we have asked for revision of that, because it is different than what the company implies and states on its label in other parts of the world. Mr. Coburn. In fact, under the label requirements, even the IND and the NDA that was done with Cytotec in this country we have no label request and no indication for the procedure under which this drug indirectly has been approved by the FDA in conjunction with RU-486; is that correct? Ms. Henney. What are you talking about here? Mr. Coburn. I'm talking under the jurisdiction--you don't have jurisdiction outside of this country in terms of labeling. You have jurisdiction in this country. I'm talking about the letter that they sent--I'd like to introduce this into the record--August 23, which they claim was written in part with the help of the Food and Drug Administration. So my question is, it really doesn't have anything to do with RU-486 and Cytotec. The fact is, I see a prostitution of the process of the Food and Drug Administration that undermines your ability in the future to ever counter a claim for any drug company that wants a liability claim on off-label using, because in fact the Food and Drug Administration, with its approval of RU-486, has implicitly approved a drug for which the drug manufacturer doesn't want it approved, has stated they don't want it approved, and you helped write a letter that helped them say that. So my question is, is this all about posturing for liability so that Searle is not sued, and all the liability for using this drug now stated, that should never be used for pregnant women or for abortion, is that to shift all the liability to the practitioner? In other words, I don't understand why we would not have approved this drug as a true drug regimen and done it in a way that does not dilute the future potential of activity for the FDA to control drugs. And it seems to me that we've diluted your capability precedent for future actions on other off-label drugs because you've implied, I believe, that it's okay to use this drug for this procedure. Is that a fair statement or an unfair statement? Ms. Henney. We have said that the treatment plan--we have approved the drug as a part of a treatment plan. I think with respect to the matter of helping in terms of drafting of that particular letter, I think we might question that. Our real assistance came in an earlier letter. Mr. Coburn. So let me make sure I understand this. The FDA did not assist Searle in this letter to practitioners stating that they do not want Cytotec used for both the induction of labor or as a use of a second drug combination as an abortive fashion. Ms. Henney. It was really for the use of this, if a woman desired to remain pregnant. It was not for its use as an abortive agent. Mr. Coburn. But I'm talking about this letter. There is no assistance by the FDA with G.D. Searle Company in developing this letter that went to every practitioner in the United States disavowing the utilization of Cytotec, the second component in a medical abortion, that they did not want, should not be used, it is dangerous to be used in that manner. That is the manufacturer of this product saying that, and the FDA had no part in the formulating or drafting of this letter. Ms. Henney. We had a part in the formulating and drafting of the letter that essentially warned health practitioners and patients if Cytotec was used and a woman desired to remain pregnant that she would be at risk of severe birth defects. That is the part of the letter that we assisted in. Mr. Coburn. Fine. Thank you. I'd like to submit with unanimous consent this letter from Searle, as well as statements from the press relating to FDA's concerted help in writing this letter. I'm not sure we have a full explanation of why the FDA would have been involved in this. The other thing that concerns me--and I would make this note in the record for the future, and I think it's very important--FDA has to be the final approver on medical uses and labeling for drugs, and I believe that that process has been bastardized with this letter and with the use of Cytotec in conjunction with this. We need to make sure that we preserve FDA's power, and I believe a precedent has been set with this because we now have the Food and Drug Administration asking a manufacturer to allow a drug to be used off-label by their implicit approval of another two drug combinations when, in fact, the manufacturer doesn't want any part of it and doesn't want the liability associated with it. The second point I would make is because this has happened, any practitioner who uses Cytotec to perform a medical abortion, if there is any complication, Searle is off the hook, and the maker of RU-486 is off the hook, but the practitioner isn't. So what we have done is shifted responsibility from those that should be to those that are carrying out what is recommended by the Food and Drug Administration as a proved policy of terminating lives in this country and doing so in a manner that shifts the liability away from those that should have it. With that, I thank the chairman for allowing me to participate. Mr. Upton. The documents, without objection, are included as part of the record. [The following was received for the record:] [GRAPHIC] [TIFF OMITTED] T5846.242 [GRAPHIC] [TIFF OMITTED] T5846.243 Mr. Upton. Mr. Burr. Mr. Burr. Thank you, Mr. Chairman. Commissioner, share with me, if you will, why it has taken 3 years since FDAMA was passed for us to write the final regs as it relates to foreign establishments whose products are imported or offered for import in the United States. Ms. Henney. Mr. Burr, I think that there were probably two factors in its taking 3 years to get this particular regulation out. The first was that we worked on those matters within the FDA Modernization Act that actually has statutory deadlines or requirements first, and they were given first priority. I would note that we have met nearly 100 percent all of those requirements and requests that are embodied in that law. Second, we were given no additional appropriations as we were expected to undertake all that is involved in rulemaking. So there were no additional appropriations provided when the FDA Modernization Act passed, so we worked on our--the priority issues first under constrained resources, and it has taken some time for us to get this out. Mr. Burr. Could this committee expect that any change in our importation or reimportation guidelines in this country would take a similar amount of time, 3 years or longer, to fully implement the regs and the guidelines for that? Ms. Henney. I would hope not. Because we do place a strong priority on this effort. But I have mentioned earlier, throughout the course of this hearing, that we have to prioritize by risk and we have to prioritize by resources. Mr. Burr. I think you clarified a lot today, and my understanding, and I think the record will show, that the FDA is supportive of a standard that is consistent with section 505, that these drugs must meet. Mr. Waxman raised a question about labeling, and I would in fact point you toward section 505. And I will just be general in my statement, but section 505 requires that any manufacturer file an NDA. And in that NDA they list those facilities that that specific drug would be made in. And the labeling is determined off of that NDA and in compliance with section 505. For anybody to suggest that there might be an additional labeling issue would be for them to not have an intention to use section 505 as a guideline. Would you agree? Ms. Henney. I don't know that they would have an intention, but yes, they would have to be given some sort of permission or access. Mr. Burr. Section 505 is very specific as it relates to labeling and the requirement for an NDA and the requirement to list the facilities where one would manufacture a drug, correct? Ms. Henney. You are absolutely correct. Mr. Burr. You would expect that to also be a guideline that you would follow as it related to reimportation or importation changes that might be considered by this Congress? Ms. Henney. Yes, there would have to be congruency between those two things. Mr. Burr. Let me go to Mr. Kelly because he is Customs. Your folks are on the border. I mean, even General Maher said in her testimony there are also drugs that are manufactured in whole or in part in unauthorized factories or facilities and then shipped with the complicity of the authorized manufacturers under its name and trademark--in other words, manufacturers in cahoots with manufacturing outside of the stream of an NDA-named facility. How do you catch that? Mr. Kelly. With great difficulty. Mr. Burr. It is not an expiration date now. It is the correct paperwork; it is the manufacturer's logo; it is everything imprinted--the color of the pill is right. How do you catch it? Mr. Kelly. As I said, with great difficulty. We need direction, we need to work closely with the FDA to get--we are looking for some national standards now from them to address a lot of these issues. Mr. Burr. It is tough, isn't it? You can say that. We understand the job that we have got, you are doing. And we understand that as pharmaceuticals become more global, which they are in fact, the challenges that we place on Customs are that much greater. Now, the natural question that I have to ask is, what is your job going to be like if we allow this new importation and reimportation to exist? How much have we strained your ability for your Customs agents to determine the difference between real and fake, adulterated and nonadulterated? Mr. Kelly. Well, it clearly will be strained, to what extent we simply don't know. We don't know what the volume is. We don't know what the complexity of these shipments will be. Mr. Burr. Let me ask General Maher. Currently, if a U.S. manufacturer manufactures a product and it goes into the consumer stream, they are liable, even if the FDA has approved the safety of, the efficacy of the good manufacturing process, everything is followed; if in fact they have a contaminated product, they are liable. I mean, they will be sued and somebody will win. Let me ask you, based upon the reimportation language that is out there, if a U.S. manufacturer manufactures in this country for export, it gets out of their chain of control-- which everybody's testimony said happens today--it is stored improperly, it is not temperature controlled, it is not humidity controlled, the active ingredient doesn't work because of the storage. It is reimported back into the country to a wholesaler or pharmacist, it is administered to a patient and their heart medication does not work and they die. Who is liable? Is the original manufacturer liable? Ms. Maher. I don't know that I could give you a legal opinion on that, based on the statute. Mr. Burr. Is that not an important question we get an answer to before we head into this world of saying we will take all drugs from around the world whether they are manufactured in the facility, whether they are stored in the warehouse, whether the manufacturer has been able to maintain that chain of control; as long as we think that it's not contaminated or that it has been made in a facility under section 505, approved, we will take it back in. Are we taking a great risk and aren't we holding private sector companies in this country liable for tremendous exposure? Ms. Maher. As I understand it, that is one of the reasons the Jeffords bill, in the version that I reviewed, requires, or will require, the Secretary to issue regulations that would establish a pedigree. Mr. Burr. We do require the Secretary to authorize the process. We authorize the Food and Drug Administration today to approve the safety and the efficacy of every pharmaceutical in our marketplace. But that authorization, that approval, that good stamp of approval from the FDA does not lift liability from the manufacturers, does it? Ms. Maher. I am not suggesting that it would lift the liability. I am suggesting that it would help to identify who is in the chain of custody of the product. Mr. Burr. And what Mr. Kelly and what you and what the Commissioner have told us today is, we have a serious problem today with counterfeit, adulterated drugs. Now we are going to open it up to a whole new world, the population is going to get that much bigger, and I only ask you to look at that one piece and tell me whether I am wrong that for a manufacturer of pharmaceutical products in the United States of America who manufactures with the intention of export, and somewhere in the chain of where that drug goes, it is stored improperly, it becomes contaminated for whatever reason, we have not done anything in the language currently debated that would lift the liability from that original manufacturer, have we? Ms. Maher. I haven't seen anything expressly in the bill that would do that. Mr. Burr. I have not either. I would hope that is one of the areas we begin to look at and ask ourselves, in fact, is this fair? Commissioner, would you agree from my earlier set of questions, that any reimportation or importation of a patented drug without the consent of the manufacturer is in fact against U.S. law? Ms. Henney. Today, yes. Mr. Burr. And is there anything in the proposed legislation that changes U.S. Code for patent protection of any manufacturer whether they are drug manufacturers or whether they are software manufacturers? Ms. Henney. Not that I am aware of. Mr. Burr. So even under the current reimportation language, it would have to be the interpretation of whatever department of the Federal Government--hopefully, it is Justice, some area of Justice--that they would look at it and say, it is still against the law to reimport against the consent of a manufacturer under patent protection. So in fact we have done nothing unless we address in legislation the ability to get around patent law in this country. Would that be a direct statement to General Maher or to the Commissioner? Ms. Henney. I would think that would be one issue that would clearly have to be worked through. Mr. Burr. Would you also agree that--would you also agree, it puts us in great jeopardy as it relates to our negotiations for harmonization with the EU on a drug standard, if in fact we get away from the gold standard we have always had, which is section 505? Ms. Henney. I don't know that the legislation under consideration would truly get us away from that standard. Mr. Burr. As long as we stick to 505, we are okay, we are on sound ground. But any movement away from section 505 is the standard that we use for a sign-off that something is safe and effective to come back into this country would, in fact, put us in great jeopardy with our trade negotiators on harmonization of drug approvals between the EU and the United States of America where we, for 3 or 4 years now, cannot find agreement. Ms. Henney. Mr. Burr, I am going to ask your indulgence in providing a fuller answer to your question for the record. We clearly have been involved in nearly a 10-year discussion in terms of our international harmonization efforts with not only the EU, but Japan and others, about harmonizing what we see in terms of our review documents. And the standard that we expect at the end for us, a standard of approval, may still be different than other countries; but we have never abandoned that standard in all of those discussions. But I really would appreciate the privilege of providing a full answer for the record. [The following was received for the record:] We do not believe the Medicine Equity and Drug Safety Act of 2000 (section 745 of P.L. 106387) would compromise the approval standard in Section 505 of the FD&C Act. Drugs allowed into the U.S. under this legislation are expected to already have been approved by FDA. Therefore, we do not expect any impact on MRA negotiations. Mr. Burr. I would appreciate that, because I hope that given the interaction that members of this committee have had with the FDA relative to this issue, that our understanding is still the same and that we would hold fast to the gold standard in any harmonization negotiations that we might go through, either with the EU or with other countries. Mr. Chairman, I am happy to yield back the balance of my time. I want once again to thank our witnesses. I hope they understand that not only are we here to look at the counterfeit problem and to be as helpful as we possibly can be as a committee and as a Congress; we are also here to make sure that any steps that we might make don't contribute to the problem that we have. And I think clearly there are questions that exist, some of which we have gotten answers to today; and I thank our witnesses for that. But clearly there are many more areas than the authors of this legislation on reimportation have thought of that are affected by what we do; and I hope for once we will slow down, we will work with an agency that up till this point in its history has never broken from the gold standard that it set. Certainly there is a list of former commissioners of the FDA who have raised questions about what we might be getting ready to do, and I would like to quote one in concluding. It is a letter dated July 17, 2000, to the Senate Majority Leader, Trent Lott, Tom Daschle from former FDA Commissioner Goyan, and I quote, ``Even with my background and training, based upon physical inspection alone, I can't tell the difference between an authentic drug that has been properly stored and handled, an authentic drug that has not been properly stored and handled, and a counterfeit medicine that looks exactly like the real medicine that it copies. ``How are the Customs Service agents at entry points along our borders with Mexico or at one of our Great Lakes ports going to tell the difference?'' I think that best sums up the challenge that you have got, Mr. Kelly, but it best sums up the reason that we should slow down and do it right and work in a partnership and not a political vacuum. I yield back. Mr. Upton. I appreciate the gentleman yielding back the balance of his time. I just note for the record, I wasn't intending to go to a third round. Mr. Burr. I had confidence you weren't. Mr. Upton. Mr. Strickland. Mr. Strickland. Thank you, Mr. Chairman. Dr. Henney, I find myself generally sympathetic with whatever we can do to lower the price of drugs for American consumers who, I think, are getting gouged with these high prices. Having said that, I think it is terribly important that we make sure that whatever we do protects the American consumer and the American public. In that regard, I understand this letter from Representative Dingell has been placed into the record; and having read this letter, I am concerned that it appears that there is a major problem, at least along the Mexican border, where substances that probably should not be available to certain individuals are being permitted into the country in significant quantities. By that I mean, I think that ought to be a major concern for us. What I would like to ask you is, can we expect an answer to the issues raised in this letter made available to this committee within, say, 2 weeks? Is that a reasonable thing to request of you? Ms. Henney. We will make every effort, Mr. Strickland, to respond within 2 weeks. I would say that the investigators or the faculty members that Mr. Dingell cites within the letter, that have done at least a preliminary study on this issue, we actually had invited to come in to talk to the whole leadership group of the Agency about their findings so that we might explore not only what they found, but if there are any other projects, that we might work on them--work with them on. So I think that we are very sympathetic to this issue, particularly as it relates to the personal importation policy, and we want to find out everything that they have found out in terms of their study and evaluation of the Mexican border. Mr. Strickland. For example, they indicate that on a particular day, 11,000 Valium tablets were brought into the country. Having worked in health care settings, I know how devastating access to that kind of drug can be if it isn't appropriately monitored by a physician. And I also understand that every study has particular methodologies and perhaps certain assumptions that need to be looked at and evaluated to make sure that it is a credible study. But I think these are very, very serious findings that are outlined in this letter, and it seems that it would be really helpful if we could have a response from you, and this committee could know what your findings and what your conclusions are regarding these particular allegations. Ms. Henney. Well, I think that they are very interesting findings, not only of the controlled substances that may be being brought in under personal importation that have unique issues, but also that it is not just seniors that are going into Canada--and not just Canada from their study, but Mexico from this study--but it is really much younger people who are seeking these medications as well. So that is why we really want to look in depth as at what is being found. Mr. Strickland. Just one more question. Is it reasonable for us to expect you will sit down, or your office will sit down, with Customs and try to work together to try to make sure that these issues are resolved? Ms. Henney. We intend to sit down not only with Customs, but with DEA. We do have a policy that harmonizes; sometimes, in operation, it is not interpreted as consistently as it might be. So we want to undergird our understanding about how personal importation, as it relates to scheduled products, really is to work. And certainly we want to share with them the findings of the study. Mr. Strickland. Thank you. Thank you, Mr. Chairman. No further questions. Mr. Upton. Mr. Bryant. Mr. Bryant. Thank you, Mr. Chairman for this second round. Ms. Maher, let me ask you, you know, so often we hear stories--probably countless stories--about how people in developed countries and underdeveloped countries, taking medication, experience problems with drugs that don't work or drugs that do them harm. And realistically we just don't have that over here in the United States very often. I am wondering, as we look at changing the policy rather dramatically that would allow potential reimportation of potentially dangerous counterfeit drugs--whatever, the whole gamut of bad things that can happen in this country--it is not unrealistic that we could see some people that are injured, some people that die as a result of this. And I know that is not the intent of Congress. We want to have drugs that are, I guess, more affordable, whatever. I assume that is the logic behind this. I know I certainly do, but again not at the risk of having people die. Is the Department of Justice--in terms of the current resources you have available, is the Department of Justice that would handle the actual prosecution of these cases that are made by Customs and made by the FDA-OCI folks, are you, with the resources you have now, ready to handle this potential from a legal standpoint? Ms. Maher. Well, we are certainly ready, willing and able to prosecute cases involving counterfeit pharmaceuticals. And if, as a result of a new reimportation law, there were to be an increase in those right now, we don't anticipate an inability to prosecute cases. So we are prepared to bring cases that are referred to us involving counterfeit drugs. I think it is the counterfeit drugs that you are referring to that cause harm to those who consume them. Whether they are in the United States or in some developing country, they are drugs that are other than what they purport to be. Mr. Bryant. I think it almost goes without saying if this law is changed, there will be an increase in the importation of drugs now; and how many of those are counterfeit and defective or whatever are yet to be determined. And there was fear of that at one point; that is why the law was passed as it is. And certainly I think we all understand that the real deterrent to this type of conduct ultimately is the fear of prosecution of getting caught and then being prosecuted to the full force of the law. Ms. Maher. These are very resource-intensive prosecutions to bring, and that is why some of the suggestions that were contained in our written testimony are things that we believe would make these prosecutions easier and less time-consuming and resource intensive. Mr. Bryant. Dr. Henney, I also practiced law, and I was a civil defense lawyer and defended medical health care providers' malpractice cases, and realistic enough to know--Dr. Coburn kind of woke me up on this. I had expressed some concerns about the approval of RU-486, but I would like to follow up on some of the questions he had--not as a doctor. I am not a physician like you or he are; I am a lawyer. And know just enough about medicine to be fairly dangerous to myself. But help me out on the FDA approach here. Is--as I understand, this is kind of a two-phase--the first phase is one drug followed up by second-phase drug that Dr. Coburn was alluding to quite a bit. Now, is this first drug--and I know it has a specific name, is it--where is it going to be manufactured, inside the country of the United States or is it going to be outside? Ms. Henney. Mr. Bryant, there are two drugs involved in this. The first is misoprostol. That is the drug that we announced the approval of last Thursday; and then following that, on the third day misoprostol is taken. That combination in a treatment plan essentially is the combination that results in early termination of pregnancy. We have at the FDA made the determination that we will keep the manufacturing site of this particular product confidential for two reasons. Mr. Bryant. Let me stop there. I think I understand some of the politics involved and some of the economic issues involved. Are the two drugs you refer to, is that first and second phase? Because I am looking--where does Dr. Coburn's Searle product come in? Ms. Henney. Day three, that is the second drug. Mr. Bryant. So we know who manufactures or who handles the second product, potentially. But the first one, you are saying you cannot tell this committee whether that product--I am not asking, where specifically is it made, other than is it in this country or out of the country; because I am concerned that--I believe if drugs are manufactured in this country generally what the FDA does have, I guess, is some authority over that and some inspection occasionally of the processes to ensure that there is quality control. I don't have that same confidence that the FDA has that for any kind of drug that is manufactured out of this country. So is it fair to say--let me ask it this way: Is it fair to say that the FDA will have some process or some inspection or some ability to judge the quality of this product and its manufacturing process? Ms. Henney. Mr. Bryant, let me assure you that this product had to go through every step of approval that any drug does approved by the FDA. And that includes the preapproval inspection of all of the processes of manufacture and making that drug. And this drug met that at its manufacturing sites. Mr. Bryant. You are not prepared to tell this committee if the manufacturing is outside the country or inside the country? Ms. Henney. No, I am not. Mr. Bryant. The second phase that Dr. Coburn questioned, again from a liability standpoint, does the FDA by asking-- let's again use Searle as an example. There may be other conditions that would be involved that could have their particular drug used off-label, I think is the terminology. Does the FDA, by approving this entire process, believe it is affording protection from liability to companies like Searle who are involved in that second process either willingly or unwillingly? Ms. Henney. Mr. Bryant, as you alluded to, I am a doctor and not a lawyer. So I don't know the full answer to that question. But we will try to provide a response to you for the record. Mr. Bryant. In simple terms, is this the first time to your knowledge that the FDA has ever asked a company such as Searle to, in effect, relabel a product, say, You can use it really for other issues beyond what we say? Ms. Henney. As you know, the FDA has been around for 100 years, and we have been approving products for probably some 50 years. And I just simply don't know the answer to that question. Mr. Bryant. So from your knowledge, you just don't know? Ms. Henney. I don't know. Mr. Bryant. When you are questioning your attorneys, what would be the liability effect of that? Would you anticipate that Searle, for example, again would have to go back and begin a retesting process for themselves, verify that this is a safe, effective use of their product? I assume they have done that for the reason the product is used for now, but with you asking them to label it to another use, wouldn't you think they would be wise to at least go back and test it themselves? Or are you providing--is FDA providing them liability from that? Ms. Henney. Mr. Bryant, certainly not liability, but the basis of the test, the clinical trials and specifics under question involve this product both at clinical trials that were part of this submission from the U.S. and France. So we would rely on that information. Mr. Bryant. Would you also--and I assume you will have access to this record; if some of my questions maybe are discombobulated, you can determine where I am going about the liability issues. Would you also give us the opinion of your attorneys, I guess, at FDA in terms of the liability for doctors? I guess the point he concluded with, even--I am not sure I disagree with Dr. Coburn--is that what appears to be an effort--there appears to be an effort by FDA to protect the manufacturer of phase one drugs, as well as what I call the phase two drugs. That is my wording. And in the end, things do go wrong. You know, the history that I have read about overseas is-- you know, has been pretty good; all that counts. But things do happen and things will happen; and in those instances, you know, people look around for deep pockets. And I am wondering if all that is going to be left out there that could provide some compensation for an injured plaintiff would be the doctors. Dr. Coburn seems to think that. I am not sure that is right, to burden their backs, and--when they are trying to do the right thing, and have you, FDA, out there working with the drug companies to maybe to give them immunity. I don't know how it will all play out, but could you maybe check and give us a response, your attorney's best guess on that? Ms. Henney. We will try to the best of our ability to give you a response to that. [The following was received for the record:] Under the approved treatment regimen, misoprostol is administered on day three to help stimulate uterine contractions. This use of misoprostol is contained in the approved labeling of mifepristone. It is based on the clinical trials for the regimen of the two drugs, which FDA found to be safe and effective for the termination of early pregnancy. FDA does not address liability issues, either for manufacturers or for physicians, in its approval decisions. Mr. Bryant. Thank you. Mr. Upton. Thank you. I might announce the intent--a vote has been called. I have got a couple of questions that I know I am not going to get through, so I am going to submit those in writing. I am going to ask one or two questions before the next bell rings. And then we will release you all, this panel, we will go vote and probably start the second panel at about 1:15 when we get back. Dr. Henney, I was very concerned about how FDA handles criminal investigative information; and my question, which I understand your staff, was briefed about last week regards how the FDA in fact handles these investigative leads. I am going to ask unanimous consent that this internal e- mail from the FDA's Office of Criminal Investigations be entered into the record. This is an e-mail that was dated January 7, 1997, concerning bulk counterfeit issues, and according to the e-mail, FDA received information from its counterpart in Australia, called the Therapeutic Goods Administration, TGA. The information was that the TGA had obtained evidence of a delivery of bulk drug material manufactured in India, supplied to a pharmaceutical manufacturer in Australia, which had been partially substituted with sugar milled to the same size as the bulk drug; and the substitution involved three of ten containers in the delivery. TGA further determined that the inferior grade active pharmaceutical ingredients were being placed in the bottom of the containers or in every third or fourth drum. Apparently, the firms involved have access to sophisticated packaging activity that may even co-opt employees in the process. According to the e-mail, the FDA agent was going to contact the TGA, obtain all the pertinent information. The only other information besides the e-mail was a handwritten note on the e- mail indicating the name of the Indian firm and that the FDA had a record of two import entries, one in 1994, but none in 1995 through 1997. However, the committee's investigation shows that this Indian firm had been inspected twice by the FDA up to that time and that the U.S. in fact was its primary export market. And, in addition, the committee has not received any other documents or information, whether the FDA ever pursued this matter. And I don't believe that the matter had been--even amounted to a preliminary inquiry by the Office of Criminal Investigations, based on the FDA's June 2 letter to Chairman Bliley. Do you have any information for the committee on whether or not the investigative lead was ever pursued further with the Australians? If so, what happened; and if not, why not? And does the Office of Criminal Investigations close the matter because they relied totally on FDA's information on the import data system? Ms. Henney. Mr. Chairman, I would want to give a full response to your question for the record. I do know that we have a very strong and good working relationship through our counterparts in Australia. And I do know that we did some tracking on this particular issue, but I would like to outline that in full detail, if I could, for the record. Mr. Upton. Okay. We will allow you to do that. [The following was received for the record:] The OCI e-mail dated January 7, 1997, concerned information provided to OCI by FDA's Forensic Chemistry Center (FCC). FCC was passing information to OCI that they received from the Medicines Control Agency (MCA) of Britain. MCA was made aware of the information in December 1996 during a Pharmaceutical Inspection Convention where the Therapeutic Goods Administration of Australia made a presentation. Other FDA personnel attended this convention. The information concerned a delivery of sulfamethoxazole raw material manufactured in India and supplied to Australia, which had been partially substituted with sugar milled to the same size as sulfamethoxazole. At the time, a query was made by OCI to determine if the company had imported product to the U.S. That inquiry determined that there was no record of entries by the company for the years 1995, 1996 or 1997. OCI did not open an investigation because there was no criminal violation to pursue. The information regarding the incident was maintained and regulatory offices in FDA were aware of the situation. Mr. Upton. We appreciate your testimony, all three of you, as you are now, as they say, ``saved by the bell.'' We will come back at about 1:15. [Brief recess.] Mr. Upton. Our next panel really includes only Nikki Mehringer, who is the Area Quality Control Leader at Eli Lilly. Thanks so much for being patient and waiting. I hope you had something to eat, or else a late breakfast. As you know, the rules in the subcommittee--we always have the tradition of taking testimony under oath. Do you have any problem with that? Ms. Mehringer. No problem. Mr. Upton. Do you wish to be represented by counsel? Ms. Mehringer. No. [Witness sworn.] Mr. Upton. You are now under oath. Your testimony is made part of the record in its entirety, and if you can limit your remarks to about 5 minutes, that would be terrific. And the time is now yours. Thank you. TESTIMONY OF NIKKI MEHRINGER, AREA QUALITY CONTROL LEADER, ELI LILLY Ms. Mehringer. Thank you, Mr. Chairman, members of the committee. Thank you very much for this opportunity to talk with the committee about matters of importance concerning safety and quality. I am a registered pharmacist, I am a quality control professional, and I am a consumer, I am a voter, I am a wife, and I am a mother; and the testimony I will give today will reflect my experiences in each of these roles. We have talked a lot this morning about counterfeit, and about people who might want to use changes in the laws and regulations of this country to their advantage. I want to talk about other possibilities that may happen when people who want to follow laws, as they may be changed under the provisions, and still lead to increased risk for American patients. Let me explain for a few moments the duties of a quality control professional at a pharmaceutical manufacturer. The current good manufacturing practices for finished pharmaceuticals, we have heard about them this morning. They are part of the code of Federal regulations; they are the book by which I do my job, by which I live, by which I am inspected by the FDA. I want to read just a few fascinating points from this to you. The second paragraph of the GNP states, ``The failure to comply with any regulation set forth in this part and in parts 211 through 226 of this chapter in the manufacture, processing, packing or holding of a drug shall render such drug to be adulterated under section 501(a)(2)(B) of the act, and such drug, as well as the person who is responsible for the failure to comply, should be subject to regulatory action.'' This is very important. This is one of the first things we teach people when they come to work in our industry. What this says is, if you don't follow any of these rules, the drug product you have manufactured is adulterated, under law. If it is under your control, you shall reject it. If it is on the market, you shall recall it. It doesn't matter what the test results were; we do not test quality, we build it in through this system. One more paragraph, ``Responsibilities of the Quality Control Unit: There shall be a quality control unit that shall have the responsibility and authority to approve or reject all components, drug product containers, closures, in-process materials, packaging, term labeling and drug products and the authority to review production records to assure that no errors have occurred; or if errors have occurred, that they have been fully investigated. The quality control unit shall be responsible for approving or rejecting drug products manufactured, processed, packaged or held under contract by another company.'' That is my job. That is the job of everybody who works for me. It is the job of a person and people at every pharmaceutical manufacturing company. Accountability here is pretty clear: The regulatory action can be taken and, again, these are rules. This law is a minimum. Every quality control unit at a pharmaceutical manufacturer determines their own internal standards, writes their own policy and procedures, determines what specifications they want to use, which may be higher and tighter than those required by the law. It is a business decision we make, because we believe it gives us an advantage. We believe it is best for the consumer. Today, nothing enters a U.S. wholesaler or the U.S. Distribution system without the approval of the quality control unit of a manufacturer. This is appropriate. These are the experts with the attributes of that particular drug. Under the provisions of the bill under consideration for importation and reimportation, the decision on whether or not a drug product can enter or reenter the U.S. distribution system would be taken away from the manufacturer and decentralized to hundreds of wholesalers and pharmacists. The basis for their decision on whether that product could enter or reenter would be a paper trail and some degree of testing that would provide reasonable assurance of the quality of the drug product. This violates the very basis of quality control principles, that quality is designed in, built in, controlled in and not tested in. And the role of these laws and regulations in this system is very unclear to me. Let's imagine a few scenarios of how this might work, Mr. Chairman. Let's say you receive a call today from a person in your district who says, I have a complaint on a drug product. A person just called my office, and they do sometimes then say, My daughter took a drug product. She's in the hospital; she had an adverse reaction. It could be from a tablet, a capsule, an injectable product, maybe an aerosol, an inhaler--maybe she had asthma and expected to get some good result in the middle of an attack, and she didn't. She calls you. She is upset. You know where to go; you can call the FDA. But you can call that pharmaceutical manufacturer, talk to that quality control group. And if it were me, if you called me, I would say, give me 2 hours. I have all the traceability of that lot. I know where it went, I know where it has been stored, I know everything about that until it got to the U.S. wholesaler. Then I handed it to a wholesaler who is registered, who is covered by the Prescription Drug Marketing Act, who is inspected by their State board of pharmacy; and he has complete records. By that afternoon, I will tell you the history of that drug, and I will tell you if there is anything wrong with it. You have got clear accountability. Let's imagine that happens again in 2 years if this is passed. You call me. I say, let me check. And then I call you back and say, You know that lot of drug I shipped out of the country 18 months ago, and I shipped it to a wholesaler out of the country? I never intended it to be reimported back into the U.S. In fact, the labeling I put on it was for the country I shipped it to. I can tell you, the labeling was not suitable for the U.S. market, not approved. I don't know when it came back. I don't know how it came back. I don't know where it came back. I don't know where it is stored. And I am not sure who to call to find out. You see the difference. The single point of accountability is very, very clear. And it is what the law charges me with. If we change this, I do not understand how I can have accountability for activities that I have no control over. The duties with which I am charged trouble me profoundly, that the activities of looking at data regarding storage, devising testing protocols, setting limits, reviewing test results and deciding disposition of batches will be done by hundreds of entities who have no technical knowledge of this drug product. Every change that is made has intended and unintended consequences. Certainly we know the intended consequences of this provision, but the unintended consequences could be very serious. We all know it would be sad if people receive very dramatic bodily harm from some counterfeit drug or receive some very dramatic adverse drug event. But I will tell you what is just as sad. What is just as sad is if somebody goes and pays their money and receives a drug that doesn't work and they don't know it is not working and they pay their money and they take it and they never get better. And the doctor doesn't know if it is a treatment failure or a diagnosis failure or a drug failure. Today, when you go to the pharmacy and you have a prescription filled, you don't worry that it is safe and effective, do you? I don't. I have great faith in the FDA and the whole enforcement system within the U.S. But how sad it would be if we would lose that. The United States has a good system of control around the manufacture and distribution of pharmaceutical products. It is tedious. It is detailed. It is not always convenient. It is monotonous. People who are in charge of control functions can drive the people around them crazy. But we do it every day in this same controlled manner so that when we need to call on it, when we need to trace a product, if we need to recall a product, we know everywhere that was sent. We can get our hands on it quickly. It is there. I will tell you that just like good health itself, you don't appreciate this control system until it is gone. That concludes my testimony, and I have also submitted written testimony for the record. [The prepared statement of Nikki V. Mehringer follows:] PREPARED STATEMENT OF NIKKI V. MEHRINGER, AREA QUALITY CONTROL LEADER, EUROPE AND NORTH AMERICA, ELI LILLY AND COMPANY Thank you for the opportunity to speak with you today regarding Quality Control and Safety matters of interest to the Committee. Quality control is essential from the initial point of manufacturing through the entire distribution chain to the hands of the patient. Even the healthcare professional cannot look at a white tablet and determine if it will still be effective--we are all dependant on the controls throughout the system that assure the Safety, Identity, Strength, Quality, and Purity of the medicine. A failure in this system may cause failure in treatment, medical harm, and result in significantly increased expense. I am a Registered Pharmacist and have practiced pharmacy in 4 states (Indiana, Ohio, Iowa, and Illinois). I have 15 years experience in the pharmaceutical manufacturing industry as a Quality Control professional. I am also a consumer, a wife, and a mother. My comments reflect my experiences in all of these roles. Food and Drug regulation in the United States is based on a three- fold approach: 1. The Law--The history of Food and Drug law in the United States has been based on reactions to public health crises rather than visionary approaches to potential risks. The principal law is the Food Drug and Cosmetic Act, which was passed in 1938 in reaction to a disaster in which a poisonous ingredient was mistakenly used in the preparation of an antibiotic causing the deaths of dozens of children. Changes in the act have been made over the years, often in response to major public health issues. Examples of these changes include the establishment of Good Manufacturing Practices and the Prescription Drug Marketing Act. As a result, we have a well-constructed system of laws and regulations, which provides the U.S. public with safe and effective medicines. This system is recognized around the world for the extremely high standards it maintains in the areas of drug manufacturing and distribution. 2. Enforcement--the Food and Drug Administration is charged with the enforcement of the Food Drug and Cosmetic Act. The FDA accomplishes this with a system consisting of the following: a) Drug Registration and Approval--This system of review determines what products may be sold in the U.S., including approval of the product itself, the labeling of the product (including approved uses and safety warnings), the location and methods for the manufacture and testing of the product, storage requirements, and allowed expiration dating. b) Facility inspections for Good Manufacturing Practices--All FDA- regulated locations, whether within the U.S. or in other countries, are subject to both routine and for-cause FDA inspections. Such inspections may relate to the practices of the manufacturer, including the state of facilities, procedures, organization and education of staff, quality systems, and process controls in place at the facility. 3. Good Science--The Pharmaceutical Industry and the FDA collaborate to improve current Good Manufacturing Practices through scientific approaches such as advancements in validation practices, stability studies of molecules, and new methods of manufacturing and testing. This three-fold system maintains the assurance of quality that the American consumer demands. The underlying concepts that support this system are complex and dynamic. At the risk of over-simplification, the goal of the entire system is to achieve ``Control.'' It is no accident that the term we use for the organizational entities entrusted with the duty to run these systems within a factory is ``Quality Control.'' The systems in place demand control from drug development through manufacturing and distribution to assure that the product is safe and effective for its intended use. Final product testing is only the confirmation that the process worked. Chart A illustrates a typical supply chain that supplies product to the U.S. Consumer. At each step, there are applicable registration requirements, regulations, and enforcement agencies. At each step, accountability is clear. Requirements for security, identity control, accountability, traceability, and storage are clear. If a consumer registers a complaint, the entire history of that single capsule or vial can be traced and investigated through the system that is in place. The supply chain is controlled. Why is this control of the supply chain critical? It has been suggested that a drug product could leave this controlled supply chain for a period of time and then be allowed to re-enter it if testing were performed upon re-entry. The inherent limitations of final product testing do not support this assertion. These limitations include the following: a) Drug products are assigned expiration dates because the drug product itself changes over time. The changes in drug products are dependent on storage conditions, particularly heat, humidity, and sunlight. Testing gives a single-point piece of data regarding the chemical status of that product on that day. To predict the ``goodness'' or the efficacy of a drug product on its assigned expiry date, one must know the storage conditions, packaging components, and inherent nature of the molecule. The methods and calculations to predict this are so sensitive and complex that the FDA has just published a Stability Guidance Document that is over 100 pages long. Thus, a single point of testing today cannot predict the performance of that product over time unless it is put in the context of the inherent nature of that molecule and the storage conditions that the product has experienced. b) Final product testing is not recognized by the law or by the industry as sufficient to guarantee safety or quality. In fact, manufacturers reject many lots that meet all testing requirements because they did not meet the requirements of Good Manufacturing Practices for in-process controls, validation, adherence to the approved NDA, or other reasons. A drug product may meet all testing requirements and still be determined to be adulterated or misbranded under U.S. law. Most of the warning letters received by FDA-regulated manufacturers do not involve product that fails to meet testing requirements; instead these warnings are based on suspect practices at the manufacturer. The FDA teaches their investigators to catch potential problems before they get to the point that a product would actually fail to meet testing requirements--the FDA wants that buffer in their control system to prevent potential public health issues. In fact, many lots that meet all testing requirements are later recalled from the U.S. marketplace each year because they are discovered to have not met these GMP requirements or because they failed to meet labeling requirements. c) Reliability of testing results varies greatly depending on the laboratory that performs the testing, the equipment used, the analytical testing method used, and the education and experience of the people who run the test. To transfer a testing method from one laboratory to another within the same company using similar equipment consumes hundreds of man-hours to assure that the different laboratories will generate similar results on a given sample. Dismantling the control of the supply chain leads to other concerns around safety and quality. A few of these are listed below: a) When a customer complaint is received today by the FDA or the pharmaceutical manufacturer, all the records necessary to investigate the lot of product are available immediately. The manufacturer can trace the history of that product from the dispensing of the raw materials, the manufacture of the active ingredient, the manufacture and packaging, storage, and distribution of that single tablet, capsule, or vial. If a recall is deemed to be necessary, the manufacturer can contact all wholesalers to whom that lot of product was shipped within a few hours. If a decentralized system of importation or re-importation were instituted, the manufacturer would not have this capability to trace product. In fact, the manufacturer may be recalling a lot of product in Europe with no idea that any of the product has been shipped into the United States. Additionally, the incident that caused the lot of product to be unacceptable to the consumer may have occurred somewhere out of the control of the manufacturer or the U.S. government, making investigation slow and cumbersome and enforcement impossible. b) Each country has unique requirements for products sold in that country. Each market has different expectations for products sold in that market. A manufacturer may be approved by FDA and therefore will target certain lots of product for the U.S. market and will manufacture those lots in accordance with FDA and U.S. requirements. However, other lots of product produced at that same facility will be targeted for other countries and will be manufactured in accordance with their requirements. If the pharmaceutical company no longer controls the movement of these materials between countries, then there is risk that the importer will not be equipped or able to discern critical differences in products that may lead to confusion among patients or health care professionals and safety issues. Examples of these concerns include: 1) Labeling requirements--Approval of labeling is a part of the drug approval process in each country. Therefore, labeling is different for each country. Differences may include critical content issues including indications for use and wording of safety warnings and also include convenience issues such as the bar codes used for inventory control in each country. Only the manufacturer can determine if a given label is appropriate for a given market based on the knowledge of the complex registration and customer requirement for each market. 2) Packaging--Once again, packaging is approved as part of each country's drug approval process. Packaging components may look the same, but may be made of different materials. Requirements vary and may have safety implications--for example, the U.S. has strict standards for Child-Resistant containers that may not be approved in other markets. Once again, the manufacturer is charged with assuring that all requirements are met for the intended market. A product may meet all testing requirements but the container may not meet the U.S. government requirements. 3) Single dose identity or trade dress--Tablets and capsules intended for market in the United States are uniquely identified by color, shape, size, or imprinting upon the tablet or capsule. These unique identifiers are registered at U.S. poison control centers to assure quick identification in case of an emergency. Tablets and capsules intended for market elsewhere may not have these same identifiers. The resulting confusion for health care professionals who depend on this system could be disastrous if an importer was not aware of this difference. All of the issues raised above demonstrate increased risk to the public health assuming that all involved are making a true effort to transform this system of a centralized, controlled supply chain to a decentralized system where hundreds of different entities may be importing the same drug product into the United States from multiple sources. None of the statements above address the potential risks from those who are looking for an open door to bring product into the country that they know do not meet the requirements of the NDA or Good Manufacturing Practices. Drug counterfeiting is a real issue. The U.S. has been able to minimize the availability of counterfeit drugs through the strict controls in place today. Areas around the world with less strict enforcement capabilities find containers of material that contain placebo, substandard or sub-potent or super-potent drug, or sometimes drugs that are a completely different entity than the label states. The people who participate in this counterfeit business are a sophisticated group who knows how to weigh the potential risk of being caught against the potential benefit. It is in all of our best interests to make sure they know that the enforcement systems in the U.S. will not be weakened and they enter here at great risk. If any of the potential changes to the supply chain for the U.S. pharmaceutical market lead to product that is dramatically harmful to patients, we will discover it quickly, and very sadly. There is a risk here that is potentially more pervasive, difficult to distinguish, less dramatic, and just as sad. That is the risk that health care professionals will prescribe medications, patients will pay for them and take them as prescribed, the patients will not get better because the medicine is not harmful, it is just ineffective. It may be ineffective because it was stored improperly somewhere along its journeys, or because it is packaged or labeled inappropriately, or because it is a counterfeit drug that is actually a placebo. In any of these cases, it is our job as the lawmakers, the agencies who enforce the laws, and the manufacturers who understand the molecules and the science around the molecules to assure we have the controls in place to prevent this from occurring. [GRAPHIC] [TIFF OMITTED] T5846.244 Mr. Upton. I appreciate that very much. And just as I sort of get prepared to ask--I do have a number of questions, but I am going to yield, I think, first to my colleague from Ohio, Mr. Strickland. Mr. Strickland. Sure. Thank you, Mr. Chairman. Let me begin by saying that you are a very effective witness. I think you advocate for your thoughts and opinions effectively and some of the things that you have said have given me pause. And so I want to thank you for that. Having said that, I would like also to share some thoughts with you. Ms. Mehringer. Certainly. Mr. Strickland. You are a scientist, and that is your responsibility with your industry. I respect that, and I respect the science, and I respect the fact that you spoke to us as you did. The problem, I think, that has brought this issue forward is the perception, I think, it is based on the fact that the industry that you work for--through no fault of your own certainly--is engaging in practices which cause many of us to think that the American consumer is being treated unfairly; that drugs that are developed, in part, through public resources are available to other citizens and other countries at a cheaper price. And I think there is a perception based on fact that the whole pricing of the pharmaceutical industry is troublesome. Now, you mentioned a business decision in terms of even going above and beyond what you may be required to do. And that is admirable. Like you, when I buy a medication in this country, I don't worry about its safety. I am glad it is that way. But I am also troubled by the fact that there is this other issue out there that is driving this concern and this effort, I think. And I think there is an equal responsibility on the part of the industry, just as there is a responsibility on the part of us who sit up here, to try to make sure that both concerns are adequately addressed; that we remain concerned about safety, but we also be concerned for the American consumer, for the senior citizen, for those who maybe can't afford the drugs. And that is a tragedy as well. And I am so puzzled, in a sense, that the industry would be opposed to a medication benefit under Medicare that would be available to Medicare recipients. I can only assume that the major concern has to do with cost and price and profit. And so I am sitting up here feeling some conflict, because what you say makes a lot of sense to me; but I am also sitting up here thinking, something has got to be done to protect the American consumer. And so I really don't have a question for you. I just--I will once again state the fact that you said things that make sense to me, and I am going to listen to what you have said and I will try to respond in a way that I think is responsible. But--and you are not responsible for the pricing policies of your industry. But that is the problem, as I see it, that makes many of us look for ways that we can change things for the sake of the American consumer. So thank you for your testimony. Ms. Mehringer. Thank you. Mr. Upton. I thank you for your testimony as well. And the thing that we all struggle with--it certainly came out when we have been totally immersed in the Firestone issue the last couple of weeks. But one of the points--and I am from Michigan, as you may know--one of the points that I had made was that whenever any of us buy a product--any of our constituents, any American buys a product that is made in America, we have a belief, in fact, that that product is going to be safe; whether it is an automobile, whether it is a tire, whether it is a bottle of Tylenol, it is going to work, it is going to work for the purpose, and that there are regulators at the State and Federal level to, in fact, assure that safety. As we examined the Firestone issue, one of the items that bothered us the most and became one of the planks in the legislation that is moving here in the House, as well as in the Senate, was that when in fact there was a recall--and there was in Venezuela or Saudi Arabia, and it happened at an earlier time--that that information needed to be passed along to, in this case, NHTSA under the Department of Transportation. And in fact, in good testimony, the President of Ford, Mr. Nasser, indicated that in the future they would do that; they didn't need a law, they would do that. He called on other members to do that as well. And we will make sure that that is done by getting this legislation passed. One of the points--and I use that as the example because in the hearing that we had earlier this summer, the FDA indicated, and Dr. Henney reiterated today, that they would require manufacturers to notify the FDA when they receive poor quality material, whether it be directly counterfeit or maybe it was a mistake in the process. And it just--I guess those of us nonchemists--and I presume that my colleague and friend, Mr. Strickland is a non; but it seems to me common sense that when you identify a faulty product coming up the line that somewhere along the line that information is going to be passed along. And based on that, they can begin to trace it. Maybe, you know, this is a bad character, maybe we have to watch them a little bit closer, maybe we will send those FDA inspectors there every year instead of who knows when. But at least they are going to get in the process, and we are going to weed them out and we are going to build cooperation between industry folks like your company, Eli Lilly, and other good players, whether it be Pharmacia, Upjohn or any other-- obviously, the client base. Because it is your folks working on the line, it is your reputation, as you point out, to make sure and ensure that that product is safe from the very beginning of your testimony to the very end. And that even after it leaves your operation, you are going to have the ability to know the quality control as it ends up finally in someone's medicine cabinet when that son, daughter, parents, whoever takes that medication. But I have to say, as we have begun to look at this process, again the issue of requiring companies to let us know about foreign recalls, the process that you, we would have hoped, I would think had already been part of the process; that in fact when you found that company overseas that put milled sugar in--tainted, you know, 30 percent of the barrels of bulk material that came in; when you found that, there is a red flag--not only would you tell your other industry peers, of which--obviously, you have them, but in fact there would be some type of inspection or some alert to make sure that what the real-life example, what happened in Haiti with the tainted glycerine, would not and could not happen again. But there was no checklist, though; is that right? Ms. Mehringer. To my knowledge--and I am not an expert in counterfeit, but to my knowledge, there is no formal requirement for that. However, also, to my knowledge, there is a great deal of cooperation between the pharmaceutical industry and the FDA on counterfeiting. Mr. Upton. That is in this country. But what about in products that actually come from overseas, where in fact you may not have the inspectors that come in and in fact things are found, whether it is the little example that I used at the end, before I broke for the vote, with the company in India? Ms. Mehringer. I do believe, although not required, there have been meetings between corporate security people and the FDA to discuss these very issues. And I would ask you to consult with the FDA and the OCI on those conversations to my knowledge would have been voluntary. But we clearly have seen that counterfeiting is a real threat and have seen the FDA as our ally there, working against that, even if it didn't originate here. Mr. Upton. So you would certainly support the FDA's new initiative to begin to catch that? Ms. Mehringer. Yes. Mr. Upton. Now, as I understand also--one of the questions that has bothered me for some time, when I learned it, was that Eli Lilly and other pharmaceutical companies manufactured the same product for different countries, obviously; but why is it that they do them in different colors and different shapes and sizes? I mean, it would seem to me, if you want to trace something, particularly if something is going to go overseas and perhaps come back, which we don't know exactly what is going to happen, that that would be a very easy way to figure out and would help the Customs folks, who have an enormous task in front of them. Why wouldn't there be some--I don't want to call it ``policing,'' but some just standards, or normalcy, repetitive to the products, no matter what it is? Ms. Mehringer. Actually, for the most part, we would welcome that. The underlying issue is that the drug approval process in countries around the world is very fragmented. So certain drugs have been launched in various countries at different times and approvals have been given; and those approvals--in the course of those approvals, each agency seems to want its own labeling or its own small nuance. Each agency dictates to us what is now approved. We now submit identical submissions in the U.S. and Europe, and we would love for the FDA and Europe both to say, that is fine, just like you submitted them; but then the changes start. And in order to market in that area of the world, we must abide by those changes. Mr. Upton. But someone actually says we would rather have them green than blue or yellow? Ms. Mehringer. That is more market driven than regulatorily driven. There are countries that want plain white tablets. That is the standard; that is what they want. They think that is what the customer expects, and so we are---- Mr. Upton. It must be aspirin, because it is white. Ms. Mehringer. That is right. That is right. There are other countries, like the U.S., that want unique identifiers, distinct color, shape, size and form. So speaking for the whole pharmaceutical industry, not everyone has the same appreciation, as the American public does, or the same wants or the same needs. So, again, these products which have been launched over a period of the last 20 years and have gone through the drug development process, we have at times been focused on pleasing the regulatory agencies and on pleasing the customers. But frankly, it would be much easier for us as manufacturers to make one package, one label, and one presentation. I would welcome that. You understand, though, that I am not free to change that? Mr. Upton. I understand that. You talked about keeping track of the records, and obviously the company, the manufacturers, keep a record from start to finish, the lots. And do the pharmacies really do that or not? I don't know the answer to the question. Ms. Mehringer. Pharmacies do not track by lot number, no. Mr. Upton. So once you ship it out--the wholesalers do, right? Ms. Mehringer. The wholesalers, our own distribution centers do. I do not know that all the wholesalers do. We can track it to the wholesaler level. Mr. Upton. But you indicated that--the example that you used, the mother that called you to say, ``My daughter has got a problem;'' give me 2 hours--you can track it through your system. Let's say you gave it to ABC wholesaler, who ships it out to Kmart, to use them as an example. Do they all have the records then of that--are you able to--are they able to track it from that? To use a real-life example, when that happens, have they been cooperative and have they been able to have the information that you have really needed to reassure that parent? Ms. Mehringer. When we go to the wholesalers, we have lot number accountability to the wholesalers. The shipment from the wholesalers on to the pharmacies is generally not tracked by lot numbers. But they have been cooperative, absolutely. It is important to recognize that the law provides for various levels of recalls. And that is dependent upon the risk to safety and the risk to health. If we are in a recall situation, we work with the FDA; we determine, do we need to go to the wholesalers, do we need to go the pharmacies or to the American public? I think the whole system works together and is very cooperative at that point. Mr. Upton. That page was for me. I guess the last question is, we try to assure the absolute quality assurance to the individual. There really isn't any single test that can be used on that product, whether it be coming from Mexico or Canada or China. I mean, there are so many different ways in terms of what a chemist would look for to ascertain the purity of that substance. It is really a very tough test. We were commenting up here, the staff was able to take, I guess you could say, a field trip that was rather lengthy; and they shared some of the information with us in terms of the thousands of pills that come across at particular border crossings virtually every day. And you really can't say it is this; you know, you hope that it is, but there is no real--without a lab, you can't really tell. Ms. Mehringer. You need a very specialized lab; simple chemical testing will not tell you that. In fact, the FDA has established their own forensic testing lab, which is quite a speciality lab, that they can--I believe they call it ``fingerprint'' products and try to discern if a material is counterfeit or not. That is the only lab in the FDA, I believe, that deals with that because they have those specialized capabilities. So this is not a matter of routine, let's find a chemist and a third-party lab and take a look at this. It is very specialized to be able to actually fingerprint that drug. To your point, also the limitations of testing are--testing gives very limited information. It is a single point of what happens. Unfortunately, these molecules are dynamic. They change, they degrade; when they see heat, they see moisture, they degrade a little more. They don't just sit there in the solution, in the injectable vial, waiting for someone to take them. That, again, is why you must have a knowledge of the molecule. You must have a knowledge of the formulation. You must have a knowledge of those requirements. So if you get a single point of testing someone--it might be 92 percent-- someone might think that is good. That may be bad because you know that at the rate of degradation, it is going to be ineffective in a matter of few months. You have to put the testing in the whole context of the knowledge of the drug. Mr. Upton. I know that I can speak for all the members of the subcommittee. We appreciate your time and testimony. We look forward to working with you and hearing from you on this issue in the future. I don't know--Ted, do you have anything? Mr. Strickland. Just, I want to thank the witness. Mr. Upton. Thank you very much. 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