UNITED STATES OF AMERICA

DEPARTMENT OF HEALTH AND HUMAN SERVICES

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HHS IMPORTATION TASK FORCE

STAKEHOLDER MEETING

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HEALTH CARE PURCHASERS

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WEDNESDAY

MAY 5, 2004

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The above-entitled matter was held at

10:00 a.m. in Conference Rooms G and H, Parklawn

Building, 5600 Fishers Lane, Rockville, Maryland, VADM

Richard Carmona, Task Force Chair, presiding.

[TASK FORCE MEMBERS PRESENT]{.underline}:

VADM RICHARD CARMONA, Chairman

MR. ALEX M. AZAR, II

MS. JOSEFINA CARBONELL

DR. LESTER M. CRAWFORD

DR. BETTY JAMES DUKE

MS. TRACEY HARDIN

DR. MARK B. McCLELLAN

DR. MIKE O\'GRADY

MR. THOMAS REILLY

MR. AMIT K. SACHDEV

DR. ELIZABETH A. WILLIS

[PRESENTERS]{.underline}:

[Panel 1]{.underline}:

The Honorable Jim Douglas, Governor of Vermont

The Honorable John Hoeven, Governor of North Dakota

The Honorable Tim Pawlenty, Governor of Minnesota

Kevin Concannon, Director, Iowa Dept. of Human Services

(Representing Gov. Tom Vilsack)

[Panel 2]{.underline}:

The Honorable John Hurson, Maryland House of Delegates,

Vice President, National Conference of State Legislatures

Kurt Knickrehm, Director, Arkansas Department of

Human Services, Co-Chair, Health Capacity Task Force,

The Council of State Governments

Steven Rowe, Attorney General, State of Maine

(Representing National Association of Attorneys

General)

Jim Frogue, Health and Human Services Task Force,

American Legislative Exchange Council

[Panel 3]{.underline}:

Thomas M. Ryan, Chairman,

President and CEO of CVS/Pharmacy

Thomas S. Paul, Chief Pharmacy Officer for Ovations,

UnitedHealth Group

Allen Dunehew, Vice President of Pharmacy for Amerinet,

speaking on behalf of the Health Industry Group

Purchasing Association

A-G-E-N-D-A

OPENING STATEMENT: 4

VADM Carmona, Task Force Chair

[PANEL 1]{.underline}:

OPENING REMARKS 5

The Hon. Jim Douglas, Gov. of Vermont

The Hon. John Hoeven, Gov. of North Dakota

The Hon. Tim Pawlenty, Gov. of Minnesota

Kevin Concannon, Director, Iowa Department of

Human Services (representing Gov. Tom Vilsack)

QUESTIONS & ANSWERS: 24

BREAK: 75

[PANEL II]{.underline}:

OPENING REMARKS 75

The Hon. John Hurson, Maryland House of Delegates,

Vice President, National Conference of State

Legislatures

Kurt Knickrehm, Director, Arkansas Department of

Human Services, Co-Chair, Health Capacity Task

Force, The Council of State Governments

Steven Rowe, Attorney General, State of Maine

(Representing National Association of Attorneys

General)

Jim Frogue, Director, Health and Human Services

Task Force, American Legislative Exchange Council

QUESTIONS & ANSWERS 96

[PANEL III]{.underline}:

OPENING REMARKS 124

Thomas M. Ryan, Chairman, President and CEO

of CVS/Pharmacy

Thomas S. Paul, Chief Pharmacy Officer for

Ovations, UnitedHealth Group

Allen Dunehew, Vice President of Pharmacy for

Amerinet, (speaking on behalf of Health Industry

Group Purchasing Association)

QUESTIONS & ANSWERS 134

[CLOSING STATEMENT]{.underline}: 157

VADM Carmona

P R O C E E D I N G S

(10:11:08 a.m.)

SURGEON GENERAL CARMONA:  Ladies and gentlemen, could you please take
your seats. We\'d like to get started. Ladies and gentlemen, good
morning and welcome to our task force meeting. Just a few administrative
remarks to begin with and then we\'ll get going.

First, I\'d like to personally on behalf of Secretary Thompson thank the
Governors and Mr. Concannon representing the Governor of Iowa for taking
the time to be with us today. Certainly, your input is extremely
important to our deliberations to be able to deliver the Secretary a
quality product which is broadly representative of all of the issues, so
we can move forward as we look at the issues of policy around drug
importation. So Governors, thank you so much for taking the time to be
with us.

Ladies and gentlemen, we will follow the schedule that we have been
doing over the past several meetings. We\'d ask the speakers to be
mindful of the clock, if possible to stay within the five minutes that
we\'ve allowed all the speakers. At the end of your speaking, we\'ll
move to the next speaker. And at the end of the panel, then the task
force will ask any questions it may have of the panel members. And at
the end of this panel, then we\'ll take a short break and then we\'ll
reconvene after that break and continue with Panel 2.

Once again, I want to thank the Governors. I want to thank all of our
other speakers for taking time to be with us today because the quality
product that we hope to deliver to the Secretary and then, of course,
onto the President and Congress really is going to be dependent upon the
diverse input that we receive from all of you.

As I\'ve said repeatedly, and as my colleagues have said, the further we
move into this area, we find out just how complex it is. And for every
question that\'s answered, often we have more doors opening with more
questions. So once again, thanks very much, and we\'ll begin now with
Governor Jim Douglas of Vermont. Governor, thank you so much.

GOV. DOUGLAS:  Well, thank you, Admiral Carmona, for your gracious
invitation, and for also taking on this important responsibility. As you
indicated, it\'s a complex one, but an important one for the people of
my state, and the American people, and I wish you well in your
responsibilities.

I know that you\'ve heard from a lot of people who have talked about how
the cost for prescription drugs have risen so sharply in recent years,
and a major factor in rising healthcare costs, and that\'s certainly
true in all of our states. These costs burden our families, our
businesses, and governments alike. I know that you share my concern and
that of my colleagues for the disparity that exists in the global
pharmaceutical market, and that\'s what makes this particular challenge
so great.

I guess there are a number of reasons for the inequality, including
price controls in other countries that adversely impact the world
prescription drug market. But one thing is clear, despite the complexity
of the market, Americans aren\'t getting the lower cost options that
they need and that they deserve. Savings available from Canada and other
industrialized nations are so substantial, 85 percent less in at least
one case, Tamoxifin, that they\'re impossible to ignore.

The oppressive cost of pharmaceuticals, the rising cost of healthcare,
the much publicized disparity of prices may explain why 71 percent of
Americans in a recent poll support legalizing prescription drug sales
from Canada.

There have been two reasons that I\'ve heard cited for prohibiting
importation of prescription drugs. First, the threat of improperly
labeled counterfeit drugs. And secondly, improper handling and storage.
They\'re certainly reasonable concerns, but I think not insurmountable.

Based on all the evidence I\'ve seen, prescription drugs are regulated
just as strictly in Canada as they are in the United States. And proper
handling and storage of prescription drugs obtained from licensed
Canadian pharmacies has never really been challenged. The integrity of
the supply system, the distribution system in Canada for drugs equals,
if not exceeds, that in our own country. The methods used to ship and
deliver drugs from Canadian pharmacies aren\'t any different from those
used by mail-order pharmacies located in our country.

As recently submitted by the Food and Drug Administration in testimony
at Congressional hearings, there hasn\'t been one documented instance of
an American citizen being harmed by counterfeit or substandard drugs
obtained from a licensed Canadian pharmacy.

As you know, the FDA has consistently followed a policy of intentional
non-enforcement of this provision in the case of individual citizens who
obtain a 90-day supply or less of drugs from Canada, so I think the real
health and safety issue that we need to address is the inability of
thousands of Vermonters and millions of Americans to afford the
prescription drugs that they need, and the fact that many of them are
simply doing without them. Denying Americans the freedom to obtain
medications from a safe, certified, or a licensed pharmacy in Canada
just makes the problem worse.

The methods for assuring safety and integrity of the drug supply
described in the McCain-Dorgan Bill by a system of inspections and
certification or a similar approach advanced by some states and
provinces would be adequate protections, in my view.

Short of a nationwide policy allowing for importation, Vermont is
prepared to serve as a national model. In fact, we\'ve taken the initial
steps by making a Canadian drug purchasing option available within our
state employees\' healthcare plan for employees, retirees, and their
dependents. The ultimate goal, of course, is to get the best deal
possible for all Vermonters on their drugs, including pharmacists and
wholesalers.

In order to be sure that we remain in compliance with all applicable
federal laws while we work to urge the Congress to act on this important
issue, I developed a plan for reimportation and petitioned the FDA for
approval of the plan. The basic framework includes the selection of a
third-party administrator in Canada to receive prescriptions from
Vermonters enrolled in the plan. The third-party administrator would
contract with Canadian physicians and accredited pharmacies that would
fill the prescriptions and return them to Vermont.

Given our small population and our proximity to the border, approval of
our petition would allow Vermont to serve as a model for the rest of the
nation. State leaders need to continue to urge this task force and the
Congress to address the reimportation issue, and allow the states the
flexibility we need to help our residents manage the skyrocketing cost
of prescription drugs.

I want to stress, though, that I really think reimportation is not a
long-term solution, but rather a way to bring Americans some relief, and
a way to pressure for much needed national and international market
reforms. It\'s obvious that America supports the world in terms of
research and development costs, and ultimately I hope through freer
trade, we can open the markets and get other developed nations to pay
their fair share. So change in the pharmaceutical marketplace I think
will come, but Vermonters aren\'t content to sit around and wait for it
to happen. That\'s why I hope that the task force will urge the
administration and the Congress to continue to move expeditiously toward
better deals for all Americans.

It\'s very important that we work as partners, the states and the
federal government, to work within the laws of the United States and our
respective states, and I pledge to continue to do that.

I want to thank the Department of Health and Human Services and the CMS,
in particular, for their recent support for our multi-state purchasing
pool that Michigan and other states along with Vermont have organized.
It\'s really important that we do whatever we can to lower the cost of
drugs, and your approval of that pool will save us millions of dollars
in our Medicaid program, and I know lots of significant savings for
these other states, as well. So there are lots of creative ways that we
can go about this. That\'s one. I think allowing reimportation under
reasonable standards of safety and security is another. I hope the task
force will continue to move in that direction. Thank you.

SURGEON GENERAL CARMONA:  Thank you, Governor. Our next speaker,
Governor John Hoeven. Thank you, sir.

GOV. HOEVEN:  Thank you. I\'d like to thank the Surgeon General and the
members of the task force for inviting me to be with you today.
Prescription drugs play an ever-increasing role in healthcare today, and
will continue to as they provide less expensive and less intrusive
methods of treating illness. That\'s why it\'s so important that we make
them available to our citizens on as affordable a basis as possible.

On a federal level, this administration has added a prescription drug
benefit to the Medicare Program, a truly historic change for our
nation\'s seniors. It\'s an addition that I supported, both as a member
of the National Governors Association Task Force on Medicaid Reform, and
as Chairman of the National Governors Association\'s Health and Human
Services Committee.

In our state governments, we struggle every day to see the benefits of
prescription drugs are extended to citizens at prices they can afford to
pay. We\'ve looked at a variety of ways to reduce the cost of
prescription drugs. In North Dakota, we\'ve established a clearinghouse
for the various discount programs offered by the pharmaceutical
companies. We\'ve established prior authorization of drugs within our
Medicaid Program. As with most states, we take advantage of buying
groups and rebates for our state institutions and for our public
employees.

We\'ve now begun the process of contracting pharmacies through the 340B
Program, and will utilize the President\'s Health Center Initiative to
the fullest extent in expanding our 340B participation. Each of these
measures provides benefits and some relief, but it\'s limited to certain
eligible populations.

In order to give the general public lower cost options when they
purchase prescription drugs, we\'ve added several features to our
existing programs, and we\'ve incorporated them into a website on the
state\'s portal. The North Dakota prescription drug guide first provides
information about generic and therapeutic alternatives that people may
consider in place of the brand name drug that they\'re currently using.

By entering the name of the drug that they\'re taking, people are
directed to a table developed by the North Dakota Pharmaceutical
Association that lists generic and therapeutic alternatives. They may
then take that list to their local pharmacist or physician to determine
whether an alternative is appropriate for their use given their history
and circumstances. That\'s our first and our preferred option. It saves
people the greatest amount of money, and permits them to continue to use
their local pharmacist in coordinating their treatment.

We\'ve noted the efforts of AARP to develop evidence-based research of
the effectiveness of prescription drugs, and provide it to the public to
help them make wiser choices. We applaud the effort, and believe that
this additional information will help people make informed decisions
about prescription drugs. And it will go hand-in-hand with our effort to
get people to talk to their prescribing physician about therapeutic
alternatives.

Next, we refer people to the North Dakota Prescription Connection, which
is a clearinghouse for the discount programs with counseling available
to help people determine their eligibility and apply for applicable
programs.

Finally, if neither of those options work, we refer people to Canadian
pharmacies. These are pharmacies, in our case in Winnipeg that have been
examined and determined to provide safe and reliable service to our
citizens.

Living in a border state, North Dakotans are familiar with Canadian
towns and cities, and are used to buying a variety of products there,
including prescription drugs. In fact, we have farmers that farm on both
sides of the border, and our people go back and forth on a regular
basis.

Currently, FDA policies and practices allow personal importation of
drugs from Canada, but they do not allow the involvement of our local
pharmacists, and so many North Dakotans and hundreds of thousands of
Americans buy drugs by mail-order over the Internet, but are prohibited
from including their pharmacist in their treatment discussions. This
should be changed.

Rather than focus on a partial prohibition of the practice of importing
drugs from Canada, it would be more beneficial to the safety of patients
if FDA would work with Health Canada to reach agreements on the safe
importation of prescription drugs. The easiest way to do that would be
for the FDA and Health Canada to accept each other\'s drug approval
determinations. People in the United States trust the drug approval and
pharmacy practice in Canada. By reaching such agreement, the regulatory
agencies of each country could focus on drugs that truly present safety
concern.

Most importantly, approving such importation would allow our pharmacists
to fully participate in patient care, and allow our state regulators to
license all pharmacies that provide drugs to our citizens, whether those
pharmacies are in Manitoba or in North Dakota.

I\'ve urged Secretary Thompson to make the necessary certification
before, and I bring the same message today. Help our citizens gain free
and complete access to the lower cost drugs in Canada that have proven
to be safe and reliable; allow our pharmacists to be part of the
treatment team.

Finally, we know that efforts are being made to constrict the Canadian
supply of drugs in an attempt to stop importation. Such efforts should
not be tolerated, and we support a non-discrimination policy requiring
the maintenance of adequate supply.

As a country, we should not be insulated from the world market, left to
subsidize the lower cost of prescription drugs given to other countries.

Thank you for inviting me again. I appreciate it, for holding these
discussions. I encourage you to move forward, and would be pleased to
answer any questions.

SURGEON GENERAL CARMONA:  Thank you, Governor. Our next speaker,
Governor Tim Pawlenty, of Minnesota. Thank you, sir.

GOV. PAWLENTY:  Thank you, Surgeon General Carmona, Dr. McClellan, and
members of the task force. Thank you for your diligent work on this
issue. I know that this is not easy, it is not simple. It is
complicated, and we are hopeful that this esteemed panel with all of
your technical expertise and access to the best and the brightest will
be able to fashion a good result. We look forward to your work product.

It is a race against the clock, and we appreciate your diligence, and
the speed of your meetings, and the diligence of your meetings. As
Governor Hoeven mentioned a moment ago, one of the challenges that we
have in keeping this effort alive is the drug companies and
manufacturers in our country are suffocating supplies to Canada. Our
Canadian pharmacies are indicating with respect to some of the most
popular drugs, they will be able to continue probably for less than six
months, so unless there is some change in policy or behavior at a
federal level or with the drug companies, they will succeed in
completely or partially suffocating these efforts over the next six
months or so.

Many of you probably remember playing the game Red Rover as young
children. The refrain of the games is \"Red Rover, Red Rover, will you
send Jim, or John, or Susie over\", and the refrain of the American
people with respect to this issue is, to our federal government, to our
federal officials, that we please send and allow safe, affordable
prescription medicines from Canada to come over.

I think the signs are brewing on Capitol Hill that the debate may be
shifting from whether to do this to how to do it. I think you are
uniquely positioned to provide the roadmap, the pathway for America to
how to do this in a safe and appropriate manner.

I\'m not going to rehash the arguments for or against reimportation.
They are getting to be well-worn, and I think they\'re well-known by
those of you on the panel. I will say it kind of boils down to safety,
since that seems to be the main concern at this point, safety. I don\'t
think the governors here today purport to be technical experts, so we
can\'t guide you or give you great insight with respect to the technical
details of this. But I will say our proposal, and it\'s important to
keep in mind, is not to simply have people randomly go out on the
internet and deal with countries that are not as developed as Canada in
their pharmaceutical distribution and standards. We are talking about
established, licensed, credible, reputable operations in Canada that our
federal government or others would certify as such. And as applied to
those types of entities, these safety concerns largely melt away, if not
entirely melt away.

The thought I would like to leave you with today is this; it is simply
implausible, in my opinion, that the United States of America, with all
of our innovation, with all of our can-do spirit, with all of our
technology is incapable of designing a system whereby we could safely
import prescription medicines from Canada. I just simply don\'t believe
that.

This is a country that within the last year or so launched two Rovers to
Mars the size of Ford Focuses. They traveled 303 million miles and
landed within 2 billionths of 1 percent of their landing zone target. If
we could all travel the world and have dinner in a place like Bangkok,
and within 28 days Visa has an itemized error-free U.S.A. currency
converted statement on your desk at your home.

The Minneapolis Veterans Hospital in Minnesota is a federally-funded,
federally-administered, federally-regulated entity that operates a
massive mail-order pharmacy. The logistics and framework for this type
of operation exists. Now granted, that\'s on our distribution and supply
chain, but it just has to be expanded legally and geographically.

It is just not plausible to think that this is a country that\'s
incapable of safely importing medicines from Thunder Bay, Ontario to
Grand Marais, Minnesota. It\'s less than an hour away by car. And so, my
encouragement to you isn\'t to offer you technical insights. I trust
that you have the expertise and the skill, and access to those kinds of
thoughts to put the program together if you want to, but it is a
question of setting a goal and getting it done. And when President
Kennedy said we\'re going to go to the moon, people didn\'t say oh,
it\'s too complicated. We just can\'t do it. Sorry.

This is a major issue for our country. I hope that you will take a
goal-setting approach to it, and try to get it done. I know one of the
concerns is perhaps cost. Yes, we could devise a system, but it would be
so elaborate and so complex, and so burdensome, and so legal, and so
burdened regulatorily that it would just be just unbearable from a cost
perspective. I don\'t know the answer to that. I hope you can explore
it, but again, given modern technology and modern thought, I have a hard
time believing we\'re incapable of putting together this kind of system.
So I don\'t think the question is can we, I think the real question is
do we want to? And I want to, and I hope you do too.

Thanks for the chance to come by and share a few thoughts with you.
It\'s an important issue. I don\'t envy your position. I know it\'s a
difficult issue for a whole lot of reasons, but we genuinely, sincerely
appreciate your leadership, and our hope, and our faith, and our trust
is in you that you\'ll come up with a fair and good report. Thank you.

SURGEON GENERAL CARMONA:  Thank you, Governor. Our next speaker, Mr.
Kevin Concannon, representing Governor Tom Vilsack of Iowa. Thank you,
sir.

MR. CONCANNON:  Thank you, Surgeon General Carmona, Dr. McClellan,
members of the task force. My name is Kevin Concannon. I\'m the Director
of the Iowa Department of Human Services, and appear before you today
representing Governor Tom Vilsack in Iowa.

Iowa strongly favors importation and reimportation of prescription drugs
as an additional way to provide access to needed medications for the
residents of our state. Iowa views much greater risks daily to the lives
of our residents who should be taking medications for chronic health
conditions, but are unable to do so because of the lack of affordability
of medications.

In short, we believe there\'s much greater risk and harm to our
residents for this reason, for lack of access primarily due to cost,
than the minimal risk associated with importation or reimportation of
medications from Canada. We believe the personal safety of our residents
is much more seriously compromised each day by their inability to obtain
affordable medications than the relatively slight risk of receiving
counterfeit medications from Canada.

As a state, Iowa and our administration has proposed to engage in
importation and reimportation in a manner that proposes to preserve both
the pharmacy home as we know it, just as we support a medical home for
the residents of our state. In Iowa, the Iowa Board of Pharmacy
Examiners has the authority under state law to license wholesale
pharmacy distributors outside the borders of our state. The Iowa Board
of Pharmacy Examiners proposes on a pilot basis to work with our
Canadian provincial counterpart regulatory authority to identify single
or multiple currently licensed, ethical, experienced wholesale pharmacy
distributors to provide sources of medications for state employees,
their dependents and retirees in the State of Iowa.

We propose to maintain the pharmacy home in our state by having Iowa
residents continue to utilize the pharmacy in their local community by
processing prescriptions ordered by Iowa physicians, which are sent to
their local pharmacy.

Initially, we propose to limit the importation or reimportation to
approximately the 200 most commonly prescribed medications, and on a
preliminary basis, the cost differential in acquiring those medications
through Canada can both save on the cost of prescription medications,
while compensating local Iowa pharmacists for providing professional
services for their patients.

We believe steps can be taken to assure the safety of pharmaceutical
goods through such a program, and again believe the risk associated with
Canadian importation and reimportation have been, and I use this word
carefully, hysterically overstated.

For a number of years, I was responsible for both the Medicaid Program
and the Public Health Programs in the State of Maine. Previous to that,
in the State of Oregon. Maine has thousands of individuals who have
directly or in the mail been obtaining their medications through Canada
for many years. I\'m pleased to be here today with the Attorney General
of the State of Maine, Attorney General Rowe.

Unless things have changed in the last year, we do not have a single
example of a problem case of a resident of Maine obtaining their
medications from Canada. We believe there are more problems internal to
the U.S. mail-order system of prescription drugs. In our view in Iowa,
the people unfortunately go without access to medications on a daily
basis who should and could otherwise, if they were more affordable.

Experience in Maine in other states that have introduced state
supplemental prescription programs have shown that there is a great need
for affordable medications for not only senior citizens, but for younger
persons, including children who may currently not be receiving those
medications, again mainly because of affordability.

Finally, I might point out to the members of this importation task force
that Canada, as you probably well know, is not the least expensive
country for medications in the west. Many other western countries pay
even less than Canada for medications. There are opportunities for the
prescription drug manufacturers to make an adequate profit by expanding
affordability and access to additional customers, the patients and their
families.

While I would personally favor much broader access across borders for
importation and reimportation, at a minimum we urge support for
authorizing pilot projects, such as those envisioned in Iowa involving
local pharmacies, the Iowa Board of Pharmacy Examiners, state employees,
their dependents, and retirees. I thank you for your consideration.

SURGEON GENERAL CARMONA:  Thank you, sir. Ladies and gentlemen of the
task force, I would like to open the floor to questions for the
Governors and for Mr. Concannon. I\'ll start with Dr. McClellan.

DR. McCLELLAN:  I want to thank you all for coming today, and for your
passion on addressing the issue of affordable prescription drugs, and
also your respect for making sure that the safety issues can be
addressed at the same time.

I want to get to some things that we are doing now to try to address
that. Governor Douglas, you mentioned some of these, but I have a
question for you first. I had the chance to talk even more extensively
to a number of members of Congress about this issue, people who feel
passionately in favor of importation like you all do, as part of my
confirmation process.

Since that time, a lot of these members are now supporting legislation
sponsored by Senator Dorgan, Senator Kennedy, and with a number of
co-sponsors that seems to recognize that there are not safety systems in
place now to assure that the medicines coming in are legitimate, real
medicines from Canada, or from other equivalent approved sources, that
they are from pharmacies that are following the same practices for
shipments to Americans as the pharmacies in Canada that treat Canadians
do, and take other steps to make sure that the drugs coming in are
legitimate.

These include, in this Dorgan-Kennedy bill, provisions for registration,
inspections, and a new approval process for the FDA. And a lot of people
are now debating whether these are processes that are too complex, or
whether they get the job done. And we\'re hearing a lot of views about
that on this task force, Governor Pawlenty, exactly as you said. We want
to try to sort through that, figure out whether and how this could be
done safely.

I\'m wondering, given your perspective on things, do you support that
legislation that recognizes that we need a new safety structure for
assuring the safety of imports on a large scale?

GOV. DOUGLAS:  There\'s no question that safety has to be the first
consideration, and you\'ve spoken eloquently to that, Dr. McClellan. And
I think everyone wants to be sure that the pharmaceutical products that
come across the international border are safe.

I guess what\'s difficult for those of us who are from border states, as
Governor Hoeven indicated, we don\'t in many respects regard Canada as a
foreign country. We have villages, we have public buildings, we have
private homes that are bisected by the international border, and the
family ties are historic, and long, and close. And we think nothing of
going across the border to shop.

Montreal is our closest big city, and frankly, if the Red Sox don\'t
start doing a little better, we\'re going to be Expos fans.

(Laughter.)

GOV. DOUGLAS:  So we understand the nature of an international border,
but believe that there has to be some way to develop a safety system
that\'s adequate. And as we\'ve noted, the recent record suggests that
there have been more problems brought to light within our own country,
recent large recall of Lipitor, for example, so obviously, safety has to
be first, but I really think that we can find a way.

GOV. HOEVEN:  I appreciate your question, Dr. McClellan. Yes, I do
support the legislation. There are a number of bills that are in
Congress now. You mentioned the bill that\'s sponsored by Senator
Dorgan, but it also has good bipartisan support. I think Senator McCain
is on there, Senator Lott, as well as Senator Dorgan and Senator
Kennedy, so we\'re seeing bipartisan support to move forward.

Safety is a primary issue. Again, as Governor Pawlenty testified to, we
believe that you can manage the importation safely. I suggested to you
that FDA coordinate with Health Canada. And I think in a large regard,
you could cover the safety issue working together very well. There may
be some exceptions that require additional work, and if so, then you
could spend additional time on those exceptions and work with state
regulators, as well. But we think it can be done safely, and we think
that really the time to move forward is now; that you have the ability
to do it now.

Again, it can be a phased approach where you start with Canada, FDA
working in concert with Health Canada. There may be some exceptions, and
then you move on from there. But I think it\'s very, very important that
you move forward.

Now according to an AP story that I was reading here just yesterday,
last year on the order of a million Americans imported on the order of a
billion dollars worth of drugs from Canada. And as Governor Douglas
pointed, if you go water skiing in North Dakota, you\'re going to ski in
Canada, as well, on a number of our lakes. It\'s probably true in
Minnesota, as well. And people go in, and whether they go to the
McDonald\'s hamburger joint, or get any kind of candy bar, or any kind
of food product, go to the drug store, you know, they go back and forth
across the border, and they don\'t hesitate to go into a pharmacy in
Canada and buy prescription drugs, just as they would in the United
States.

DR. McCLELLAN:  And just to follow up on that, I think I can truly
appreciate your perspective and your constituents\' perspective about
the safety of Canadian pharmacies. I\'ve said many times, as well, when
you walk into a Canadian pharmacy that serves Canadians, it\'s very
high-level assurance, and I think that the bigger concerns are about
large-scale purchasing through internet operations and other operations
that don\'t primarily serve Canadians, and where there\'s at least some
questions. And maybe we could talk about this further, too, about
whether they\'re really getting drugs from Canada, where they\'re
following good pharmacy practices, and whether we can make sure there
are systems in place to assure that kind of safety.

And while Congress is sorting that out, and they do seem to be more
interested - my sense is they\'re more interested in really coming to
terms with those kinds of safety issues, and whether the drugs are
really equivalent. This is sort of a question, but also a request -
there are a lot of things, as you all said, this is not an either/or
choice. There are a lot of strategies that we ought to be pursuing to
lower drug costs safely. And many of you have paved the way in a lot of
areas beyond the questions of importation.

I guess my request for you, from where I\'m sitting now, is that I hope
we can work closely together on some of the ways that are proven, and
safe, and legal, and available right now. For example, with the new
Medicare Drug Card Program, there are, I think, something on the order
of 19,000 people in Vermont who would qualify for the \$600 in direct
assistance, plus additional manufacturer discounts, will get their
prescription cost down to \$8 for Lipitor. And in Iowa, probably close
to 90,000 people; Minnesota over 100,000 people; North Dakota 26,000
people, and then thousands more Medicare beneficiaries who can get the
lower prices from the drug cards.

You all have done a great job of setting up outreach programs, websites
and the like. I hope we can work together on linking into what we\'re
doing in Medicare to make it as simple and easy as possible for people
to find out about these options, and whether it\'s right for them.
Especially for these low-income people who are struggling between drugs
and other basic necessities of life. This is thousands of dollars of
real assistance right now that we hope we can work together with you to
get out there. And for other low-income vulnerable populations, we\'ve
got some good programs going now with Governor Douglas. He mentioned the
multi-state purchasing pool. I think that\'s something that Minnesota, I
know is interested in pursuing, and you all think you could save \$12
million a year by participating in that kind of effort. We want to work
with you on that.

There are other proven approaches, like using generic substitution,
programs in Medicaid in your state, health insurance plans. Many states
have now tried disease management programs, and we can provide new help
to the states in setting these up. These are legal, proven mechanisms
that can be implemented right now, so I think there\'s a lot that can be
done, while Congress and others sort out whether and how this can be ??
importation can be done safely through this new kind of regulatory
structure to assure safety for the internet pharmacies and the like, so
I hope we can try really hard to work together on these other
approaches, as well.

We\'ve all got the same goal in the short-term of getting costs down; in
the long-term, of getting a fair system for drug pricing around the
world that supports innovation, and gives Americans access to affordable
medicines. And I sure hope it can be a team effort.

GOV. PAWLENTY:  If I might, on the original question that Dr. McClellan
raised, the bills that are pending before Congress do speak to the issue
of safety, because they built in mechanisms and proposals to address
that. And we are mindful of that, and we think that\'s a good idea. But
I think we are, again, not focusing or proposing on some sort of wide
open arrangement. We think that if applied to licensed established,
credible, reputable Canadian pharmacies, the record would suggest, the
experience would suggest that they are quite safe. And so the challenge
isn\'t to reinvent the wheel, it is how do you then conduct a business
relationship with those types of entities, recognizing the internet and
mail-order operations all over the globe, even within the United States
pretending to be Canadian pharmacies, United States operations,
Malaysian operations. There\'s all kinds of garbage and shady characters
operating out there, but that\'s not what we\'re proposing. We\'re
proposing that the government, ideally the federal government, use its
regulatory and safety powers to credential and establish those kinds
of - and identify those kinds of operations and the business protocols
around them. And I think the legislation speaks to that, and some would
say a couple of them go too far, some would say it doesn\'t go far
enough, but you can light the pathway. This task force can light the
pathway for Congress and for the country on how to do this, if you want
to.

DR. McCLELLAN:  I want to thank you. I\'m sorry I have to leave. I\'ve
got to go to another event and get some beneficiaries signed up for this
low-income assistance right away, but I\'m looking forward to working
and continuing to work with all of you on this. It\'s some very
important steps that we\'re trying to take.

GOV. HOEVEN:  Doctor, if I might, just a short comment. You mentioned
working together. We want to do that. Still it\'s very important that
you move on this issue, because remember you\'ve got the general
population out there that needs to be served, as well. We\'ve got to
work on this option from the standpoint of making prescription drugs as
affordable as possible to the entire population, so we\'ll work with you
on the specific programs. Again, what we\'re talking about impacts the
entire general population - a very important factor.

GOV. DOUGLAS:  Let me also thank Dr. McClellan for keeping this in
perspective, and this discussion shouldn\'t minimize the positive steps
we\'ve taken in many other ways. In fact, I\'m missing an AARP rally on
the steps of our Capitol at noon today to kick-off the Prescription Drug
Card Program in Vermont, and there\'s a lot of potential for savings,
and the purchasing pool, we\'re very grateful for your support and that
of the Secretary. But this is a strategy that\'s important to providing
relief to a lot of folks, particularly in Vermont where the average
income is barely 80 percent of the national average. It\'s very
expensive. We need to do what we can.

I think in this country, if we agree on the goal, we can find a way.

SURGEON GENERAL CARMONA:  Thanks, Mark. Appreciate it. Thank you. Other
task force members, questions. Dr. Crawford.

DR. CRAWFORD:  Thank you very much. And also, thank you for being here
all of you. I appreciated your testimony, made a few notes. There seem
to be a couple of key sort of inter-linking issues. One, of course, is
cost controls. I think all of you more or less addressed that, and the
other is the concern about research and development for the future.

Dealing bilaterally, if you will, on these subjects is not usually
successful, so we think in FDA at this point, now that we know that the
United Kingdom also wants to join, have the opportunity to export to the
U.S. along the same lines, and other countries, no doubt, will step
forward - maybe we need some international reference. And there are a
couple of organizations that I\'d just like to throw out and tell you
how we might charge them, and ask what you think.

One is the North American Free Trade Agreement. We have within there the
opportunities for this kind of thing to take place. That was certainly
contemplated. Maybe that would help with setting up a system - ask for
your reactions to how effective that\'s been with your states and in the
overall situation of dealing with this problem.

The other thing is, on the research and development issue, we now know,
it seems like each month the case gets stronger for the United States
supporting the research and development enterprise of the world. And we
now find that 62 percent of the profitability for the international
pharmaceutical community comes from the United States. And that in a
very real sense fuels R&D.

Would it be useful, in your view, to go to some organization like the
Organization for Economic Cooperation and Development - consists of, as
you know, the 40 or so richest countries in the world - and to start an
open, free dialogue about how we share the cost of research and
development. There may be ways to do it, other than trying to have
international price controls.

At the very minimum, in my view, it would raise international
consciousness about this. I think working out something quick with
Canada, for example, either through legislation or otherwise, might open
up the market to other countries standing in the queue to get in, and I
think we need a system in place, and maybe that\'s done by international
reference. So I just, without any malice or whatever, I just throw that
out as a possibility, something we worry about at FDA almost as much as
we worry about safety.

GOV. PAWLENTY:  Dr. Crawford, my initial reaction to that is that it may
be well worth pursuing, and may offer some hope, and a more
comprehensive approach to the issue. However, it strikes me, in my
opinion, that the pharmaceutical industry in our country is in quite a
bit of a powerful position, and they\'re not going to change unless they
feel more pressure. And the Canadian solution or option isn\'t ideal,
but it brings pressure. It brings hopefully some increased appetite for
change.

I have a very eye-opening experience in Missouri a couple of weeks ago
when I went to the Pfizer Board Meeting. The CEO of Pfizer and I talked
about trade and how pharmaceutical pricing might be introduced into the
discussion about trade. In his press conference when asked having other
countries drop price controls or to reform their pricing policies would
alleviate price pressures in the United States, his answer was not
necessarily. We would perhaps harvest that money for more research and
development, and the American consumers shouldn\'t expect to realize any
actual absolute or relative savings. I\'m paraphrasing, but that was the
gist of his comments.

I\'m also told that in the Australian round of trade negotiations,
pharmaceutical pricing has been put on the table for the first time in
these types of arrangements, and the goal appears to be from the
pharmaceutical industry perspective where they\'d like other countries
to drop their price structure so they can do to their consumers what
they\'re doing to us. And if that\'s the net result, if the net result
is the pharmaceutical industry then gets to go and have their way so to
speak with a country like Australia, I\'m not sure that\'s helpful to
our near and intermediate term goals to bring price relief to the
American consumer.

MR. CONCANNON:  I would add to that. I\'m recalling an article written
by Dr. Marsha Angel and Reilman, two previous editors of the New England
Journal of Medicine back just about a year ago, in which they refuted
the oft cited so-called research costs that pharmaceutical industry
often invokes. As soon as you start to press your price, we\'re told
that we won\'t be able to cure Cancer. And I think scientists have
looked at that, and again refute some of the so-called costs estimated
at bringing a drug to market. But also, I think the industry has changed
as we note that often companies are buying up products that are
well-along in the pipeline where they haven\'t financed the research, so
I think I\'m not as concerned about the ability of the industry to
continue to make it.

It\'s in their interest to do research, so I\'m not as concerned about
putting pressure on margins as I am knowledgeable again recognizing that
as we sit here today there will be people across the United States who
will have strokes, who will have heart attacks, who will die because
they don\'t have access to medications that they should have access to.

GOV. HOEVEN:  I think to explore the avenue of looking at some of these
trade negotiation settings, maybe something you want to do - I would
just caution you though, they typically add significant complexity to
the issue, and it\'s already a very complex issue. We deal with this all
the time in our Ag Trade Agreements. We were with the International
Trade Commission, U.S. Trade Ambassador\'s Office, Bo Zoellick and Al
Johnson. And we need to move forward on this issue. Our citizens needs
this assistance now, and I think what we\'re suggesting to you is just
as you have bilateral trade agreements that advance the process, you
have a clear opportunity here to advance the process with Canada. And I
do believe that you can do that within parameters that will allay any
concern you might have as regards other countries.

GOV. DOUGLAS:  I agree with my colleagues. I think these are ideas worth
pursuing, and I hope that we will. As I indicated in my opening remarks,
I believe in free trade. I believe that the freedom of markets will
ultimately provide some positive pressure on pricing, and we should
explore those possibilities.

I also think about the people in my state and others who are earning
well below the national average, as I indicated, who have high
pharmaceutical costs that they\'re facing in an improving but still
difficult economy, need that relief right away, so I think we should
move forward on both fronts; a short-term strategy to provide for
reimportation for Canada, and then explore a more comprehensive
approach, as well.

SURGEON GENERAL CARMONA:  Thank you. Questions from other task force
members. Josefina Carbonell.

MS. CARBONELL:  I would like to ask following a previous question, would
you support the drug importation from Europe?

GOV. PAWLENTY:  Ms. Carbonell, I think the easiest and safest route for
us right now is Canada for a whole variety of reasons. I will underscore
what I said earlier, there is pretty clear evidence that the
pharmaceutical industry is explicitly retaliating against the pharmacies
who we\'ve identified and are participating in the program, and they
will succeed in suffocating the program within six months, so our
options are to shut it down, partially shut it down, or to explore
parallel trading or direct trading with the United Kingdom, Switzerland,
Scandinavia, other countries that have comparable quality safeguards,
sophistication in their drug supply and distribution system. That is not
our preference.

I think the American public, as a matter of public relations perception,
and as a matter of just relationship comfort feel best about Canada,
although I would not rule out, and I\'m not going to rule out the
possibility of having to explore relationships with Canada-like
countries in Europe or elsewhere if the drug industry is successful in
suffocating the supply to Canada, so I\'m going to leave that option
open at least for Minnesota.

MR. CONCANNON:  I would be supportive of European importation. I was a
number of years a Mental Health Commissioner in several states, three
states actually. I recall the nearly miraculous effects of the drug
Clozoril that came from Sandoz Pharmaceuticals at the time, had been
available in Europe for a number of years before the U.S., so I\'m very
conscious of the fact that Lipitor, the most widely prescribed drug now
if not in the world, in the U.S., much of it is manufactured in Ireland.
We live in a world of global multi-national drug companies.

I think with controls and protections, I certainly would support it.

GOV. HOEVEN:  I would agree with the comments that have been made by
both gentlemen. I think Canada has offered an option to step forward
now, and I think in the legislation that you\'re going to see from
Congress, you are going to be charged with looking at more than Canada.
I don\'t think it\'s if, I think it\'s when.

SURGEON GENERAL CARMONA:  Thank you. Alex Azar.

MR. AZAR:  I wanted to echo what Dr. Carmona and Dr. McClellan have
said, thanking all of you for your commitment to lowering the price of
drugs in America, and also, Mr. Concannon, it\'s nice to finally put a
face with the name on much litigation. But you\'ve obviously devoted a
lot of energy and thought to these issues.

One thing, and I ask this in all honesty just hoping you can help me
think through this - when we talk about importation of drugs from
Canada, I think the reason everyone wants to do that is the cost of
drugs. And the reason, at least what I\'ve heard so far, that we have a
difference in cost of drugs, is that the Canadians have essentially
price controls on the drugs there.

It seems like all of the various systems that we end up talking about,
alternative safety regimes, control of channels of distribution,
regulatory harmonization, that it seems like that ends up being a very
complicated and expensive way to skin this cat. Have you all governors
thought about imposing, just directly imposing price controls in your
state instead of importing ?? going through the Canadian or European
importation regime? I\'m just trying to figure out why that isn\'t
something that you all have done, or what the factors are that would go
into that, considerations.

MR. CONCANNON:  I\'m not a lawyer, but I have been a frequent defendant,
and I think for states to impose price controls on goods that are
manufactured in other states gets into ?? creates a constitutional
problem.

GOV. PAWLENTY:  As a matter of philosophy, I don\'t support price
controls, and wouldn\'t pursue that in Minnesota, but I would make two
observations in response to your questions. One is, the folks
particularly in my political party who say you\'re just reimporting
indirectly the price controls from Canada, and that the net effect of
what we\'re doing is taking advantage of their price controls. I think
that\'s a fair summary.

However, we routinely seek the world for the best price on almost every
other commodity without regard to form of government, without regard to
regulatory frameworks, without regard to a whole variety of issues. You
buy, I bet, all sorts of products from China. People don\'t stand up and
say we can\'t trade with China. They\'re Communists. They have
diminished human rights expectations. They have labor and environmental
policies that are concerning, so why would we single out prescription
drugs to get uniquely righteous about with respect to other countries\'
form of government or regulatory scheme? There\'s not a good answer to
that question, in my view.

Secondly, short of price controls, I think there\'s a lot more we can
and should do as just smart purchasers of prescription medicines in
America. It is mystifying to me why the United States Congress would
prohibit itself, prohibit the federal government from allowing to seek a
bulk purchase discount for Medicare patients. I mean, I am stunned by
that approach. That\'s not price controls. That\'s just being a smart
purchaser in the marketplace, using the leverage of the bulk ability of
the Medicare program to go to the drug companies and say if you want to
participate, we expect X percent discount. So short of price controls,
there\'s lots of other things we can and should be doing.

But as to your ultimate question, are we taking advantage of Canada\'s
price controls? You bet, but do we take advantage of every other
imperfect form of government around the world on every other product?
You bet.

GOV. DOUGLAS:  Price controls have certainly been considered in Vermont.
In fact, one House of our General Assembly has passed such a measure on
a couple of occasions, but I don\'t expect it to become law. That\'s why
when I originally approach my colleague from Michigan and some others to
form the multi-state purchasing pool, we wanted to do it by using the
power of the marketplace, not with artificial controls, but by
leveraging the volume of our number of lives to negotiate for better
prices, so I think that\'s the better approach.

GOV. HOEVEN:  I guess my response would be, I don\'t understand why
it\'s up to our government to enforce the price controls of some other
country. It doesn\'t make any sense to me. I mean, if a company in the
United States that manufactures prescription drugs is willing to sell
drugs into another country at a cheaper price than they\'re willing to
sell it to their own citizens here in our country, why is it up to our
federal government to enforce some other country\'s price controls? It
doesn\'t make sense to me.

MR. AZAR:  Wouldn\'t it be ?? not about enforcing their price controls,
but if you want to have price controls in your state, just impose them
directly, rather than worry about the issues of safety, and is there
trans-shipment through Canada, just if X drug company - you want to sell
drugs in our state and not get arrested, you\'re going to sell it at our
price controlled price.

GOV. HOEVEN:  I guess if states felt that they could effectively do
that, they would be doing it.

SURGEON GENERAL CARMONA:  Other questions? Yes, Ms. Willis.

MS. WILLIS:  I was wondering if we were able to come to some sort of
plan for importation or reimportation, do you envision that to include
all prescription-type drugs, or should there be a restriction on certain
types, such as controlled substances?

GOV. PAWLENTY:  I think there are all sorts of drugs that should be
handled specially or excluded from a program for a whole variety of
reasons; they\'re temperature sensitive, they\'re the types of narcotics
that might be too tempting of a target for interception. In Minnesota,
we have limited our program to folks who are on maintenance medicines,
and it can\'t be a prescription of first use. In other words, they have
to have already been on the drug, presumably gone through a period of
exposure with respect to allergic reaction or the rest, and so we\'re
just allowing maintenance drugs.

So to answer your question, I think there are some drugs that are less
well-suited for importation and should be excluded for a variety of
reasons. And I might just say, jumping back to Mr. Azar\'s question -
again, reimporting drugs from Canada is not the ideal solution, but
we\'re not picking from ideal options. And it is one way, I think, to
reasonably bring some pressure for change on a number of fronts, and I
think that is one of the main values of the initiative.

SURGEON GENERAL CARMONA:  Thank you, sir. Other questions, comments? Dr.
O\'Grady.

DR. O\'GRADY:  Yes. Governor Douglas, I just wanted to talk to you a
little bit about this idea of the cross-border trade. And I come from
one of those communities that\'s right on the border, and I can ?? you
know, the flip side. Plenty of American entrepreneurs set up large
shopping malls and whatnot to draw those Canadian dollars for where our
prices are lower. And I certainly understand that dynamic there.

You also brought up that you\'ve tried to incorporate some of these
design characteristics in terms of what you\'re doing for your state
employees. And certainly, you\'ve been innovative in terms of the
multi-state pools for your Medicaid purchasing. And I guess just as an
empirical question, the kind of discounts that you\'ve been able to
achieve ?? I mean, one of the things that we have is we see a certain
price in Canada, but we know that American consumers are sort of like
well, you\'ll probably get on an airplane later this afternoon, and you
know the guy on one side is paying \$200 for this ticket, the other guy
is paying \$6, and you\'re paying \$4. And we know it has to do with
that relative ability to, as Governor Pawlenty said, what group you\'re
buying from, et cetera, et cetera.

In terms of the advantages to the people in your state from doing this,
is it that you\'re trying to get people who aren\'t kind of ?? access to
Medicaid discounts. Is it to bring other people who are either
uninsured, or don\'t have very ?? their insurance companies don\'t
negotiate particularly well for them, to bring them down to that same
level, or do you really think that you\'re going to want to bring large
employers in your state, other sort of ?? I mean, are they already
there, or close to being there in terms of what you\'ve been able to
find?

GOVERNOR DOUGLAS:  Well, you make a couple of important points in your
question, Dr. O\'Grady, that the Medicaid purchasing pool will benefit
those beneficiaries, and to a greater extent, the taxpayers of our state
through those savings. And our state employee, and retiree and dependent
plan helps that population, so there are obviously others who are, as
you noted, uninsured. And the percentage of our population who are
uninsured has risen dramatically in the last seven years from about 6 to
10 percent of the population. And those who are covered through private
insurance plans that may or may not be negotiating for the best deals.
So my goal is to extend it to the entirety of our state\'s population,
especially those who don\'t have coverage so that they can maintain
their supply of needed pharmaceuticals and not impoverish themselves.

And we hear the proverbial stories about people choosing between drugs
and food, and that gets to be close to reality in many cases given the
relatively low income of the people of our state, and the high cost of
drugs. So access to those pharmaceuticals at the lowest possible price
is my goal.

DR. O\'GRADY:  Have you found that in terms of so far what you\'re
finding in terms of people kind of doing the cross-border, that it is
more likely to be the sort of folks who are uninsured or have poorer
coverage than someone who works for a larger firm, or a state employee?

GOV. DOUGLAS:  Generally, I should have said earlier that our state
employees\' plan is not designed specifically for Canada. We will
reimburse a state employee for a drug purchased anywhere in the world.
It was designed originally to insure people while traveling and they
need drugs, are reimbursed.

We\'ve had a number of well-publicized bus trips of folks going to
Canada, mostly seniors. And it will be interesting to see if there\'s
any change in their attitude because of the new discount card that\'s
available through Medicare, but I would say the majority of people I\'ve
seen cross the border have been elderly.

DR. O\'GRADY:  Thank you. Can I ask one more?

SURGEON GENERAL CARMONA:  Please, go ahead. Yes, please.

DR. O\'GRADY:  Governor Hoeven, as part of your testimony, you brought
up this idea of if there\'s a question of restricted supply to Canada as
part of this dynamic, that steps should be taken. I\'m just not clear on
what those ?? if there\'s a relationship going on, positive or negative
between a private sector company and the Canadian government, or the
provincial, you know, the Ontario provincial government, I wasn\'t quite
sure what you had in mind of what steps would be taken by the United
States government.

GOV. HOEVEN:  The concern, of course, is that supply is being restricted
to some of the Canadian internet pharmacies in an effort to prevent
personal purchase of prescription drugs from Canada. And I think that we
have to make sure that we have fair trade practices in place, and that
may be something that would require a legislative approach. Whether you
have that from a regulatory standpoint or not, I don\'t know, but
that\'s the point I\'m making, is that that\'s a concern.

Again, we\'re talking about really promoting a citizen\'s opportunity to
buy prescription drugs at the best price. It kind of goes back to the
point we were making before. If they can attain prescription drugs
safely from Canada, but are precluded from it by our federal government,
that\'s an unfair situation. So you as go forward and address this, what
we\'re saying is you\'ve got to find ways to make that opportunity
available to our citizens, either through regulatory means or through
legislation.

DR. O\'GRADY:  Oh, I\'m sorry, Governor.

GOV. PAWLENTY:  On that point, Dr. O\'Grady, originally there was some
thought that perhaps there was an anti-trust or could be an anti-trust
violation if the pharmaceutical companies were working in concert to
choke off supply. Our Attorney General and the Attorney General of some
other states have at least explored that possibility by asking for
documents. I don\'t think that\'s proceeded very far. There\'s no
indication or evidence yet that an anti-trust violation may have
occurred.

There are others who speculate that under current trade laws, the act of
punishing a foreign entity for merely engaging in trade or a transaction
with a consumer in our country might, or it might violate a trade law.
There\'s some groups who I know who are researching that, and at least
considering litigation, but I don\'t know the particulars. I don\'t know
if it\'s meritorious, but those are the kinds of theories that are being
explored.

DR. O\'GRADY:  And we have heard from the Canadian government, and kind
of the Board of Pharmacists and whatnot, and certainly there\'s quite a
concern on the Canadian side of the border about when they look and all
of a sudden see that the shelves are empty, something that there\'s not
really a lot of flexibility. You know, when you\'re out of insulin,
you\'ve got a problem. And so far they\'ve been able to move things
around between different pharmacies.

But I\'d have to say that the overall tone to a certain degree is not
that they\'re wild about these ideas. And Governor Hoeven, you talked
about trying to work something out with Health Canada, and again, do you
have something in particular in mind that you could help kind of give us
some feel for what those steps would be? As I say, the Canadians do not
seem wildly thrilled about what\'s going on now, and exactly what effect
it\'s having on their own local markets, and concerns of I think about
their own local prices, as well, but I\'m putting words in their mouth.

GOV. HOEVEN:  Well, in terms of allowing importation, reimportation, and
the safety of Canadian prescription drugs, I think there is a high
degree of confidence by consumers in both the United States and Canada,
clearly in FDA, but also in Health Canada, and so it\'s kind of the rule
versus the exception approach. We think that the vast majority of drugs
would fall under essentially the rule, rules that you would agree to
between Health Canada and FDA, which would cover most of the drugs that
people are importing or reimporting.

There may be some exceptions that either the FDA or Health Canada have
concerns about. There may be certain restrictions that they want to
apply. Those would be the exceptions, but again, it allows people to
move forward in the vast majority of cases. There may be some things
that you continue to work on. And that would also extend to drugs that
may come into Canada from other countries and those types of things. And
I think that goes back to Dr. Crawford\'s questions about how do you
move forward?

You know, the idea is we need to advance because people need this help
now, and it is an issue about the general population. Yes, it will help
with people that are in groups and so forth, but this is available to
the entire population, helps somebody who\'s uninsured, but also now
that FDA is allowing insurance companies to provide reimbursement also
helps people that are insured. So it\'s a way to move forward without
solving every single aspect. There may be some things you set off to the
side and say this needs more work, but the vast majority of cases are
addressed.

GOV. DOUGLAS:  Dr. O\'Grady, you\'re not putting words in the
Canadian\'s mouths. I\'ve had this conversation with some of our friends
in Quebec, and they are concerned, indeed, about the potential impact on
prices there. The explanation I gave them is what I\'ve told the task
force today, that this is not the be all and end all to address the cost
of pharmaceuticals, but is an important step, at least on an interim
basis, that\'s important for a border state to provide relief from high
prices for Vermonters, so they certainly have expressed that concern.

SURGEON GENERAL CARMONA:  Dr. Duke.

DR. DUKE:  I\'d like to address that issue, because you are a border
state. There are a lot of states that are not border states, and we also
have another 2,200 mile border with Mexico that is also an area of our
nation in which there\'s a great deal of individual importation. And in
my mind, I see that the problem sort of has two aspects; one is the
personal importation in the bus heading over to the favorite pharmacy
across your border. And we see that both in the north and in the south,
southern borders. And then there\'s the larger issue of a systemic
approach to some form of licensing of wholesale purchases on behalf of a
general population. And I was hoping you might all comment on that,
because I find that in these discussions, often the conversation wanders
across this terrain rather loosely, because I see them as two very
distinct economic, moral, philosophical, medical issues. And I just hope
maybe you would comment on that.

MR. CONCANNON:  I\'d be happy to comment on it. The Iowa proposal, as I
mentioned, as one that we have had direct dialogue with three provincial
Canadian pharmacy regulatory boards in the western provinces. And you
may already be aware of this, that the price ceiling for prescription
drugs in Canada represents a limitation on the median acquisition cost
for medications in something like nine western countries. So Canada
doesn\'t arbitrarily pick a target for Lipitor, Zocor, or something else
and say you cannot charge above that. It is the median, the middle
price, so that it means that half of those western countries are
charging less than that. So I think given that fact, again to me it
underscores the fact we\'re in a global market here.

But back to your question, our proposal - and I heard similar proposals
here from one of the governors, or several of the governors, is to at
least initially organize this in a way that systematically - not put
people at risk, put them up on the internet and say let us know how you
make out - but to systematically work with a Canadian regulatory
counterpart. As you may be aware, in Canada most of the medications are
provided in a blister pack. They don\'t provide at the retail level
medications in the same way we do in the U.S., so that there again I
think further protections for people. And we would propose to have those
medications go from, again, a selected, ethical, vetted pharmacy
wholesaler in Canada that would have to meet our state\'s standards, as
well as provincial standards, have a track record. And then have those
medications come back through a local pharmacy in the U.S.

Why we propose the top 200 medications, again reflects the prescription
drug market in the U.S. One of my favorite factoid questions is how many
medications does a drug store stock. It\'s about 2,000, but about half
of the prescription drugs spent in the U.S. can be accounted for by the
top 200 drugs. So that\'s why we say we\'re not going to try to import
the 1,950 medications. We\'re going to limit it to the top 200 drugs.

And again, just as Governor Pawlenty mentioned in his remarks, we don\'t
think this is a perfect solution, but in a world of imperfection, this
would help and would be a responsible way to do it systematically, to do
it with very minimal risk. And by the way, my impression from meeting
with the regulatory agencies in Canada, they are more stringent in terms
of their pharmacy regulations than we are in the U.S. They require more
stringent reporting at the retail level than we do in the U.S., so I\'m
not concerned about the Canadian system.

GOV. PAWLENTY:  Dr. Duke, I believe one other aspect of your question
was by moving from the grandma individual purchase to a commercial
level, is that helpful or counterproductive? I think that would actually
be helpful, because if you look at the pharmaceutical or the pharmacy
industry in America, it\'s consolidating. There are certainly many small
and independent operators, but if you bring to the table the commercial
pharmacies in the form of Wal-Mart and Walgreen\'s, and CVS and
everybody else, you would empower them to be part of the transaction,
you would get the benefit of their commercial capabilities, skills,
purchasing, due diligence, safety protocols, professionalism. I think it
actually would increase the attractiveness of the program from a safety
perspective.

GOV. DOUGLAS:  I think it has to be comprehensive. I know that Vermont
on a map of the United States looks quite small, but it\'s a four hour
drive from some of our southern communities to the international border,
and to have those grandmas, and they are grandmas in many cases make
that trip, I think is unreasonable, so I hope that we find a way to do
it on a comprehensive basis, and provide the safety that\'s so
important.

GOV. HOEVEN:  I agree with that. I think that\'s one of the main points
we\'re making; it needs to be done through the professionals, through
the pharmacies so that the citizens have not only the convenience, but
the safety of working through the professionals. And that is why it\'s
so important that you step forward.

GENERAL CARMONA:  Thank you, Governors. One last question, I think.
You\'ve all, staring with Governor Douglas, either stated or implied
that importation doesn\'t seem to be a long-term solution. It\'s an
imperfect world. We\'re more or less putting a bandaid on a very complex
problem. Be that as it may then, what would you recommend as a long-term
solution for our nation?

GOV. DOUGLAS:  I think Dr. Crawford offered some suggestions that are
helpful to pursue with international partners through agreements and
organizations that are in effect now, some greater freedom in the
international marketplace. I think free trade can provide some real
pressure on a permanent basis to the pricing that we\'re seeing in
pharmaceutical products to allow the rest of the world to share in some
of the research and development costs that we\'re paying here, so I
think eventually that\'s where we should be. But for now, for the folks
who need it today, I think reimportation provides an important relief.

GOV. HOEVEN:  I think the comment is that starting with Canada is just
that, a start; that the longer term solution is for having the safety
mechanisms in place, the regulatory structure in place which allows the
free trade with more than just Canada, allows trade with a number of
countries.

I think if you ?? the legislation that I think either Surgeon General,
you or Dr. McClellan mentioned the bill with Senator Drogan, Senator
Kennedy and others, I think that\'s where it\'s going. In other words,
it\'s saying we\'re going to look at a lot of countries, but make sure
that we put a structure in place so that we can do it safely. So I think
we\'re saying okay, it\'s imperfect from the standpoint that we\'re just
starting with Canada, and that\'s just one step. That\'s more like a
bilateral, but it takes us on the way to a larger and a better solution
long-term.

SURGEON GENERAL CARMONA:  Thank you.

GOV. PAWLENTY:  Surgeon General, I would suggest a few things. One is
safe access to world markets, as imperfect as they are, is a helpful
tool and point of leverage for the American consumer. That\'s number
one. Number two, I think the Medicare legislation and the prescription
drug benefit that will come is a big help, but again it\'s incomplete
with respect to the others that won\'t be covered by that benefit.

I do think we need to rebalance, as Dr. Crawford said, world pricing. We
can\'t continue to pay such an obscene premium compared to the rest of
the world for research and development. And we\'re grateful for the
cutting edge medicines we have in America. I don\'t think we should
object to paying a premium, but it should be a reasonable premium
compared to the rest of the world, not the wide gulf that we\'re seeing.
And as we attempt over the long haul to rebalance world pricing and
trade negotiations, or through market forces or otherwise, I would hope
that the benefit of that rebalancing would accumulate to the American
consumer in some form. And so I think tied to Dr. Crawford\'s suggestion
would be some device or expectation that we would experience some price
relief, or at least our prices would go up less slowly than they
otherwise would have under a different scenario. But simply rebalancing
world prices and allowing that to not benefit the American consumer in
some predictable fashion isn\'t real progress.

And then lastly, I would say we need to be as government smart
purchasers. In Minnesota as one example, if you add up all of
government, township, city, county, intermediate levels of government,
or state colleges and university, our University of Minnesota, all of
our state employees, all of the people who are on publicly assisted
health care programs in Minnesota, we purchase something like 60 percent
of all the healthcare in the entire state as government broadly. If we
bring that purchasing power to bear in the marketplace, not through
price controls but as smart purchasers, we can have a significant effect
on the marketplace if that\'s bundled. And so I\'m hopeful that our
government would revisit things like that prohibition and bulk discounts
in the Medicare program.

MR. CONCANNON:  Yes, just where Governor Pawlenty left off, I think the
single most important thing we could do to help secure better pricing
would be to strike the prohibition and the recently enacted Medicare
legislation in which paradoxically in a \$500 billion spend over a 10
year period, the HHS or the Secretary is prohibited from negotiating
better prices. I can\'t imagine how to explain that to anybody in terms
of a rational policy, so that would be, to me, a mightily important step
forward.

I can reflect the fact that this concerns us at the state level because
in the Medicaid program, and I speak as a Medicaid administrator, nearly
half of the Medicaid drug spend in the United States can be accounted
for by the so-called dual eligibles, people are both Medicare and
Medicaid eligible. Those costs are going to transfer over to the
Medicare bill, and then the states are going to be in the so-called
\"Claw Back\" provision, are going to pay that back, are not going to
have access to those resources. But I can tell you as a state person,
I\'m concerned that absent ?? and with that directive, the Secretary of
the Department not to use its purchasing power to secure better pricing,
I\'m concerned it\'s going to have an inflationary effect on
prescription drug costs. I have very little faith that the
pharmaceutical, the PBM industry is going to secure better prices than
the government could. And we know the historic lack of transparency in
that industry, we\'ve had a step forward in the last couple of weeks
with a court settlement that the Attorneys General secured on our
behalf, but I still find it a very murky part of the world to try to
secure good price information. So I think a major step forward would be
strike that prohibition before 2006, and tell the Secretary to use to
gather the best minds in the federal government to secure better pricing
for Americans.

SURGEON GENERAL CARMONA:  Thank you. Yes, Governor.

GOV. HOEVEN:  Admiral, if I may, I can\'t hardly think of a case where
world markets have been opened up, and you haven\'t had reduction in
price.

SURGEON GENERAL CARMONA:  Thank you, sir. Mr. Sachdev, a question?

MR. SACHDEV:  Yes, Governors. And I want to echo the sentiments of the
other panel members in thanking you for being here to help us in
achieving our mandate. We were given a very difficult mandate by the
Secretary, and that\'s one that he was given by Congress to look at a
series of questions, including safety, liability, impact on innovation
related to importation, and to report back to Congress on what we found.

In doing that as part of the task force, we\'ve had several of these
listening sessions and heard from a lot of witnesses on different
aspects of this, and so we\'ll be working to pull that together. But I
think one of the things I wanted to ask you all about, particularly the
Governors, Governor Pawlenty and Governor Hoeven, who already have some
experience with your state websites that have been set up, that are
linked to Canadian websites, relates to some of the concerns that we\'ve
heard, or questions we\'ve heard from other witnesses about the practice
of pharmacy in Canada, and how we, if we were to look at a system for
importation, would interface with that practice.

In particular, I think you\'ve heard FDA raise concerns about the fact
that they don\'t really regulate the practice of pharmacy, and really
don\'t have access, and the states generally don\'t have access to
Canadian pharmacies. But, in fact, in Canada we\'ve had witnesses
testify who are Canadian pharmacy regulators, including last week we had
the Canadian pharmacy regulators from Manitoba, and from Quebec come
forward and provide testimony, along with the Canadian Pharmacy
Regulator Group, raising some concerns about importation and their
ability to assure safety for products that are exported from Canada from
their pharmacies.

Similarly, Health Canada has gone on record and said that under their
laws they focus their resources on products that licensed Canadian
pharmacists are providing to Canadian citizens. And they have a law
that\'s similar to ours related to exports that would direct them to
spend less time on products that are intended to be exported to the
United States, that imported, then given to their own citizens. That\'s
why I think it\'s very important that both in Minnesota and North
Dakota, in the programs that you\'ve set up with your websites, that you
focus on sending your - in particular in Minnesota - sending your
regulators to Canada to look at the Canadian websites.

I know that when you did that, Governor Pawlenty in particular, you
found that about 70 percent of the websites had deficiencies, and I
think it\'s important that you chose not to link to those websites.

I\'d like both Governor Hoeven, and Pawlenty, and anyone else, any other
panel members to comment on this. One of the issues we\'re interested in
is how, if importation is legalized, would we assure the source is
protected; in particular, in the event that there was a dispensing error
in Canada, how to make sure that ?? or that there are other major
deficiencies with Canadian pharmacies, that we would assure that U.S.
citizens would have both recourse, but also be protected from those
types of problems.

GOV. PAWLENTY:  Thank you. I might just one quick aside, and that is
when we sometimes have this discussion with our foreign counterparts
about this issue, and we suggest, Dr. Crawford, that they\'re not paying
their fair share, one of the things they say is well, why do you allow
that non-medically helpful advertising, and how much does that affect
your pricing - just to share that retort with you that we do get from a
number of our foreign friends.

As to your question, sir, I think Minnesota\'s experience was again, we
stipulate and everyone readily acknowledges there is all kinds of junk
out there, and so one of the great powers and responsibilities that we
have as government is we have the ability, I would say the
responsibility and the opportunity to sort through all of that, and set
up criteria, set up credentials that we want people to follow, expect to
follow and then design a recourse if it\'s not followed. And so the
premise in Minnesota was we would use our resources and expertise as a
government to go there, to try to set up parameters and criteria that we
had with respect to safety expectations, and have those individuals sign
a contract that we believe is legally enforceable, although there\'s
lots of folks say well, there\'s just no way you can have a relationship
with the Canadian government or a Canadian pharmacy, and what recourse
do we have?

Well, what recourse do you have any time you have an international
business relationship? I\'m stupefied by the fact that we can\'t ?? are
we really saying we can\'t design a commercial relationship, or a
government relationship with Canada that is not legally enforceable? I
don\'t ?? I used to practice law. I don\'t any more, but last I checked,
there are ways to do that. There are ways to have appropriate
consequences in place, and safeguards in place, so I don\'t think it\'s
a question of can we. I think the question is do we want to, and how
much does it cost? But there\'s all sorts of criteria we put into our
program. You know again, not prescriptions of first use, have to be
maintenance medicines. You could have blister packs, you could have dose
appropriate amounts, you could have any list of requirements that you
want, that you\'d expect - in fact, we already know about with respect
to American pharmaceutical practice, pharmacy practice, apply those to
our Canadian counterparts along with some distribution expectations, and
then set up a legal arrangement that is enforceable with recourse.

I don\'t think it\'s hard - I shouldn\'t say it\'s not hard to do, but
it\'s doable. It is certainly doable. We have complex international
relations with entities regulated and otherwise around the world all the
time every day, and now when it comes to pharmacies in Canada, we\'re
like oh, how could we possibly do that? How could we possibly enforce
those arrangements? It defies what we know about business practice in
every other walk of life.

GOV. HOEVEN:  We took a lot of the same steps. Matter of fact, I sent
the head of our Department of Human Services and also Duane Houdek, who
is here with me today from my staff, along with Governor Pawlenty when
they went up and looked at pharmacies in Canada, so we did that
exploratory work in the front end.

Second, we picked pharmacies that are not only licensed by the Province
of Manitoba, but certified by CIPA, Canadian International Pharmacy
Association, which we believe to be a very strong designation. Then we
have certifications and requirements in the agreement that do provide
restrictions as far as what the pharmacies can deliver to North Dakota
citizens that use the site and order the drugs. So again, all of those
things can be done, and they can be done by the federal government, we
believe very well. And again, that\'s why I recommended a relationship
or a working relationship between FDA and Health Canada, that we think
could put this system in place very effectively.

Even if there are certain exceptions that need to be excluded for
further work, or because there are concerns, fine. You can certainly do
that. The reality is we\'re doing this now with Canada on all kind of
food products right now. Think of all the food products that we have
that are consumed by our people that come into our country from Canada
on a regular basis, and we\'ve certainly found a way to manage that and
do it safely and effectively.

MR. SACHDEV:  Just one follow-up. Again, I want to be clear because
we\'ve had this question come up at several of these task force
meetings. In the event that one of your citizens of your state was
harmed by a dispensing error from a Canadian pharmacy that was linked to
your state website, what is the state\'s position, what would the state
do to assist that citizen in achieving recourse from the Canadian
pharmacy?

GOV. PAWLENTY:  Fortunately, we have not had that experience in
Minnesota, and the pharmacies do attempt to some level of disclaimer of
responsibility, and the state also has put a disclaimer in, so there is
an element of risk, as there are with most things in life, which is
precisely why it would be extremely helpful if the federal government
would weigh in and create, either through treaty or through regulation,
or through contract, a relationship that was not only ?? has integrity
from a safety standpoint, but also has an enforceability and recourse to
it. And I think you, not you personally but the federal government has
the ability to construct that if you want to. But as to Minnesota\'s
current experience, there is risk. We don\'t believe the pharmacies are
unsafe or the product is unsafe, but in terms of recourse, there are
disclaimers both by the state and by the Canadian pharmacies that they
may not be responsible under certain conditions, but you could help with
that if you want to.

GOV. HOEVEN:  We\'ve done the best due diligence that we can. We tried
to put the safety features in place, as well. Like I say, certain
limitations, certifications that we require from them as to what drugs
they can deliver for somebody accessing mail order pharmacy through the
website.

You know the reality is, you can go on Google, or you can go on almost
any search engine, Yahoo or any search engine you can think of, just go
on there and see how many Canadian pharmacies you can access, internet
pharmacies, that haven\'t been checked out by somebody in the United
States. So you\'ve got all these search engines out there right now that
are available to people. And last year again, on the order of a million
people ordered a billion dollars worth of drugs from Canada.

It just makes sense for us to get the federal government, to get FDA
involved to set up criteria which will enable us to do this safety and
well. And that\'s why we think, again, it\'s so important you move
forward now.

GOV. PAWLENTY:  What we offer is better than nothing. It\'s a lot
better, frankly, but it\'s happening. It\'s happening in uncontrolled
and unregulated ways. We have brought the power of Minnesota government
to bring some assurance of safety and credibility to the program that we
have. You could take it to the next level.

MR. SACHDEV:  One final question. As I said, I think it\'s very
important in the programs that you have set up that you did the initial
work to go to Canada to assess the pharmacies that you link to on your
websites that are ?? for the ones that the state is referring its
citizens to. Those initial inspections were important, but I want to
ask, have you guys done or do you intend to do any follow-up with those
pharmacies or any ?? or have you done any follow-up with additional
pharmacies that you may be considering adding?

GOV. PAWLENTY:  Yes, we have ?? we don\'t want to pre-announce the
visits, but we will be doing and have planned follow-up visits and
inspections. We will be shortly announcing some additional pharmacies.
And I\'ll also tell you in anticipation of the absent federal government
action, the pharmaceutical industry choking-off supply to Canada, we do
need to explore other countries, and so we\'re at least in the beginning
stages of that, as well.

GOV. HOEVEN:  What I would add to that is remember I described in my
testimony how our website is structured. Our first option is to take
them to therapeutic alternatives, lower-cost, name brand generics
through their local pharmacist. That\'s option one. Option two is what
we call Prescription Connection, which is the discounted programs that
pharmaceutical companies will provide to lower income individuals. And
then we say okay, now third - here are these pharmacies that we\'ve
evaluated that is a third option for you. So again, we\'re trying to
work within the framework we have as best we can, but we\'ve got to get
help from you at this point to move forward, and that\'s what we\'re
asking for.

SURGEON GENERAL CARMONA:  Governors, Mr. Concannon, thank you all so
much for enlightening us. As you know, we\'ve all said we have a very
tough job here, but without your input, we wouldn\'t be able to move
this issue forward. So once again from all of us, from Secretary
Thompson, thank you so much for being here with us.

We\'ll take a short break now while we switch over the tables, and then
we\'ll reconvene. Thank you.

(Whereupon, the proceedings in the above-entitled matter went off the
record at 11:38 a.m. and went back on the record at 11:50 a.m.)

SURGEON GENERAL CARMONA:  Ladies and gentlemen, welcome back. We\'d like
to begin the second panel now. Our first speaker will be Mr. John
Hurson, of the National Conference of State Legislators. Thank you, sir.

MR. HURSON:  Thank you very much. My name is John Hurson. I am actually
President-Elect of the National Conference of State Legislatures, and
will take over the organization at their annual meeting this July. I\'m
also a delegate in the State of Maryland, and happy to say that I think
you\'re actually sitting in my legislative district as we meet here
today. I\'m also Chairman of the Health and Government Operations
Committee in the House of Delegates, which considers all these
healthcare issues that do go through our chamber.

The work of this task force is extremely important, and I appreciate the
opportunity to share a few thoughts with you today. And I am speaking on
behalf of the National Conference of State Legislatures. And while the
conference does not currently have a policy on drug reimportation, we
are working on one at our annual meeting this summer. And legislatures
across the country are actually dealing with this issue and have been
dealing with it in the current sessions, and in sessions that have
already concluded.

In the 2004 legislative sessions, almost half the states, 21 states have
dealt with bills or resolutions dealing with drug reimportation. Two
states did pass resolutions, and I can tell you that a third state, our
State of Maryland, would have passed it if they had had one more minute
in the Senate session. It literally died on the last day of session at
the very end, and the bill was actually on the Senate board ready to
take a vote, but we just didn\'t have the time. So it would have passed
in our state, as well.

This is because, and you know this, prescription drugs are playing an
increasingly critical role in the healthcare of our citizens. Our
constituents are finding it increasing difficult to afford the
medications prescribed by physicians, and as states, we are searching
for answers, but are coming up short in trying to provide low-cost
prescription alternatives for them.

State legislatures have experienced and continue to experience
unprecedented budget problems, and the genie is really out of the
bottle. Our constituents are going to Canada, Mexico, and to the
internet to buy affordable prescription drugs.

The Just Say No policy or message regarding drug importation is not
resonating with the public. Many of our constituents, generally law
abiding citizens, are crossing the borders to obtain these drugs.
They\'re concerned about breaking the law, but they\'re equally
concerned about going without needed prescriptions. We are concerned
about the criminalization of drug reimportation, and the effect it may
have on individuals with limited options.

The current federal policy on drug reimportation is confusing, at best.
State legislatures would find it helpful if the Food and Drug
Administration would clarify its personal use policy.

I think it\'s fair to say that we don\'t believe that drug reimportation
is the goal. Affordable, accessible prescription drugs is the goal. Drug
reimportation is merely a means to that end. NCSL shares your concerns
about safety and quality. We are particularly concerned about creating a
policy that would encourage seniors and others with lower or fixed
incomes to purchase prescription drugs in a way that may ultimately risk
their health and safety. That\'s why the work of this task force is so
critical. The task force must be prepared to lay out its findings in a
clear and concise way so that policymakers can use this information to
make important decision regarding the role of drug reimportation in our
future.

Ultimately, if it is determined that drug reimportation is not the right
approach, I hope Congress will make it a priority to explore ways to
increase the number of individuals with health insurance, thereby
increasing access to prescription drug coverage, increasing the
affordability of prescription drugs.

Of course, NCSL wishes you success in this important endeavor, and we
will be available to be of assistance to you in any way that we possibly
can. And I\'d be happy to answer any questions.

SURGEON GENERAL CARMONA:  Thank you, sir. Our next speaker, Mr. Kurt
Knickrehm from the Council of State Governments. Thank you, sir.

MR. KNICKREHM:  Thank you very much, Surgeon General Carmona and members
of the task force. I greatly appreciate the opportunity to be here, and
frankly thank you guys for your diligence in this effort. This is a very
important topic.

My name is Kurt Knickrehm. I\'m the Director of the Department of Human
Services in Arkansas, which is an umbrella of the Social Services
Agency, but I\'m here today on behalf of the Council for the State
Governments, as I serve as the Vice-Chair of the Health Task Force.

The Council of State Governments represents, of course, a diverse group
of the three branches of government. The main mission of the Council of
State Governments is really to focus on future and tracking of trends
that come about, and then try to identify solutions for states.

Clearly, globalization is one those important trends that we see that\'s
out there. Prescription drugs, of course, are just a component of that
whole entire globalization issue.

We all know that the real reason that we\'re here is frankly because
consumers know that drugs are cheaper in other countries. With easy
access to online pharmacies, consumers are increasingly taking this
route to obtain their prescriptions. For most of our vulnerable
citizens, this isn\'t just an economic issue, it\'s also a health issue.
They too either have to find lower cost drugs across the border, or
they\'re going to have to do without some lifesaving medicines. The
Medicare Modernization Act, of course, will be a huge step forward in
helping many of those constituents who face this type of dilemma.
Others, however, without access to drug coverage will still have to buy
drugs from outside the United States.

In Arkansas, we have about 400,000 folks who are uninsured at the
moment. They are the working uninsured, and they still continue to be
price-sensitive shoppers. In this regard though, it is not enough for
the federal government simply to say don\'t buy prescription drugs
outside of the United States. This path tends to ignore that forces of
globalization that we talked about, as well as consumer preferences, and
the use of technology.

The federal government needs to work with states, we believe at Council
of State Governments, to help consumers be informed of the issues and
the risks that are involved with internationalization of prescription
drugs. There is, of course, a wide diversity of opinion in state
government on the wisdom and feasibility of allowing and supporting drug
importation from Canada or any other source. There is, however, near
unanimous agreement among those states of the underlying issue, and that
is the rising healthcare costs. Those are outpacing our ability to keep
up with, and threatens state\'s ability to provide some of the basic
services.

Prescription drugs are just one part of that overall cost issue, but
they\'re the fastest growing component of our healthcare budget. They
represent an increasing portion of that healthcare dollar, especially in
Medicaid. My agency, which oversees the Medicaid program, our
prescription drug costs are growing about 17 percent a year. This is
simply not sustainable in our current environment.

Thus, I encourage the President, Secretary Thompson, and other leaders
at the federal level to continue to support state efforts to control the
cost of prescription drug costs. For too long, states have had to work
around federal government rules and regulations that hamper many of
these market reform efforts. Drug importation is but one example of the
many ways, or many things that states are doing.

States do applaud the recent approval of multi-state Medicaid waiver on
prescription drug purchasing pools between Michigan, Vermont, New
Hampshire, Alaska and Nevada. This is an innovative market-based
approach to dealing with this issue.

Similarly, as we heard a little earlier in the first panel, pursuing
lower drug costs, no one wants to damage the remarkable and innovative
new treatments that have emerged in the American healthcare system.
Thus, states support the federal government\'s efforts to keep other
countries, and to get other countries to help pay their fair share of
the research and development costs for prescription drugs. To be
realistic though, this is very much a long-term approach.

In closing, the caution from the Council of State Governments is to be
very wary of putting forward any recommendations that will hamper state
efforts and state innovation. Rising healthcare costs are devastating
the financial future of families, seniors, and states. States must have
the flexibility to continue to address these critical issues. I thank
you for your time.

SURGEON GENERAL CARMONA:  Thank you, sir. Our next speaker, Mr. Steven
Rowe, National Association of Attorneys General. Thank you, sir.

MR. ROWE:  Thank you, Admiral Carmona and members of the task force on
drug importation. I want to thank you for inviting the National
Association of Attorneys General to present information to you today. I
appear before you in my capacity as Attorney General for the State of
Maine, as a member of the National Association of Attorneys General,
NAG, and as a Co-Chair of NAG\'s pharmaceutical pricing task force.

I just want to put a disclaimer out here. While I know that many of my
fellow State Attorneys General share my views regarding drug
importation, I want to make clear that I\'m not presenting testimony on
behalf of the entire NAG membership today, nor am I presenting testimony
on behalf of all members of NAG\'s pharmaceutical pricing task force.

State Attorneys General are responsible for protecting the public and
enforcing the laws of our states. We advise various state agencies with
respect to compliance with both state and federal laws. We also advise
various state licensing boards, such as pharmacy boards and medical
boards. And during the past few years, we have also been advising state
legislatures and executive agencies regarding legislation designed to
increase the affordability of, and access to prescription drugs for our
citizens. And the State of Maine has been particularly active in this
regard, as some of you may know.

I know that you\'re aware of ?? I just heard the governor speak, and
Commissioner Concannon, and I know you\'re aware that a number of
Congressional, and state, and municipal governmental websites provide
information designed to assist consumers with purchasing prescription
drugs from Canadian pharmacies. And there are a lot of Congressional
websites that also have that information.

I know you\'re also aware of the municipal and the state health plans
that are attempting to implement prescription drug purchasing programs
utilizing drugs imported from Canada, and these actions by governmental
officials appear to directly contradict the FDA\'s official position
that importation is illegal. Similarly, the actual experience of
millions of Americans who have safely imported prescription drugs from
Canadian pharmacies appears to directly contradict the FDA\'s repeated
warnings that importation poses a threat to the safety of Americans.

As a law enforcement officer and a public safety official, I feel
conflicted. I want you to know that. On the one hand, I do not want to
encourage citizens to violate federal law. On the other hand, however,
for many the only way to access health sustaining and life sustaining
prescription drugs is to apparently violate federal laws.

Due to the high prices in the State of Maine, thousands of our citizens
have been importing prescriptions drugs from Canadian pharmacies over
the past few years. A number of these individuals have looked me
squarely in the eye time and again and told me that purchasing from
Canadian pharmacies was the only way they could have afforded the drugs
that their physicians prescribed. And these were primarily maintenance
drugs for chronic conditions like arthritis, diabetes, hypertension,
heart disease, elevated cholesterol, and the majority were brand name
drugs.

And you heard Commissioner Concannon talk about his experience in Maine.
I have yet to hear about any injury from imports or any dispensing
errors that were made by Canadian pharmacies dispensing to Maine
residents.

The differentials in cost in the United States and Canada are
substantial. Citizens in this country, as you\'ve heard time and again
I\'m sure, pay about 30 to 75 or 80 percent more than Canadians do for
the very same drugs. And on a recent bus trip to St. Steven, New
Brunswick, 19 Maine seniors collectively saved almost \$20,000 for a six
month supply of drugs. And this is typical of the experiences of other
Maine citizens who have purchased drugs from Canadian pharmacies either
in person, through the mail, or over the internet.

And I use a phrase - I say that the horse is out of the barn, the genie
is out of the bottle. And what we need to do is to provide some guidance
to citizens, a safe harbor, if you will. And I know that\'s what you\'re
looking to do.

For a growing number of people in the State of Maine, the choice is
either to purchase drugs from a Canadian pharmacy, or do without, and
the consequences of electing that do without option often involve
worsening health, eventual institutionalization in a hospital or
long-term care facility, or eventually death. And these consequences
also mean an increased cost to the state, a cost that could have been
avoided had the individual stayed healthy and stayed in their home, and
stayed on drug maintenance. So I\'m not exaggerating to make a political
point. I\'m stating fact as I know it, based on my experience in our
state.

And I continue to be dumbfounded by the FDA officials\' intransigent
attitude toward importation. Like these federal officials, I care
greatly about consumer safety. I certainly want to ensure that citizens
in my state access drugs that are safe. However, I believe that
procedures presently exist to ensure that consumers could be protected
from unsafe drugs. I mean, I think they are protected in many cases.
I\'m going to share some information with you, and I\'ll try to go
quickly.

Twenty Attorneys General - you have this letter - twenty Attorneys
General recently described such a procedure in a letter to Secretary
Thompson. It involves allowing the states to be appointed as licensed
wholesalers or to contract with licensed wholesalers for the importation
of FDA approved prescription drugs from Canada. The licensed wholesalers
could contract directly with licensed Canadian pharmacies, which would
then be required to meet safety standards set by the Health Departments
of the individual states. And all prescription drug shipments would be
made directly to the states. The states would work with Health Canada
and the FDA, both of whom, as you know, have systems to ensure that
safety and quality of prescription drugs.

They would inspect the Canadian pharmacies and exchange drug plan
inspection information. We have the capabilities, I believe, to do that.
All drugs would be manufactured in FDA approved facilities and imported
into the United States from Canada in their original packaging. All
drugs would be tracked using advanced anti-counterfeiting technology,
such as radio frequency identification, chemical markers and bar codes.
And in addition, steps would be taken to ensure that the FDA\'s tracking
system works in conjunction with Canada\'s own comprehensive labeling
system, which includes the issuance of a unique drug identification
number for all prescription drugs that are commercially sold within
Canada.

I just want to emphasize that states are sovereign entities, and we
negotiate billions of dollars worth of medical goods and services for
our state agencies and health plans. Our pharmacy boards already
regulate pharmacists and prescription drug wholesalers, and in some
states we administer our own prescription drug discount programs, as you
know.

With the assistance of the FDA, I am certain that we could work with
Canadian authorities to develop a process for the safe importation of
prescription drugs. And I want to follow-up on something the governor
has covered, because please note that I have emphasized Canada here,
because I believe we should start with Canada, and later expand the
program to other countries.

I\'m aware that the Canadian market is small compared to the United
States, and that Canadian importation is not the long-term answer to
provide sustained price relief for consumers in this country. In fact, I
don\'t think importation in general is a long-term answer, and I believe
you agree with that. However, relief is urgently needed, and importation
will provide some of that relief now, not in the future but now.

Let me say, I also support the efforts ongoing in the federal Congress
that are intended to provide prescription drug price relief by allowing
importation from Canada with certain restrictions. I particularly
support the bill that\'s been mentioned today, the Pharmaceutical Market
Access and Drug Safety Act of 2004, which is sponsored by Senators
Dorgan, Snow, Kennedy, Daschle, and McCain, among others. This bill
includes specific measures to ensure the overall safety and integrity of
imported drugs by requiring that a chain of custody be maintained and
inspected. It requires that wholesalers meet high standards, including
detailed recordkeeping, labeling, and tracking requirements. And it
requires frequent FDA inspections of pharmacies and wholesalers, and it
employs the latest in anti-counterfeiting technologies.

In closing, let me say that I appreciate the complexity of the product
safety issues that you\'re dealing with, including the risk of
counterfeiting, contamination, and mislabeling. I also appreciate the
politically charged atmosphere that surrounds the drug reimportation or
importation issue. I believe the key to whether you will be able to
recommend to Secretary Thompson that prescription drug importation can
be conducted safely is whether you want to or not.

I come here today in the hope that you, indeed, do want to. And after
hearing your today, I believe that you do want to. And I want to just
tell you that we in the State of Maine are ready to work with you to
find a solution.

I mentioned about the horse being out of the barn. It\'s tough.
Consumers are looking for some direction, and that\'s why folks are
going out and putting up on the websites, governmental organizations,
but they\'re doing it with some trepidation because the FDA keeps saying
it\'s a violation of federal law. We know we can do it safely. We need
to explain to consumers the best way to do it safely.

Anyway, I very much appreciate you inviting me here today. Thank you.

SURGEON GENERAL CARMONA:  Thank you, sir. Our next speaker, Mr. Jim
Frogue, with the American Legislative Exchange Council. Thank you, sir.

MR. FROGUE:  Good morning. My name is James Frogue, and I\'m Director of
the Health and Human Services Task Force at the American Legislative
Exchange Council. ALEC is a 30-year old organization made up of 2,400
state legislators from all 50 states. We are the largest bipartisan
organization of individual state legislators in the country. Our
membership also includes approximately 300 private sector members, and
we receive no taxpayer dollars.

As Task Force Director, it is my job to work with our legislators and
private sector members to maximize patient empowerment. ALEC is divided
up into 10 task forces, other task forces address issues such as
education, tax and fiscal policy, the environment, technology, to name a
few. Each task force can have a maximum of three legislators per state.
Our task forces meet three times each year to discuss the issues of
greatest importance to our legislative members.

At each meeting, task force members consider model legislation that if
passed, goes on to become available to all ALEC members to use as they
see fit in their respective states.

We just returned from Austin, Texas where last weekend we completed our
annual spring task force summit. The HHS Task Force passed the attached
resolution, which you have attached to my testimony, by a vote of 52-0.
The purpose of the resolution was to recognize the dangers inherent in
importation, acknowledge the good work, but limited scope of the FDA,
and place ALEC clearly on record as opposed to the illegal importation
of non-FDA approved prescription drugs due to concerns about safety.

An announcement from the FDA on September 29^th^ of last year found that
nearly 90 percent of mail parcels arriving from foreign countries that
had prescription drugs, contained medications that violated American
drug safety laws. For some elements of this debate, to minimize concerns
over safety is simply irresponsible in light of this single study.

Beyond the very legitimate risks associated with importation is the
question of whether or not it would actually be effective in lowering
drug prices for American consumers. In order for importation from
Canada, for example, to place significant downward pressure on American
retail prices, there would have to be a tidal wave of product coming
from north of the border. This simply cannot and will not happen.

Canada represents approximately 2 percent of the global prescription
drug market, with the U.S. around 50. Under no circumstances would a
market as small as Canada set the broad prices for a market 25 times its
size. This is due to the simple fact that drug manufacturers can control
the number of their pills on the market, and they will not indefinitely
sell Manitoba wholesalers exponentially more product than is needed for
citizens of Manitoba.

The rights of patent holders are clearly enshrined in both American and
international law in trade agreements. Title 35 U.S. Code Section 271
states that \"whoever without authority makes, uses, 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
infringes that patent.\" Article 1709 of NAFTA, and Articles 27 and 28
of the World Trade Organization\'s Trade-Related Intellectual Property
Agreement also secure the rights of patent holders.

This being the case, manufacturers of patented medications have domestic
and international legal recourse against middlemen who seek to violate
the terms of private licensing agreements. To suggest as some have both
here and abroad that drug makers should be sanctioned, forced to sell
their product on unfavorable terms, or be subject to compulsory
licensing is a full frontal assault on intellectual property rights, the
kind that would be unthinkable if the subject were movies or software.

Just last week, Congressional Budget Office released a six-page paper
entitled, \"Would Prescription Drug Importation Reduce U.S. Drug
Spending\". Their analysis concluded that HR-24-27 introduced by
Representatives Gil Gutnecht of Minnesota and Ron Emanuel of Illinois
that would permit importation from a broad range of industrialized
countries, would lower 10-year drug sending by 1 percent. They
attributed this negligible savings largely to the ability of patent
holders to control the amount of their product on the market. It is up
to policymakers to decide if a 1 percent savings is worth a very
significant risk.

As a result of reduced supplies in Canada, Canadian pharmacies and,
therefore, patients are beginning to experience drug shortages. Health
Canada\'s Assistant Deputy Minister Diane Gorman stated that she,
\"regards this as a very serious matter\". Michelle Fontaine, Vice
President of the Coalition for Manitoba Pharmacy, recently experienced a
shortage of drugs to treat cancer and high blood pressure.

Suffice it to say, Canadian politicians are not going to sit idly by
when medications needed by their constituents are being sent to America.
Chalk up this impediment as another major reason why American consumers
are highly unlikely to see widespread Canadian prices in this country.

Let us keep in mind exactly who are the bulk of Americans traveling out
of the country, or going on line to get foreign drugs. They are mostly
low income, uninsured, ineligible for Medicare. They are not members of
Congress, or 9 million federal employees, their dependents and retirees
who get to choose from a wide array of competing, comprehensive private
insurance plans, all of which have excellent drug coverage.

Indeed, it was the Federal Employees Health Benefits plan that should
have been the model for Medicare reform last year. It has been around
longer than Medicare. It is tried and tested, and has provided more
comprehensive services to its beneficiaries.

Thank you for your attention, and I look forward to any questions.

SURGEON GENERAL CARMONA:  Thank you all panel members. Task force,
questions? Dr. Crawford.

DR. CRAWFORD:  Yes. Thank you very much. Mr. Rowe, I wanted to first
compliment you on your conscientious program, and intention to try to
get safe and affordable drugs on the market in the U.S. And I recognize
that are not only conscientious but have thought about this a great
deal. There are a couple of things on behalf of FDA I\'d like to respond
to.

One is, you said something like we were proceeding as if this was
illegal, the importation of drugs from Canada. The fact is, is that they
are illegal. The second thing is that you said that we were being
intransigent, and that may or may not be. That may be our middle name,
but we do it for the reason of safety and protection of the American
people.

If, in fact, there is, God forbid an adverse event or a series of
adverse events from products imported from Canada, keep in mind that the
same Diane Gorman that was just quoted from Canada, who is in effect my
counterpart, has said that she has no legal authority to control these
drugs. We have no legal authority to deal with them, except to declare
them illegal. But if something goes wrong, like using these kinds of
products as an agent of terrorism or something like that, you\'re
looking at who would be blamed for that. So we have to proceed very
cautiously, indeed.

I appreciate what you\'re trying to do, but let\'s be sure of the facts;
and that is that FDA has a charge to keep in this regard, and we\'re
trying to do it.

MR. ROWE:  Can I just say something? I understand that, and FDA has said
that it\'s illegal, but we\'re not going to enforce the law with respect
to some of the things going on now. My point is that there are citizens
that feel conflicted. People want to abide by the law, but they can\'t
do it. We have people in my state who don\'t qualify for any public
subsidies, and who don\'t have enough money to pay their rent, to buy
their food, and to pay for their six or seven prescriptions. So they
asked their doctor, can your prioritize these for me? They split pills.
You know the story. You\'ve heard this before.

I\'ve been around the state, and when you talk about risk, I mean, there
are dispensing errors in this country, there has been contamination,
there has been counterfeiting in this country. I think it\'s a risk
analysis, and you make it as safe as you can. But I\'m telling you now,
and you know this, people are dying because they can\'t afford the
medications that would keep them alive. People are going into nursing
homes rather than remain independent and healthy because they can\'t
afford the medications that would keep them independent and healthy.

I mean, it\'s happening in my state and I know these people. And so, you
know, it\'s not a perfect world. And I think it\'s a risk analysis, but
let\'s reduce that risk as much as we can. And I think we can save some
lives that way. I\'m not talking ?? I\'m in agreement, but I think we
know what we\'re talking about, so I appreciate your comments.

DR. CRAWFORD:  With permission, General.

SURGEON GENERAL CARMONA:  Please.

DR. CRAWFORD:  Thank you for that. The purpose of Surgeon General
Carmona\'s task force here is to come to some sort of solution, as you
well know, and that\'s why you\'re here, and that\'s why we\'re here. So
thanks.

SURGEON GENERAL CARMONA:  Yes. Thank you so much. Other comments. Yes,
Ms. Willis.

MS. WILLIS:  Yes, for Mr. Rowe again. You mentioned and suggested that
perhaps the U.S. government could work out an arrangement with Health
Canada. Considering the information that Mr. Frogue provided and
comments by Dr. Crawford, do you know if Health Canada or the Canadian
government is interested in working out such an arrangement with the
United States?

MR. ROWE:  I would expect today they might be skeptical based on what\'s
going on with the pressure by the pharmaceutical industry in Canada, but
I think if we were to put a plan in place, I think you would see a
change of attitudes. I have not talked with officials with that
organization, so what I\'m putting forward is, I believe, a process that
I\'m asking you to look at. But a lot of the fear that\'s going on in
Canada is created by the pharmaceutical companies, and there are some
investigations going on with respect to anti-trust and collusion. But
it\'s a concerted effort, a calculated effort to put fear in the minds
of Canadians, in the minds of consumers, in the minds of pharmacists, in
the minds of wholesalers, and in the minds, I believe, of Health Canada
about what will happen if we should open up importation and make it
legal. So I think you can\'t look at today. I think we have to look at
this is going to require some dialogue, and I wouldn\'t have put this
forward if I didn\'t think it would work.

There are 20 Ags that signed on to this. We\'ve talked a lot. I know
people who have dealt with Health Canada. I personally have not.

SURGEON GENERAL CARMONA:  Mr. Reilly.

MR. REILLY:  This is again for Mr. Rowe. I appreciate some specific
proposals you have in here. We hear a lot of testimony on either side of
the issue, and don\'t always get specific suggestions. I did have a
question, because it seems, if I heard your testimony correctly, that it
wouldn\'t necessarily be the federal governments working with Health
Canada, it would be individual states who would be licensed to import
drugs, and they would work on individual state arrangements. Maybe you
can describe a little more how that would work, and would states be the
only licensed wholesalers for importation?

MR. ROWE:  I think it could vary by state, Mr. Reilly, but the idea
would be, and the proposal would be that states would be able to be
wholesalers or they would license another wholesaler on behalf of the
state to work directly with Canadian pharmacies. Both FDA and Health
Canada would work with the states, and I mentioned, because that\'s
ensuring the safety and the quality of the drugs, and the inspection of
the pharmacies, and exchanging drug plan inspection information. But
some individual states might not elect to do this, but I\'m just saying
I think states are, as you know, under federalism, we\'re sovereign
governments.

We work with prescription drugs now. We license all of the
professionals. We license pharmacists, we license the pharmacies, both
in-state and those mail order. Right now most states, as you probably
know, DUC cannot license because the state laws would have to be amended
to license that out of country pharmacy as a mail-order pharmacy, but I
believe we could do that. And once we did that ?? I mean, this is a
plan, and we haven\'t worked it out in minute detail, but I think the
framework is there, and I\'m just asking you to look at that.

It\'s a very conservative plan, I believe, when you look at the
safeguards that I propose today, and many of these are contained in the
bill that\'s in the U.S. senate.

SURGEON GENERAL CARMONA:  You\'ve got another one? Yes, Mr. Reilly.
Please.

MR. REILLY:  To follow-up on that, so if some states chose not to
participate, and once some states do import drugs, would there be some
prohibition in selling to those states - you know, imported drugs in
those states, would that be a mechanism our regulatory procedure would
have to work out?

MR. ROWE:  Yes. I would expect all states would participate. The
procedure that I put forward is not favoring border states. It would be
something that would benefit all states, regardless of geographic
location.

SURGEON GENERAL CARMONA:  Okay. Mr. Sachdev.

MR. SACHDEV:  This is a question that follows up on the question that
Mr. Reilly just asked, and it actually is framed to any one of, or all
members of the panel. And I again thank you all for being here to help
us do our job. It\'s a tough job. We have a broad mandate in the form of
the questions that Congress raised to the Secretary, and he asked to
opine on for him.

In particular, one set of questions that he asked us to comment on that
we\'ve been looking at, and asking all of the panels about, relates to
the direct and indirect costs, including potential increased liability
costs associated with importation if it were legalized more broadly.
Specifically, you heard I think this morning\'s testimony where the
governors who have already established websites that link to Canadian
pharmacies have disclaimed any liability related to purchases, as
related to the state\'s costs for any problems resulting from the
purchase of those products from Canada.

In a system where you legalize this, where the state is, in fact, a
player in that because they regulate the pharmacies that are licensed to
practice business in the states, have any of you, and in discussions in
state legislatures, in discussions at the state government level, have
there been ?? is there additional information that can inform us about
the potential or estimated costs associated with increased liability,
increased insurance that may go along with any proposal to legalize
importation?

MR. HURSON:  I can\'t tell you specifically any discussions that have
gone on in specific legislatures. What I would point out is that without
guidance from the federal government as to how to do this, you\'re going
to get not 50 different solutions, you\'re going to get hundreds of
different approaches, and all kinds of different regulatory schemes
about how to avoid liability, how to create insurance programs. You
know, last year there were 21 states that considered various ways of
doing this. Next year there\'ll be 35 states, unless something is done.
So I think the point is, is that while there\'s probably been a lot of
discussion in state legislative settings about how to go about doing
this and what the implications are, you don\'t get uniform testimony,
you don\'t get uniform concepts about how to deal with the liability
questions. You\'re going to get very, very different approaches.

Usually that\'s something we like at the state level, but in this
particular case I think it\'s safety issues, that the federal government
provide direction on how to go about doing this. And we do consider
ourselves sovereign states, and do consider our ability to go about
doing this one of our rights, so it\'s important, I think, that we do
get guidance, because you are going to get different approaches to this.
I\'m not sure that answers your question, but I think it\'s important to
state that there isn\'t going to be a uniform approach on liability or
insurance, or anything else until we get guidance from the federal
government.

MR. KNICKREHM:  I would just echo that there have been a lot of
discussions about the liability piece, as well as the physician
liability. If a physician writes the script here and it goes off to ??
and something changes in the reimportation side, where does that
liability rise, so those discussions are in place. But like my
colleague, I believe that most of those are kind of a risk and reward
piece; same thing in terms of the mechanisms that a state would have to
put into place to try to regulate some of these things. There\'s an
additional cost associated with that.

Again, it just comes down to the affordability piece. Part of the
comment about numerous ways to approach this, that\'s exactly what\'s
going on. The states are approaching this in very many ways. Part of
that becomes the challenge that you guys have to face on how to give
some of the guidance so that we don\'t have 50 different approaches to
this piece.

MR. FROGUE:  Well, thank you for that question. I think that\'s a very,
very important question, and the answer I think anyone can give is, you
just don\'t know what the liability could be. That\'s still up in the
air. But I think what is important is that there are certain members of
the trial bar that would certainly go after deep pockets. And if
counties or states were promoting this activity and someone got injured,
it\'s reasonable to think that the creativity and persistence of certain
lawyers would lead to lawsuits against states and counties. What they
would result in, it\'s hard to tell. But would they result, I think
it\'s very plausible, yes.

MR. ROWE:  If I could just ??

SURGEON GENERAL CARMONA:  Please, sir. Go ahead.

MR. ROWE:  I don\'t have a dollar figure, but I would just say that
whatever ?? I would be happy to undertake an analysis, but whatever you
came up with, I would compare that with the expenditures that states are
making now with their ever-escalating Medicaid budget, with prescription
drugs increasing at the highest level of increase of all medical
expenses, and to look at the long-term care facility bills that states
are paying because people have to spend down to a point where they had
to go into ?? either qualify for Medicaid, go into a long-term care
facility. So my point is, there are lots of expenses now I think that
states are incurring that would be reduced dramatically should we find a
way to allow importation that would reduce the cost of prescription
drugs to our citizens. So I think you might see ?? I don\'t know exactly
what that would be, but I think you would see a substantial decrease in
state expenditures on the other side.

MR. SACHDEV:  I would simply ask each of you, and I appreciate the
comments from each of you, if you ?? after you leave here, and we have a
docket open until June 1^st^, if you have additional information in this
area - this is an area that we are looking for information. The CBO, the
Congressional Budget Office, just recently noted that there would be
less than ?? very, very small, less than 1 percent savings over 10
years. We\'ve had a witness testify at a session two weeks ago, who made
clear that in the parallel trading system in Europe, where there is
parallel trading occurring amongst countries in drugs, what they were
finding was that there was very little cost passed on to the consumer.
And, in fact, much, if not all, the vast majority of this potential
savings from importation in parallel trading situations were being
collected by the wholesalers and the pharmacists, and not being passed
to the insurers, or to the consumer. That type of analysis at the state
level would be very useful to the task force.

SURGEON GENERAL CARMONA:  Thank you. Yes, Mr. Azar.

MR. AZAR:  Mr. Frogue, I wanted to see if you could help me with
something that ?? Attorney General Rowe in his remarks raised, I think,
a very important point that has not had much discussion here; that he is
aware of individuals who have died or have to be institutionalized
because they could afford to buy drugs at the Canadian price, but
couldn\'t afford the differential of the American market price. And I
wanted to see, as someone who has testified against importation, how do
you respond to that? How should policymakers who are trying to address
this issue face that question? A very, very important one, obviously.

MR. FROGUE:  Absolutely. A couple of things. First of all, this debate
is not about brick and mortar Canadian pharmacies. Mr. Rowe\'s state,
people in Maine and Vermont, and Minnesota, they\'re lucky in that most
of them can actually physically go to Canada, buy the drugs at a
pharmacy, and they are safe. Governor Pawlenty has often said show me
the dead Canadians. I mean, it\'s a fair comment.

The issue is more about the trans-shipped drugs that Health Canada does
not control, and drugs bought online. That\'s where I think the
significant potential for problem is far higher.

In this little booklet that I passed out that I put together with a
colleague of mine, we list a series of anecdotes from around the world
and Canada, here in the United States, where we talk about the problems
in supply. And the most, I think, egregious one is the one from
September, where the FDA found that 90 percent of the mail parcels
received, 90 percent of the drugs were drugs that didn\'t meet FDA
standards. So I think that\'s something, and it\'s very easy to fake a
drug and not know about it right away.

I mean, an analysis, when we import food, there hasn\'t been real
problems there. Well, it\'s kind of hard to fake a banana, and there\'s
not a lot of money in that. But it\'s very easy to fake a pill. And I
think when we talk about this issue, it is important to recognize that
Canadian brick and mortar pharmacies that people go physically visit are
not the problem. It\'s more the online, .CA does not mean it actually is
in Canada. It could be anywhere, and that\'s I think where more of the
problem is, and what should be the focus.

MR. AZAR:  What if you were to come up with a system, though, that then
dealt with importation only from the brick and mortar Canadian
pharmacies and distribution systems, and somehow avoid the
trans-shipment issue?

MR. FROGUE:  Then you get to the issue of where does the supply come
from? And I think that\'s ?? when we talk about safety, that\'s a very
important issue. But ultimately, the issue that makes importation a
false promise is where is the supply going to come from? You can\'t
force manufacturers to sell Manitoba 30 times more product than they
actually need. Could you do that? Maybe you could, but does that mean
there\'s going to be so much supply there that every consumer in the
United States can get Canadian prices? Absolutely not.

MR. AZAR:  I just ?? General Rowe, I wanted to mention, and I,
obviously, don\'t know these individuals and their circumstances. And I
don\'t know what the State of Maine does here, but just to take off on
something I think Dr. McClellan would say if he were here. There might
be some programs, and the states, I think, can play a very important
role in educating consumers, patients about a lot of programs that
people just aren\'t aware of out there, and whether these individuals
would qualify for them or not, obviously, I wouldn\'t know, but there
are an increasing number of pharmaceutical company programs for
low-income individuals, and several of them have already announced that
under the new prescription drug discount card benefit, when an
individual qualifies for the \$600 a year transitional assistance, if
they run out of that money, they will actually give their drugs for free
to those individuals automatically if they need them. And then some, and
I know that I was just looking through Mr. Frogue\'s brochure - there is
a list in here of some other discount programs that a lot of people just
may not be educated about, that they might qualify for. And then
obviously Medicaid enrollment, people who could qualify for that. And
then, hopefully the drug discount card which I\'m sure all the governors
are going to be out there trying to educate Medicare beneficiaries about
possible savings, and certainly trying to get everybody who is eligible
enrolled in the transitional assistance to get that \$600.

And then something that Dr. McClellan has talked a lot about is generic
substitution and alternative drugs, really trying to educate consumers
about the options that are out there that they may not know about, that
are dramatically lower cost, but therapeutically the same. So I don\'t
know what Maine is doing there, and I obviously don\'t know the
situation of these individuals, but the more states can do to help us
with ?? we\'re trying also, but the more we can do to educate people who
are in that kind of a situation, I think the better it will be also.

MR. ROWE:  That\'s a good comment. We are. I think we\'re doing all of
the above. We\'re working hard, and the challenge right now is to
educate people about our low cost drug programs for the elderly and the
Medicare prescription drug benefit, and how they dovetail, and how it
can be most beneficial to you. But all the things you said, one of the
issues is a complexity of all this stuff. Wouldn\'t it be nice if you
could pay less for a drug, than trying to find out all the subsidies
that might be available to help you pay a higher price for a drug, and
that\'s what we have right now for a lot of folks. And it\'s very
complex. And when you get old, I live with my 80-year old mother-in-law
and my 87-year old father-in-law, and with age comes a difficulty
sometimes dealing with a lot of complexity. And right now, it\'s very
complex. And what I\'m suggesting, if we work with this, it\'s going to
be less complex. We\'re talking about reducing the price of the drug, as
opposed to giving subsidies to help you pay for it.

But what you said, Mr. Azar, and I think if you look at our DHS website,
my website, you\'ll see we a lot of information to try to help
consumers. Unfortunately, a lot of seniors don\'t access the internet
either. That\'s not the be all, end all for communications, as you know.

SURGEON GENERAL CARMONA:  Task force, other questions or comments. Yes.

MS. HARDIN:  I just want to reinforce what was said before about
soliciting information on the liability issues. Mr. Rowe, I\'m going to
pick on you because you are an Attorney General, and have obviously
worked with Attorney Generals around the country on this issue.

Aside from just trying to define the numbers on a possible liability
problem, any information that you or your group can share with us about
thinking through the actual substantive liability issues that might
arise, particularly you may have already looked at liability issues that
may arise if you participate as a wholesaler or a distributor and
importation. That would be very helpful.

MR. ROWE:  I will do that. Thank you. We\'ll get something to you.

SURGEON GENERAL CARMONA:  Yes.

MR. KNICKREHM:  If may just add one comment to that; one of the things
that I think we have to look at across this too, is not just the ?? it
is that uninsured population too, at the same time. In our state, as
I\'ve mentioned, we have about 400,000 who are all working. The number
one reason for bankruptcy in our state are healthcare costs, it\'s all
health care related, and that is systematic across the country too, so
there\'s other social costs associated with this, not only the liability
and the infrastructure costs are all part of this.

SURGEON GENERAL CARMONA:  Thank you. Dr. O\'Grady.

DR. O\'GRADY:  Hi. Just to not pick on poor Attorney General Rowe, I\'d
like to ask the other panel members some questions. Mr. Frogue brought
up the CBO estimates that they\'ve put out, and that is a little
haunting to me, in terms of, as I said to the other panel, having come
from a border area where I understood the price differentials, and the
Canadians come over to get lower prices on whatever commodities we have.
I\'m a little concerned by the implications of the CBO logic. I
understand what they\'re saying there, and that if you really did kind
of fully implement, if you really took some of these steps, you\'re in a
situation where the U.S. market is at least 10 times the size of the
Canadian market. Certainly, that\'s our population, and that we would go
through great efforts, and then find out that when we were all done with
that, we have very little to show. Because I do believe that the bottom
line here is an ocean of how you affect prices.

We don\'t talk about Canadian gasoline that much any more. You know, I
mean it\'s just not that much difference. Why would go to the effort?
And so I guess my concern, and I\'d like you to discuss a little bit if
you have some thoughts on this, is like I say, I\'m a little haunted
that we go to this effort, and five, ten years from now we turn around
and we say those kinds of ?? unfortunately in this case, we\'re
absolutely right, and we\'re looking at a minimal price difference in
terms of just that 87-year old grandfather or father-in-law kind of face
when they get down to the CVS.

Any thoughts on that one, of that kind of economy of scale. It\'s one
thing when folks are going across and going to Montreal, or Toronto.
It\'s something different if we are talking about a full implementation.

MR. HURSON:  Let me just say that I think that the way to look at this
is not, or at least the way I look at it, 7,000 legislators who are part
of NCSL look at is we\'re facing individuals in our constituencies who
are looking at media reports that say that it\'s half the cost for the
drugs that we\'re taking. Why can\'t we, as policymakers, figure out a
way that they can purchase these drugs in Canada? And we get the
pressure to figure out some solution there.

Is some kind of national program of reimportation the right way to go?
Probably not, but we\'re reacting to the political pressure of our
senior citizens who are saying their aunts, and uncles, and sisters, and
brothers who live in Vermont and New Hampshire, able to get the drugs
for half of what they have to pay.

I don\'t think reimportation, I think probably most legislators don\'t
see reimportation as sort of the solution to the problem, even on a
massive scale. You\'ve got to find a different way to deal with the high
cost of now one of the most important components of healthcare for
seniors. I think Congress made an attempt to do that. I think there are
some problems with the bill, and those will be worked out. But it\'s not
going to solve the problem overnight. We\'re looking for that one
solution, that one thing, Canadian reimportation for our citizens,
doesn\'t matter what CBO says to my legislators. You know, I\'ve got the
pressure from my constituents to do something to help them get the
Canadian drugs. That\'s the bottom line.

MR. KNICKREHM:  Dr. O\'Grady, I\'m in complete agreement that this
discussion is really about price. Reimportation is just one of the many
strategies that have come out of states. Overall, increasing
pharmaceutical cost is not necessarily a bad thing if they\'re being
spent in the right areas, and are actually decreasing hospitalizations,
and a whole host of things. So just that, in and of itself, is not a bad
thing. But states have done things with preferred drug lists, states
have done things in disease management areas, states of done things -
evidence-based medicine approaches to the pharmaceutical side at the
same time, all of which are trying to get our arms around the drug
pricing, and frankly, the entire economy in the healthcare world.

We are still an interesting component on how we fund research in this
country, and it really is about price. This, I think, is just one small
strategy. It is not the ultimate strategy. There\'s certainly not a
silver bullet to it, but it is one of many that I think keep continuing
to come back to how do we control the price of healthcare and deliver
that healthcare to all citizens in this country.

MR. FROGUE:  Delegate Hurson certainly makes a good point. We hear that
exact line from our legislators, too. It is very difficult to respond to
that, why is it half the price in Canada? Why can\'t I get that too? But
keep in mind that that\'s for uncovered retail drugs, low-income,
uninsured seniors, uncovered retail drugs. It is far, far, far better to
be a United States Congressman or federal worker and get your drugs here
in Rockville, than buy them retail uncovered in Canada. There is no
coverage in Canada. You pay retail. Yes, it\'s cheaper, but it\'s much
better to have a \$10 or \$20 co-pay here, much safer drugs, no risk in
that area, and far less money out-of-pocket if you have the appropriate
coverage.

That makes it difficult for Delegate Hurson because it\'s not as much
his issue, as it is a federal issue. Again, the Federal Employees Health
Benefits Program is older than Medicare. It works very well. That\'s
what Congress and the administration should have done last time around
in December. Instead, we got a tiny little pilot program that starts in
2010 that\'s for about 1 percent of the population. It should have been
for everyone immediately. It works. This is not some tried untested
theoretical model.

DR. O\'GRADY:  Can I ask one more question?

SURGEON GENERAL CARMONA:  Please, go ahead, Dr. O\'Grady.

DR. O\'GRADY:  Mr. Frogue, just in terms of the way the logic as you\'ve
laid it out here, I guess there is one just follow-up in terms of your
testimony and whatnot, because your testimony very much focuses on the
safety and the concerns about safety, and I think there\'s certainly
many of us, well all of us are very concerned about the safety aspect of
it. But if for some reason we wave the magic wand and the safety
concerns go away, are there other things that are still problematic to
you, or is that really the nub of the issue?

MR. FROGUE:  Absolutely, and I think it was just touched on, in five or
ten years, as the CBO said, you\'re not going to see much of a price
differential at all, simply because it\'s about supply. You can\'t have
reduced supply and demand. You can\'t have reduced price here, if
there\'s no supply to meet the demand. I mean, it\'s really that simple.

Safety is an issue, of course, and something we should all be concerned
about. And we can go back and forth on whether or not it\'s safe, and
you can make good points on both sides of that argument. That\'s why we
opposed, or our legislators decided to oppose importation because of the
safety issue, but beyond that, the supply issue is an even bigger one.
You can\'t promise Canadian prices because there\'s just not going to be
supply of Canadian drugs at those prices.

MR. ROWE:  Can I just add to that?

SURGEON GENERAL CARMONA:  Yes, sir. Go ahead.

MR. ROWE:  I just want to say to Dr. O\'Grady\'s question, I will look
at the CBO analysis. I\'m not as familiar ?? I\'m not very familiar with
that at all, I\'ll admit. I need to go and look at that carefully and
share it with some of my peers, and try to bring back while the docket
is open some information. Also on the liability issue, look at that. But
I want to agree that I think that the Medicare prescription drug benefit
we gave up the biggest thing that we had, which was our purchasing
power, our clout in the marketplace. And that\'s really what we need to
get back, in my opinion. Maybe that\'s a little political statement, but
I think importation is not the long-term fix, clearly not. It\'s a shame
that we\'re here talking about importation today, I mean, but the
rebalancing of world prices that you heard Governor Pawlenty talk about,
it has to happen. And also, the expenditures.

The unique thing, and it finally came back to me about what we\'re
talking about, this product. It\'s not a pair of shoes where you can go
out and get a \$20 pair, a \$50 pair, a \$100 pair, a \$200 pair, and
the \$50 pair will keep you warm and dry. Sometimes there\'s one drug
and it costs 200 bucks, and it\'s a necessity of life item. This is a
unique product we\'re talking about, and we\'re paying 30 to 70 percent
more. And it\'s just what\'s wrong with this picture?

I know you know this, but don\'t think ?? I think I speak for all of us.
None of us think that importation is the silver bullet here, but it\'s a
way to get where we need to go. And I think for some people, it\'s going
to help them an awful lot. It\'s helping people in my state already. The
folks in Kansas and Oklahoma probably aren\'t getting the benefit that
some people in my state are getting because of where we\'re located.
Thank you.

SURGEON GENERAL CARMONA:  Thank you, sir. Mr. Hurson, I thank you for
maybe pointing out the obvious, what we might describe as the elephant
in the room as it relates to this issue, that we\'ve heard it
repeatedly, especially from elected officials that they\'re confronted
with a constituency that wants something done, a constituency that often
isn\'t aware of the complexities of all of the issues that we are
dealing with here, nor do they want to be aware of the complexities.
They just want the medication that they need. And it\'s been an
extraordinarily difficult issue for us to deal with in terms of what we
call health literacy in our first few meetings, is how do we adequately
inform the public as to the complexity of this? And we just can\'t
discount those complex issues, because they have long and short-term
implications economically, and safety-wise. And so engaging the American
public in this in further depth than just a sound byte or a headline is
the difficulty here.

You know, we\'re driven by the science, what the best practices are, and
our reports will reflect that. And unfortunately, it is the elected
officials then that will then get to decide based on our input what
needs to get done. But we are still confronted with a very difficult
issue that we\'re all struggling with, is how to engage the American
public, those who vote to be better informed citizens as to the
complexity of this issue. And I\'m not sure that, as much as we\'ve done
with the media and we\'ve done with our own leadership, we\'ve done the
best job yet. And a lot of it is, quite frankly, some of the apathy from
the American public when we attempt to discuss these issues, that they
don\'t want to have that discussion. So any of you who can help us and
shed a light on that, but the themes that seem to be emerging here a
fairly consistent, from experts, from law enforcement, to our elected
officials, to all of you, that nobody seems to look at importation as
the solution, but rather a band aid, that we have to do something. And
we\'re tasked with figuring out is that the right something to do? What
evidence would support it, and if we do it, at what cost? And
notwithstanding the liability when we talk about bringing in an
importation program and each state doing one, or states banding
together, the issue of regulation, the issue of oversight, who does it -
and notwithstanding the liability, there\'s a huge cost also. And at
some point, that cost benefit analysis becomes extraordinarily important
because to some who have written on this academically, it\'s simple a
matter of cost shifting. You\'re really not saving any money, you\'re
just moving the cost someplace else.

So if there are no more questions, I would just like to thank you all.
It\'s been really informative for us. I really appreciate your input.
We\'ll go ahead and switch over to the other panel now.

(Whereupon, the proceedings in the above-entitled matter went off the
record at 12:46 p.m. and went back on the record at 12:50 p.m.)

SURGEON GENERAL CARMONA:  The finish line is in sight. I think we\'ve
got our last panel here. I thank you, gentlemen, for your patience.
We\'re running just a little bit behind, but as you know, the time
frames on these are just estimated because of the fact that sometimes we
get into some very important discussions that we don\'t want to curtail.
And all of us had agreed early on that when the discussion is fruitful
and giving us important information that we\'ll continue even though it
may impose some restrictions on our deadlines.

Our first speaker in panel number 3, Mr. Thomas Ryan from CVS. Sir,
thank you.

MR. RYAN:  Thank you, Mr. Chairman, members of the task force. I applaud
you on your persistence in this tough problem that we face as a country.

By way of background, I\'m Chairman and President of CVS/Pharmacy. After
completing our acquisition that we recently announced, we\'ll have over
5,000 stores in 36 states. We\'ll dispense about 14 percent of all the
prescriptions in the country, and we\'ll purchase about \$16 billion of
drugs, largest purchaser in the U.S. In addition to that, we also have a
Pharmacy Benefit Management Company with about 30 million live, so we
are living this challenge every day with the three and a half million
customers that come in our stores day in and day out.

While many in our industry believe the importation issue is a
fundamentally flawed concept and oppose it, I come with a slightly
different view. While there are many programs out there alluded to
earlier by Mr. Azar around manufacturers\' programs, the Together Card,
the Pfizer Sharecard, the government programs, the Medicare program,
retail programs, the consumer doesn\'t really understand the programs.
We spend a lot of time trying to educate the consumer on those programs.
But having said that, it still doesn\'t solve the issue. It doesn\'t
treat the underlying condition, if you will. It only relieves some of
the symptoms. And the condition I\'m referring to is the way prices are
set around the world. And I think we\'ve heard a little bit about that
today, but to give you an example, I mentioned that we\'re the largest
purchaser of drugs.

A consumer in the United States can buy a drug in Canada at retail for
anywhere from 14 to 40 percent less than we can purchase it, not sell
it, than we can purchase that particular drug. I think the issue around
having safety and accessibility are important issues, but these
arguments miss the core. The existing underlying global pricing model
cannot be sustained.

I am not advocating price controls. It\'s a fact that a Ford Taurus, a
Dell laptop, or a bottle of Tylenol all cost more in the U.S. than they
do in Canada. That\'s the market working, not arbitrary government price
controls. Global pricing is a complex problem with an either simple
explanation or solution. But this much I believe is clear, no industry
can permanently sustain a pricing system where the cost of the product
arbitrarily varies that much, so much between a country, and
pharmaceuticals are certainly no exception. We must find a common
ground. So I put forth two basic principles.

One, I believe the federal government and pharmaceutical companies must
move to a global pricing system. You\'ve heard it before, you\'ve heard
it from other people testifying. We cannot support all the R&D in the
world. I would suggest that the U.S. Trade Representative begin to lead
this dialogue and establish a more market-based pricing system with our
partners.

The recent U.S.-Australia Free Trade Agreement is a notable advance on
this front. The administration must elevate this to the highest level.
And this is not just about seniors or the uninsured, Mr. Chairman. I
think this is about all payers. Prescription drugs are costing all
payers, private companies, as well as the government. Now fixing these
disparities in price will not be a simple task, as you alluded to, and
will not be quick. This brings me to my second principle.

While the process moves forward, many Americans need help today. It is
this help that CVS/Pharmacy calls on the administration and Congress to
quickly establish a means for customers to legally and safely import
prescription drugs. It may be a stop-gap measure, it may only last three
or four years, but it\'s a solution that needs to happen. To do
otherwise would ignore the millions of Americans who are playing
prescription roulette as we speak.

Today there are well over 100 internet pharmacies sending medications
into the U.S. from Canada alone. And as you\'ve heard this morning from
the governors, there are states and cities setting up programs for the
uninsured, or directly to their employees.

Mr. Chairman, I believe that if CVS/Pharmacy tried to import drugs for
our customers, the federal and state authorities would shut us down
within the hour. It\'s not acceptable to let this trade practice happen
in the shadows.

Now I recognize there are many potential issues around problems with
importation, which drugs do we import because they don\'t have uniform
standards, how do we ensure adequate supply, which was alluded to
earlier, how do we determine who the intellectual property rights work?
These are just a few of the issues we need to tackle. But I believe
opening up a domestic distribution system to additional sources of
individuals will increase the potential for counterfeit and adulterated
product.

Therefore, I believe the lowest risk is bulk importation, designated and
approved foreign entities, designated and approved licensed wholesalers,
and designated and approved U.S. pharmacies. Such a system would give
you a clear drug pedigree, a chain of custody, the use of appropriate
anti-counterfeiting technologies, and we would charge adequate fees for
these exporters to have federal oversight and inspections.

In contrast, legalizing direct importation for consumers would involve
millions of packages, from hundreds of sources. The resources needed to
ensure the safety would be massive, compared to the safeguards.

To conclude, we all know this is not an academic exercise, and I applaud
you for what you\'re going through. Millions of Americans have already
opted to import drugs because they can\'t afford not to. We owe it to
them to face this issue head-on and not look the other way. If
importation is made legal and safe, CVS/Pharmacy will play an active
role. But in the long term, the answer must be fair and equitable trade
practices.

We cannot allow millions of our fellow citizens to go without life
sustaining medications due to arbitrary international trade practices.
We don\'t do it for sugar, we don\'t do it for rice, and we don\'t do it
for corn, we shouldn\'t do it for life-saving medications. And I guess
you\'ve heard a lot about this from others, but the difference is now
you\'re hearing it from someone who is the largest purchaser of
pharmaceuticals, and the largest dispenser of pharmaceuticals in the
U.S. Thank you.

SURGEON GENERAL CARMONA:  Thank you, sir. Our next speaker, Mr. Thomas
Paul, Ovations United Health Group.

MR. PAUL:  Thank you, Mr. Chairman and task force for inviting United
Health Group to participate in today\'s meeting. We\'re pleased to
provide a perspective from a payer, or a health purchaser perspective in
regard to drug importation.

Ovations is a company within United Health Group that focuses in on
Americans 50 and older, so we focus in on a senior population. But
included in the broader business, United Health Group, we provide
healthcare services to over 55 million Americans, which makes us the
largest provider of health and well-being services in the country today.

United Health Group is committed to finding solutions to making
healthcare coverage affordable for all Americans. We believe that senior
Americans are most affected by some of the decisions that are going on
today, and throughout the country in regard to healthcare, and
especially to prescription drugs.

Many of the older Americans that we work with under our Medicare
programs and Medicaid programs are living on fixed incomes, have limited
prescription drug coverage, and have more chronic healthcare conditions
than younger Americans, causing them to take more prescription drugs. So
it\'s easy to understand from our perspective why people are seeking
alternatives other than the current American systems to purchase their
prescription drugs, and are forcing them to go beyond the border or to
international internet pharmacies.

In regard to importation, I think our thoughts are consistent with many
of the issues that have been stated previously today, and with respect
to time, what we probably wanted to do is emphasize some of the issues
that may not have been addressed at this point. And they really focus in
on our primary perspective in being a healthcare provider, and that\'s
in the continuity and effectiveness and efficiency in the care that\'s
provided.

There\'s been a lot of discussion today, and I imagine from what you\'ve
heard in the past in regard to safety, but one area that we would like
to highlight is in regard to the continuity of care. And Tom Ryan, as a
pharmacy provider, talked a little bit about safety, but I wanted to
kind of expand on something that he may not have said, and that\'s the
value of what happens when an individual has continuity of where they
receive their prescription drugs.

Today part of our concern with importation has to do with the fact that
as individuals cross the border and go to pharmacies in order to
purchase some of their medications, but go to their local pharmacy for
other medications, that what may end up happening is a disconnection in
what we would call a single profile system.

Within our benefit coverage, and our benefit provision today, we connect
all of the pharmacies within our network so that if they go to a
CVS/Pharmacy in California and then travel to a CVS/Pharmacy in New
York, there\'s consistent drug utilization reviews that are taking place
on our members\' profiles, so the CVS pharmacist has access to that
connection, that continuity of care.

By causing the separation and allowing individuals to go to a Canadian
pharmacy, you all of sudden now disconnect that profile, and that
becomes for us a concern in the continuity of care. In doing so, what we
would recommend, that if importation is something that is pursued, that
mechanisms be put in place, such as like Mr. Ryan was saying, is that
current U.S. systems for the processing of claims or the delivery of
pharmaceutical care within the U.S. allow for that continuity, so that
we can connect those pharmacies into the current drug utilization
systems.

The second piece that we\'d like to emphasize was a question that was
brought up during the first panel today, and that has to do with if
importation is not the answer for affordability, what are the other
answers that are available? And again, United focuses on it from a
continuity and quality of care, and would like to emphasize our
commitment to improve the research on comparative efficacy of drugs that
are released today.

In fact, we believe that in focusing on comparative efficacy and causing
that to be a standard within the U.S., that it could have just as great
of an impact as importation of drugs from other countries, as well. We
believe that in providing comparative efficacy it provides physicians,
pharmacists, consumers enough information in order for them to make
informed decisions about their purchasing decisions, so that they are
not ?? that they are selected medications or treatment regimens that are
based on the most cost-effective therapies that will bring the greatest
outcome.

In addition, we believe that it will drive more appropriate research to
focus in on innovative therapies rather than those therapies that expand
the marketplace without expanding efficacy, quality, or general
outcomes.

So with those two statements said, as kind of in addition to what has
already been said today, we do believe that all Americans should have
access to prescription drugs that are appropriate to treat their medical
conditions, and that we need to find ways to ensure that Americans,
particularly older Americans, can afford those needed medications. And
we strongly support further steps to lower cost for senior Americans.
Thank you.

SURGEON GENERAL CARMONA:  Thank you. Our next speaker and final speaker,
Mr. Allen Dunehew. Sir, thank you for being with us.

MR. DUNEHEW:  Thank you, Attorney General. I\'d like to thank all of you
for the invitation to come here and participate in this effort. It\'s
commendable, and for your work on this long process.

My name is Allen Dunehew. I\'m Vice President of Pharmacy for Amerinet.
I\'m a registered pharmacist, and I\'ve practiced pharmacy for many
years in various provider settings, including in border towns in
Northern Maine. I have also served on the Vermont Board of Pharmacy, as
well, in past lives.

Currently in my position at Amerinet, I\'m responsible for the strategic
direction of the pharmacy program, including contracting clinical
pharmacy services, marketing strategies related to pharmacy and
development programs that provide value to all members. We are a proud
member of the Health Industry Group Purchasing Association, or what we
refer to as HIGPA, and I\'m here on behalf of them today to represent
HIGPA, and the members.

HIGPA is a trade association for health care group, purchasing
organizations or GPOs, and represents over 170 healthcare supply chain
organizations, such as Amerinet. HIGPA\'s trading partner members
include many of the world\'s leading manufacturers of healthcare
products, including pharmaceuticals, as well as distributors,
wholesalers, and related suppliers.

My comments for this will apply primarily to the importation, or the
issues surrounding importation by healthcare providers other than in the
ambulatory setting, which is what most of today really speaks to.
HIGPA\'s GPO members aggregate the purchasing power of the healthcare
members and negotiate discounted prices for practically everything that
providers need to buy, and you\'ve heard some comments this morning
about the value of aggregating purchasing volume.

According to a study conducted by a former principal analyst at the
Congressional Budget Office, hospitals save patients over \$30 billion
each year by purchasing products through a GPO contract, so there is
some value associated with that.

In regards to HIGPA, I serve as the association\'s Chair of the Pharmacy
Working Group, which was created about two years ago, primarily at that
time with a focus on drug product shortages. And we\'ve been involved in
a number of task forces in that area, as well as other various pharmacy
issues.

One of the working group\'s most recent efforts was in response to
concerns and questions raised by pharmacists concerning drug shortages,
product integrity, and a primary and secondary sourcing and distribution
channels, which all play into this issue of importation potentially, and
the unique challenges presented in ensuring the safety of patient care
products.

The unique role of GPOs in the marketplace provides us with an ideal
opportunity to help our provider members deal with drug shortages. WE
recently published a white paper entitled, \"Integrity of the
Pharmaceutical Supply Chain Product Sourcing for Patient Safety\", and
we have submitted that for the record for your review. It was
unanimously adopted by HIGPA\'s Board of Directors, and released to the
public in February, 2004.

It\'s important to note that when a healthcare provider is in urgent
need of a product that is unavailable in the routine distribution
channel, an alternative source must be accessed. To take just a moment
to define terms, secondary distributors or secondary distribution
channel is described in this context as movement of products from an
authorized distributor or manufacturer to a source other than the
manufacturer, and intermediary distributor, or the like, which could
come into play as you talk about these importation issues. Those
products are then sold to a provider for the dispensing to the end
customer, or directly to an end customer.

Following our highlights of our suggestions for healthcare providers to
consider as they contemplate accessing this marketplace, we strongly
suggest that they require of alternatives sources, provide them as a
minimum at least the following, the pedigree back to the previous
source. The preferred is back to the point of origin to show true
product integrity, and we all know that that\'s a challenge today.
Certify that it\'s not a diverted product, certify that actions by the
alternative source will not alter any original manufacturer warranties
or guarantees, which is an important issue. And certify that the product
has been stored and handled consistent with labeling requirements, as
we\'ve heard about earlier.

We also suggest that they consider development of lists of key
pharmaceutical products that will not be purchased from products other
than the direct manufacturer or authorized distribution channel because
of their potential for counterfeiting and safety issues, storage issues,
whatever.

In this context, the HIGPA Pharmacy Working Group also reviewed the
issues surrounding the drug importation by healthcare providers, and
patients. The members of the working group believe that many of the same
safeguards as I just described also apply to the importation of
pharmaceuticals.

In addition, the following issues have been identified; the integrity of
an imported product may be questionable, and there is no current
pedigree process available to validate the integrity of that product, at
least an effective process. Due to the lack of this available system and
technology to facilitate the assignment and tracking of serial numbers
for individual packages, there is no secure method to separate imported
stock from stock obtained through primary distribution channels, unless
that labeling is different, so that\'s important to think about, how
this product would appear on the pharmacist\'s shelf. There\'s also no
currently available technology used to validate that an imported or
reimported product was stored according to USP standards, as we\'ve
discussed.

Our working group outlined the minimum safeguards that we feel are
critical to have in place prior to importation. They include an
electronic pedigree to provide secure track and trace of product at the
individual package level throughout the supply chain, regardless of its
source; development by the FDA of acceptable and efficient regulations
on reimportation and importation to ensure integrity of the imported
product. And we separate those two issues out, reimportation and
importation because they are very different; development of technology
that tracks storage conditions, validates, conforms to the USP
standards, assurance that entities in other countries which export
products to the U.S. market are regulated appropriately using the same
standards as required of the U.S. supply chain, and have the authority
to sell products in the U.S. without compromising warranties or
intellectual property rights.

The guidelines state that pursing importation as a cost-saving strategy
without implementation of safeguards places an undue risk on patient
care in its current initiatives in place to improve patient\'s care and
safety.

Going forward, HIGPA believes providers should look to the position of
the Food and Drug Administration as a final rule on importation and
reimportation, and let that position serve as a key indicator of its
acceptability. We have encouraged our member providers to consider these
issues as they make decisions regarding the sources of products.

It is recommended that providers who are interested in accessing
pharmaceuticals from outside the U.S. distribution system should first
become involved in advocating for the implementation of systems that
facilitate electronic pedigree to ensure the integrity, and become
educated about all those vast issues that come to play in that. Anything
short of this may be construed as placing financial considerations above
patient care and safety.

We recognize that healthcare costs are escalating and there is a
constant need to relieve cost pressures. This is what GPOs strive to do
everyday. Unfortunately, without the proper safeguards, importation
provides more risk than the potential savings may be worth. At the end
of the day, we as the primary contractors for the healthcare supply
chain must come down squarely on the side of what is in the best
interest of patients.

I encourage you to break down this issue of counterfeiting into its many
diverse and complex subsections as you start to contemplate these
issues, because you may find that one part of it is okay, but others may
provide too many risks.

I commend Health and Human Services Secretary Thompson, Surgeon General
Carmona, and the members of the task force for focusing attention on
such an important part of the healthcare supply chain, and thank you for
the opportunity to contribute to this effort.

SURGEON GENERAL CARMONA:  Thank you, sir. Members of the task force,
questions for our panel members. Dr. O\'Grady, and then we\'ll go to Mr.
Reilly.

DR. O\'GRADY:  Mr. Ryan, certainly this is a bold proposal you\'ve put
on the table here. And I certainly want to commend you and appreciate
that you\'re sort of taking the time to sort of lay out specifics how
things would go. And I just want to ask you a few kind of follow-up in
terms of getting a feel for exactly how it might work. And with the
understanding that nobody works out all the details of how these things
would work right off the bat. But in terms of ?? you talk about a number
of things having to do with sort of licensed and approved entities on
both sides of the border. Did you have a feeling for or thoughts on
exactly who would do that and how that might work?

MR. RYAN:  Well, first, doctor, your point about we spent a lot of time
coming to this decision, and because it flies in the face, you know,
it\'s essentially illegal, and yet our consumers are out there, our
patients are out there going to pharmacies, and coming into our stores
and talking to our pharmacist saying what are we going to do about this?
So I think it\'s an issue that we don\'t ?? a position we don\'t take
lightly.

The fact of the matter is we believe there\'s about 3 billion drugs
across the markets now, including Europe, Australia, not just Canada.
Canada is a piece, the biggest piece. It\'s the most visible right now,
obviously because of the proximity, but we believe it\'s up to \$3
billion. And we see individuals who don\'t even have a high school
diploma setting up shop, opening up a store front, individuals come in.
Our concern is the patient, so we have a healthcare system in place, as
Tom alluded to earlier. We have a distribution system in place in this
country. We have licensed pharmaceutical wholesalers. We have,
obviously, 54,000 pharmacies.

The issue would be licensing and inspecting those foreign entities.
That\'s the key. I mean, we don\'t have all the answers here. There\'s
issues around supply, there\'s issues around inventory separation, how
do you do that? You know, maybe this is a step for the uninsured
initially, if you think about it, but at the end of the day, it can be
done. I mean, to think that you\'re going to have \$3 billion worth of
drugs coming into Main Street, U.S.A. from hundreds and hundreds of
internet pharmacies and be able to monitor that - I mean, Dr. McClellan
and I have had one-on-ones on this for a number of periods of time, and
my comment to him has always been why not use the system we have in
place? Although imperfect, it\'s a system of checks and balances. We
know the U.S. piece of it. Let\'s put our focus on the foreign piece of
it. And it\'s going to take some monies to step up to it, but I talked a
little bit about that around the fee, so difficult ?? easy say,
difficult do, but at the end of the day, I think there is an opportunity
for us to do it. It can happen.

DR. O\'GRADY:  Okay. Just a follow-up. So in terms of the way you\'re
conceptualizing this right now, you\'re saying that you feel that the
most ?? if there\'s some vulnerability, it\'s this individual sort of
transactions going on. So is it this ?? for the most part you\'d see
this sort of reimportation or importation, or however you want to think
about it, is it going to be ?? would it mostly be between wholesalers?
Is that the way to conceptualize it?

MR. RYAN:  I would think it would be ?? the way we envision it would be
from a \"certified\" exporter to an approved U.S. wholesaler, with all
the necessary licensing, storage agreements, insurance liability
coverage to a licensed U.S. pharmacy, internet, license to internet
pharmacies, Drug Store.com, mail order, retail, but a system that\'s in
place that we have checks and balances on, as opposed to situations that
you had in Oklahoma where the FDA actually shut down some of those
firms.

DR. O\'GRADY:  What would CVS\' role be in this? Would it sort of act as
one of these wholesalers for their own then ??

MR. RYAN:  No, no, no. We would be one of the 54,000 pharmacies.

DR. O\'GRADY:  Okay. Thank you.

SURGEON GENERAL CARMONA:  Mr. Reilly.

MR. REILLY:  This is also for Mr. Ryan. You had said that if you tried
to import and sell drugs from Canada, you\'d be shut down very quickly.
This is a hypothetical. There were no legal impediments. We\'ve heard a
lot of testimony from the governors this morning and from others that
going across the border buying drugs from a Canadian pharmacy, they feel
perfectly safe. Without these systems in place that you\'ve talked
about, would CVS feel comfortable doing business with a Canadian
pharmacy and putting those products on their shelves?

MR. RYAN:  Sure. Let\'s make the assumption that it is legal, so we
would do the necessary due diligence and quality controls to ensure that
wherever we\'re importing the drugs from, or obtaining the drugs from
would be quality and the type of quality of drugs that you should be
importing.

We alluded to it a little bit earlier here that even in our U.S. system,
there are still drugs that are out there that are not U.S. approved,
that enter our system today, that come from secondary wholesalers, that
get pushed out of the country and come back in. We have to monitor that
day in and day out, 400 million prescriptions. So the issue for us would
be there are retail pharmacies in Canada obtaining drugs. Where are they
getting drugs from? They\'re getting the drugs from Canadian
wholesalers. We would go to those Canadian wholesalers and import
approved drugs, so I don\'t think ?? our issue would not be, once again
the legality aside, our issue would not be a safety issue. Our issue at
the end of the day would probably be a supply issue. Could we, in fact,
get the necessary supply?

But I go back to the bigger issue. The broader issue is, and it\'s a
difficult one that we all have to address as a country. And you have a
difficult challenge here. You\'re dealing with trade practices and
health practices, or trade policy and health policy in countries around
the world. How do you influence that? But I believe that if you do put
some pressure on individual countries and pharmaceutical manufacturers
are allowed to raise their prices in other countries to cover their
return on capital, return on investment that they\'re making, I believe
you will see pharmaceutical manufacturers in this country begin to lower
prices to take share in this country. Now they can\'t afford to do that,
because they need to get the return on their investment, so it\'s not an
easy problem, and it\'s not a problem that will be solved overnight, but
I think it\'s something that we have to step up to and let other
governments know that it\'s just unacceptable at this point.

SURGEON GENERAL CARMONA:  Thank you. Other comments, questions, panel
members?

DR. O\'GRADY:  Can I ask ??

SURGEON GENERAL CARMONA:  Please, go ahead, Dr. O\'Grady.

DR. O\'GRADY:  Mr. Paul, you went into a discussion about kind of
comparative data and how to ?? what I think of is in the genre of more
prudent consumer, consumerism going on here. But you seem to stop a
little short of ?? I mean, you were talking about comparative
effectiveness, but I didn\'t quite get cost effectiveness. Now I assume
given that we\'re talking about price and whatnot, was ?? I just wanted
to ask a follow-up. We you also thinking of cost effectiveness there in
terms of that, and at kind of what level? I mean, the British government
has come under a certain amount of criticism for sort of being somewhat
hardline about those sort of things, but what were you guys thinking of
in terms of how you might comparative, cost effectiveness, some of these
other ideas out there to be a more prudent consumer?

MR. PAUL:  Right. Coming from a consumer\'s standpoint or a pairs
perspective, it does get into the comparative efficacy of one drug
compared to another, and then what\'s the cost value if they\'re not
comparable. So today, in the system that we have today what we know is
there\'s a list of drugs that treat cholesterol, and we know that
there\'s a variance in price in each of those. But what we don\'t always
know is how each one of those compares to each other in the
effectiveness of reducing cholesterol. So we may be paying \$70 for a
drug that may be less effective in comparison to a \$50 drug. So when
you get down to the comparative research, what you get to is a point
where you know that your clinical value and your outcomes value is
comparable to the cost value. And we know that at one point that may be
skewed, where the cost value may be ?? it can be higher cost for a less
effective agent. So in our case, we would use it to help to make benefit
determinations or coverage determinations, but be doing it more from a
clinical outcomes perspective, rather than a pure cost perspective.

DR. O\'GRADY:  Now is that data, is that infrastructure in place at this
point?

MR. PAUL:  There is actually very little comparative data out on
prescription drugs today. There is safety and efficacy data that often
may compare to a placebo or potentially older therapies, but when you
look at comparing new therapies to each other, there\'s very little data
out there, and even less when you look at a senior population, which is
where a lot of the emphasis is placed.

DR. O\'GRADY:  Then do you have to actually make a coverage decision,
cover something and then kind of have your own data to then go back
after a year or two of coverage and sort of say wait a second, we\'re
paying much more for this, and it seems either no more effective, or
less effective?

MR. PAUL:  In essence today, United has kind of adopted a policy of we
don\'t really limit what people have access to, so in our benefit
policies, we have open access to prescription drugs. But where we do
have variances is again, the level of that benefit determination, and
often that level is determined on its effectiveness, or its
comparability, or how it ?? what is the general outcome from both a
quality and a cost perspective. So as new data comes out, we review it
to make sure that the decisions we made previously are still the right
decisions.

DR. O\'GRADY:  Gotcha. So a beneficiary may still be able to have access
to that drug, but it may have a higher co-pay than it would have once
that data is sort of ?? that determination is made.

MR. PAUL:  Exactly.

DR. O\'GRADY:  Thank you.

SURGEON GENERAL CARMONA:  Any other comments, questions? Yes, Mr.
Reilly.

MR. REILLY:  Both Mr. Ryan and Mr. Dunehew have laid out components of
systems that might work to help ensure the safety. This is a two-part
question. Any sense at all about what, as a percentage of drug sales or
would that cost 2 percent, 3 percent, 5 percent, or any notion at all
about what we might? And I understand if not, because that\'s not an
easy question.

But, Mr. Ryan, you also suggested I think that all or some of these
costs be borne by fees on, I think you said exporters?

MR. RYAN:  Exporter fees, right.

MR. REILLY:  So like Canadian pharmacies.

MR. RYAN:  Right. What you do with devices now, there are certain fees
that are charged. You could do that with the foreign exporters.

MR. REILLY:  And what the cost of this scheme would end up being, should
the entire cost be borne by fees, or do you have any view on should the
federal government bear the cost directly, which I guess then would be
?? I assume the fees would be passed on in pricing to the consumer, or
to purchasers, whereas if it\'s cost borne, put in the FDA budget, for
example, it would be a cost borne by all taxpayers. Do you have any
views on ??

MR. RYAN:  Well, obviously, the devil is in the detail, and we haven\'t
worked out the whole scheme in the British sense, as it were. I don\'t
think it would cost a lot. There\'s a whole infrastructure and
distribution structure in place. The situation would be - and I\'m
over-simplifying it, so I apologize because it\'s obviously not that
easy - but the issue would be once you have the pedigree on the drug,
once you understand where the drug is coming from, once you ensure the
quality of that exporter, whatever it costs for the U.S. government to
do that, FDA, DEA, that cost would be paid for by somebody.

Now let\'s just put that aside. But once it comes into the system, the
wholesalers and the retail pharmacies wouldn\'t have any additional
costs. They\'d be just calling on drugs the way we normally call on, so
I\'m over-simplifying it, but I don\'t think there would be a lot of
costs.

Now the question was alluded to earlier about how much the savings would
be, is it material enough? Are we going to go through all of this, and
is it really going to save anything? Well, when you think about the
largest purchaser in the U.S., CVS, and we can\'t purchase the drugs for
14 to 40 percent less than they\'re selling them, there has to be more
savings than 2 or 3 percent. There has to be.

Now what the pharmaceutical manufacturers do with pricing is a question
to be discussed, but I do think there has to be some savings there.

MR. DUNEHEW:  On the system, I think you\'re referring to RFID that I
mentioned, Track and Trace. Right? I work with another association, as
well, on some issues, and that is one of them. In my own opinions, this
is my own opinion - RFID presents a lot of benefits just beyond Track
and Trace, and there are actually pilots that are being developed and
put together now to demonstrate that. There are a number of retail
pharmacy chains, CVS is one, that\'s getting involved in a pilot, as
well as a few manufacturers who have products that have been subjected
to counterfeiting. And in that sense, there are studies underway, but in
addition to Track and Trace, that type of a system offers a lot of
benefits beyond true efficiency in the supply chain and distribution
channel. And it\'s interesting at a time when the FDA has just published
a bar code final rule, and that\'s going to be enacted.

Again, my own opinion, I think it\'s conceivable that certainly seven
years out maybe, perhaps even before, but there will be a time when RFID
tags could potentially replace bar code tags. And so now you build Track
and Trace in as part of a system. And that\'s what I was alluding to a
little bit earlier when I talked about developing a system that provides
safety and integrity. And that\'s probably not an overnight thing.

Now the question is how long can we wait for that, but the price of
those systems is dropping as they\'re becoming more mainstream. They\'re
certainly not there yet, but there are a number of demonstration
projects that are put together, so I think that that is a viable
alternative or way to introduce safety into the system. It\'s just it\'s
not going to be here tomorrow.

MR. RYAN:  I would just add that we are working - we were the first
retail pharmacy to work with the RFID system. And initially they started
out about 8 cents apiece, and now they\'re getting down to about 5 cents
apiece, but having said that, that\'s something we need to do in the
U.S. I think that\'s something we need to do in general, but we have a
big challenge right here and now. And I think you can ensure the safety
and effectiveness of the drugs that you import without RFID technology
coming from your ?? they don\'t have RFID technologies in Canada. They
don\'t have them in Europe, and they\'re buying drugs there now, so it
would help in the long run, I think in three to four years we should
have it.

If world pricing was all the same and we didn\'t have this issue, we
still should have RFID technology in the U.S. But having said that, I do
think we can do it safely and effectively.

SURGEON GENERAL CARMONA:  Thank you. Dr. Duke.

DR. DUKE:  I\'m looking for guidance because of the interaction of two
sets of this problem. In your discussion, your testimony, you talked
about the bulk purchase. And I do agree with Dr. O\'Grady, I think that
was a bolden proposal, and it is nice to see a proposal from time to
time in this discussion.

I\'m trying to put together the three panels of this morning, and I
think one of the themes of the previous panels has been the tremendous
pressure that folks feel at local and state levels from constituents.
And I\'m looking at the ?? you\'ve got a systemic solution, which may
bring down prices some unknown at this point, and we\'re going back and
forth to the study that Dr. O\'Grady mentioned earlier.

On the one hand, that we believe could, after significant investment of
energy and effort, and policy and time, produce some savings. On the
other side, there\'s an investment in enforcement resources for FDA to
close down the sort of backdoor channel that has not been enforced up to
this point. Which then has the FDA arresting grandma. And I have a
little concern around some of ?? constituency issues around how we, as a
free society, work that issue too. And I\'m seeking guidance here.
Believe me, this is a dilemma.

MR. RYAN:  I\'m seeking guidance too.

DR. DUKE:  I know.

MR. RYAN:  It\'s a tough issue. Obviously, it\'s a politically charged
issue, but the way our laws are written, it\'s illegal. And I just
harken back to if CVS with 5,000 stores decided to import drugs and take
care of grandma, we\'d be shut down. Mark and I have discussed it, and
he doesn\'t have the number of people and the resources to go after it.
He\'s trying to do it. He shut down some in Florida, and some in Tulsa,
as I said earlier. But you shut it down, and I\'m getting the same drug
that my friends in Toronto are getting, you know, and why are you not
letting me take it? I know it\'s a challenge, but that\'s why I think we
need some bold moves, and we can\'t be working around the fringe. We
either have to say we\'re going to allow imports, or we\'re going to
shut it down. We can\'t be looking the other way because it\'s a
politically charged football. And I hate to say it, but that\'s what\'s
happening now. And I understand that, you know, any governor in any
state shuts down one of these, he\'s not very popular, or she\'s not
very popular. I get it, but at the end of the day, I think it\'s either
legal or it\'s not. So I\'m suggesting a way that I believe we could
solve at least probably the uninsured issue, and perhaps the low income
seniors issue around a relatively, I don\'t say simple, but a relatively
easy solution.

DR. DUKE:  Thank you very much.

MR. RYAN:  Maybe not all drugs, by the way. It might be just some drugs.
One thing I will say, as a little off to the side, so I\'ll stop, but
each state has their own Medicaid system. And as you know, private
insurers allow brand name and generic drugs to be dispensed. And
there\'s also different co-pays for brand to drive the consumer, but you
can\'t do that with Medicaid program. And I think that\'s something you
can fix pretty quickly. There\'s no difference in co-pay. You are not
allowed to have a different co-pay for generic and brands at the state
level, which flies in the face of where healthcare is headed, so states
have to go through a waiver. And to me, generics - there\'s no incentive
for physicians to write generics on a Medicaid recipient so, therefore,
we\'re just driving the cost up. But that\'s a small item.

SURGEON GENERAL CARMONA:  Other questions or comments? If not,
gentlemen, thank you so much for your time. We really appreciate your
input. It\'s going to help us a great deal in our deliberations. Task
Force members, thank you for hanging in there once again, and we\'ll
stand adjourned.

(Whereupon, the proceedings in the above-entitled matter went off the
record at 1:32 p.m.)