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81–494CC 2002

EXAMINING PRESCRIPTION DRUG IMPORTATION:

A REVIEW OF A PROPOSAL TO ALLOW THIRD

PARTIES TO REIMPORT PRESCRIPTION DRUGS

HEARING

BEFORE THE

SUBCOMMITTEE ON HEALTH

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

JULY 25, 2002

Serial No. 107–135

Printed for the use of the Committee on Energy and Commerce

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON ENERGY AND COMMERCE 

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman 

MICHAEL BILIRAKIS, Florida 

JOE BARTON, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

JAMES C. GREENWOOD, Pennsylvania 

CHRISTOPHER COX, California 

NATHAN DEAL, Georgia 

RICHARD BURR, North Carolina 

ED WHITFIELD, Kentucky 

GREG GANSKE, Iowa 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES ‘‘CHIP’’ PICKERING, Mississippi 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

TOM DAVIS, Virginia 

ED BRYANT, Tennessee 

ROBERT L. EHRLICH, Jr., Maryland 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

ERNIE FLETCHER, Kentucky 

JOHN D. DINGELL, Michigan 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RALPH M. HALL, Texas 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

PETER DEUTSCH, Florida 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

TOM SAWYER, Ohio 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

KAREN MCCARTHY, Missouri 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

THOMAS M. BARRETT, Wisconsin 

BILL LUTHER, Minnesota 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

CHRISTOPHER JOHN, Louisiana 

JANE HARMAN, California 

DAVID V. MARVENTANO, Staff Director 

JAMES D. BARNETTE, General Counsel 

REID P.F. STUNTZ, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON HEALTH

MICHAEL BILIRAKIS, Florida, Chairman 

JOE BARTON, Texas 

FRED UPTON, Michigan 

JAMES C. GREENWOOD, Pennsylvania 

NATHAN DEAL, Georgia 

RICHARD BURR, North Carolina 

ED WHITFIELD, Kentucky 

GREG GANSKE, Iowa 

CHARLIE NORWOOD, Georgia 

Vice Chairman 

BARBARA CUBIN, Wyoming 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES ‘‘CHIP’’ PICKERING, Mississippi 

ED BRYANT, Tennessee 

ROBERT L. EHRLICH, Jr., Maryland 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

W.J. ‘‘BILLY’’ TAUZIN, Louisiana 

(Ex Officio) 

SHERROD BROWN, Ohio 

HENRY A. WAXMAN, California 

TED STRICKLAND, Ohio 

THOMAS M. BARRETT, Wisconsin 

LOIS CAPPS, California 

RALPH M. HALL, Texas 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, Jr., New Jersey 

PETER DEUTSCH, Florida 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

JOHN D. DINGELL, Michigan, 

(Ex Officio) 

(II) 

3

C O N T E N T S 

Page

Testimony of: 

Copeland, Don, President and CEO, Associated Pharmacies, Inc ................ 80

Hubbard, William K., Senior Associate Commissioner, Office of Policy, 

Planning and Legislation, accompanied by John Taylor, Director, Office 

of EnForcement; and David Horowitz, Director, Office of Compliance, 

Food and Drug Administration .................................................................... 19

Hutt, Peter Barton, Covington & Burling, on behalf of PhRMA .................. 70

Shepherd, Marv, College of Pharmacy, University of Texas at Austin ........ 59

Wennar, Elizabeth A., President, United Health Alliance ............................ 63

Material submitted for the record by: 

Streck, Ronald J., President and CEO, Healthcare Distribution Management Association, prepared statement of .................................................... 109

(III) 

(1)

EXAMINING PRESCRIPTION DRUG IMPORTATION: A REVIEW OF A PROPOSAL TO ALLOW 

THIRD PARTIES TO REIMPORT PRESCRIPTION DRUGS 

THURSDAY, JULY 25, 2002

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON HEALTH, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:50 p.m. , in room 

2123, Rayburn House Office Building, Hon. Michael Bilirakis 

(chairman) presiding. 

Members present: Representatives Bilirakis, Greenwood, Burr, 

Whitfield, Norwood, Bryant, Buyer, Pitts, Tauzin (ex officio), 

Brown, Waxman, Strickland, Barrett, Capps, Towns, Pallone, Stupak, Wynn, and Green. 

Also present: Representatives Kingston, Gutknecht, Thune, and 

Sanders. 

Staff present: Brent Del Monte, majority counsel; Steven Tilton, 

health policy coordinator; Eugenia Edwards, legislative clerk; Benjamin Beaton, policy analyst; Patrick Morrisey, deputy staff director; Chris Knauer, minority investigator; David Nelson, minority 

investigator; and Jessica McNiece, minority staff assistant. 

Mr. BILIRAKIS. I call this hearing to order. I would like to start 

by welcoming our witnesses and all of the subcommittee members, 

though there are not many here at this point. 

The issue we will be discussing this afternoon is reimportation 

of prescription drugs. Like many issues our subcommittee deals 

with, today’s topic is a complicated, politically charged issue that 

engenders strong feelings among members of the subcommittee and 

of the Congress. 

The goal of many members is to legalize reimportation of drug 

products, which in turn may provide many Americans with cheaper 

medicines. Conversely, if this practice is permitted without adequate safety controls, reimportation could place our constituents in 

grave danger. 

The high cost of prescription medicine is a monumental concern 

for all of us. About a month ago, our committee worked all night 

and favorably reported legislation, which passed the House. The 

House bill would provide lower-cost medicines to seniors. Unfortunately, the Senate has not been able to muster the necessary votes 

to pass a bill. We all hope, I like to think, that the Senate acts soon 

2

to pass a prescription drug benefit; but if they do not, our committee will act responsibly to find creative solutions for Americans. 

In 1988 the Democratically-controlled House of Representatives 

passed the Prescription Drug Marketing Act, which made reimportation of prescription drugs by anyone other than the original 

manufacturer illegal. The driver for this legislation was this committee’s finding that reimporting drugs placed Americans in danger. 

Despite the illegality of personally importing prescription drugs, 

we have all heard of the bus trips to Canada to purchase cheaper 

drugs. In fact, some members of our subcommittee have organized 

these types of trips. If this practice is illegal, I guess one question 

should be: Why doesn’t the FDA, the Food and Drug Administration, prevent these types of actions? I am very interested in why 

the FDA chooses to use its discretion and allow for personal import. 

Specifically, I would like to ask if the Agency has quantified the 

risk that is involved in this type of reimportation. 

I look forward to the testimony today, and hope we all keep an 

open mind and political rhetoric to a minimum, which I doubt is 

going to happen. We need to carefully examine the pros and cons 

of this major policy shift and avoid grandstanding for political 

points. Reimporting drugs is a serious issue. If we pursue legislation, we must be certain that in fact it will help to lower the cost 

of prescription medicines without compromising the health of 

Americans. 

Once again, I would like to offer a warm welcome to all of our 

panelists and thank them for their time and effort in joining us 

today. 

Now I am pleased to recognized the ranking member, Mr. Brown, 

for his opening statement. 

[The prepared statement of Hon. Michael Bilirakis follows:]

PREPARED STATEMENT OF HON. MICHAEL BILIRAKIS, CHAIRMAN, SUBCOMMITTEE ON

HEALTH

I now call to order this hearing of the Health Subcommittee. I would like to start 

by welcoming our witnesses and all of the Subcommittee members. 

The issue we will be discussing this afternoon is reimportation of prescription 

drugs. Like many issues our Subcommittee deals with, today’s topic is a complicated 

politically charged issue that engenders strong feelings among Members of the Subcommittee and the Congress. The goal of many Members is to legalize reimportation 

of drug products, which in turn may provide many Americans with cheaper medicines. Conversely, if this practice is permitted without adequate safety controls reimportation could place our constituents in grave danger. 

The high cost of prescription medicine is a monumental concern for all of us. 

About a month ago our Committee worked all night and favorably reported legislation, which passed the House, that would provide lower cost medicines to seniors. 

The Medicare Modernization and Prescription Drug Act of 2002 creates a voluntary 

prescription drug benefit for seniors and utilizes strong tools to ensure that seniors 

will receive the lowest prices available. Unfortunately, the Senate has not been able 

to muster the necessary votes to pass a bill. I hope that the Senate acts soon to 

pass a prescription drug benefit, but, if they do not, our Committee will act responsibly to find creative solutions for Americans. 

In 1988, the Democratic controlled House of Representatives passed the Prescription Drug Marketing Act, which made reimportation of prescription drugs by anyone 

other than the original manufacturer illegal. The driver for this legislation was this 

Committee’s finding that reimporting drugs placed Americans in danger. 

Despite the illegality of personally importing prescription drugs, we have all 

heard of the bus trips to Canada to purchase cheaper drugs. In fact, some Members 

of our Subcommittee have organized these types of trips. If this practice is illegal, 

3

why doesn’t the Food and Drug Administration (FDA) prevent these types of actions? I am very interested in why the FDA chooses to use its discretion and allow 

for personal importation. Specifically, I would like to know if the agency has quantified the risk that is involved in this type of reimportation. 

I look forward to the testimony today and hope that we all keep an open mind 

and political rhetoric to a minimum. We need to carefully examine the pros and cons 

of this major policy shift and avoid grandstanding for political points. Reimporting 

drugs is a serious issue, and if we pursue legislation we must be certain that it lowers the cost of prescription medicines without compromising the health of Americans. 

Once again, I would like to offer a warm welcome to all of our panelists and thank 

them for their time and effort in joining us today. I now recognize the Ranking 

Member, Mr. Brown, for an opening statement.

Mr. BROWN. I thank the chairman. 

Ruth Tubbs is an engaging and articulate 70-year-old woman 

from Bristol, Connecticut. Ruth has Medicare but no drug coverage. 

She receives Social Security, and her husband works part-time. In 

the United States, Ruth pays $1,200 every 3 months for her prescriptions. In Canada, she pays $350. In 1 year, by going to Canada, she saves $3,700. These savings amount to 6 months’ worth 

of Social Security for her. 

Ruth should be testifying this afternoon. Instead, she was earlier 

in the audience, and then caught a train back to Connecticut. My 

Republican colleagues did not want a consumer witness, but a representative from the drug industry will join us today to testify. 

After all, reimportation would reduce the industry’s revenues, and 

drug makers only earned $300 billion last year. 

It is crucial that we discuss reimportation in the context of its 

impact on the drug industry. The fact that seniors throughout this 

country are able to fill their prescriptions only by purchasing them 

from other countries, that fact is messy, it is emotional, and should 

be ignored. 

To whom do Members of Congress report? I thought we reported 

to our constituents. I thought their concerns were important. I 

thought we reported to people like Ruth Tubbs. If we ignore Ruth 

Tubbs, it becomes so easy to ignore the fact that the risk to a senior of forsaking their medicine may far outweigh the risks of reimporting those medicines. 

It becomes too easy to ignore the fact that reimportation is one 

of this Nation’s only means of protecting U.S. consumers, U.S. companies, and U.S. tax dollars from grossly inflated drug prices. 

I don’t know any American, as I have taken people on buses to 

Canada, who want to travel to another country solely for the purpose of purchasing affordable medicine, or who thinks the Internet 

and commercial reimportation are a step up from the way medicines typically are distributed in this country. But I do know Americans, as we all do, who cannot afford to fill their prescriptions at 

U.S. prices, who need to pay for food and shelter, so they can’t afford to fill those prescriptions. 

Reimportation is a symptom, not the problem. It is a symptom 

of the fact that 12 million seniors lack drug coverage, and millions 

more are underinsured. It is a symptom of the fact that health care 

inflation, fueled by spiraling drug costs, is jeopardizing access to 

health care coverage and health care for every American. 

It is a symptom of the fact that Americans pay two and three 

and four times more than consumers in any other country for drugs 

4

manufactured by the same company, in the same facilities, in the 

same packaging, in the same dosage, the exact same drugs. 

It is a symptom of the fact that while this administration and 

this Congress hang on every word when multibillion-dollar drug 

companies spew their self-serving rhetoric, attacking reimportation 

or attacking any other attempt to get a fair deal for American consumers, while this administration and this Congress permit the 

drug industry to subject American consumers to what amounts to 

blackmail for saying to seniors on fixed incomes, if you want new 

medicine, you are going to pay your share of our enormous profits, 

plus compensate for the profits we can’t earn in other countries 

around the world; while this administration and this Congress permit the drug industry to push our health care financing system 

into crisis, this administration and this Congress stall and hem 

and haw and patronize and outright ignore seniors who depend on 

purchasing their drugs in Canada. 

FDA, like the drug industry witness—and, unfortunately, more 

and more these days we simply can’t tell them apart—will warn us 

that reimportation is dangerous. The Agency may even recommend 

cutting off all mail order imports into this country. But FDA has 

not conducted a study of the actual dangers to prove to seniors that 

the risks of taking imported drugs are greater than the risks of not 

taking anything at all. Somehow it is okay to recommend taking 

away the only option that many seniors have for affordable drugs 

without proving to them it is necessary. 

FDA has taken to stopping mail order shipments from Canada 

at the border. I have been on the phone time after time after time 

with them when they hold drugs at the border, not because the 

Agency is concerned about safety, because they know they are safe 

when they come from certain pharmacies in Canada, but because 

the Agency is concerned that these shipments may be commercial 

in nature, and we know whom that bothers. 

Is it more important to protect the drug industry from commercial reimportation than to make sure that seniors who purchased 

insulin or medicine to control the symptoms of Parkinson’s, or 

medicines to forestall another stroke, that they receive that medicine? Apparently the FDA thinks so. 

I have great respect for Bill Hubbard, who is testifying on behalf 

of FDA this morning—or this afternoon—but the Agency he represents is falling into the same trap as this Congress. Their role 

is to ensure the safety and efficacy of prescription drug products. 

Their role is not to protect drug industry revenues, and not to brag 

about U.S. drug company market share in the world. 

Brand name drug companies should make a profit. They invest 

heavily in research, they take on substantial financial risks, they 

produce life-saving products. For that we are grateful. If commercial reimportation would jeopardize this important industry, we 

need to know that. 

But American consumers should not pay the highest price in the 

world for brand name drugs. Seniors should not have to go to Canada. And, with all due respect to the drug industry, the welfare of 

seniors is more important than their profit performance, something 

this Congress should understand, something the FDA should understand. 

5

Mr. Chairman, it is a proconsumer safety bill, a pro-consumer access bill, and a bill the drug industry will no doubt demonize. I 

only hope this administration and this Congress can disentangle 

itself from the drug industry and consider this legislation on its 

merits. 

Mr. BILIRAKIS. The Chair recognizes the chairman of the full 

committee, Mr. Tauzin, for his statement. 

Chairman TAUZIN. Thank you, Mr. Chairman. 

First of all, we all know Americans deserve access to affordable 

prescription drugs. We believe that is particularly true for our seniors. Just less than a month ago, this committee worked through 

the night, 30 long hours, to produce a drug benefit bill under Medicare. We hope, obviously, to see that enacted into law very soon. 

But until then, we have to continue to see what we can do to get 

safe and effective, affordable drugs in the hands of our seniors. 

Corporate America, by the way, is beginning to feel the crunch of 

rising drug costs and is asking us, too, to help them make sure 

they can keep people employed under health plans that cover them 

for prescription drugs. 

Today we consider a proposal which attempts to do this by legalizing the personal reimportation of drugs from other countries. I 

want to commend you, Mr. Chairman, and our friend, Jack Kingston, for his interest in this important subject. 

By and large, drugs do cost less in Canada and in Mexico, largely 

because of price controls. We have all heard of the bus trips when 

seniors cross into Canada to purchase these cheaper prescription 

drugs. While these trips provide seniors with access to cheaper 

drugs, they also provide seniors with access to drugs which may or 

may not be safe or as effective as drugs that have been approved 

by the FDA. 

Our Nation today has the safest drug supply in the world. The 

FDA’s safety regimen is commonly referred to as the ‘‘gold standard.’’ I look forward to learning from FDA today precisely whether 

they have quantified the risk posed by personal reimportation. Is 

the risk posed by personal reimportation not so high, given that the 

FDA exercises its enforcement discretion and generally does not 

stop these drugs from entering the country? Or are there other factors preventing FDA from stopping the flow of reimported drugs 

into the United States? 

Does the FDA have data which shows that a percentage of drugs 

being brought into our country, which have in fact been adulterated or unsafe, or are subpotent? And if not, why not? Why don’t 

we have that data? 

As many know, our country technically has a law on its books 

pertaining to reimportation. The law was passed in the 106th Congress. It permits reimportation by pharmacists and wholesalers, 

but only if the Secretary of Health and Human Services certified 

that the practice would ensure cost savings and would provide safe 

drugs for Americans. 

Now, the fact, Mr. Brown, is that neither the Clinton Administration nor the Bush administration was able to certify those facts. 

Is the Clinton Administration in the pockets of the drug companies? Was Donna Shalala in the pockets of the drug companies? 

6

All Donna Shalala had to do was say, we can certify, it is safe 

to do so. She could not do it. That ought to be troublesome to all 

seniors. It ought to be troublesome to any one of us who is worried 

about this issue. We ought to get an answer to it. We ought to 

know. We ought to know facts before we commit anyone to damaging the safest drug regimen in the world. 

As a result of neither the Clinton Administration nor the Bush 

Administration apparently being able to certify that reimportation 

is safe, the practice remains illegal, as it has been since this committee passed the Prescription Drug Marketing Act under John 

Dingell’s leadership in 1988. 

So the legislation before the committee today would change that 

act and would say that pharmacists are allowed to reimport drugs 

from anywhere in the world, as long as the drugs do not appear 

to be adulterated, counterfeited, or misbranded. There is no requirement that the they certify that reimportation will ensure safe 

drugs; and further, unlike any proposals which we have seen, this 

bill does not limit reimportation to any specific country or list of 

countries, and it does not require that reimported drugs be tested 

by anyone. 

The Secretary has already told us that legislation with these protections is not enough to protect the public health—if you don’t 

have these protections in it, rather. So we are interested in learning from the FDA what protections are necessary to protect the 

public health if we change the law and allow reimportation. 

I appreciate Jack Kingston’s bringing this to the committee’s attention, and we will learn whether reimportation could be done 

safely, and if so, what protections ought to be put into the law to 

get it done right. 

It is my intent, Mr. Chairman, that our committee move on this 

issue before the end of September, and the witnesses you assembled today are vital to helping us get it right. 

Thank you, Mr. Chairman. 

[The prepared statement of Hon. W.J. ‘‘Billy’’ Tauzin follows:]

PREPARED STATEMENT OF HON. W.J. ‘‘BILLY’’ TAUZIN, CHAIRMAN, COMMITTEE ON

ENERGY AND COMMERCE

Mr. Chairman: We all agree that all Americans deserve access to affordable prescription drugs, particularly our seniors. Just less than one month ago this Committee worked through the night to make good on the promise of an affordable drug 

benefit under Medicare, and I look forward to seeing that a drug benefit is enacted 

soon. Until then, however, we must continue to explore what can be done to get 

safe, effective, and affordable drugs in the hands of our seniors. Today, we will consider a proposal which attempts to do this by legalizing the personal importation 

and reimportation of drugs from other countries. I commend you, Chairman Bilirakis, for calling this hearing to examine this issue, and I commend our colleague, 

Jack Kingston for his interest in this important subject. 

By and large, drugs cost less in both Canada and Mexico, largely due to price controls. We have all heard of the bus trips where seniors cross into Canada in order 

to purchase cheaper prescription drugs. 

While these trips provide seniors with access to cheaper drugs, they also provide 

seniors with access to drugs which may not be as safe and as effective as drugs approved by the FDA. Our nation has the safest drug supply in the world, and the 

FDA’s safety regime is commonly referred to as the ‘‘gold standard.’’ I look forward 

to learning from FDA precisely whether they’ve quantified the risk posed by personal importation. Is the risk posed by personal importation not so high, given that 

FDA exercises its enforcement discretion and does not stop these drugs from entering the country? Are there other factors preventing FDA from stopping the flow of 

reimported drugs into the U.S.? 

7

Does FDA have data showing the percentage of drugs being brought in to our 

country which are adulterated, unsafe, or subpotent? If not, why hasn’t this data 

been collected? 

As many of you know, our country technically has a law on the books pertaining 

to reimportation. This law, which passed in 106th Congress, would permit reimportation by pharmacists and wholesalers, but only if the Secretary of Health and 

Human Services certified that the practice would ensure cost savings and safe drugs 

for Americans. Neither the Clinton nor the Bush Administration could certify those 

things. As a result, reimportation by third parties remains illegal, as it has been 

since this Committee passed the Prescription Drug Marketing Act under Mr. Dingell’s leadership in 1988. 

The legislation before the Committee today would change this by allowing pharmacists to reimport drugs from any nation in the world, as long as the drugs do 

not appear to be adulterated, misbranded or unapproved. There is no requirement 

in the bill that the Secretary of Health and Human Services certify that reimportation will ensure safe drugs for Americans. Further, unlike other proposals which I’ve 

seen, the bill before us today does not limit reimportation to a specific country or 

list of countries, and it doesn’t require the reimported drugs to be tested. The Secretary has already told us that legislation with these protections is not enough to 

protect the public health. I’m interested in hearing from FDA what protections are 

necessary to protect the public health. 

I appreciate Jack Kingston bringing this matter to the Committee’s attention. I 

want to work with him, as well as all concerned Members of the Committee, to learn 

whether reimportation can be done safely and, if so, what protections must be 

placed into the law for it to be done right. It is my intent to continue to examine 

this issue thoroughly and then move legislation through our Committee before the 

end of September. I look forward to hearing from the witnesses.

Mr. BILIRAKIS. I thank the gentleman. 

Mr. Pallone for 3 minutes. 

Mr. PALLONE. Thank you, Mr. Chairman. I have a great deal of 

respect for our full committee chairman, but I am listening to what 

he says, and of course, his emphasis has been on the safety aspect 

with regard to reimportation. 

I would venture to say that I think that is sort of spinning it in 

a direction that maybe is convenient for the Republican leadership 

but does not tell the true story about what is going on with reimportation. Reimportation and the need for it right now directly 

relates to price, and the issue of price and price discrimination is 

the issue that the Republican leadership in this committee and in 

the House as a whole do not want to address. 

That is why they didn’t include it in the prescription drug bill 

that they passed. That is why they would not allow Ms. Tubbs, a 

consumer witness, to testify today, because she was going to testify 

about the issue of price. That is what seniors face. They face tremendous price discrimination. The price and the inability to access 

drugs because of the price is the main reason why we need a Medicare prescription drug benefit. 

The bill that we should pass in the House—not the Republican 

bill but the Democratic alternative that we tried to get up on the 

floor and could not because the Republicans would not allow it—

directly addresses the issue of price by requiring that the Secretary 

of Health and Human Services negotiate price reductions. The Republican bill says the opposite: There can be no interference with 

price, no negotiations, no price structure. There is a specific clause 

in the bill that says that. 

I want to say—I was going to address it, but now they left—we 

had three of our Republican colleagues here who are sort of heroes 

on this issue: Mr. Gutknecht, who takes to the floor from time to 

time; Mr. Kingston; and Mr. Thune. I maybe should not talk about 

8

them because they did leave the room, but I am only saying good 

things, so I think it is okay. 

The bottom line is that this is a very—there is a political reason 

for this hearing today. That is, that there are members of the Republican Party—and Mr. Gutknecht is one of them—who were supportive of the Democratic alternative because it addressed the issue 

of price. 

Now, they were basically told, I am sure, well, you know, we 

can’t get to it in the bill that passes the floor, but maybe we will 

have some hearings on it, so we can give you an opportunity to say 

that we are trying to do something about reimportation, we are trying to do something about price. 

You are not trying to do it after the fact. You already passed the 

bill. What is this hearing for today? Is it simply for show, to try 

to give the impression to these guys who wanted to be helpful that 

somehow we were going to address the issue? 

We are not addressing it today. This is a sham. The fact of the 

matter is that the Republicans do not want to address the issue of 

reimportation, other than talk about the safety aspect. They are 

not going to allow an amendment or any kind of legislation that 

would allow reimportation or expand reimportation. They are not 

going to address any issue that relates to price, because PhRMA 

and the pharmaceutical industry does not want the issue of price 

addressed. We have a PhRMA witness, but we don’t have a consumer witness for that very reason. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

Mr. Burr for 3 minutes. 

Mr. BURR. Mr. Chairman, I must admit I tried desperately not 

to listen, but some of it did seep through. 

You know, on this day, Mr. Chairman, where we in a bipartisan 

way will take up homeland security for one very specific reason, to 

say to the American people that the current threat that we have 

on terrorism, we will try to eliminate as much of it here at home 

as we possibly can. And we are here today to debate a similar thing 

as it relates to the possibility of whether we are going to lower the 

gold standard that we have set for the American people about the 

safety and the efficacy of the pharmaceutical products that they 

take, without question of how they were made or where they were 

made or whether they work. 

I want to take this opportunity also to highlight Mr. Kingston 

and Mr. Gutknecht and Mr. Thune and Mrs. Emerson, who have 

been passionate about this issue. They are a lot of the reason that 

we are here today. 

But the fact is that I also want to make some remarks on an editorial I read this week. It was an editorial written by Anthony 

Daniels, and for the purpose of my colleagues on the other side of 

the aisle, he is not an industry rep, he is not a policymaker, he is 

an FBI agent, retired. 

He said, ‘‘Legislation allowing reimportation of U.S.-made drugs 

from abroad could open the door, the floodgates, to adulterated and 

often dangerous counterfeit drugs from unscrupulous profiteers, deranged individuals, and even terrorists. Not even trained professionals can spot the negligible differences between many of today’s 

counterfeit and real things.’’

9

It goes on in that editorial to quote another individual who is a 

policymaker. That quote is: ‘‘Without our domestic safety net to ensure the integrity of these pharmaceuticals, consumers simply do 

not know what medicines they are buying.’’ That quote was the observation of Senator John Breaux. 

Mr. Daniels goes on to sum up in his editorial. He says this: ‘‘my 

advice to 100 Members of the U.S. Senate and to 435 Members of 

the House of Representatives on allowing reimported drugs is pretty straightforward: Don’t risk it. Don’t risk it.’’ Some say they are here today because their stand is for the 

health of the senior population. I would tell you that the reason we 

are here is to ensure the safety of the pharmaceutical inventory for 

the entire American population. 

Mr. Chairman, I hope on this that we will have a healthy debate, 

and at the end of the day, the decision will be to protect this very 

valuable tool that we have in our health care arsenal, just like we 

intend today to protect this country from terrorists. 

Mr. BILIRAKIS. I thank the gentleman. 

Mrs. Capps. 

Mrs. CAPPS. Thank you, Mr. Chairman. I am pleased we are 

holding this hearing on the reimportation of prescription drugs. 

The issues relating to reimportation, such as safety, such as medication prices, are very critical to my constituents. 

In my time in Congress, I have been a supporter of proposals to 

bring U.S.-made prescription drugs back into this country. It has 

been the only way I could find on our agenda to help my constituents get access to affordable prescriptions. 

Many have raised questions about the safety of reimportation. As 

a public health nurse, I want answers to these questions. But 

frankly, it is so appalling that we even need to look at these issues 

and that we are having this hearing today. 

Why—and I hope this question is addressed by members of our 

panel—why are Americans feeling driven to seek their medications 

overseas or across the border? It is a cost and time to them to do 

this. Why are there not affordable alternatives here at home? 

Our taxes fund billions of dollars in research and development at 

the National Institutes of Health. Our taxes subsidize the research 

that our American corporations enjoy, but the fruits of these public 

investments remain far out of reach to so many of our citizens, especially those on fixed incomes, our seniors. 

Over the last decade, as new miracle drugs have come on the 

market, their prices have skyrocketed way above the cost-of-living 

increases, and as a result of that, many Americans have no choice 

but to turn to foreign markets to find affordable medications. Everywhere I go in my district, my constituents tell me about the 

problems they face because of the high price of drugs, prescription 

drugs; not just seniors, either, but working men and women struggling to support their families. They need help as well. 

Nothing happens, however, to bring the prices down or to help 

people with their costs. We still have not enacted a prescription 

drug benefit under Medicare, and the proposal passed by the House 

will not help, particularly Ms. Tubbs who wanted to testify today, 

whose medication she pays out of pocket amounts to about $4,000 

a year. She would have to incur costs of up to $2,000 additional a 

10

year before the benefit that was passed out of the House would 

come into play. 

Prescription drug companies insist that if we do anything to cut 

their exorbitant profits, it will prevent them from developing new 

drugs. When we suggest that maybe they can afford to do testing 

to make sure their products are safe and effective for children, they 

demand patent extensions. Yet they still have millions of dollars to 

pay for expensive advertising to induce people to buy their products, whether they need them or not, and to lobby against prescription drug proposals here in Congress. 

Some of these companies do offer discount cards, but these discounts are usually nothing more than an illusion. They often provide limited savings that are wrung out of community pharmacists 

and do nothing to reduce the overall costs of medications. So I 

think we need to seriously examine the cost of prescription drugs 

in this country. 

A debate about the safety of reimportation medications should be 

part of that evaluation, but it is not the entire question. It is only 

a symptom of a much larger crisis. I look forward to hearing from 

our witnesses. 

Mr. BILIRAKIS. I yield 3 minutes to Dr. Norwood. 

Mr. NORWOOD. Thank you, Mr. Chairman. Every time I open a 

paper, it seems like I see an article about seniors loading onto 

buses heading into Canada or Mexico to buy cheaper prescription 

drugs. While I admit I am encouraged by their ingenuity, I continue to have concerns about their safety as they try to meet their 

financial bottom line. 

When I am back in Georgia, I hear from scores of constituents 

concerned about their rising prescription drug costs. We worked 

hard to address this issue in passing a Medicare prescription drug 

bill for seniors. There is no question in my mind that implementing 

a comprehensive prescription drug bill for seniors actually will 

bring down prices, and we do need to continue to talk about the 

cost of drugs. 

We are going to talk about generic drug competition in September. I am very interested in some possible Hatch-Waxman reforms. I have also made no secret of my interest in examining the 

consequences of direct consumer advertising on drug costs. 

But Mr. Chairman, I want to commend you. This whole series of 

hearings about prescription drugs have been, in my mind, divided 

correctly. This is about safety, that is what this hearing is about; 

the next hearings will be about cost. Even though you would not 

let me have my consumer advocate here, I am delighted that you 

held Mr. Brown to the same rules where he could not have his consumer advocate at this hearing about safety, and should have them 

next month at the cost hearing. So I commend you and thank you 

for that. 

I will not continue on. I will put the rest of my statement in the 

record. 

It appeared to me that the chairman copied my statement, anyway. My remarks were very similar to his, and I don’t know that 

they need to be repeated. But I want us to keep in mind why we 

are here. We are here about the safety and efficiency of the medicaVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 W:\DISC\81494 81494
11

tions that people in this country take. We had better take a very 

close look at that, or either we don’t need an FDA. 

I don’t know anybody who is ready to vote the FDA out of business, but if you think they are important for our drug manufacturers in America, they have to be even twice as important for the 

drug manufacturers in China. 

I hope we will be very careful, other than just talking about yes, 

they are too high; yes, it is a concern; and yes, we are going to try 

to look at that. But let us not do something stupid at this point 

by allowing drugs to come into this country that actually not only 

do not work, but potentially could kill people. 

With that, Mr. Chairman, I yield back. 

Mr. BILIRAKIS. The Chair thanks the gentleman. 

Mr. Green for 3 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. Thank you for holding 

this hearing on reimportation of prescription drugs. 

As a member representing Houston, Texas, I know from firsthand experience that many of my constituents travel south to Laredo, Brownsville, McAllen, and other border crossing sites to purchase their medicine. It is no wonder that they do. Prescription 

drugs in Mexico are significantly less expensive than they are in 

the United States. But as many critics of reimportation point out, 

there is understandable concern about the safety, potency, quality, 

and even authenticity of the drugs. 

Unfortunately, gaping holes in our data prevent us from really 

knowing what the true scope of the problem is. We do know that 

we do not know how many people reimport drugs, what percentage 

are adulterated, counterfeited, or tampered with, and what the impact is on the individuals who take them. There is no doubt that 

this problem should be addressed. In all honesty, I have had the 

honor and privilege of buying pharmaceuticals in Mexico myself. 

But I think the biggest problem is what drives individuals to 

cross the border in the first place: the skyrocketing prices of prescription drugs here in the United States. According to the National Institute for Health Care Management, expenditures for prescription drugs in the United States continue to be the fastest 

growing component of health care, increasing by an average of 15 

percent per year over the past 5 years. 

Even more troubling, American consumers are consistently paying higher prices than not only our neighbors, the Canadians, or 

citizens of Mexico, but also individuals in Europe, Japan, and other 

industrialized countries. 

This huge problem for people who do not have prescription drug 

coverage, the low-income, the uninsured, and our seniors—I don’t 

think a single member of this panel, whether we support reimportation or not, believes that it is the answer to our prescription drug woes. We need a national health care system that takes 

care of people so they do not have to drive across the border to access their medicines. 

We need a meaningful and comprehensive, affordable Medicare 

prescription drug benefit. We need to expand Medicaid, S-CHIP, to 

help those individuals without health insurance get access to the 

health care system. Unfortunately, Congress continues to grapple 

with the issues year after year, and seniors must continue to do 

12

what they need to do, and that is including taking bus trips to 

Mexico or Canada. 

They don’t want to go on the bus and drive 5 hours to the Rio 

Grande Valley; they would much rather drive 5 minutes down to 

their local drugstore. But we are not giving them any choice. If you 

live near a border, you will go get your pharmaceuticals if you can 

physically do it. 

But until we solve the problem of drug coverage in our country, 

we really do not have a solution. As long as they are doing that, 

we need to make sure of the safety of those drugs, and make sure 

that our constituents know those risks. 

Mr. BILIRAKIS. The Chair thanks the gentleman. 

Mr. Bryant for 3 minutes. 

Mr. BRYANT. Thank you, Mr. Chairman. I will try to be brief. I 

think just about everything that can be said has already been said, 

and we are not even halfway through the opening statements. 

I do thank you for holding this hearing. It is an important issue. 

It is an issue today since we are discussing the reimportation issue 

and certainly the safety factors. 

I understand that it is an election year, but I really think this 

is not a Republican or Democrat issue. I think what we want are 

affordable drugs for senior citizens that are safe. And to blow off 

safety is just a political issue. I do not understand that. 

I know I have heard a couple of comments about that today, that 

we are just talking about safety and that is not really the real 

issue here; it is the cost of drugs, is what I am hearing. Mr. Green 

did not say that. And I would affirm what he said, that safety is 

a major, major reason. We can have all the drugs in the world at 

as cheap a price as possible, but if they are not safe, and we are 

not sure they are safe—again, we all know what can happen overseas. Even now, post 9/11, the possibilities are unimaginable what 

can be done. 

But we have the FDA for a purpose. We need safe drugs. Certainly they need to be affordable. I hope this panel can work and 

learn something today that will help us along those lines. But ultimately, we are going to have to be concerned with the safety of 

these drugs, and ultimately that is the problem out there when we 

start talking about reimporting drugs. We just cannot be sure. 

There are risks involved here, and certainly the people that go 

over there now assume those risks, and willingly do so. They are 

informed and they understand they are taking a risk. But certainly 

if they are going to bring them over here and sell them to 

unsuspecting people who are not willing to assume those risks, that 

is where I see a great problem here. 

But indeed, this is a very complicated issue. I hope we can keep 

politics out of this, because certainly the administration prior to 

this administration, I do not think they were able to certify the 

safety of reimported drugs, either. 

So it is not Republicans, and it is not Democrats. Let us look at 

this in seriousness, with the idea of trying to find some reasonable 

compromises and reasonable solutions here. 

I want to thank my three colleagues, Mr. Kingston, Mr. Gutknecht, and John Thune, for the great work they have done on this. 

I yield back my time. 

13

Mr. BILIRAKIS. The Chair thanks the gentleman. 

Mr. Strickland. 

Mr. STRICKLAND. Mr. Chairman, I have a statement that I would 

like to put in the record. 

Mr. BILIRAKIS. Unanimous consent is granted that statements of 

all members of the subcommittee be made part of the record. 

Mr. STRICKLAND. Having just said that, I will just take 30 seconds to say that the problem that we are trying to deal with is this 

cost issue. There may be several ways to approach that, but I think 

many of us are desperately trying to find something that is going 

to work. This is one approach that I certainly am willing to look 

at, but I agree with those who have said that if we have a comprehensive, affordable drug program available within this country, 

this reimportation issue would go away. 

I yield back the balance of my time and I look forward to hearing 

the witnesses. 

Mr. Whitfield, 3 minutes, please. 

Mr. WHITFIELD. Thank you, Mr. Chairman. 

Of course, all of us do want affordable prescription drugs. That 

is why we in this committee and in the House passed a meaningful 

prescription drug benefit for our senior citizens, so that those at 

the 150 percent of poverty level and below would receive free prescription drugs. 

It is not the Cadillac program that all of us would like, but I 

think it is an important first step and a meaningful first step to 

provide affordable prescription drugs for seniors. 

I am disappointed that some of our friends on the opposite side 

of the aisle, when they realize that we do not agree with them on 

every issue, refer to our arguments as a spin, as a sham, as a 

show. I think the concerns that we have on safety are real concerns. 

I was reading an article in the Associated Press on August 17 

that said a man who rode a U.S. Senate candidate’s Rx Express to 

Canada to buy prescription drugs says he was sickened by some of 

the medications he received. A gentleman from St. Cloud ‘‘was 

rushed to the hospital Tuesday after his heart slowed and he 

passed out. The emergency room doctor who treated him blamed it 

on the Canadian-purchased medication. While he purchased the 

correct drug, it was not in the time release capsule form that he 

usually received in the United States.’’

So I think these are real concerns, and I would also point out 

that there is no effective way under some of these drug importation 

bills to prevent the transshipments of drugs, legitimate or not, 

from Third World countries into Canada and then into the United 

States, because Canadian law explicitly exempts pharmaceuticals 

intended for export from any regulatory oversight whatsoever. 

So I think we do have a legitimate concern here on safety, and 

I think that every senior citizen in America wants a safe drug; not 

only an inexpensive drug, but a safe drug. I think that is the goal 

of all of us to guarantee that. 

So the fact that we are raising questions about reimportation certainly should not reflect or indicate that we are not interested in 

providing affordable drugs, safe drugs for our senior citizens. So 

14

this is not a clear-cut issue, and I am delighted that the chairman 

is having this hearing and will have more on this subject. 

Mr. Waxman is recognized for 3 minutes. 

Mr. WAXMAN. Thank you very much, Mr. Chairman. The gentleman who preceded me says that this is not a clear-cut issue. 

There is something that is very clear-cut about this issue. That is 

the fact that the prices for drugs are too expensive. Seniors don’t 

have coverage. They are being discriminated against. Costs are 

being shifted onto them, so our American seniors, often elderly 

women, are finding themselves gouged by the pharmaceutical industry and being charged the highest possible prices. 

What we need to solve this problem is a defined, dependable, 

comprehensive Medicare prescription drug benefit. We need to use 

the strength of the purchasing power of America’s seniors to secure 

better prices as other countries do. Instead, today these seniors 

don’t have coverage. They pay out of pocket for their drugs. They 

are the victims of unconscionable discriminatory pricing by the 

drug companies. 

We need not spend time asking why our seniors want to be able 

to buy drugs from Canada. The answer is obvious: They don’t have 

Medicare coverage. They can’t afford the high cost of drugs here, 

and they can buy those drugs at a cheaper price in Canada. 

One response to price discrimination is to legalize reimportation 

of American drugs into the United States. How can we say no to 

seniors who cross the border into Canada because they can’t afford 

their medications at U.S. prices? But reimportation schemes are 

usually complex. They raise difficult questions about whether the 

reimported drugs will be safe and will actually save consumers 

money. Some of them do not help all seniors. 

So let us be completely clear about this. The pharmaceutical industry could make this problem disappear tomorrow without any 

of the legislative interference that they dread so much. We would 

not need to consider relaxing the rules on reimportation if they 

would voluntarily stop discriminatory pricing against American 

seniors. 

I am proud to be a sponsor of the Allen bill that would stop this 

discriminatory pricing and put a limit on what can be charged our 

seniors, consistent with what seniors in other countries are paying 

for the very same drugs. 

Of course I want, first and foremost, a strong prescription drug 

benefit in Medicare, but the majority of this committee seems to 

want to change the subject. They want to concentrate on the criticisms of reimportation bills instead of focusing on the reasons seniors have to go to Canada to get better prices in the first place. 

Let us address the problems of the high price of drugs, respond 

to the abuses of the Hatch-Waxman legislation that is keeping 

generics from the market, let us proceed with a hearing on that 

subject, and let us give seniors real coverage in Medicare. That is 

the way to address this problem. 

[The prepared statement of Hon. Henry A. Waxman follows:]

PREPARED STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF CALIFORNIA

We are here today for one reason. That reason is price discrimination. 

15

We are here because pharmaceutical companies charge America’s seniors far more 

for prescription drugs than they do any other buyers. They charge seniors more 

than they charge other Americans with market power, and more than they charge 

seniors in other countries. And they have singled out some of the most vulnerable 

members of our society, most of them elderly women, for this price-gouging. 

What we need to solve that problem is a defined, dependable comprehensive Medicare prescription drug benefit. We need to use the strength of the purchasing power 

of America’s seniors to secure better prices, as other countries do. 

Instead, today, those seniors don’t have coverage. They pay out of pocket for their 

drugs. And they are the victims of unconscionable discriminatory pricing by drug 

companies. 

Studies conducted by my staff on the Government Reform Committee show that, 

for the very same drug, our seniors pay, on average, more than twice what ‘‘preferred customers’’—such as HMOs and the federal government—pay. For some 

drugs, seniors are paying more than 15 times the price paid by other favored customers. 

Our studies also show that our seniors are charged at least twice and sometimes 

three times what seniors in Canada, France, Germany, Italy, Japan, and the United 

Kingdom pay for the same drugs. 

We needn’t spend time asking why our seniors want to be able to buy drugs from 

Canada. The answer is they need Medicare coverage. And they need an end to price 

discrimination by the pharmaceutical industry. 

One response to price discrimination is to legalize reimportation of American 

drugs from Canada into the U.S. How can we say ‘‘no’’ to seniors who cross the border into Canada because they cannot afford their medications at U.S. prices? But 

reimportation schemes are usually complex, they raise difficult questions about 

whether the reimported drugs will be safe or will actually save consumers money, 

and some of them do not help all seniors. 

Let’s be completely clear about this: the pharmaceutical industry could make this 

problem disappear tomorrow, without any of the legislative interference they dread 

so much. We wouldn’t need to consider relaxing the rules on reimportation if they 

would voluntarily stop discriminatory pricing against American seniors. 

I have been proud to be a sponsor of the Allen bill which has been so effective 

in focusing attention on the practice of discriminatory pricing and the advantage 

citizens in other countries have over Americans in accessing more affordable drugs. 

It remains an effective response to these discriminatory pricing practices, and so 

long as these practices continue, we’ll continue to pursue it. 

Of course, I want first and foremost a strong prescription drug benefit in Medicare. That is what seniors want too. If this Subcommittee had allowed our beneficiary witness to testify today, that is what we would have heard. 

But the majority on this Committee seems to want to change the subject. They 

want to concentrate on the criticisms of reimportation bills instead of focusing on 

the reason seniors have to go to Canada to get better prices in the first place. 

Let’s look at the real issue. Let’s end price discrimination. 

Let’s address the problem of the high price of drugs, and respond to the abuses 

of the Hatch Waxman legislation that are keeping generics from the market. Let’s proceed with a hearing on that. 

And let’s give seniors real coverage in Medicare. That’s the way to address the 

problem.

Mr. BILIRAKIS. Mr. Pitts is recognized for an opening statement. 

Mr. PITTS. Thank you, Mr. Chairman. Thank you for holding the 

hearing. I think it is important for us all to hear from the witnesses and have the opportunity to ask questions about drug importation and reimportation. 

I personally have some concerns about the safety of imported or 

reimported drugs, which I’m sure will be discussed today. The 

Food, Drug, and Cosmetics Act requires the FDA to prevent the importation of any drug which appears to be adulterated, misbranded, 

or unapproved. The approval requirements in the act require that 

every new drug sold in the U.S. be approved in advance by the 

FDA based upon safety and effectiveness. 

Mr. Chairman, a drug made outside the United States will be 

unapproved, and therefore, illegal, if it is made in a different plant 

or through a different process than what FDA approved for U.S. 

16

use. This legislation allows for personal reimportation of prescription drugs, and also allows pharmacists to reimport prescription 

drugs, thus overriding the prohibition established on reimportation. 

I understand my colleagues’ concerns about the costs of prescription drugs. However, I am interested to hear in the hearing today 

whether this legislation will indeed reduce the cost of prescription 

drugs. Would the potential savings from this legislation be passed 

on to the American consumers? Mr. Chairman, is it possible for us 

to certify that reimported drugs are safe? 

Opening our borders to this would increase the likelihood that we 

would expose ourselves to counterfeit drugs, cheap foreign copies of 

FDA-approved drugs, expired drugs, contaminated drugs, and 

drugs stored in unsafe conditions. 

Further, border inspectors cannot be expected to examine imported drugs and accurately determine the identity of such drugs 

for the risk they pose to patients who need them. 

So I will submit my entire statement for the record, but Mr. 

Chairman, I think we must be very careful on how we proceed on 

this very important issue. 

[The prepared statement of Hon. Joe Pitts follows:]

PREPARED STATEMENT OF HON. JOE PITTS, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF PENNSYLVANIA

Mr. Chairman, thank you for holding this hearing today. I think it is important 

for us all to hear from the witnesses and have the opportunity to ask questions 

about drug importation and reimportation. 

I personally have some concerns about the safety of imported or reimported drugs, 

which I am sure will be discussed today. 

The Food Drug and Cosmetic Act requires the FDA to prevent the importation 

of any drug which appears to be adulterated, misbranded or unapproved. 

The approval requirements in the Act require that every new drug sold in the 

United States be approved in advance by the FDA based upon safety and effectiveness. 

Mr. Chairman, a drug made outside of the United States will be unapproved, and 

therefore illegal if it is made in a different plant or through a different process than 

what FDA approved for US use. 

This legislation allows for personal importation of prescription drugs, and also allows pharmacists to reimport prescription drugs—blatantly overriding the prohibition on reimportation established by the Prescription Drug Marketing Act. 

Mr. Chairman, I am concerned that this legislation has no requirement that the 

bill would not compromise health, or reduce costs, to become effective. 

I understand my colleagues’ concern about the cost of prescription drugs. However, I am interested to hear in this hearing today whether this legislation will indeed reduce the cost of drugs. Would the potential savings from this legislation be 

passed on to American consumers? 

Mr. Chairman, it is impossible for us to certify that reimported drugs are safe. 

Opening our borders to this would increase the likelihood that we would expose ourselves to counterfeit drugs, cheap foreign copies of FDA-approved drugs, expired 

drugs, contaminated drugs, and drugs stored in unsafe conditions. 

Further, border inspectors cannot be expected to examine imported drugs and accurately determine the identity of such drugs or the risk they pose to patients who 

need them. 

The Administration as well as OMB, HHS, FDA, DEA, and CMS—all have released statements in opposition to reimportation. In fact, the Administration announced on June 27, 2001, that : 

‘‘The Administration would oppose any amendments...that could result in unsafe, unapproved, or counterfeit drugs being imported into the United States.’’

And Secretary Thompson has expressed his strong disapproval and admitted that 

he cannot certify that imported drugs are safe. I quote: 

‘‘. . . the law requires us to certify as Secretary that we know that these drugs 

are safe. It’s impossible for us to certify that these drugs are safe.’’ (during testimony before the Senate Budget Committee on February 14, 2002.) 

17

Mr. Chairman, we must be very careful on how we proceed on this issue. The Prescription drug Marketing Act was enacted for a reason—to ensure US public health 

is protected. The ramifications of this legislation could be dire. 

I fear that this legislation would make it virtually impossible for FDA to conduct 

meaningful enforcement. 

I yield back.

Mr. BILIRAKIS. The Chair thanks the gentleman. 

Mr. Wynn, 3 minutes. 

Mr. WYNN. Thank you, Mr. Chairman. I appreciate your calling 

this very important hearing. 

I would only comment very briefly that the fact that we are having this hearing and this discussion today is a terrible indictment 

of America’s health care system. 

I would concur with the comments of my colleague, Mr. Waxman. 

The fact that we have to discuss reimportation of drugs suggests 

that we have failed. We have failed to provide an adequate prescription drug benefit under Medicare that makes prescription 

drugs, which are essential in our modern age, available at a reasonable price. 

This has led to the creation of this issue, where people are willing to take the risks—that my other colleague on the Republican 

side of the aisle just described—from a health standpoint in order 

to get access at reasonable costs to drugs that they believe are either life-saving, or certainly life-enhancing. 

So the real point is we ought to have the witnesses’ testimonies 

and we ought to consider ways to do this, to allow people to gain 

access to these drugs, but we really ought to keep in mind the fact 

that the business of Congress this year ought to be passing a viable 

prescription drug plan that can reduce costs for our seniors. 

Mr. Chairman, I yield back the balance of my time. 

[The prepared statement of Hon. Albert R. Wynn follows:]

PREPARED STATEMENT OF HON. ALBERT R. WYNN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MARYLAND

Mr. Chairman, thank you for holding this important hearing to address the issue 

of drug reimportation. I look forward to hearing from our witnesses about the safety 

of drugs reimported from Canada, Mexico and all over the world. 

The increasing costs of prescription drugs in the United States has forced many 

Americans, particularly the 35 percent of seniors who are uninsured, to travel to 

Canada and Mexico for less expensive prescription drugs. The problem, however, is 

that these reimported drugs are not inspected by the FDA and may pose a possible 

risk to patients. I hope that today’s hearing will shed some light on the possible 

risks associated with drug reimportation. 

However, while the safety of reimported drugs is important, it is an issue which 

we should not even have to address. Had Congress passed an adequate prescription 

drug benefit, the reimportation of drugs would not even be a salient issue. Unfortunately, the House has not yet passed legislation that would sufficiently provide affordable prescription drugs in the United States for seniors. 

While I am interested in hearing from today’s witnesses about the safety issues 

surrounding the reimportation of drugs, it is unfortunate that the House of Representatives has not passed a prescription drug benefit that will help all seniors in 

need of assistance.

Mr. BILIRAKIS. The Chair thanks the gentleman. 

I believe that completes the opening statements. We will go on 

into the hearing—the appalling hearing, as some have referred to 

it as. 

[Additional statements submitted for the record follow:]

18

PREPARED STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you Mr. Chairman for holding this important hearing. The issue of drug 

pricing is one on which all Members are focused. In particular, much has been made 

regarding the difference in prices between the United States and other countries. 

Congress annually votes on measures to allow the reimportation of prescription 

drugs into this country. I was in Congress in 1988 when we passed the Prescription 

Drug Marketing Act. We included in this Act a provision which limits the reimportation of pharmaceuticals to the manufacturer of the product. This provision 

was designed to address the safety risks associated with drugs entering into the 

country which were sub-potent or adulterated. 

In 2000, Congress passed legislation which allows third party reimportation of 

prescription drugs; however the legislation included a provision that prohibits implementation until the Secretary of Health and Human Services certifies that there 

would be no adverse effects on health and the provision would significantly reduce 

costs. Both Secretary Shalala of the Clinton Administration and Secretary Thompson of the Bush Administration have concluded that they can not guarantee the 

safety and efficacy of third party reimported pharmaceuticals. 

I have supported, and voted for, allowing individuals to import prescription drugs 

for personal use. If a person knows the risk that a drug from another country may 

be adulterated, and they assume that risk, then that is their decision. However, if 

a senior from Grand Prairie, Texas walks into a pharmacy to pick up her heart 

medication, there should be zero risk that she will take home medication that does 

not work, or will have adverse health affects. 

I come to this hearing with two questions: Can we allow third party reimportation 

in a manner that ensures the drugs coming into this country will be safe and effective? Will allowing third party reimportation lead to a price reduction in what our 

seniors are paying for prescription drugs? If the answer to both of these questions 

is yes, then we must reexamine our policies. If the answers are no, then we must 

take care in rushing ahead to implement policies which could endanger the public’s health. 

I look forward to learning the answers to these questions, and again I thank 

Chairman Bilirakis for holding this hearing. 

PREPARED STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF MICHIGAN

Mr. Chairman, thank you for holding today’s hearing on the issue of prescription 

drug reimportation. At every town meeting I hold in Southwest Michigan, the high 

cost of prescription drugs is one of the top issues raised. We all want to do something about this issue, and lifting the current-law ban on third-party reimportation 

of U.S. manufactured drugs sold in Canada, Mexico, or other countries at substantially lower prices than in the U.S. seems to many of our constituents and to many 

in Congress one easy, immediate way to accomplish this goal. But we need to move 

carefully and measure the perceived benefits of reimportation against the very real 

risks that could result. 

In the last Congress, as chairman of the Oversight and Investigations Subcommittee, I presided over an ongoing investigation of the importation of bulk 

chemicals used in the manufacture of prescription drugs. While this is not the same 

issue as reimportation, what we learned about the sophistication of counterfeiters 

and the porousness of our borders should give us great cause for concern. 

Here’s a case in point. Several years ago, 89 Haitian children tragically died after 

taking cough medicine made with contaminated glycerin traced to China. We may 

think that tragic events like this can’t happen here, with its sophisticated regulatory 

system. But it almost did. Some of that same batch of contaminated glycerin made 

it into our country. Fortunately, it was found before it could be used to manufacture 

cough medicine or other medications here. We got lucky that time. 

Here’s another case in point. The Subcommittee’s investigation revealed that the 

FDA had linked the adverse reactions of 155 American patients to gentamycin sulfate made by a Chinese drug company. Despite FDA inspections and quality control 

by U.S. drug companies that used this material, this bulk drug still infiltrated our 

healthcare system without detection. 

Let’s not forget that it was this committee that wrote the 1988 Prescription Drug 

Marketing Act banning third party reimportation, and with very good reason. The 

Oversight and Investigations Subcommittee—then under the leadership of John 

Dingell—investigated drug reimportation in the 1980s and found that nearly $10 

billion worth of drugs manufactured in the U.S. and exported were re-entering the 

19

U.S. marked as American Goods Returned. Some had been mishandled, become subpotent, or were labeled improperly. 

Even if we were able to put in place a reimportation policy that would protect 

us against the threat of counterfeit, sub-potent, misbranded, or adulterated drugs 

from entering this country—and I think this would be difficult if not impossible to 

do—I am not convinced that we would see any significant lowering in the cost of 

drugs to consumers. Remember, neither Secretary Shalala nor Secretary Thompson 

could certify to this or to the fact that reimports would not pose a public health risk 

when we tried this approach in the last Congress. 

PREPARED STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF WYOMING

Mr. Chairman, most Americans understand there is a price to be paid for living 

in a country with arguably the most advanced medicine in the world. The research, 

development, innovation and manpower does not come cheap. 

What concerns me is whether or not that price has become too high for too many. 

Prescription drug costs in this country are rising, and they affect each one of us differently—based on our stage in life, our walk of life, and our quality of life. 

Senior citizens especially are struggling to afford the most basic of medications. 

These same individuals are making lengthy road trips to Canada and Mexico to buy 

their medications at a lower price. That is a very sobering thought, and one to 

which we must pay attention. 

Technically, those seniors crossing the border to buy their prescription drugs are 

violating the law. Our system is very closed in that sense, but with good reason. 

The law ensures a built in safety mechanism for consumers in how drugs are 

packaged, labeled, and tested. 

Because of that, I have peace of mind knowing that the prescription medication 

I gave my child or my mother was proven safe. Do I want to compromise that? Absolutely not. 

We need to find common, reasonable ground on this issue. 

I am not about to compromise safety but, by the same token, prescription drugs 

serve no purpose if they are too expensive to access. 

The legislative proposal before us today, the Drug Importation Act of 2002, attempts to find this common ground, but I do have safety concerns about that provision in the bill dealing with pharmacists. 

If pharmacists can import drugs from anywhere in the world, like the legislation 

proposes, how can HHS conceivably follow the chain of distribution of a drug outside 

the United States? That seems problematic to me, in terms of the overall safety of 

the drug. 

I would like Mr. Hubbard with the FDA to follow up on that if he might. In fact, 

I would like all of our witnesses today to comment on that. 

Realizing we do have some work to do on this issue, I am certainly ready to do 

my part, and look forward to the discussion today. 

With that, Mr. Chairman, I yield back my time.

Mr. BILIRAKIS. The first panel consists of Mr. William Hubbard, 

Senior Associate Commissioner for the Office of Policy, Planning, 

and Legislation of the Food and Drug Administration. 

Mr. Hubbard, obviously your written statement is part of the 

record. Hopefully you will complement and supplement it as you 

will. 

STATEMENT OF WILLIAM K. HUBBARD, SENIOR ASSOCIATE 

COMMISSIONER, OFFICE OF POLICY, PLANNING AND LEGISLATION, FOOD AND DRUG ADMINISTRATION; ACCOMPANIED 

BY JOHN TAYLOR, DIRECTOR, OFFICE OF ENFORCEMENT; 

AND DAVID HOROWITZ, DIRECTOR, OFFICE OF COMPLIANCE 

Mr. HUBBARD. Thank you, Mr. Chairman. This is Mr. John Taylor, head of the Office of Enforcement, and Mr. David Horowitz 

from the Office of Drug Compliance in FDA. 

As you said, Mr. Chairman, I do have written testimony, but I 

will include a few things orally. 

20

First of all, on the drug pricing issue, personally I can relate to 

that as I have an 89-year-old mother myself who cannot afford her 

prescription medications. 

But as an FDA official, I cannot really speak to that issue. That 

is not within FDA’s mandate. All I can do today is talk about safety. I apologize that I can’t do that balancing act that so many of 

you wish to have. 

But we do have some things to say about safety, if I may. First 

of all, I will start with the concept or the problem of counterfeiting. 

We are all familiar with counterfeit handbags and watches and 

clothing and those sorts of things. That has been fairly commonplace. It certainly has an economic impact. 

But we believe that pharmaceuticals are a much bigger potential 

problem because consumers not only risk their pocketbook with a 

counterfeit drug; they also risk their health, and even their life. 

Consumers cannot discern the difference between a counterfeit 

drug or a good drug. 

This is a counterfeit watch. This is a counterfeit $900 watch. It 

happened to cost $9. A jeweler could tell the difference; a consumer 

could even perhaps tell the difference if they looked closely enough 

and feel how much lighter it was than the real thing. But these are 

counterfeit drugs; these are real drugs that FDA found recently. 

One is counterfeit and one is real. They are indistinguishable. No 

one in FDA can tell the difference. Even people in the company 

cannot tell the difference without doing testing. 

I will pass these up to the table for them to be passed out. No 

pharmacist or physician could tell visually whether those drugs are 

good or not. Not only is the fact that they cannot be distinguished 

a problem, but these sorts of counterfeit drugs pose real health 

problems. 

As we have said, counterfeits can be drugs that are subpotent, 

superpotent, a sugar pill, a powder, or anything else. This is a 

counterfeit drug that was a fertility drug. It is indistinguishable 

from the real thing. The actual drug is about 80 percent potent. If 

a woman took this, she would get a real drug. The problem is, to 

make this drug, the two vials, you pull a liquid solution called a 

diluent into a syringe and then shoot it into the other vial where 

the powdered drug is, and shake it up to dissolve it. Then you pull 

the reconstituted drug back into the syringe and inject it into the 

patient’s arm. 

The problem is, this was made in the back of a warehouse. It has 

bacteria in the diluent, in the saline solution. When you are injecting that into the patient, you would be injecting essentially blood 

poisoning into the patient, even though she would be getting some 

semblance of a real drug. 

So we believe that sort of thing is a real concern, particularly 

since no one can tell at the time they administer it—the nurse administering that would not be able to tell, nor could the physician. 

Since 1998, FDA has opened 55 counterfeit drug cases resulting 

in 26 arrests and convictions, but we are worried that this problem 

is growing fairly fast. We are seeing a gradual increase in counterfeit drug activity. In 1999, we opened 6 cases of counterfeiting; in 

2000, 10 cases; in 2001, 23 cases; and so far in 2002, 16 cases, for 

21

a rate of 30 for the year if that keeps up, which is a fivefold increase in 4 years. That does concern us. 

We are also seeing counterfeit drugs being smuggled, which is a 

somewhat new thing. We are all familiar with narcotics being 

smuggled, and the Customs Service has been dealing with that for 

years, but we are seeing things like these. These are stuffed animals from an Asian company. The drugs are in here, the counterfeit drugs. These are not narcotic drugs but prescription drugs 

which are in this bear. Here is a little car which we found recently. 

These are prescription drugs in there. These are not narcotics, this 

is not cocaine, these are prescription drugs. This particular product, they took the motor out and put the drugs in where the motor 

would have been. Those drugs are counterfeit as well. 

Of course, American citizens are clamoring for foreign drugs. 

They are seeking relief from the high cost of pharmaceuticals. As 

I said, we can understand that, but that is not our job. 

As a result of the consumer demand, mail and Internet drug purchases are increasing steadily for these products. We and the Customs Service cannot adequately screen these drugs for authenticity 

or safety. Despite almost 400 investigations of these Internet drug 

sites that sell these drugs, and many, many convictions and arrests, we are still seeing a rapid increase of drugs coming in in little packages like this that we have shown you in the past. This is 

an injectable drug. It poses some of the same sorts of concerns we 

have mentioned earlier. 

Here we have Viagra and antibiotics. Someone ordered them over 

the Internet. Of course, antibiotics are particularly a problem to 

come in over the Internet because we have an antibiotic resistance 

problem in this country. 

Of course, we see these ads over the Internet that say ‘‘No physician examination needed, no prescription needed, just send us your 

credit card number and check off the drug you want, and it will 

be on its way.’’ So we are very concerned that despite an effort to enforce against 

these drugs, we are actually seeing an increase in this Internet 

purchase. Also, our criminal investigators are seeing counterfeit 

drugs coming from anywhere and everywhere. 

These are just some recent ones. Here is one from Spain, one 

from France, Switzerland, Mexico, Germany. These are coming in 

every day, so we know the counterfeiters are out there. That is why 

we keep raising this issue of opening the borders up to these sorts 

of drugs. It is, from FDA’s point of view—notwithstanding the price 

issue that, of course, you are all concerned about—we are very concerned about that as a trend. 

Of course, the latest trend is to go to Canada. There has been 

legislation introduced and considered by Congress to legitimize 

that practice. Ads are running in newspapers around the country: 

‘‘you can get your drugs from Canada, a big price savings. Just fill 

out this form and the drugs will be on the way.’’

We understand the consumer demand for these products, but we 

are concerned that if a Canadian system is set up, that Canada, 

which now probably has one of the more secure systems for assuring the safety of pharmaceuticals, could become a place where the 

drug supply is far different than it is today, and that it could be 

22

a transshipment point for all of these folks who are making these 

counterfeit drugs in various parts of the world. 

With that, Mr. Chairman, I will end my opening remarks and be 

glad to take questions. 

[The prepared statement of William K. Hubbard follows:]

PREPARED STATEMENT OF WILLIAM K. HUBBARD, SENIOR ASSOCIATE COMMISSIONER

FOR POLICY, PLANNING AND LEGISLATION, FOOD AND DRUG ADMINISTRATION

INTRODUCTION

Mr. Chairman and Members of the Committee, I am William K. Hubbard, Senior 

Associate Commissioner for Policy, Planning and Legislation at the U.S. Food and 

Drug Administration (FDA or the Agency). I appreciate the opportunity to discuss 

our mutual concerns related to the importation of drugs into the United States. This 

topic encompasses a range of issues, including the importation by individuals of prescription drugs through the mail or in person; the purchase of drugs from foreign 

sources over the Internet; and the potential introduction of counterfeit drugs into 

the U.S. drug supply. 

FDA is also concerned about legislative initiatives that, while intended to provide 

drug price relief to consumers, would severely damage the system of drug regulation 

that has come to be known as the ‘‘gold standard’’ for drug safety throughout the 

world. Last month, speaking at a biotechnology summit in Canada, Secretary 

Thompson said ‘‘Opening our borders to reimported drugs potentially could increase 

the flow of counterfeit drugs, cheap foreign copies of FDA-approved drugs, expired 

and contaminated drugs, and drugs stored under inappropriate and unsafe conditions. In light of the anthrax attacks of last fall, that’s a risk we simply cannot 

take.’’

PERSONAL IMPORTATION OF DRUGS THROUGH THE MAIL

Under the Federal Food, Drug, and Cosmetic (FD&C) Act, unapproved, misbranded, and adulterated drugs are prohibited from importation into the United 

States. In general, all drugs imported by individuals fall into one of these prohibited 

categories. This includes drugs that are foreign versions of FDA-approved medications, and drugs that are dispensed without a prescription. In addition, under the 

Act, FDA-approved drugs that are manufactured in the U.S. and exported may not 

be reimported by anyone other than the manufacturer. 

The volume of prescription drugs for personal use imported through the mail has 

increased dramatically in recent years. According to testimony by the U.S. Customs 

Service (Customs) before the House Government Reform Committee in May 2000, 

seizures of parcels containing scheduled or controlled substances at international 

mail facilities increased by 450 percent in FY 1999, primarily due to drug sales over 

the Internet. FDA estimates that approximately two million parcels containing 

FDA-regulated products for personal use enter the U.S. each year through international mail facilities. This estimate is based on an extrapolation of data obtained 

during a pilot project conducted at the international mail facility in Carson, California, which is discussed in more detail below. 

At mail facilities, Customs officials identify parcels that may violate the FD&C 

Act for FDA examination. FDA inspectors then determine if these products should 

or should not be permitted to enter the country. If detained, FDA must issue a notice to the addressee describing the potential Federal violation and provide the individual with an opportunity to respond and provide reasons why the drug parcel 

should be allowed entry. If the addressee does not respond or provides an inadequate response, FDA will give the parcel back to Customs to have it returned to 

the exporter. Due to the requirements for notice and an opportunity to respond, the 

detention and further processing of mail parcels consumes large amounts of FDA 

resources. In addition, considerable storage space is needed to hold the large number of detained parcels until replies are received from the addressees. 

Recent advertisements in U.S. newspapers and magazines claim that Congress 

has made the personal importation of drugs a legal practice. Other advertisements 

and certain Internet sites state that personal importation of up to a 90-day supply 

of prescription medications is legal. Neither of these claims is true. As we will discuss in more detail below, we are seeing an increasing number of Canadian pharmacies and U.S. intermediaries marketing prescription drug products directly to 

U.S. citizens, in violation of state pharmacy laws and the FD&C Act. 

From a public health standpoint, importing prescription drugs for personal use is 

a potentially dangerous practice. FDA and the public have no assurance that unapVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00026 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
23

proved products are effective or safe, or have been produced under U.S. good manufacturing practices. FDA cannot assure the public that re-imported drugs made in 

the U.S. have been stored under proper conditions or that they are even the real 

product, because the Agency does not regulate foreign distributors or pharmacies. 

Therefore, unapproved drugs and re-imported approved medications may be contaminated, subpotent, superpotent, or counterfeit. In addition, some websites based 

outside the U.S. offer to dispense prescription drugs without a prescription by a licensed practitioner or a physical examination, bypassing the traditional doctor-patient relationship. As a result, patients may receive inappropriate medications due 

to misdiagnoses, they may fail to receive appropriate medications or other medical 

care, or they may take a product that could be harmful, or fatal, if taken in combination with other medicines they might be taking. 

Personal Importation Policy 

Under FDA’s personal importation policy, as described in guidance to the Agency’s 

field personnel, FDA inspectors may exercise enforcement discretion in limited circumstances to permit the importation of certain unapproved prescription medication 

for personal use. 

First adopted in 1954, the policy was last modified in 1988 in response to concerns 

that certain potentially effective treatments for AIDS patients were not available in 

the U.S. but were available in other countries. The Agency expanded the guidance 

for humanitarian purposes to allow individuals suffering from serious medical conditions to acquire medical treatments legally available in foreign countries but not approved in the U.S. 

The policy is articulated in guidance to FDA field personnel and is not a license 

for individuals to import unapproved, and therefore illegal, drugs for personal use 

into the United States. Because the policy does not apply to medications that are 

already available in the U.S., even if sold under the same name, only a very few 

drug products available from foreign sources, especially Canada and Mexico, meet 

the personal importation criteria. 

The current personal importation policy permits the exercise of enforcement discretion to allow entry of an unapproved prescription drug only if the intended use 

is for a serious condition for which effective treatment may not be available domestically; the product is considered not to represent an unreasonable risk; the product 

is for personal use; there is no known commercialization or promotion to U.S. residents by those involved in the distribution of the product; and the individual seeking to import the product affirms in writing that it is for the patient’s own use and 

provides the name and address of the U.S. licensed doctor responsible for his or her 

treatment with the product or provides evidence that the product is for the continuation of a treatment begun in a foreign country. 

FDA’s personal importation policy, as written, is difficult to implement with respect to mail shipments of drugs. This is due, at least in part, to the difficulty faced 

by Customs or FDA inspectors, or even health care practitioners, in identifying a 

medicine simply by its appearance or its labeling, which may falsely identify a product. From a practical standpoint, FDA inspectors cannot visually examine drug 

products contained in a mailed parcel and accurately determine their identity or the 

degree of risk posed to the individual who will receive these drugs. Also, largely due 

to the advent of Internet sites selling prescription drugs from all points around the 

globe, the volume of parcels containing prescription drugs has increased dramatically, beyond the ability of Customs and FDA staff to efficiently process. 

Due to the huge volume of drug parcels entering the U.S. through the international mail and courier services, the requirements for notice and hearing, and our 

limited resources, it is difficult for FDA to detain and refuse mail imports for personal use. As a consequence, tens of thousands of parcels that FDA does not review 

are eventually released by Customs and sent on to their addressees, even though 

the products contained in these parcels may violate the FD&C Act and pose a health 

risk to consumers. We do not believe this is an acceptable public health outcome. 

CARSON MAIL FACILITY PILOT

In early 2001, FDA and Customs conducted a survey of imported drug products 

entering the U.S. through the Carson City, California, mail facility (the Carson 

pilot). The purpose of the Carson pilot was to provide a means for examining incoming mail shipments of pharmaceutical products over a specified time frame to identify both the volume and the types of drug products entering the U.S. We also wanted to better assess the level of effort and human resources required to handle drug 

importations at a mail facility, and to better understand the public health implications these importations may have for U.S. consumers. 

24

The Carson pilot ran for a five-week period, with FDA inspectors present for 40 

hours per week, a much higher staffing level than is normally possible. Although 

Customs took a baseline sample which indicated they could have set aside for FDA 

review an estimated total of 16,500 international packages (650 packages per day), 

FDA was able to examine only 1,908 packages during the five-week pilot, or an average of 381 packages per week. Unexamined packages were sent on to the addressees. Of the 1,908 packages examined by FDA, 721 parcels originating in 19 countries were detained and the addressees notified that the products appeared to be 

unapproved for use in the U.S., misbranded and/or a drug requiring a doctor’s prescription. 

Analysis of the Carson Pilot Drug Parcels 

FDA’s Center for Drug Evaluation and Research (CDER) reviewed listings of the 

products detained during the Carson pilot to define better the nature of the risk to 

public health from the types of products coming into the U.S. through personal importation. CDER’s review demonstrates that there are serious public health risks 

associated with many of the 721 drug shipments (composed of 197 different drugs) 

detained at Carson. There are primarily two types of risks that consumers of these 

drugs would face. The first risk arises when consumers take drugs of unknown origin or quality. Second is the very significant risk associated with taking many of 

these drugs without first obtaining a physician’s prescription and without the continued oversight of the physician. 

In general, FDA has no information to establish where these drugs were actually 

manufactured and whether current Good Manufacturing Practice requirements were 

followed. There is also no assurance that the drugs were packaged and stored under 

appropriate conditions to avoid degradation or contamination. Approximately eight 

percent of the shipments contained drugs that could not be identified because they 

contained no labeling; some of these contain only foreign language labeling. Most 

of these drug shipments were contained in plastic bags; one shipment contained 

drugs taped between magazine pages. 

Several drugs do not appear to correspond with any FDA-approved drugs and the 

risks are therefore difficult to assess. One drug had been reviewed for FDA approval 

but was denied approval due to cardiac abnormalities and because its efficacy could 

not be demonstrated. Several shipments contained three drugs that were once approved by FDA but have been withdrawn from the market based on serious safety 

concerns. The vast majority of the shipments were identified as containing prescription 

drugs, which by definition have a degree of toxicity and/or risk associated with them 

such that they are not safe for use except under the supervision of a licensed health 

care practitioner (Title 21, U.S.C. section 353(b)). We believe that very few foreign 

Internet sellers require a prescription from a practitioner licensed in the U.S. before 

dispensing drugs to U.S. residents. Moreover, after detention notices were issued to 

the intended recipients of the 721 drug shipments, fewer than four percent responded with evidence of prescriptions or that a physician would provide oversight 

of the use of the drugs purchased from abroad. 

A number of controlled substances were identified, including lorazepam, codeine 

sulfate, loperamide, chlordiazepoxide, chloral hydrate, and diphenoxylate. These 

drugs have the potential for abuse, addiction or life-threatening overdose. A physician’s prescription and oversight are essential for managing these risks. Additionally, drugs having potentially serious adverse side effects including diabetes, hypertension and serious infection were included in the Carson shipments, as were many 

drugs with serious contraindications and/or possible drug or food interactions for 

which physician oversight is essential. 

Many of the drugs identified in the Carson pilot are intended to treat conditions 

that only physicians can properly diagnose. Consumers who bypass physician diagnosis and prescribing may be exposing themselves to risks and toxicities that cannot 

be justified by offsetting benefits. For example, almost ten percent of the shipments 

were for antibiotics, despite the fact that consumers are generally not able to diagnose whether their symptoms are caused by bacterial or viral infections. Several 

drugs listed are potent steroids, which are generally prescribed for conditions that 

are not self-diagnosable. 

Based on these observations, FDA believes that the type of drugs that are coming 

into the country for personal use, as demonstrated by the Carson pilot, pose substantial risks to the public health. 

INTERNET DRUG SALES

Based on a survey conducted in early 2000 by FDA’s Office of Criminal Investigations (OCI) and a subsequent study by the General Accounting Office, there appears 

25

to be roughly 300 to 400 Internet sites selling prescription drugs to consumers, with 

approximately half located domestically and half located outside the U.S. FDA has 

long taken the position that consumers are exposed to a number of risks when they 

purchase drugs from Internet sites that are not operated by pharmacies licensed 

and operating within state pharmacy law or sites that dispense foreign drugs. These 

outlets may dispense expired, subpotent, contaminated or counterfeit product, the 

wrong or a contraindicated product, an incorrect dose, or medication unaccompanied 

by adequate directions for use. FDA cannot provide consumers with any assurance 

that these products were manufactured under current good manufacturing practice 

standards. Taking an unsafe or inappropriate medication puts consumers at risk for 

dangerous drug interactions and other serious health consequences. 

Internet sites that provide prescription drugs by having consumers fill out a questionnaire rather than seeing a doctor can pose serious health risks. A questionnaire 

generally does not provide sufficient information for a healthcare professional to determine if that drug is appropriate or safe to use, if another treatment is more appropriate, or if the consumer has an underlying medical condition where using that 

drug may be harmful. Finally, it must be noted that in the case of foreign based 

web sites, if consumers have an adverse drug reaction or any other problem they 

have little or no recourse because the physical location or operator of the ‘‘pharmacy’’ often is not known or the seller is beyond the consumers’ reach. FDA has 

no ability to take effective action against these foreign operators on behalf of U.S. 

citizens. 

Over the last twelve to eighteen months, FDA has noticed a proliferation of 

websites that offer drugs purportedly from Canada directly to U.S. consumers. As 

noted earlier, a number of these websites claim that drug sales from Canadian pharmacies directly to U.S. consumers are legal. This is false. Some websites purport to 

offer ‘‘U.S. approved’’ drugs, however, it is highly unlikely that the drugs are in fact 

approved by FDA. Some web sites are actually ordering services that take orders 

from consumers that are then fulfilled by supposed Canadian pharmacies. However, 

under state law, these ordering services are likely participating in the practice of 

pharmacy without a license to do so. 

A number of Canadian drug websites and U.S. ordering services indicate that the 

Canadian drugs are dispensed pursuant to existing prescriptions that are rewritten 

by a Canadian doctor in order to comply with Canadian law. However, the dispensing of medication on a prescription written by a physician who has not seen 

the patient or conducted a physical exam is generally contrary to state medical practice standards. Additionally, Dr. Henry Haddad of the Canadian Medical Association 

has said that under the Canadian Code of Ethics, physicians have a responsibility 

to do a history, physical exam and discuss the risks and benefits of the medication 

with the patient. He went on to say that the approval of prescriptions for patients 

they have not seen ‘‘Is something Canadian physicians should not be doing’’ (Associated Press, 6/26/02). 

Some of these sellers have become so emboldened that they have solicited state 

Medicaid programs to import drugs from Canada. One Canadian pharmacy recently 

sent packages of prescription drugs to more than 500 U.S. consumers in a single 

shipment. Another boasted that since it added Internet sales to its local pharmacy 

a year ago, the store has gained about 100,000 U.S. customers. An ordering service 

based in Florida has announced plans to open 500 storefront shops nationwide within three years (Orlando Sentinel, 6/3/02). 

Some recent criminal cases indicate the seriousness of the risks to public health 

that confront regulators with regard to Internet drug sales, but also illustrate the 

progress that is beginning to be made in combating this problem. 

NORFOLK MEN’S CLINIC

On February 16, 2002, a federal jury in Alabama convicted Anton Pusztai and 

Anita Yates of charges arising out of the operation of the online pharmacy that illegally sold prescription drugs over the Internet to consumers. On June 18, Pusztai 

and Yates were sentenced respectively to over 15 years and 6.5 years of incarceration. Pusztai, an Australian citizen, and Yates, a resident of Clanton, Alabama, 

were convicted of conspiracy to commit violations of the FD&C Act, conspiracy to 

commit money laundering, mail fraud, dispensing misbranded drugs, and operating 

a drug repackaging facility not registered with FDA. From fall 1998 to the summer 

of 2000, the defendants operated a website called Viagra.au.com, also known as Norfolk Men’s Clinic, and related sites, that sold Viagra, Xenical, Celebrex, Propecia, 

and Claritin-D to consumers. 

In September 1999, OCI received information regarding the Norfolk Men’s Clinic 

and the website. Based on this information, several covert purchases were made via 

26

the Internet. Search warrants were executed in October 1999 that resulted in the 

seizure of prescription drugs along with numerous business records. Additional covert purchases were made from part of the Internet operation in West Virginia. 

Based on these purchases and numerous interviews, several individuals were indicted. In addition to defendants Pusztai and Yates, the president of a prescription 

drug wholesaler located in Miami, Florida, and the company itself, pled guilty to 

distributing midbranded drugs and to obstruction of justice. In conjunction with the 

indictment, a second search warrant was executed in Clanton, Alabama along with 

two search warrants in West Virginia. While most of the drugs sold in this operation were domestic product, some appeared to have originated in New Zealand. 

MEDICATIONS EXPRESS

On June 7, 2001, Gerald Bevins was convicted in U.S. District Court for the 

Southern District of California of conspiracy to defraud the U.S. and commit offenses against the U.S. by introducing misbranded drugs into interstate commerce 

and smuggling. On September 4, 2001, Bevins was sentenced to serve twenty-four 

months in prison. The case was initiated on information received from Customs concerning an Internet web site called Medications Express. Bevins sold Mexican prescription pharmaceuticals from this website and claimed that no doctor’s prescription was necessary. He continued to sell Mexican prescription pharmaceuticals 

through the mail from Sun City, California, even after discontinuing the Medications Express web site. Bevins, his wife and daughter, would receive orders via mail, 

travel to Tijuana, Mexico to purchase the pharmaceuticals, and smuggle them back 

into the U.S. The three packaged the pharmaceuticals into commercial courier boxes 

and shipped them to customers around the U.S. The drugs supplied by Bevins were 

labeled in Spanish and included Ritalin, Valium, Rivotril, and steroids. 

CANADIAN DRUG STORE, INC. 

On May 14 of this year, the Ontario College of Pharmacists, a Canadian government agency, filed charges under Ontario law against The Canadian Drug Store Inc. 

for unlawfully operating an unlicensed pharmacy and using an un-registered pharmacist in filling prescriptions for U.S. residents. The College also filed charges 

against a licensed pharmacist, pharmacy, and physician in Ontario for helping to 

facilitate the delivery of prescription and non-prescription drugs to U.S. residents. 

A drug wholesaler was charged with supplying medications to a non-licensed pharmacy. 

According to a statement released by the College, ‘‘There are many websites selling prescription and non-prescription medicines that have not been accredited as legitimate pharmacies by pharmacy regulators in either Canada or the U.S. The public needs to know that some websites presenting themselves as online ‘‘pharmacies’’

or ‘‘drugstores’’ may be operating without a pharmacy license and dispensing prescriptions without the oversight of a licensed pharmacist.’’

TOTAL REMEDY / PRESCRIPTION CENTER II

According to news accounts, a Los Angeles pharmacy and two pharmacists were 

assessed penalties of almost $90 million in a state Board of Pharmacy proceeding 

this past May for filling more than 3,500 illegal prescriptions over the Internet. The 

case was under a new law enacted in 2001 that creates a requirement in California 

to fill prescription pursuant to a ‘‘good-faith medical examination.’’ The Internet site 

concentrated on filling prescriptions for ‘‘lifestyle’’ drugs such as Viagra and 

Propecia (Associated Press, 5/29/02). 

Pillbox Pharmacy 

In March of this year, a Texas pharmacist, three doctors, two corporations and 

an individual were charged in a federal indictment alleging that they conspired to 

illegally dispense drugs in connection with an Internet pharmacy operation. The indictment charged one pharmacist, three physicians and two corporations, the S&H 

Script Shop and the Pillbox Medical Center, with conspiring to illegally dispense 

controlled substances and commit money laundering. According to the indictment, 

between January 1, 2000, and June 12, 2001, the defendants grossed more than 

$7.7 million from the Internet sales of just two drugs alone. The indictment alleges 

the doctors would issue prescriptions without establishing a patient history, performing a mental or physical exam, using appropriate diagnostic or laboratory testing, or providing any means to monitor medication response. The charges were the 

result of an 18-month investigation by FDA, the DEA and the Internal Revenue 

Service, working with the U.S. attorney’s office. In April, the pharmacist and two 

27

corporations pled guilty to illegally dispensing controlled substances, and agreed to 

forfeit $1 million. 

Other Enforcement Activity 

To date, OCI has initiated 296 Internet drug investigations with each case involving a variable number of websites from one to 25 or more. These cases originated 

from multiple sources including interception at mail facilities, web based research, 

consumer complaints, and a variety of others. OCI has effected 112 Internet-related 

drug arrests and obtained 72 convictions. OCI currently has 101 open Internet drug 

investigations. 

Currently, FDA has 90 sites under active review for possible regulatory or civil 

action. Warning letters have been sent to 55 domestic online sellers. Additionally, 

FDA has sent 137 ‘‘cyber letters’’ to operators of Internet sites in many countries, 

including Canada, that offer to sell online prescription drugs or unapproved drugs. 

These sites may be engaged in illegal activity such as offering to sell prescription 

drugs to U.S. citizens without valid (or in some cases without any) prescriptions. 

Cyber letters are sent over the Internet to the suspect websites to warn the operators that they may be engaged in illegal activities, and inform them of the laws that 

govern prescription drug sales in the U.S. Cyber letters have a deterrent effect and 

FDA has seen positive results from using them. FDA also sends copies of its cyber 

letters to the home governments of targeted websites when the locations can be 

identified. Follow-up depends on the ability and willingness of the foreign regulatory 

bodies to investigate and take actions against website operators who are illegally 

shipping drugs to other countries. 

In cooperation with the Department of Justice (DOJ), FDA has obtained five preliminary injunctions against the sale of illegal products, including one product marketed as a weight-loss aid containing a potent thyroid hormone which could cause 

heart attacks or strokes, and an unapproved cancer therapy. Additionally, 15 product seizures, 11 product recalls, and the voluntary destruction of 18 violative products have been achieved, generally pertaining to unapproved new drug products including gamma hydroxybutyric acid, gamma butyrolactone, Triax, 1,4 butanediol, 

and laetrile. Forty-five foreign shippers have been placed on Detention Without 

Physical Examination and added to Import Alert 66-57 for targeting sales of unapproved new drug products to the U.S. 

IMPORTATION AT LAND BORDERS

FDA is aware that a number of U.S. citizens travel to other countries to purchase 

medications at a lower cost. However, many prescription drugs available from foreign sources are either unapproved foreign versions of FDA-approved drugs or products for which there is no U.S. approved counterpart. In either case, these products 

are unapproved drugs prohibited from importation by section 505 of the FD&C Act. 

In FDA’s experience, many drugs obtained from foreign sources that purport to be 

the same as U.S. approved prescription drugs are of unknown quality. FDA cannot 

provide adequate assurance to the American public that the drug products they purchase in other countries are the same products approved by FDA. 

FDA is developing a program to better warn U.S. citizens about these dangers 

and the potential risks to their health when purchasing such drugs. We have begun 

to provide brochures to consumers crossing U.S. borders to make such purchases 

and are installing posters at borders stations warning of the dangers inherent in 

purchasing drugs outside the U.S. 

Within the last two years, FDA has conducted three surveys at U.S. borders to 

gather data on drug products carried by individuals entering the U.S. While these 

border surveys involve land traffic rather than mail importation, the results show 

some similarities to the findings from the Carson mail pilot, but also some significant differences. 

Southwest Border Survey (August 2000) 

A survey of prescription drugs being brought by pedestrians into the U.S. at eight 

ports of entry along the 2,000 mile border with Mexico was conducted by FDA’s 

Southwest Import District (SWID) with the assistance of other agencies. The survey 

looked at activity during four hours on a Saturday (August 12, 2000) at eight border 

ports in California, Arizona, and Texas. The purpose of the survey was to determine 

what specific types of products are being imported, and who is importing these products. The data collected from over 600 interviews indicated that the most common 

importers of prescription drugs were older male Caucasians with prescriptions from 

the U.S., bringing back primarily antibiotics or pain relievers for their own use. Prescriptions were held by 63 percent of the persons interviewed (59 percent U.S. prescriptions and 41 percent Mexican). The most common drugs and their indications 

28

that were purchased in Mexico during the survey were as follows: Amoxicillin (antibiotic), Glucophage (diabetes), Premarin (estrogen), Dolo Neurobion (vitamin supplement), Vioxx (inflamation), Retin-A (acne), Tafil (anxiety), Celebrex (arthritis), Penicillin (antibiotic), Viagra (impotence), and Carisoprodol (analgesic). While many of 

these products are already available as FDA-approved drugs in the U.S., some are 

unapproved for sale in this country. 

Canadian Border Survey 

On January 6, 2001, in cooperation with Customs, FDA conducted a survey to obtain a snapshot of prescription drug products being brought into the U.S. from Canada via passenger vehicles. During the eight-hour survey at three ports of entry in 

New York, Michigan and Washington, a total of 10,374 passenger vehicles and 58 

buses crossed into the U.S. Of these, 33 passenger vehicles (35 individuals) were referred by Customs to be interviewed. These individuals brought in a total of 47 containers of drug products from Canada. The types of products included pain medicines—primarily A-222 (a combination of acetaminophen, caffeine, and codeine) or 

similar products. The indicated reason for import was that the products were available over-the-counter (OTC) in Canada and cost less than in the U.S. The next largest group of products was herbal products, with the reason for importation being 

that the products were not available in the U.S. Other products included Tobradex 

(antibiotic/ steroid opthalmic for individuals having laser eye surgery); Claritin and 

Allegra (allergies) purchased OTC in Canada; Sibelium capsules (calcium channel 

blocker); and a variety of OTC products sold in Canada and not available in the U.S. 

Some of these drugs are unapproved foreign versions of FDA-approved drugs, although some approved for sale as prescription drugs in the U.S. are sold as overthe-counter medications in Canada. 

Southwest Border Survey (April 2001) 

On April 11, 2001, FDA, Customs, and other agencies conducted a survey of prescription drugs being brought into the U.S. at seven ports of entry along the U.S./

Mexican border. This survey coincided with both Easter vacations, college spring 

break and the end of the snowbird season, when tourists from Northern states visiting along the Southern border return home. During the four hour survey, a total 

of 586 persons brought in a total of 1,120 drugs. Approximately 56 percent had a 

prescription for the medicines (61 percent were U.S. prescriptions, 39 percent were 

Mexican). The most common drugs purchased in Mexico were: Amoxicillin (antibiotic), Premarin (estrogen), Claritine (allergy), Terramicinia (antibiotic), Ampicillin 

(antibiotic), Ibuprofen (analgesic), Penicillin (antibiotic), Vioxx (inflammation), Tafil 

(anxiety), Dolo Neuorobian (vitamin supplement), Glucophage (diabetes), Celebrex 

(arthritis), Naproxen (analgesic), Retin-A (acne), Ventolin (pulmonary disease), and 

Valium (controlled substance/ nervous system depressant). As in the earlier survey, 

many of these products are already available as FDA-approved drugs in the U.S., 

while some are unapproved for sale in this country. 

Controlled Substances 

Although we do not know, nor is it possible to clearly determine, the amount of 

controlled substances brought into the U.S. purportedly for personal use, it is likely 

that such medicines are frequently imported for resale and pose a public health risk. 

The Agency has been working with both Customs and DEA to streamline and clarify 

Federal import policies specifically related to the importation of controlled substances. 

COUNTERFEIT DRUGS

FDA continues to believe that the quality of drugs in this country is high, and 

that the public can continue to have confidence that the drugs sold in the U.S. market are authentic. The Agency, however, takes very seriously any allegations or information regarding the counterfeiting or adulteration of drug products. As the drug 

manufacturing and distribution system has become more global in nature, the challenge of protecting against counterfeit, adulterated or substandard drugs has become more difficult. We are concerned about a spate of drug counterfeiting and tampering cases that have occurred in recent months, and we believe these incidents 

caution against any weakening of the current regulatory system. 

The manner in which FDA handles these types of counterfeit and tampering incidents are driven by two primary goals that are often, but not always, complementary. First and foremost, FDA works with consumers, manufacturers, wholesalers, 

distributors, state agencies and others in order to determine the composition of the 

unsuitable product and the extent to which it has been introduced into the distribution chain, and we use this information do whatever is necessary to protect the pubVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00032 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
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lic health. Second, OCI, with the support and cooperation of other FDA components 

and other law enforcement agencies, attempts to bring the perpetrators of criminal 

acts to justice. It must be noted, however, that the need to publicize the existence 

of a counterfeit or adulterated product in order to alert professionals and the public 

to potential dangers may compromise the successful conduct of criminal investigations. 

Regular FDA district field investigators often work closely with OCI special 

agents in these cases. They follow up at specific wholesalers, distributors, hospitals 

or pharmacies identified as having received counterfeit product to conduct 

tracebacks on particular lots and to determine sources, quantities involved and the 

distribution of product to retail outlets. The FDA’s Forensic Chemistry Center (FCC) 

and/or the drug and biologic review divisions provide field personnel with the labeling and packaging of authentic product for comparison with counterfeit product. 

FDA also posts information to its MedWatch site to inform consumers and health 

care professionals about safety concerns related to counterfeited or tampered products. 

OCI opened 55 counterfeit drug cases from October 1998 through June 2002. During that time we have made 26 arrests with 20 convictions. We have seen a gradual 

increase in the incidence of finished dosage form counterfeit activity over the last 

few years. So far this year we have 16 cases opened, 12 arrests, and seven convictions. Eight of these arrests and five convictions are attributable to the latest eight 

counterfeit drug appearances. 

The current focus on drug counterfeiting and the public perception of a more dramatic increase in counterfeit drug activity is due to the fact that the latest several 

counterfeits have appeared in the wholesale market and received wider distribution 

than has been the case historically. This is due to the existence of an illicit wholesale drug diversion network that has grown up around tiered pricing and economic 

fraud. 

This system consists of criminal middlemen who knowingly solicit closed door 

pharmacies, such as a hospital or nursing home supplier, to over-order certain drugs 

based on fraudulent demand. The drugs are then sold into the wholesale drug diversion network. The diverter typically offers a 25 percent kickback to the closed door 

pharmacy and diverts the excess drugs into the illicit wholesale diversion system. 

This system depends on the diverter maintaining confidentiality for the closed door 

pharmacy since the pharmacy would lose its preferred pricing should the manufacturer discover the fraudulent arrangement. False pedigrees are the hallmark of the 

system as each wholesaler passing the drugs on to the next faces being ‘‘cut out’’

if the subsequent buyer knows the identity of his supplier’s source. It is easy to see 

how this system of ‘‘willful blindness’’ facilitates the entry of counterfeit and otherwise unsafe drugs into the marketplace. Unfortunately these illegal schemes net 

huge profits. From October 1998 to June 2002, OCI opened 255 Prescription Drug 

Marketing Act diversion cases, executing 464 arrests and resulting in 337 convictions, with fines and forfeitures totaling approximately $32 million. 

The following examples of counterfeit drug products and tampering incidents may 

help to illustrate the types of activity we have recently encountered. 

Serostim (somatropin (rDNA origin) for injection), Serono Laboratories 

In late 2000 and early 2001, FDA became aware of consumer complaints about 

adverse effects and a recall at the distributor level of Serostim. FDA enforcement 

personnel and criminal investigators became involved and engaged FDA field offices 

nationwide, which included investigative follow-up at other distributors and the 

manufacturer. In January 2001, Serono issued a press release regarding the apparent counterfeiting of one particular lot. An additional press release and Dear Health 

Care Professional letter were issued by the company in May 2001, regarding a second lot. 

In May 2002, Serono became aware that counterfeit Serostim displaying a fake 

lot number had been distributed. Preliminary information indicates that the counterfeit product may have been distributed via the Internet. Laboratory analysis by 

FDA shows that the product contains no active ingredient, and it has been determined that the product did not originate from Serono. 

On May 16, Serono issued a letter advising Serostim handlers to be aware of the 

counterfeit lot even though it has not shown up in normal distribution channels. 

Neupogen (filgrastim), Amgen, Inc. 

In the spring of 2001, based on observations by a distributor about product appearance, Amgen analyzed a suspect lot and determined that the vials contained 

only saline solution. Investigation by the company and FDA revealed that the lot 

did not display a legitimate Neupogen lot number, but one that had been assigned 

30

to a lot of Epogen, another Amgen product. The FCC performed additional analysis. 

In May 2001, Amgen issued 17,000 Dear Health Care Professional letters nationwide informing patients, physicians, pharmacies and wholesalers about the counterfeiting of Neupogen. Later that month, Amgen reported to FDA on product with four 

lot additional numbers having wrong expiration dates, indicating either counterfeit 

lot numbers or that expiration dates were changed to make them more saleable by 

extending dates. In June, Amgen updated its Dear Health Care Professional letter 

with information on additional confirmed and suspected counterfeit lots. 

Epogen (epoetin alfa), Amgen, Inc. 

In May 2002, FDA, state regulators and Amgen became aware that potential 

counterfeit Epogen may be in commerce. Amgen analysis indicated that a counterfeit product labeled as Epogen 40,000 U/ml vials with a particular lot number contained a clear liquid having active ingredient approximately 20 times lower than expected. Samples of the authentic product as well as the counterfeit product were 

sent to FCC for analysis. On May 8, Amgen issued a letter advising health care professionals about the counterfeit Epogen and describing the differences between authentic and counterfeit packaging so that physicians can identify the authentic product. Further investigation revealed that a major wholesale distributor was holding 

approximately 1,600 cartons of counterfeit product. The majority of this counterfeit 

product was tracked back to a wholesaler located in the western U.S. On May 24, 

Amgen issued a second advisory letter to warn health care professionals that two 

additional counterfeit lots of Epogen were discovered. 

Combivir (lamivudine plus zidovudine), GlaxoSmithKline 

In the spring of 2002, GlaxoSmithKline (GSK) received four complaints that bottles containing 60 tablets of Combivir were being replaced with Ziagen tablets. In 

addition, the firm determined that counterfeit Combivir labels were placed on authentic bottles of Ziagen tablets. Both medicines are used as part of a combination 

regimen to treat HIV infection. A GSK health hazard evaluation of this situation 

determined that if an individual takes the wrong tablet and is sensitive to abacavir 

sulfate (Ziagen), a potentially life threatening hypersensitivity reaction could occur. 

GSK has stated that the incidents appear to be isolated and limited in scope, and 

no injuries or adverse reactions have been reported. However, in May, distributors 

were advised to initiate recall to their customers. GSK also issued a press release 

to alert patients, pharmacists and physicians to watch for third party tampering 

that incorrectly labels Ziagen as Combivir. 

Zyprexa (olanzapine), Eli Lilly & Co. 

In the winter and spring of 2002, Eli Lilly received complaints from four pharmacies in four states that the product Zyprexa had been removed and replaced with 

white tablets labeled as aspirin. Zypreza is indicated for the treatment of schizophrenia and acute bipolar mania. The tampering situations occurred in two 

strengths and in three different lots. The company determined that the tablets from 

two of the complainants were non-Lilly tablets and looked the same in both complaints. FDA has determined the manufacturing source of the white tablet marked 

as aspirin and is continuing to investigate. On May 4, Lilly issued a press release 

and Dear Health Care Professional letter concerning the tampering situation. The 

company stated in their press release that these incidents appeared to be isolated 

and limited in scope. 

Procrit (epoetin alfa), Amgen/Ortho Biotech 

In May 2002, based on requests from state health authorities, Amgen obtained 

and analyzed samples of 40K vials of Procrit from a certain wholesale distributor. 

The analysis indicated that a counterfeit drug product labeled as Procrit 40,000 U/

ml vials with a certain lot number contains a clear liquid having active ingredients 

approximately 20 times lower than expected. Samples of the authentic product as 

well as the counterfeit product were sent to FCC for further analysis. Investigators 

are continuing following up at wholesalers and distributors identified as receiving 

the counterfeit product. One major wholesale distributor was found to be holding approximately 339 cartons of counterfeit product. In June, Ortho Biotech issued a 

Dear Health Care Professional letter and press release which details the differences 

between authentic and counterfeit packaging so that physicians can be certain they 

have the authentic product. 

In addition to the above cases, OCI has made a number of recent arrests relating 

to counterfeit AIDS and cancer drugs, as described below. 

31

Serostim, (somatropin (rDNA origin) for injection), Serono Laboratories 

In November 2000, Nicholas Hanson was arrested by a task force of OCI, U.S. 

Postal Inspection Service, and Iowa State Police on charges of conducting an ongoing criminal enterprise. Hanson was the leader of a small group that counterfeited 

Serostim. He imported the human growth hormone through the Internet from 

China, via Express Mail. At the same time, Jeremy Gansen was arrested by the 

same task force and charged with conducting an ongoing criminal enterprise related 

to the misbranding and distribution of human growth hormone and steroids. Gansen 

assisted Nicholas Hanson in the counterfeiting of Serostim. 

Nutropin AQ (somatropin (rDNA origin) for injection), Genentech 

In July 2001, an individual was arrested in Texas by OCI and subsequently indicted in August 2001 by a Federal Grand Jury. He was charged with counterfeiting 

Nutropin, trafficking in counterfeit goods and controlled substances violations. He 

subsequently plead guilty to counterfeiting Nutropin and distributing controlled 

substances. In December 2001, a second individual was indicted by a Federal Grand 

Jury in Texas for counterfeiting the above Nutropin, conspiracy to defraud the FDA, 

aiding and abetting and controlled substances violations. He is a fugitive and a provisional international arrest warrant is being sought for his arrest. He will be extradited to the U.S. In April 2002, two additional individuals involved in the distribution of counterfeit Nutropin were arrested by OCI and DEA for selling heroin to an 

undercover agent. Finally, in May 2002, a fifth individual was arrested by OCI for 

selling counterfeit Nutropin, and he subsequently plead guilty to the charge. 

FDA remains strongly concerned about any possibility that counterfeit or otherwise unsafe drugs may find their way into the American drug supply. We will remain vigilant as we refine and improve the programs and procedures that we use 

to ensure the availability of safe medications for consumers. We also believe that 

proposals that have been put forth in Congress to allow either the reimportation of 

drugs by persons other than the original manufacturer, or to allow consumers to import drugs for their own personal use, will provide additional avenues for unscrupulous individuals to place counterfeit, substandard or otherwise dangerous drug products into U.S. commerce and into citizens’ medicine cabinets, as discussed below. 

DRUG IMPORTATION LEGISLATION

Currently, new drugs marketed in the United States must be approved by FDA 

based on demonstrated safety and efficacy; they must be produced in manufacturing 

plants inspected and operated in conformance with FDA’s current Good Manufacturing Practice (GMP) requirements; and their shipment and storage must be properly documented and subject to inspection. This ‘‘closed’’ regulatory system has been 

very successful in preventing unapproved, adulterated or misbranded drug products 

from entering the U.S. stream of commerce. Legislation that would establish other 

distribution routes for drug products, particularly where those routes routinely 

transverse a U.S. border, creates a wide inlet for counterfeit drugs and other dangerous products that can be injurious to the public health and a threat to the security of our nation’s drug supply. 

Although a number of bills have been introduced that would facilitate the importation of foreign drugs, FDA has looked most closely at S. 2244, which has been the 

subject of recent activity on the floor of the U.S. Senate. This bill, introduced by 

Senator Dorgan and others, and its companion bill in the House, H.R. 4616, introduced by Rep. Sanders, would create two new pathways for drugs to enter the U.S. 

outside of the current drug regulation system that, while not perfect, has a remarkable record of protecting the public from contaminated, ineffective, or counterfeit 

drugs. Of particular concern are the provisions for allowing individuals to import 

drugs directly from Canadian pharmacies. This would greatly exacerbate the growing problem of the hundreds of websites purporting to sell legitimate medications 

that are in fact selling unapproved or otherwise dangerous drugs to Americans. 

These personal importation provisions are so broad that they will over-ride existing 

statutes that allow FDA to refuse entry to prescription drugs from Canada if they 

are believed to be unsafe, ineffective, adulterated, contaminated or counterfeit. 

Throwing the door open to drugs purchased by individuals directly from Canadian 

sellers will encourage unscrupulous individuals to devise schemes using Canada as 

a transshipment point for dangerous products from all points around the globe. Web 

sites touting the availability of supposedly legal drugs from Canada will spring up 

in large numbers, duping consumers that will have no way of knowing that the 

drugs may be illegal, counterfeit or contaminated. 

S. 2244 and H.R. 4616 would create a second route for transporting drugs into 

the U.S. outside of the existing regulatory system. The bill would allow pharmacists 

32

and wholesalers to purchase drugs from Canadian sellers over which U.S. authorities (FDA or others) have no jurisdiction or control. Because the bill requires that 

the drugs comply with sections 501, 502 and 505 of the Act, it may be found, in 

practice, that for the bill to have its intended effect, U.S. manufacturers would have 

to sell drug products manufactured, labeled and intended solely for the U.S. market 

to Canadian distributors, specifically for re-sale to the U.S. As a practical matter, 

meeting these requirements would be very difficult, and it is unlikely that Canadian 

sellers and U.S. importers would be willing to endure them. Additionally, it is not 

clear as to how FDA could ensure that drugs reimported under this proposal would 

in fact comply with those sections of the Act, because the Agency has no practical 

ability to regulate or inspect Canadian facilities. 

The bill attempts to ensure the safety of the drugs under 804(b) by requiring testing for authenticity. Unfortunately, authenticity can rarely be established solely 

through chemical analysis. That can only be assured by the multiple layers of safeguards that are built into the FDA’s oversight system in which drug approval, regulation, inspections and surveillance tracks drugs over their entire life cycle. The 

testing required by the bill would not protect against the threat of counterfeit drugs 

because no random sampling plan can protect against such criminal conduct. The 

threat of counterfeits does not depend on the integrity of the product itself, but on 

the integrity of those handling it. Since counterfeits can easily be commingled with 

authentic product, either by the case, by the bottle, or by the pill, there is no sampling or testing protocol sufficient to protect against the grave public harm they 

pose. 

In addition, the bill would require drug manufacturers to disseminate their drug 

formulations and chemical fingerprints to potentially thousands of pharmacies and 

wholesalers. This information, currently protected as trade secret, could be worth 

millions of dollars, per drug, on the black market. Counterfeiters could obtain drug 

formulations and learn how to make their fake drugs look real and survive chemical 

analysis. Notwithstanding these very real safety concerns, it is questionable as to 

whether the bill would achieve the goal of bringing cheaper pharmaceutical products 

to U.S. consumers. Any cost savings that might be generated may well be absorbed 

by the fees charged by exporters, wholesalers, pharmacists and testing labs. 

We would also like to recognize that the Administration is continuing to review 

this legislation and may have further comments. Finally, FDA notes that we will 

continue to offer our expertise and advice to the Congress, as we have in the past, 

in exploring any additional proposals which may be offered to address the drug pricing issue, including those involving reimportation. 

CONCLUSION

Mr. Chairman, FDA remains concerned about any possibility that unsafe drugs 

may find their way into the American drug supply. We will remain vigilant as we 

refine and improve the programs and procedures that we use to ensure the availability of safe medications for consumers. We appreciate the Committee’s interest 

in assuring that the American public has access to safe and affordable medicines 

and we look forward to working with you in furtherance of this goal. Thank you 

again for the opportunity to participate in today’s hearing. I will be happy to answer 

any questions.

Mr. BILIRAKIS. Thank you very much, Mr. Hubbard. There certainly will be many questions. 

Mr. Hubbard, how long have you been with the FDA? 

Mr. HUBBARD. I will have 30 years in September with the Department of Health and Human Services, 26 of those with the 

FDA. 

Mr. BILIRAKIS. So you are certainly far from a political appointment, are you not? 

Mr. HUBBARD. One could say that, yes. 

Mr. BILIRAKIS. Were you faced with this problem—for how long, 

now? Is this a new problem? Is this a very recent problem? 

Mr. HUBBARD. We have seen isolated examples of counterfeiting 

going back at least 15 or 20 years, and probably further than that, 

but they were very isolated. Our concern is that, as with some of 

the statistics I gave you, we are seeing a ramping up of that right 

33

now. It does concern us that the counterfeiters are increasingly 

anxious to get their products into this country. 

Mr. BILIRAKIS. How about the reimportation? 

Mr. HUBBARD. On the reimportation via the mail, the growth of 

the Internet has been a big cause of a spurt there. There were always catalogs around that people could order drugs from Germany 

or wherever, but that was a very low-level activity. Now, with the 

growth of the World Wide Web, it is fairly easy to go buy these 

drugs, and we are seeing—we don’t have any firm data, but it is 

probably an exponential increase in the last 4 or 5 years. 

Mr. BILIRAKIS. Mr. Hubbard, under present law, the FDA can 

prevent the reimportation of a drug which appears to be unapproved, adulterated, or misbranded. The Kingston legislation prohibits the FDA, as I understand it, from preventing importation if 

the drug appears to be approved. 

I wonder if you could address the ‘‘appears to be approved,’’ if 

you will. What does that mean, really? Can a drug appear to be approved and still be unsafe? 

Mr. HUBBARD. Well, this is one of the drugs that we found in the 

mail. This appears to be approved. It says ‘‘Viagra,’’ and gives the 

name of the manufacturer. We have no idea where it was made. 

Mr. BILIRAKIS. What do you mean, it appears to be approved? 

Mr. HUBBARD. It has the brand name of an approved drug, and 

it has the name of a manufacturer, and it has labeling that looks 

like the approved labeling. I have no idea whether this is a safe 

and effective drug or not, but it appears to be approved. 

Mr. BILIRAKIS. So by changing the current standard whereby 

under the legislation it would meet the ‘‘appears to be approved’’ standard, if you will—— Mr. HUBBARD. I believe that is correct, Mr. Chairman. I believe 

this drug, if it arrived under Mr. Kingston’s bill, would in fact be 

allowed in because it appears to be approved. 

Mr. BILIRAKIS. You couldn’t stop it? 

Mr. HUBBARD. It appears to be approved. If that is what the 

standard would be, then we would not be able to stop it. I suppose 

if we had some—I believe the bill would allow—if we had evidence 

that a drug was unsafe, we could then stop it, but in most cases 

we would not know that. 

Mr. BILIRAKIS. Under the legislation, could you stop it if you had 

concrete evidence that—— Mr. HUBBARD. My understanding—and I would want to consult 

with counsel—but I believe if we had concrete evidence that it was 

not approved or was somehow unsafe, that would indeed allow us 

to say it is misbranded or otherwise illegal. 

Mr. BILIRAKIS. The FDA has analyzed a number of reimportation 

proposals and consistently told Congress that they would jeopardize public health. All of these proposals have contained various 

protections intended to safeguard the American consumer, and yet 

the FDA has said that they are all—they do not do enough to ensure safety. 

Do you have any recommendations in terms of protections that 

might be necessary to allow reimportation to work? 

We have all acknowledged the high cost of drugs, and many here 

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oric, and all that. We all acknowledge that it is the high cost of 

drugs that is resulting in this reimportation. Mr. Brown indicated 

reimportation is due to the system of high drug costs. I don’t think 

anybody would disagree with that. But until or unless something 

is done toward that end, we are faced with reimportation. 

Do you have any suggestions on the part of the FDA, sir? 

Mr. HUBBARD. We could give the Congress a list of things that 

might ameliorate the safety issues; things like assuring the pedigree of the product, testing the product, licensing the importer, limiting the people and places it can come into, and many other 

things. 

You could tick off a lot of things that would be expensive for the 

FDA or the taxpayer to do that would hopefully make things better, but I don’t believe that anything that we have been able to 

think of could create a system that duplicates the current safe system. 

The current system is fairly closed. It is difficult for unsafe and 

ineffective drugs to get into the market in this country, so our fear 

is that anything that opens that up, even with some protections 

built in, would not be adequate for us to be able to say that the 

drugs are as safe as they are now. 

Mr. BILIRAKIS. Thank you, Mr. Hubbard. 

Mr. Brown. 

Mr. BROWN. Thank you, Mr. Hubbard. If prices were lower in the 

United States, would there be as many prescription drugs smuggled in and toy trucks and fluffy bears from China, or whatever 

you held up? Would we see as much of that? 

Mr. HUBBARD. I actually think we might still see a fair amount, 

because many of the drugs, they are so-called lifestyle drugs: 

Viagra for sexual potency and propecia for hair growth. There are 

certainly consumers and patients out there who would still be seeking drugs, we believe, because it would be the kind of situation 

where they would not want to consult with a physician, or they 

might think they are doing something not totally legal. 

But certainly for those who are seeking drugs because they cannot afford their current prescription, then that could be the case. 

Mr. BROWN. So you had talked about drugs being smuggled in, 

and you mentioned three countries. You mentioned others, but 

three jumped out at me: Switzerland, Spain, and France. 

It is curious that drugs in those three countries, all three, particularly Switzerland and France, wealthy countries but countries 

where drug prices—and Tamoxifen is one—it is one-fifth or oneeighth the cost as it is in the United States. 

If we were to do some of the things that other countries did, compulsory licensing, bringing in competition into the marketplace, 

some sort of negotiations like Canada does with the drug companies, something direct like that, you would not—you would see very 

few drugs that seniors now can’t afford that you mentioned, you 

would see very few of those smuggled in from Switzerland and 

France and Spain, presumably. Correct? 

Mr. HUBBARD. I would defer to your judgment as to whether 

those sorts of controls had that effect. I would note that these are 

not real drugs, they are counterfeit, so you would be buying a fake 

35

drug. You would be wasting your money. You would be getting a 

worse deal than you get by paying a high price in this country. 

Mr. BROWN. I would submit that the number of counterfeit drugs 

is directly proportionate to the demand for them, and the demand 

for them is higher because prices are so high. 

Let me go a different direction. Has FDA looked closely at Canada’s drug regulatory system? 

Mr. HUBBARD. I talked to the Canadian FDA the week before 

last, at some length, and asked them a lot of questions about their 

system. We obviously know some things about their system, because they are a neighboring country, and sometimes the two FDAs 

collaborate on things. But they have their own separate system. 

They make two important points to us. One is that they have a 

law, just as we do, that exempts them from being concerned about 

the safety of a product for export. So just as a drug that can be 

brought in this country and sent to another country is not one that 

FDA looks at, they do the same thing. 

So if an importer from Canada brings a drug in strictly to export 

to the United States, the Canadian FDA could care less. That is 

not even under their jurisdiction. 

Mr. BROWN. You would assume, if they imported it from the 

United States, it would be safe, though? 

Mr. HUBBARD. One would hope so. 

Mr. BROWN. And most of these drugs that my constituents bring 

back and that the lady, Mrs. Tubbs, that refused to sit at the table 

on the next panel, a consumer representative, a consumer herself, 

that the drugs she buys are from the United States, sold to Canada 

and at a much lower price. 

Is there evidence that the Canadian system is less rigorous than 

the U.S. system? Do you have any evidence of that? 

Mr. HUBBARD. They did explain a concern that they didn’t have 

as many inspectors as we did. They have about 90 to 100 inspectors for a very large country. 

Mr. BROWN. Well, for a very small country. 

Mr. HUBBARD. A very large country in size, I think. 

Mr. BROWN. Well, I don’t think drugs are bought by acres; they 

are bought by human beings. I mean, we are talking—the number 

of people is a lot more important than, you know, the size of Siberia. 

Is the FDA—okay, this is through a couple of conversations you 

have had recently with——

Mr. HUBBARD. Right. 

Mr. BROWN. Has the FDA looked at how Canadian provinces license their pharmacies? 

Mr. HUBBARD. We have asked; it is similar to our system. The 

Canadian system is similar in that there is a Federal authority 

that oversees the safety and efficacy of drugs; and then the practice 

of medicine and the practice of pharmacy are regulated at the provincial level, which is analogous to the State level of the United 

States. 

Mr. BROWN. Are the standards, in your view, more lax than those 

applying to U.S. pharmacies—to your knowledge, Canadian pharmacies? 

36

Mr. HUBBARD. I couldn’t qualitatively judge their standards. 

They appear to be analogous, at least in the way they are described. But I don’t know the specific standards, I don’t know the 

frequency of inspection, and I don’t know the rigor of the regulatory authority. 

I can only describe what they say, which is similar to ours. 

Mr. BROWN. Okay. So you don’t know their standards. You don’t 

have evidence that they might be lax, more lax, less lax, the same. 

You don’t know about the—if there is evidence, you don’t have evidence that they are less rigorous than the U.S. regulatory system. 

You have had a couple of conversations—almost the way you relate them, they sound kind of informal—fairly recently. Yet you 

make decisions to hold drugs at the border that American seniors 

have wanted to buy. You are making decisions where some of those 

seniors may not get their prescriptions at all because they can’t afford them. So you have made the choice, it sounds like, at the FDA, 

based on no real evidence except a few conversations that you are 

admitting, you are saying, don’t tell you a lot of information—you 

are making decisions that really do deny access to prescriptions, 

that a lot of American seniors and others want, based on no real 

evidence. 

I mean, shouldn’t the FDA be looking and really making and 

learning more about this and understanding what this is about, so 

you can make a decision on whether or not those drugs should be 

held at the border, whether we should be allowed to have—they 

should have access to them. 

Mr. HUBBARD. Well, if I may respond, the law says they should 

not come in, none of them. We should be letting none of these products in. 

But we tend to prioritize because of resource limitations and 

have been focusing on larger, so-called ‘‘commercial shipments.’’ So, 

you know, Canadian pharmacies that send in hundreds of prescriptions, large, large bulk packages, Customs sees those. They call us, 

and we say, don’t let them in. 

The individual little packages that citizens mail tend not to be 

caught. It is not that we wouldn’t like to turn them back, but we 

can’t. We have to, as you know, go through a notice system to turn 

those back, so they do tend to come in. 

Mr. NORWOOD. Thank you very much, Mr. Hubbard. 

Mr. BROWN. I have one more question. 

Mr. NORWOOD. The chairman is next. You are considerably over, 

Mr. Brown. 

Mr. Chairman, you are now recognized for whatever time you 

would like. 

Chairman TAUZIN. Thank you, Mr. Chairman. 

Let me ask you a couple of questions directly from your testimony, sir. You pointed out in the testimony that the FDA does not 

have the ability to reach into another country, even Canada, to protect U.S. citizens from drugs that may have been sent to them that 

are harmful or dangerous, adulterated, or possibly just they were 

cheated because they were noneffective drugs; is that correct? 

Mr. HUBBARD. That is correct, Mr. Chairman. 

Chairman TAUZIN. You can take action here in the United 

States, though, against people who do that to our citizens, right? 

37

Mr. HUBBARD. That is correct, Mr. Chairman. 

Chairman TAUZIN. In the United States you don’t authorize—as 

I understand it, the FDA has never authorized a drug until it is 

properly tested, until you know it is safe and effective; is that 

right? 

Mr. HUBBARD. That is correct, Mr. Chairman. 

Chairman TAUZIN. If we passed a law that said FDA from now 

on could authorize drugs for American seniors that simply appear 

to be safe and effective, would that destroy the gold standard? 

Mr. HUBBARD. Well, it would certainly undermine it very substantially. I suppose the word ‘‘destroy’’ would be a good word for 

that. 

Chairman TAUZIN. Yeah. I mean, if I were a drug manufacturer 

and I brought you a drug and I said, you know, look at it, does it 

appear to be safe and effective; and that is all you had to do—you 

didn’t have to go through protocols and test it thoroughly to make 

sure it didn’t have side effects; that it was the right potency; it was 

properly designed so that it didn’t have damaging effects on citizens; that it really did what it was intended to and did it well; if 

you didn’t go through that rigorous testing procedure, if all you 

were required to do was say, it appears to be safe and effective, 

that would destroy the safest drug system this world has ever seen, 

would it not? 

Mr. HUBBARD. I think you make a strong case for that, Mr. 

Chairman. 

Chairman TAUZIN. I am certain it would. 

In your testimony you do talk about Canada. You give us some 

pretty good information. You tell us FDA has noticed a proliferation of Web sites that offer drugs purportedly from Canada directly 

to U.S. customers; is that right? 

Mr. HUBBARD. Yes, Mr. Chairman. 

Chairman TAUZIN. You make it clear that those Web sites are illegal, that ordering shops like that today take orders from consumers and probably violate the laws against practicing pharmacy 

without a license; is that right? 

Mr. HUBBARD. Yes, Mr. Chairman. 

Chairman TAUZIN. Are you shutting down those Web sites? 

Mr. HUBBARD. Well, no. We have no authority to. We do write 

them and ask them to cease doing this. 

Chairman TAUZIN. You don’t have authority to shut them down 

even? 

Mr. HUBBARD. And only a few have even bothered to write us 

back. 

Chairman TAUZIN. Yeah, but I mean, they don’t even get back in 

touch with you; We have got a real problem. 

You also point out that in Canada, the Canadian code of ethics 

requires physicians to do a history, physical exam, and discuss the 

risk and benefits of medication with the patient; is that correct? 

Mr. HUBBARD. I understand there is such a——

Chairman TAUZIN. And yet these shops are getting Canadian 

physicians to simply rewrite the prescriptions in order to comply 

with Canadian law; is that right? 

Mr. HUBBARD. Yes. 

38

Chairman TAUZIN. Without ever seeing a patient, without ever 

doing a history, without ever doing an examination to make sure 

this patient can take the drugs in the quantity or the way in which 

they are being presented to them from these shops; is that right? 

Mr. HUBBARD. That appears to be the fact pattern. 

Chairman TAUZIN. Is that not a risk to American seniors and 

people taking drugs in this country? 

Mr. HUBBARD. And that is true not only with Canada, but with 

all Internet sales. 

Chairman TAUZIN. I would think it would be. 

I asked some questions when I gave you the opening statement, 

and I am going to ask you perhaps to do something you feel uncomfortable doing, but I am going to ask you to do it anyhow. 

There is an awful lot of pressure on the Congress just to say, go 

ahead, let people buy drugs from anywhere they want to buy them, 

because drugs do cost an awful lot; and until drugs are faced with 

real competition, with generic varieties, you know, a patent protects drugs, and they are very expensive when they have to be tested. The rigorous testing standards we have in this country are 

pretty expensive to go through, all that testing and research and 

development, and they end up costing us a lot. 

But that is part of our gold standard. We need to remember that. 

But if this Congress were pressured to pass a bill that allowed 

importation, we could do several things. We could say, look, we are 

not worried about safety. We are not worried about whether physicians really see patients or whether drugs just appear to be safe. 

We are not worried about it anymore. It is okay. Send it in, if it 

appears to be safe, doctors, go ahead and sign prescriptions even 

though you don’t know the patients, never saw them, never did a 

history, don’t know whether they should be taking these drugs, go 

ahead and send it on in. 

We could take that view. We are not worried about safety; we are 

just worried about costs, so send it on in. But if we took that view, 

and we were worried about making sure that people who bought 

drugs from another country were as protected as they are when 

they buy drugs under our gold standard here in America, from 

cheaters and people that might hurt them with adulterated and 

unsafe drugs, what reasonable, cost-effective measures would you 

recommend to us to ensure to the best practical extent, recognizing 

that we could not have as good a gold standard on imported drugs 

as we have on protecting citizens with drugs manufactured in this 

country and sold in this country, what would that list be? 

Now, I am not asking for it today. But we are going to be back 

here in September having more hearings. We are going to be asked 

to report something to the House so the House can look at a bill. 

And I want to do the best job I can, and I know Mr. Bilirakis wants 

to do the best job he can. 

And if we have to include protections, I really want you to work 

hard at this and send us your best recommendations on what the 

most cost-effective, most reasonable protections would be and still 

tell us what the—at that point, even what risk we have to accept, 

because if we in Congress really want to do this, we ought to know 

the risk we are taking not just for ourselves, but for the folks who 

39

sent us up here to try to make sure we had a good, safe drug system. 

One final question, Mr. Chairman, and I will yield. 

We just got through passing a bioterrorism bill in the face of this 

war against terrorism we are engaged in. We were appalled to 

know how little we inspect food and drugs at the border. And I 

have read your importation policy, where you do allow people to 

come in with some drugs under certain circumstances. 

And I read about your complaints, about your inability to do a 

real good job because of mail orders and inspections at the border 

and how weak that can be. We just went through an effort of trying 

to beef that up, because we were deeply concerned about people 

sending things in, like guys who mail anthrax letters to people 

around this city, deeply concerned about them using an importation policy we might pass to suddenly begin hurting citizens of this 

country by sending in drugs that may be laced with products like 

that that would harm them. 

Can you give us any assurance that after having passed this bioterrorism bill, if we pass a drug importation bill, we will not have 

complicated the efforts of those at the border whom we are trying 

to energize into protecting Americans against people who intentionally would adulterate drugs not just to make us sick, but to kill 

us. 

Mr. HUBBARD. It would certainly undermine the effort that Congress just passed in instructing us to be more careful at the border, 

because it would have more of these products coming in, more likely to have problems. And then we would be diverting resources, to 

look at these away, from sort of the terrorist thing that Congress 

ordered us to do; and the whole system would presumably get 

weaker. 

Chairman TAUZIN. Thank you, Mr. Chairman. 

Mr. NORWOOD [presiding]. Thank you, Mr. Chairman. 

Mr. Stupak, you are now recognized for 5 minutes. 

Mr. STUPAK. Thank you, Mr. Chairman. And let me thank Mr. 

Pallone. I have a 3 hearing that I have to get up to, and he let me 

go before him; so I appreciate his willingness to do that. 

Mr. Hubbard, you know, the chairman talked about the gold 

standard our FDA has, and all that, and what reasonable protections can we have and what is the risk; and I thought those were 

good questions. But these are questions we asked you back in June 

of 2001, and I think we are still waiting for some answers. If people 

really knew that the drugs are, flowing into this country, whether 

it is Carson City—that is a Los Angeles mail facility—or the one 

right here in Washington, DC, you would have millions and millions of this stuff coming in every year. 

And we had a hearing last year where people have died because 

they had taken drugs that—they thought it was something that 

they needed, and in fact, it was something that they did not need, 

and actually it was counterproductive to their health. 

So I guess my question is that it has been more than a year ago 

when we had this hearing on the issue of reimportation—it was 

June of last year—and you testified that because these drugs represent a serious threat to public health that the FDA was recomVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 W:\DISC\81494 81494
40

mending to the Secretary of HHS that FDA stop allowing the importation of such drugs through the mail. Is that correct? 

Mr. HUBBARD. That is correct. 

Mr. STUPAK. So what have you done on that to make sure that 

we stop this importation of drugs through the mail? 

Mr. HUBBARD. Well, we have met with HHS Secretary Tommy 

Thompson and gained his understanding of the issue and, I think, 

his concurrence that we have a problem and it needs to be addressed along the lines of what we recommended. And I believe 

Secretary Thompson discussed that with this committee at his 

March 13 hearing. 

And so we stand by that recommendation and believe that we 

should work with the Congress to develop legislation that would indeed give FDA the ability to screen these drugs and turn them 

back. 

Mr. STUPAK. All right. Mr. Hubbard you have met. You made the 

Secretary understand. You recognize there is a problem. 

But my question is, what have you done? It has been 13 months. 

What have you done? 

Mr. HUBBARD. Well, I believe—I understand we have given some 

draft language to the staff, but there has not been a formal administration position on that coming forward. 

But I think we still stand by our position, and I think the Secretary still stands by what he said in March. 

Mr. STUPAK. Well, it sounds like—if you are standing by your position, it sounds like your position is nothing because nothing has 

been done in over 13 months. And you promised us last time that 

there would be legislative language. 

We haven’t seen anything, and the frustration we are seeing up 

here, whether it is a little teddy bear or whatever they are coming 

in through—it is really obscene, if you go down to the mail house 

down here and see this stuff coming in here. 

Mr. HUBBARD. Well, as I said, we will be very happy to sit down 

with the committee right away and——

Mr. STUPAK. Can you tell us when? 

Mr. HUBBARD. Tomorrow. And present language and work with 

you to get it enacted. 

Mr. STUPAK. You will have language ready tomorrow? 

Mr. HUBBARD. Absolutely. 

Mr. STUPAK. Why don’t we have any formal language now signed 

off by the Secretary or else the acting Commissioner? 

Mr. HUBBARD. Well, I think the process is just a cumbersome 

one. 

I believe he has concurred, as he said on March 13, but he is 

going to have to go through a larger administration process, and 

it is a slow cumbersome process. 

Mr. STUPAK. Slow. Okay. It really is slow and cumbersome. I 

mean, 13 months. You know, this stuff that comes in here through 

the mail, there are five requirements that have to be on that package before it can be accepted in the United States through the 

Postal Service, isn’t it? 

Five requirements? That is what you testified to 13 months ago. 

Certain requirements on the package had to have the prescription—the doctors script on it, return address, forwarding address, 

41

a number of things; had to indicate what it was, what the drug 

was—all that had to be on the package, right? 

Mr. HUBBARD. Well, no. Actually none of these drugs should be 

coming in. There is no requirement to let them in, because they are 

all illegal. 

Mr. STUPAK. Right. So if they are coming in, they don’t meet the 

requirements, they are all illegal, why doesn’t the FDA say, Postal 

Service, turn them around? 

Mr. HUBBARD. Well, again, that gets back to the problem. Under 

the current law, the Postal Service and Customs Service says to 

FDA, give us the authority to turn them around. And for us to do 

that, we have to have the authority. But our law was written 

to——

Mr. STUPAK. And they have been asking you now for well over 

13 months, correct? 

Mr. HUBBARD. And they are correct to ask. And our law says, we 

have to first send a letter to the intended recipient, give them notice of an opportunity for a hearing before the FDA to explain 

whether the drug is legal or not; and that is what we would like 

to dispense with is that notice and opportunity for a hearing. 

Mr. STUPAK. Why won’t the FDA just say, Postal Service, you 

have certain requirements a package has to meet before it comes 

into this country; if it doesn’t meet that requirement, send it back? 

Mr. HUBBARD. I understand. We do not have the authority to ask 

them to do that. 

Mr. STUPAK. Why don’t you have that authority? Did you ever 

ask for that authority? Have you ever come to Congress and asked 

for the authority? 

This is the same question I asked you 13 months ago. 

Mr. HUBBARD. That is what we would like to work with the committee and draft the language on. 

Mr. STUPAK. It is going take you 13 more months to draft the 

language to ask this committee to give you the authority to tell the 

Postal Service to send it back because it hasn’t met the requirements of the U.S. Postal Service and it could be illegal drugs. 

I don’t think it should take another 13 months. That would be 

26 months and, you know, our patience up here isn’t probably 

going to wait that long. 

Mr. HUBBARD. I understand. As I said, Mr. Stupak, we will be 

glad to sit with you tomorrow on that, if that would be helpful, on 

such language. 

Mr. STUPAK. Well, I think maybe at least Chris Knauer on the 

minority staff will probably help you with that language, since it 

has taken 13 months to draft. 

I am sure we could get that to you, right, Chris? Thank you. 

Mr. NORWOOD. Thank you very much, Mr. Stupak. And I believe 

it is my turn for questioning, but let me get the chairman back in 

the chair. 

Thank you very much, Mr. Chairman. And I did think of staying 

in that chair where I could take all the time I needed, but believe 

it or not I think I am going to be fairly brief. 

Mr. Hubbard, how many employees at the FDA? 

Mr. HUBBARD. I believe there are around 9,500. 

42

Mr. NORWOOD. How many of them are devoted in their daily 

work to stopping counterfeit prescription drugs coming into this 

country? 

Mr. HUBBARD. Well, we have an Office of Criminal Investigations, and they spend about 65 percent of their time on drug safety 

issues, a substantial part of that on counterfeit drugs, so a rough 

estimate would be 40 or 50 people per year. 

Mr. NORWOOD. Forty or 50 people. Is the counterfeit drug problem larger than that? 

Mr. HUBBARD. I certainly think, if you asked them if they could 

use more resources to catch more counterfeiters and track down 

more, the answer would be yes. 

Mr. NORWOOD. How many would it take to stop the business of 

counterfeit drugs, which I think is horrendous, but coming into this 

country. How many folks would it take? 

Mr. HUBBARD. Well, that is sort of like asking how many it 

would take to stop narcotic drugs. We don’t know. But it would certainly be more than we have. 

Mr. NORWOOD. Give me a little better answer. 

Mr. HUBBARD. I am sorry, Mr. Norwood. I think we will just have 

to get that for the record, if I may. I would be hard-pressed for a 

guess. Perhaps one of my colleagues would make a guess. 

Mr. TAYLOR. I mean, part of the problem in answering that question is that we are still trying to quantify, quite frankly, the size 

of the problem. There are wide-ranging—— Mr. BILIRAKIS. The mike, please. 

Mr. NORWOOD. Oky. Look, because of time limitations you don’t 

know the answer, and I don’t fault you for that. We do know that 

they have to be at every airline terminal in the country and every 

port in the country, and et cetera, et cetera. What we do know is 

that to stop counterfeit drugs it would take a tremendous increase 

in personnel to do so. 

Mr. TAYLOR. That is correct. 

Mr. NORWOOD. Now, that is—one part of our problem is not the 

counterfeit drugs that are coming in. The other part of our problem 

is perhaps legitimate drugs that are being sold through the Web 

sites. They may actually not be counterfeit, or I guess they would 

be counterfeit, but they may actually work is what I am saying. 

Mr. HUBBARD. That is correct, Mr. Norwood. 

Mr. NORWOOD. And that is illegal to do that. 

Mr. HUBBARD. Absolutely. 

Mr. NORWOOD. And that would take how many people to bring 

that to an end if it were humanly possible? 

Mr. HUBBARD. Well, that is an even tougher question because not 

only would we have to have the resources but we would have to 

have more authority. Many of these Web sites are in other countries and we can’t reach them anyway. 

Mr. NORWOOD. Well let’s presume the authorities—I am trying 

to—we have a bill before us that says besides counterfeit drugs, besides the Web site, let’s make it legal for the importation of drugs 

from around the world to come into America, and I am trying to—

and let’s say Congress says, yeah, we need to do this. Let’s say we 

pass this bill, but we add a little amendment to it saying we will 

agree to this as long as the FDA can assure us that these drugs 

43

are safe and effective. Now, if we don’t add the ‘‘safe and effective,’’ what we are basically doing is telling all of our constituents, ‘‘Good 

luck, do the best you can. We hope to hell it doesn’t kill you.’’ Mr. HUBBARD. That is right, Mr. Norwood. 

Mr. NORWOOD. And so I can’t really imagine a reimportation bill 

that doesn’t include some ‘‘safe and effective.’’ So if it does that 

now, how many more people do we have to hire at the FDA to 

make sure now that reimportation of drugs coming from everywhere in the globe, which this is a pretty neat market, you know, 

folks are going to let it rip. How big will this agency have to be 

to—for us to assure our constituents that when they go buy a prescription drug, it will be exactly what they think they are buying 

and what their doctor ordered. How big must you become? 

Mr. HUBBARD. Again, we will have to get back to you. But we 

will do that if you like, Mr. Norwood. 

Mr. NORWOOD. It might be cheaper for us to just give everybody 

money to buy their drugs. 

Mr. TAYLOR. I mean, there would obviously still need to be an 

increase in our resources because the very nature or the very— probably the amount of imports would go up, and so there would 

have to be a corresponding need once again to ensure that the 

products that are coming over are safe and effective, so there will 

be a corresponding need for additional resources on the borders as 

well as probably a corresponding need for resources domestically. 

In those instances where we find out that a product that was 

claimed to be safe and effective is not, we will need to figure out 

domestically where that products has gone. We will need to do a 

recall. We need to ensure that if that product is in the domestic 

marketplace that we can get it back. So the answer is that indeed 

even in the scenario that you just painted, there would still be a 

significant need for increased resources to ensure that the—— Mr. NORWOOD. Well, some of us have visited Dulles and we have 

seen some of the stuff that is coming in. And bless your heart, you 

can’t even stop what is coming in now, much less us passing a law 

making it legal for it to come in from everywhere in the globe. 

Mr. Chairman, I submit that we are going to have to do one of 

two things. If we want to reimport drugs, we are going to have to 

be prepared to either make sure that the FDA can assure us that 

they are safe, or we are going to have to tell our constituents, oky. 

If the only thing here that matters is what they cost, you are on 

your own, and when you take it you can do a little prayer and hope 

first that it works, that it is efficient, or is it efficient enough; second, hopefully it is actually anything; and third, hope it doesn’t kill 

you. 

I mean, we are all concerned with the cost. But a fast, quick answer like this is very, very dangerous. And many of the team who 

want to solve the cost problem are good friends of mine and they 

are good people, but we need to be very concerned on the safety 

part of this, and that is what has held me up on this all along. 

Probably that visit, Mr. Chairman, to Dulles Airport did as much 

to get my attention as anything I know. I mean, I would like to 

let’s start, and you assure me, or Congress help you make sure we 

just stop the counterfeit stuff. Let’s just start with that. 

Time is up. Thank you, Mr. Chairman. 

44

Mr. BILIRAKIS. Mr. Pallone, to inquire. 

Mr. PALLONE. Thank you, Mr. Chairman. You know, I have listened to you, Mr. Hubbard, and I understand where—you know, 

your concern. But I guess you know you started off by saying that 

you can’t talk about price, and it seems to me that that is the 

whole problem here. I am sort of following up on what Mr. Norwood said. I mean we have desperate people. We have people who 

are going to Canada, for example, because they don’t have—they 

can’t afford to buy the drugs. 

And so for me, price is the issue. And I mean, the bottom line 

is that these people that are going on these buses to Canada are 

basically—I am sure that to some extent they may think in their 

minds that there is some risk, because they are going, you know, 

across the border, but they don’t really have a choice. It is a question of their—you know, they are either going to buy the drugs and 

they are going to use it and hope that it works—and most of the 

time it probably does—or they are going to have no drugs and die 

or have other consequences from it. 

So I guess I am very much in favor of what Mr. Kingston and 

Mr. Gutknecht are doing, because I think they—and I realize there 

may be some risk. But it is probably worth the risk, and that is 

what I wanted to discuss with you. In other words, let’s assume, 

you know, I am a senior with a life-threatening disease that requires certain prescription drugs for treatment. You know, I can’t 

afford to buy in the United States and so, you know, I go over to 

Canada. And maybe there is a slight risk but. If you were such a 

person and you were taking—had the option of taking a bus over 

to some pharmacy in Canada as opposed to not getting the prescription drug that you need to be alive, what would you do? 

Mr. HUBBARD. Well, let me first apologize to you and Mr. Pallone 

and Mr. Kingston and Mr. Gutknecht, that we understand your 

motivation about the price issue. What we are saying is that we 

can’t make those value judgments. 

Mr. PALLONE. Oky. Well, if you can’t make it, let me move on. 

Mr. HUBBARD. I mean, it is just not what we do. 

Mr. PALLONE. I understand that. But this is what it is all about. 

I mean, I don’t see bodies piling up in the streets from taking 

drugs from Mexico or these bus trips to Canada. You know, millions of people are using prescription drugs that come from Canada, Mexico, the Internet. Wouldn’t we begin to see thousands and 

thousands of adverse effects, particularly given the volumes of 

drugs now entering from these sources, if there was a serious risk 

and there was a widespread problem? It seems to me the problem 

is not that severe, given your alternative. 

Answer it that way. Why aren’t we seeing all these adverse effects if it is such a huge problem? 

Mr. HUBBARD. That is a good question. I will answer it in two 

ways: 

First, our concern is that if you institutionalize this process and 

open up the system that way, that the bad guys will have a better 

entree to the U.S. market and you could increase risk that way. 

The other possibility is—and we have seen some evidence of 

this—people that buy these drugs this way when they have a problem tend not to tell anyone, particularly those who buy drugs over 

45

the Internet. We have actually gone around to some of the folks 

who have bought these, because we have their addresses on these 

packages. And while we don’t threaten any sort of enforcement action, we ask them why are you doing this? And they all say, well, 

I knew I shouldn’t be doing this, and then they—the feeling is if 

they are injured by it, they won’t tell anyone. 

Mr. PALLONE. Oky, but let me ask you this. A lot of these bus 

trips go specifically to a pharmacy. You know, they set up something to go to Pharmacy X outside of Montreal or whatever. I 

mean, if you know you are going to a particular pharmacy, which 

is what is usually the case, is there any risk at all really of doing 

that. Going from Maine to, you know, Sherbrooke at the Quebec— you know, I love Quebec pharmacy—what is the danger? 

Mr. HUBBARD. I have said that if I were in Canada as a tourist 

and fell ill and went to a Canadian doctor and got a prescription 

and went to a Canadian pharmacist and got it filled, I would have 

a relatively high confidence level that I should take that drug, especially if I had a serious illness. But the FDA still can’t assure 

any safety of that product. And then, again, once you open the system up—— Mr. PALLONE. No, I understand that. But you know, maybe then 

the answer is to tailor the bill so it is more specific as to where 

you are going and how you are going there. But I mean, these guys, 

my colleagues on the other side, are making an honest effort to try 

to come up with something that is necessary, because frankly the 

Republican leadership won’t pass a bill that addresses price. So I 

mean, it seems to me that rather than—and I am not trying to be 

difficult with you. I mean, rather than just holding on and saying 

we have got these counterfeit products, let’s try to figure out a way 

that they can do the reimportation in a relatively safe way, because 

frankly it is not much of a risk if you know where you are going 

and it is a particular pharmacy on the other side of the border. 

That is what most of the cases are now, at least with the bus trips. 

And maybe you have some suggestions about how to change the 

bill to provide that kind of protection. If you know where you are 

going and you are going to a specific place, I mean, give us some 

ideas to help us, rather than just say we have got all these counterfeit things and we have a huge problem. If you can either today or 

in writing, I don’t know. 

Mr. HUBBARD. Well, as I said to Mr. Bilirakis, we will be glad 

to provide whatever help we can to the community. But in the end, 

we are not going to be able to say that the drugs will be safe as 

they are now. 

Mr. PALLONE. I know it is not foolproof, but nothing is. That is 

not what we are doing. 

Mr. BILIRAKIS. Right. And Mr. Stupak went into that particular 

area, that promises were made, what, 13 months ago or whatever 

it was, and, you know, we are opening up the door to ask for your 

help in trying to do what is right here from the standpoint of safety, and you have got to do your share, though, and certainly you 

are. 

Mr. HUBBARD. Well, we will help any way we can, Mr. Chairman 

and Mr. Pallone. 

Mr. BILIRAKIS. Mr. Pitts, to inquire. 

46

Mr. PITTS. Thank you Mr. Chairman. 

Commissioner Hubbard, plasma therapies are life-saving medicines used to treat serious diseases such as bleeding disorders, immune deficiencies, alpha one burns, and shock. The safety and advocacy of these important therapies depend on assuring an appropriate chain of custody and proper storage and handling conditions, 

unlike traditional pharmaceuticals. These therapies must be treated carefully and maintained in tightly controlled environmental 

conditions. 

Does reimportation, either personal reimportation or commercial 

reimportation, present any special threats to the safety and efficacy 

of these products? Put another way, is there any way to guarantee 

to the patients who rely on these medicines for their lives that 

plasma therapies imported from foreign countries are safe and effective? 

Mr. HUBBARD. Without question, Mr. Pitts, some products are 

much more susceptible to risk depending on how they are handled, 

the length that they have moved around, the places they have 

been, the temperature extremes they have been under, the ways 

they have been stored, and many many other factors. And so the 

type of property that you are talking about would be exceptionally 

vulnerable to that. And so absolutely, that sort of chain of custody 

would be a critical issue for a product like that, and there are 

many other drugs for which that same issue would exist. 

Mr. PITTS. I understand the FDA is presently considering requiring FDA-approved drugs to be labeled with bar codes. If reimportation were allowed, could this technology be used to prevent counterfeit drugs from entering the country? 

Mr. HUBBARD. It might be a technology that could be helpful. We 

are having a public meeting tomorrow on bar coding. It is some 

years away from effectuation, but clearly there would be opportunities for greater inventory control. But having said that, if you can 

counterfeit a label, you can counterfeit a bar code. 

Mr. PITTS. Is it possible for an Internet site to act as an ordering 

service and still comply with U.S. law; that is, is there any way a 

service can call a Canadian pharmacy to have scrips filled for U.S. 

patients? 

Mr. HUBBARD. Well, theoretically a domestic site that only dealt 

within the United States could serve as an intermediary like that 

to link a patient with the physician and the pharmacy. But you 

would still have the State requirements of valid prescription and 

a valid doctor-patient relationship and then, of course, a licensed 

pharmacy, and these Internet sites tend not to have that in many 

cases. 

Mr. PITTS. Can you definitely state that allowing for reimportation will increase the likelihood of counterfeit drugs making their 

way into the country? Would limiting reimportation to foreign 

pharmacies which, for instance, register with FDA, address these 

concerns? And how would you expect those drugs to be relabeled? 

Mr. HUBBARD. Well, registration might be helpful, and you know 

who is there. But you don’t really know what is behind that registration. The ultimate goal of any system is to assure that the registrant and/or the manufacturer is properly manufacturing and 

storing and holding a product, and registration alone would not get 

47

you that. It would only get you some information about who the 

person is. Then, of course, lying about a registration would be fairly 

easy for a foreign firm. 

Mr. PITTS. I understand Europe allows for parallel trade of pharmaceuticals wherein drugs freely proceed from country to country. 

Are you aware of whether this activity has increased counterfeiting 

in Europe? 

Mr. HUBBARD. I don’t know whether that particular activity has. 

We know that Europe is—that counterfeits are seen in Europe with 

some frequency. 

Mr. PITTS. Thank you, Mr. Chairman. 

Mr. BILIRAKIS. Mr. Green, to inquire. 

Mr. GREEN. Thank you, Mr. Chairman. And Mr. Hubbard, again, 

after you heard all of our opening statements—how could you not, 

they were so long. But my concern is our southern border and the 

residents, because we don’t go to Canada. We do go to Mexico. And 

can you assure us that for an individual has a life-threatening disease and required certain pharmaceuticals for that treatment, 

probability-wise is it a greater risk that they can’t afford their 

pharmaceuticals here because of the high cost, would they be better 

going across the border and being able to purchase whatever that 

pharmaceutical may be called there? Oftentimes I am not familiar 

with the quality of what may be in all the pharmacies in Mexico, 

and I have been to a number of them, in fact, taking physicians 

with me, and said, okay, look at the array that they have. If you 

were to evaluate that risk, would it be better not to take the medication for a life-threatening disease here if you can’t afford it or to 

go to Mexico? 

Mr. HUBBARD. Well, I think Mr. Pallone asked a similar question. So if you go to Mexico and get the real thing and it is cheaper, 

then, that is a good thing. If you go to Mexico and get a fake drug 

and it doesn’t do anything, whatever you spend is a bad deal not 

only for your pocketbook but for your health. But ultimately Congress has to decide what level of safety it wants for drugs. FDA can 

only say we do safety, and we are telling you that sort of thing is 

not safe. 

Mr. GREEN. Well—and I have some other questions. But I know 

we have—we import lots of foodstuffs, and I know FDA—and I 

don’t know if this has been touched on—but we bring in lots of cattle, lots of vegetables, lots of everything from Latin America, for example. Does the FDA inspect or have requirements on those various ranches or farms that ship into the United States? 

Mr. HUBBARD. Well, for meat, the Department of Agriculture has 

very strict requirements that the meat be slaughtered in the other 

country under strict U.S. standards and then——

Mr. GREEN. And they inspect——

Mr. HUBBARD. And then often reinspect. They are inspected in 

the foreign country and then they reinspect when the product arrives at the border. Now, for the non-meat products, the fruits and 

vegetables, FDA has certain standards. For instance, you can’t use 

an illegal pesticide. And we do random sampling to determine that, 

and if we find a particular grower, importer from a foreign country 

is using an illegal pesticide, we will prevent them from bringing 

that product in in the future. 

48

Mr. GREEN. What if there was a pharmaceutical company in 

Renoso or Matamoros? Could the FDA, if we gave the authority 

and the funding, inspect that particular pharmaceutical specifically 

for reimportation, not unlike maybe what the Department of Ag 

does for meat? 

Mr. HUBBARD. Well, if you gave us that authority and the Mexican Government gave us that authority, sure. But then, of course, 

we would want to be inspecting against an approval, so we would 

want it to be an FDA-approved drug that we would go there to inspect. 

Mr. GREEN. Oh, sure. It would be something that would be approved in the United States because I know, in fact, our next panel 

has a witness from Texas who talks about you can go to Mexico 

and buy lots of things that you can’t buy off the shelf or you can’t 

even get in the United States. But I am talking about seniors who 

need the medications and could utilize that and, again, with some 

cost savings; we hope, in fact, a great deal. 

Let me talk about the domestic actions that the FDA has done. 

In the Carson City Pilot, you found a high number of illegal or unsafe medications. How did this compare to domestic mail orders, 

because it seems like today so many of our pharmaceutical plans, 

you know, we get all our pharmaceuticals or so much of our pharmaceuticals by mail. And how does the FDA regulate domestic mail 

order services, and why can’t these mechanisms work with selected 

international mail order services? 

Mr. HUBBARD. I will ask Mr. Horowitz to answer that if he has 

an answer. 

Mr. HOROWITZ. I am not aware of any data that compares the domestic mail order operations to the international operations. We 

did see a pretty high number of antibiotics that were coming into 

the country through the Carson mail facility. We saw a number of 

hormone products and potent steroid products. But I am not aware 

of the comparison to how domestic mail order drugs would relate. 

Mr. GREEN. Okay. In your testimony—and I share the concern 

about the problems guaranteeing that drugs are packaged and 

stored correctly. What would the FDA need to guarantee this, and 

how do we guarantee this for domestic packages? Again, I think I 

receive my pharmaceuticals by mail because of our—how do we do 

that on domestic, and how could we set up a procedure to do it 

internationally? 

Mr. HUBBARD. Well, we certainly have pervasive authority over 

domestic manufacture of drugs. The drug must be approved after 

adequate testing, and then it must be packaged properly, manufactured properly, have proper labeling and other things. And we inspect those facilities that do that. And then at the dispensing level, 

the States license pharmacies who actually dispense the drug, so 

you have another layer of regulation at the State level to ensure 

the drug is properly held and dispensed by a licensed pharmacist, 

for to do similar things in a foreign country would require a very 

substantial reach of FDA’s regulatory authority across the foreign 

border, which is—would be an unusual thing, I believe. 

Mr. TAYLOR. Just to follow up on that point, I mean the key here 

is domestically we obviously have a jurisdictional strength that we 

don’t possess in terms of dealing with foreign manufacturers or forVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00052 Fmt 6633 Sfmt 6602 W:\DISC\81494 81494
49

eign purveyors of these products. I mean, domestically we can go 

into the district court and we can take certain actions. We can 

avail ourselves of certain investigatory tools that allow us to follow 

up on those instances where we realize that a product is crossing 

interstate borders domestically. 

Those same tools don’t apply in the context, for example, of a foreign Web site, which is often why we need to work with the foreign 

government and solicit their help and solicit their assistance in 

dealing with the site, because our jurisdictional reach does not extend that far. 

Mr. GREEN. Mr. Chairman, I know my time is up but sometime 

along the way, how do you regulate foreign Internet which is concerned? Because I have constituents who drive to Mexico. No telling how many we have who buy their pharmaceuticals through the 

Internet, and that might be something that the committee—— Mr. BILIRAKIS. Do you have a brief answer to that? We are well 

over time, but I think it is worthwhile. 

Mr. HUBBARD. We don’t regulate Internet sales. We would like 

to. And the way we would deal with Internet sales is to try to stop 

these mail shipments, because people order over the Internet but 

it arrives by mail, and so our proposal to you is to help us find legislation to stop the mail importation which deals with the Internet. 

Mr. TAYLOR. Right. But in those instances where we do suspect 

that a product is coming from a certain country, what we will often 

do is we will try and stop the product at the border but, in addition, will notify the foreign government and seek their assistance 

in dealing with the product within their borders. And we have had 

some good cooperation with several countries including Germany, 

England, The Netherlands and some other countries. 

Mr. GREEN. Well, Mr. Chairman, just briefly, it seems like you 

have become postal inspectors, instead of FDA making sure the 

pharmaceutical is correct, that it is legal, and that is the concern. 

Mr. BILIRAKIS. Certainly. That is a good point. 

Mr. GREEN. Thank you. 

Mr. BILIRAKIS. Mr. Buyer, to inquire. 

Mr. BUYER. Thank you. I would just like to pick up a little bit 

from where Mr. Green left off. Which countries are the largest importer of the counterfeit drugs? Do you know? 

Mr. TAYLOR. No, I don’t think I can answer that question. 

Mr. BUYER. Would you answer that for the record, then, please? 

Mr. TAYLOR. Sure. Yes, indeed we will get it. 

Mr. BUYER. All right. With regard to our pharmacists, how would 

a pharmacist know whether the drug that he is dispensing to the 

customer is safe, whether it is FDA—or if that pharmacist somehow is going to get a reimported drug? How does he know? 

Mr. HUBBARD. He wouldn’t. Earlier we passed around a sample 

of a counterfeit and real drug that no patient, physician, or pharmacist could tell by visual examination that one was counterfeit 

and one was the real thing. In fact, companies have told us that 

even when they see the counterfeits it takes substantial analysis 

by the company to determine the counterfeit from the real one. And 

these are the people that actually make the drug. They ought to 

know that—if they don’t know what their drug is, no one would 

know. 

50

Mr. BUYER. I am challenged on this issue even from a philosophical standpoint. Having defended the quasi-private health system that we have in our society—quasi, because we have got Medicaid, Medicare, VA and the military health delivery system, and 

then we have got the uninsured that we end up dealing with 

through our Medicaid and other types of State systems, and the 

rest we do private pay, and then we use private pay to push the 

bounds of science. And then the same advocates, some of my own 

colleagues within the advocates of the private pay system are 

going, well, I tell you what; why don’t you run off to a couple of 

those social systems and then you can get a cut-rate deal? 

I don’t understand. So I guess going back to philosophy, you guys 

are in charge of a closed system, because the closed system is what 

we recognize and have endorsed that provides great assurances, security assurances and safety into the American people. When it 

gets your stamp of approval, it gets a lot of comfort by the consumer, right? So I am challenged. So even though we have had 

these ideas about—I am a lawyer, chain of custody, chain of distribution, if we can counterfeit the bottle and counterfeit the label, 

can they counterfeit even chains of distribution? Or how would we 

know? 

Mr. HUBBARD. Well, they can counterfeit the documentation that 

would show the chain of distribution. So in fact, yes, they would 

be counterfeiting that as well. In fact, they do. We see it all the 

time. 

Mr. BUYER. Give me some examples. 

Mr. HUBBARD. Well, if you go to a firm and ask them to show 

us, let’s say, a counterfeit drug or where it has been, they can pull 

out records: Oh, we get it from this guy who got it from the manufacturer. It is all legal. And, of course, if we trace it back to the 

manufacturer and he checks lot numbers or something and he says, 

oh, I didn’t sell that, it is obviously fake paperwork and we see 

that. 

Mr. BILIRAKIS. Would the gentleman yield? 

So what you are saying is in a corner drugstore, at a corner 

drugstore, a chain drug or whatever it might be, that there would 

be counterfeit drugs. 

Mr. HUBBARD. Well, currently, very rarely, Mr. Bilirakis. And 

that is one of our points, is we don’t see a lot of counterfeiting in 

this country because the system is so relatively closed. But when 

we have seen counterfeiting, we see related counterfeit documents 

because the counterfeiter wants to try to show a total picture of a 

good drug to the best he can. 

Mr. BILIRAKIS. But is it conceivable that a drugstore might find 

in its supply of drugs a counterfeit drug that has been reimported 

from another country? 

Mr. HUBBARD. Absolutely. As a matter of fact, the——

Mr. BILIRAKIS. It is not conceivable, it is definite. Is that what 

you are saying? 

Mr. HUBBARD. The counterfeiting that this committee discovered 

in the late eighties that led to the Prescription Drug Marketing Act 

was a counterfeit birth control pill, and a pharmacist happened to 

notice, if I recall, zero was slightly different on the label than on 

the real thing. And this incredibly sharp-eyed pharmacist, I believe 

51

in Indiana, found that and called the company and read the lot 

number and the company said there is no such lot number. 

Mr. BUYER. So the challenge you are going to have if we open 

up the system to reimportation is even in the chain of distribution 

because you are finding that occurring along with the bottle. 

Mr. HUBBARD. Yes, that would be what we would expect to find. 

A good counterfeiter is going to do it all. He is going to know how 

to fake it all. 

Mr. BUYER. I yield back, Mr. Chairman. 

Mr. BILIRAKIS. All right. Thank you. 

Mr. Strickland. 

Mr. STRICKLAND. Thank you, Mr. Chairman. I am sitting here 

listening to this, and I am feeling like Mr. Hubbard in his operation is just completely overrun and out of control, and I am wondering if anybody can guarantee any of us safety. You know, the 

mail order, the Internet operation, it seems to me like there is no 

effective way to deal with that, or that you can tell us that, in answer to Doctor Norwood’s question. You seem to be unable—and I 

understand the difficulty in telling us how many personnel you are 

going to need if you are going to deal with this. Do you need more 

money? 

Mr. HUBBARD. I think regulatory agencies would always like to 

increase their funding. But let me say that today if you go to an 

American physician and go down to your corner drugstore to get 

the prescription filled, you have an incredibly high likelihood that 

you are getting a safe and effective drug. Almost certainty. But if 

do you buy it over the Internet or go to another country and buy 

it, that certainty is not there, and I couldn’t give you a percentage, 

but it is a much less reliable source of a drug. 

Mr. STRICKLAND. Okay. That leads me to a question that last 

year Doctor Shepherd, who is with us today, testified before the 

Oversight Subcommittee that perhaps as many as 30 to 40 percent 

of the travelers that enter Mexico return to the U.S. with a pharmaceutical product. Do you have any idea how many people visit 

Mexico from our country a year? 

Mr. HUBBARD. No. 

Mr. STRICKLAND. It could be millions. 

Mr. HUBBARD. Could be. 

Mr. STRICKLAND. Let’s assume it is millions. I think it probably 

is. Doesn’t that mean that it is likely that millions are bringing 

into the U.S. prescription drugs for personal use consumption? 

Mr. HUBBARD. I will say—and you can certainly ask Dr. Shepherd—I believe that data shows, though, that many of the drugs 

people are bringing in from Mexico are things like narcotics and, 

you know, painkillers and antibiotics and not the sort of things 

that censors are so much worried about. And we also belief that 

drugs purchased in Canada tend to be different; that it tends to be 

more of these sorts of things. 

Mr. STRICKLAND. You think Canadian drugs would likely be likely to be more safe than drugs purchased in Mexico? 

Mr. HUBBARD. Well, I would rather not put—you know. 

Mr. STRICKLAND. I am just asking for your opinion. 

Mr. HUBBARD. Well, I think given that the Mexican system 

doesn’t require a prescription for many of their drugs would, for inVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00055 Fmt 6633 Sfmt 6602 W:\DISC\81494 81494
52

stance, give me more hesitancy, because many drugs in Mexico are 

sold over the counter, such as antibiotics, and you don’t need a prescription there. And so that would be a less strict regulatory system, and therefore, sure, I would probably have a little bit less assurance there. 

Mr. STRICKLAND. Okay. Since FDA is allowing many of these 

drugs to enter the U.S. in rather massive quantities under the socalled personal use policies, has your Agency done any systematic 

studies to analyze the contents of these many drugs that you are 

allowing seniors and others to bring into the U.S.? And if not, why 

not? 

Mr. HUBBARD. Let me say that while we argue that a lot of these 

drugs are coming in, that there are 4 billion prescriptions written 

in the United States each year for prescription drugs, and if there 

are 2 million of these Internet boxes coming in, that is a lot; but 

it is still nowhere near the number of total prescriptions being 

written. 

Mr. STRICKLAND. Do you not agree with me that it would be 

helpful, if not obligatory, for the FDA to carry out the studies so 

that we can have some more accurate data to work with in terms 

of what the situation is? 

Mr. HUBBARD. I think Mr. Bilirakis asked us that last week, and 

I believe we said that this better data will help us. We would be 

glad to work with the subcommittee on a study. We feel that we 

have enough information to know that there are problematic drugs 

out there that make us raise these alarms we are raising today. 

Mr. STRICKLAND. Do you have any idea what such a study may 

cost? 

Mr. HUBBARD. I asked our economists that after Mr. Bilirakis 

asked us, and we think between $500,000 and $1 million would 

probably get you a reasonable data set that the Congress could use 

to make some policy decisions. 

Mr. STRICKLAND. In your judgment, would that be a rather wise 

expenditure of funds? 

Mr. HUBBARD. Well, as we told Mr. Bilirakis, sure, if Congress 

wants that data we would be glad to help them do that. 

Mr. STRICKLAND. And I would encourage, if we can get such data, 

Mr. Chairman, I would suggest that we get it for both Canada and 

Mexico. 

Mr. Chairman, I have one further question. 

Mr. BILIRAKIS. Well, why don’t you ask the question very briefly 

and we will request a brief answer? 

Mr. STRICKLAND. Okay. We have all these drugs coming in but 

we don’t have bodies piling up in the streets from taking Mexican 

or Canadian drugs, do we? If millions are using these drugs that 

come from these countries and from the Internet, wouldn’t we 

begin to see thousands and thousands of diverse events, particularly given the volume? Does it surprise you that apparently we 

aren’t seeing these adverse consequences? 

Mr. HUBBARD. Well, one answer is that we believe that people 

that purchase these products in such surreptitious ways tend not 

to want to report them if they do have a problem. And to be quite 

honest, there could be lots of people out there whose blood pressure 

is not being controlled or whose infections are not being adequately 

53

treated or otherwise are not getting adequate treatment, and they 

are slowly—their health is slowly deteriorating. But we wouldn’t 

know that, because they were unhealthy to begin with. 

Mr. STRICKLAND. Okay. Thank you, sir. Thank you, Mr. Chairman. 

Mr. BILIRAKIS. I thank the gentleman. The Chair would recognize Messrs. Kingston and Gutknecht for 3 minutes each to inquire. Please stay within that 3 minutes. 

Mr. KINGSTON. Thank you very much, Mr. Chairman. We certainly appreciate all the hard work this committee is doing. And 

Mr. Hubbard, I am going to make a deal with you. I get 90 seconds 

and I am going to give you 90 seconds. And my first question to 

you is—I am a member of the Agriculture Appropriations FDA 

Committee. You had actually 2 years since we had a bill in our appropriations committee in which we gave $25 million. In all fairness, I think it was to HHS; I am not sure. But this committee has 

given you 13 months to come up with recommendations, and in our 

hearings we never have heard from FDA that, hey, we need more 

money because this is a growing issue. 

The reason why that is important is because you have said you 

don’t really care about price, which is fair. Your issue is safety. 

Well, doggone it, people are doing it now, and you are not coming 

to my appropriations committee and saying, you know, ‘‘We need 

money because we have got 45 to 50 people doing this now. We 

have made some commitments to the Energy and Commerce Committee, and we need to address this.’’ And so if safety is your only 

concern, why aren’t you addressing that? 

Mr. HUBBARD. Well, when the bill that you are talking about was 

enacted, we certainly did put together a cost estimate of implementation. And you are right. The committee did appropriate that $25 

million, and we were prepared to go implement that. And, of 

course, it ramped up over several years. But Secretary Shalala 

then sort of refused to certify that it could be done safely, so we 

never got the money because the way that the law was written, we 

didn’t get the money unless Secretary Shalala certified it could be 

done and then instructed us to do it. And then Secretary Thompson 

further certified when he came in that this couldn’t be done. So we 

have gotten most of that funding. 

Mr. KINGSTON. Okay. Let me ask you this now. Actually we do 

have reimportation now. The U.S. pharmaceutical companies can 

reimport, correct? 

Mr. HUBBARD. That is correct. The company can bring back their 

own products. 

Mr. KINGSTON. And I am just going to infer that you are saying 

that that is okay because it is a better chain of custody. 

Mr. HUBBARD. Well, the way Congress set it up in 1988, it said 

American goods could not come back in if they had left the custody 

of the manufacturer, but if they had stayed in the custody of the 

manufacturer they could come back. 

Mr. KINGSTON. And is that the way it happens? 

Mr. HUBBARD. Well, I assume——

Mr. KINGSTON. I mean, I assume you guard those pretty closely. 

Armored cars, maybe? 

54

Mr. HUBBARD. Well, the company is the one that is maintaining 

custody, not—FDA doesn’t hold the drug. 

Mr. KINGSTON. It is okay for the pharmaceutical companies who 

have the high price to reimport it, but it is not okay for Ruth Tubbs 

to do it, because she is at risk; but the companies can do it? I 

mean, I want you to think about that policy as a government 

that—what we have. 

Mr. HUBBARD. You understand, this was an explicit policy of the 

Congress, adopted in 1988, and the feeling was if a company sold 

more of its product, say, in England than could really be sold, they 

should be able to bring that back. 

Mr. KINGSTON. Well, I just want to make sure for the record we 

are reimporting now, it is just that we are only allowing the drug 

companies to do it, not the Ruth Tubbses to do it. And they are the 

people who need it. 

Now, in the case of Ruth Tubbs—nd getting back to Mr. Pallone’s 

question—if she knows the Canadian pharmacist she is dealing 

with, and if she feels comfortable about that, she is buying drugs 

from them now, what are we doing to make sure that that is a safe 

relationship because, of course, that is going on with hundreds of 

people, thousands? 

Mr. BILIRAKIS. The gentleman’s time has expired. You will respond in a brief manner. 

Mr. HUBBARD. What we are doing—and we will pass it to the 

committee—you will see on these easels brochures that we are 

going to be passing out at the border, beginning this month, that 

advise people such as Ruth Tubbs what they are doing, that they 

may be taking some risk. And it says things like, make sure you 

tell your doctor you are doing this so he can monitor you, or your 

pharmacist in the United States. This is not a, quote, regulatory 

warning. It is not saying you are doing anything wrong. It simply 

says, be careful and talk to your doctor. 

Mr. BILIRAKIS. So as these buses arrive at the border coming 

going north, someone will be handing these out? 

Mr. HUBBARD. Right. These brochures will be given to the patients who purchase drugs, correct. 

Mr. BILIRAKIS. All right. Thank you. 

Mr. Gutknecht for 3 minutes. 

Mr. GUTKNECHT. Well, I thank the chairman. I thank you for this 

hearing. I think it is historic. We are finally—Congress is taking 

seriously the matter of importation and reimportation. The fact 

that we are having a hearing, I think, is very refreshing and I hope 

that the FDA will work with us. I have attempted in the past not 

to beat up on the pharmaceutical industry because they do some 

wonderful things. It is not their fault that we have given them this 

market opportunity; and it is not shame on them, it is shame on 

us. And frankly, we need to do some things on the price side of the 

equation, because no one has refuted the charge that I use in terms 

of the difference between what Americans pay and consumers 

around the rest of the industrialized world pay for the same drugs. 

But my question is for you, Mr. Hubbard, and I think the real 

ultimate question is how safe is safer? You know, I have a professor, Doctor Steve Shandelmeir, who is head of the pharmacology 

department at the University of Minnesota, and he has a great 

55

quote. He said that a drug that you cannot afford is neither safe 

nor effective. And so if people can’t take the drugs they need, all 

of the safety barrage that we put in front of them makes no sense. 

And I think that I would hope that you would work with us to 

come up with some kind of a program using bar coding technology. 

I think my colleague asked the question; it is a good one. You 

know, what do the pharmaceutical companies do? How do drugs—

how are they delivered to a local pharmacy? Is it by armored car? 

No, it is by regular truck. When they bring it into the country, it 

is by Evergreen containers. The idea that they have some kind of 

super-safe system that will guarantee that nothing can happen is 

really not true, and you know that, don’t you? 

And let me come back to the other issue about safety. Well, no, 

I want to change subjects slightly. It is the Food and Drug Administration, isn’t it? 

Mr. HUBBARD. Correct. 

Mr. GUTKNECHT. Do you know how much pork comes into this 

country every year? 

Mr. HUBBARD. Pork? 

Mr. GUTKNECHT. Pork. 

Mr. HUBBARD. I have no idea. We don’t regulate pork. 

Mr. GUTKNECHT. Well. You do regulate food, and it ultimately 

comes in as a food item. 

Mr. HUBBARD. No, we don’t regulate meat, unfortunately. The 

Department of Agriculture does. 

Mr. GUTKNECHT. All right. But the point is, we bring into this 

country 500,000 tons of pork. And you can get salmonella, you can 

get trichinosis. As a matter of fact, a lot of people get sick from eating bad pork. The same is true with fruit and vegetables. By your 

own studies, the FDA’s own studies, 2 percent of the fruit and 

vegetables that come into this country are contaminated with some 

kind of food-borne pathogen. 

I guess the point, and Mr. Pallone asked it, you know, how safe 

is safe? It seems to me we ought to be able to come up with a regimen that would work to guarantee as much safety from Geneva 

Pharmaceutical Supply as we get from our local pharmacies, because we know one of the worst examples where drugs were actually contaminated occurred with a local pharmacist in New York 

City. Is that true? 

Mr. HUBBARD. That is true. That was a pharmacist basically diluting a drug. 

Mr. GUTKNECHT. Most of the counterfeit drugs you showed us 

today originated here in the United States? 

Mr. HUBBARD. Many do, yes. 

Mr. GUTKNECHT. The other point I want to make is that every 

month approximately $21 million worth of cocaine is imported into 

the United States through Miami alone. Yet the whole idea that 

somehow we can stop this and make it completely safe I think really tests credulity. 

I think we have to come up with a system and regimen, because 

my sense is this is going to happen regardless of whether this bill 

passes. We are going to have importation. We are going to have reimportation. It is just a matter of whether or not people—my 85-

56

year-old father—is going to be treated like a common criminal. I 

don’t think he should be. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

The Chair would yield, as soon as he gets settled, 3 minutes to 

inquire of Mr. Sanders. 

Mr. SANDERS. Mr. Speaker, I thank the chairman very much for 

allowing me to barge right in here and ask a few questions. 

As somebody who lives near the Canadian border and was one 

of the first persons to take people over the border to get Canadian 

drugs, needless to say, all of this concerns me very, very much. 

A brief history: We took a number of women over the Canadian 

border. They purchased the widely prescribed breast cancer drug, 

Tamoxifen. Do you know what the differential was, sir? 

Mr. HUBBARD. Probably substantial. 

Mr. SANDERS. It was like one-tenth. Women in the United States 

of America who are fighting for their lives are paying 10 times 

more for the exact same drug as they are an hour away from where 

I live. If I may be allowed to editorialize, I think that is an outrage, 

and I think that is a disgrace. 

Let me ask you this question. The pharmaceutical industry, I am 

sure they are probably headed here in droves, has 600 lobbyists on 

Capitol Hill, and has spent $200 million in the last few years on 

campaign contributions, on lobbying, and on advertising. 

Do you think that it is any coincidence that the most powerful 

lobby in this country, which spends such a huge amount of money 

influencing public opinion, that as a result of that—do you think 

it is any coincidence that our people pay, by far, the highest prices 

in the world for prescription drugs? 

Mr. HUBBARD. I really can’t answer your specific question. I 

think that to some extent American patients do pay higher prices 

because other countries do put price controls on, so Americans 

have—you know, in some sense we are subsidizing other countries’ patients. 

Mr. SANDERS. I don’t think we are subsidizing. The pharmaceutical industry, based on my knowledge, makes money in Canada, they make money in Europe. Yet maybe you can tell us, help 

me out on this one: Year after year, the pharmaceutical industry 

earns higher profits than any other industry in America. Yet millions and millions of Americans are unable to afford the prescription drugs they need. 

Can you tell me why the administration is not moving forward 

vigorously in terms of reimportation or other approaches to substantially lower the prescription drug costs in America? 

Let me pick up on the point Mr. Gutknecht made, because it has 

to be made over and over again. You could have the best drug in 

the world, but if a person cannot afford it, it does not exist. It is 

no good. 

Why are we the only country in the world that does not, in any 

substantial way, fight to lower the cost of prescription drugs? Why 

are our people forced to pay in some cases 10 times more for the 

same exact medicine? 

Mr. HUBBARD. You are getting into questions that are beyond my 

scope. I have simply said that if the drug is—if the drug purchased 

overseas is not the real drug, it does not matter if it only costs you 

57

$1. If you are getting nothing from it, you are not getting treatment and you are still wasting that dollar. 

Mr. BILIRAKIS. The gentleman’s time has expired. He can make 

his point. 

Mr. SANDERS. Explain to me and the American people how we 

can——

Mr. BILIRAKIS. That is not your point, with all due respect. 

Mr. SANDERS. How do we import lettuce, tomatoes, beef, poultry, 

pork, you name it, from all over the world, how are we able to do 

that and yet we cannot regulate a few warehouses and a few companies to make sure, with FDA supervision, the product coming 

back into this country is not safe? 

Mr. HUBBARD. We regulate food in a much different way; and 

second, there is no such thing as a counterfeit head of lettuce. It 

is really sort of a, no pun intended, an apples and oranges issue. 

Mr. SANDERS. Thank you, Mr. Chairman, very much. 

Mr. BILIRAKIS. You are welcome. 

Mr. Burr, to inquire. 

Mr. BURR. Thank you, Mr. Chairman. I will be brief. 

Having heard some of the things that were covered and knowing 

some of the items in Mr. Kingston’s bill that empower pharmacists 

to make some determination about the possible adulteration or 

counterfeit status of a product that might be reimported, given 

what you know and what the agency’s position is on pharmaceuticals, and the degree of sophistication now with counterfeiting 

that we find, is there any possible way for a pharmacist to truly 

determine, if they are not 100 percent confident of the source from 

which they purchased the drugs, that that drug is not counterfeit 

or adulterated? 

Mr. HUBBARD. We don’t believe so, Mr. Burr. I could slip this 

package into a drugstore without notice, and the pharmacist would 

not know it. I even could ask a pharmacist, I could say, this is 

counterfeit. Tell me the difference. He could not tell me, nor could 

a physician. These counterfeits are perfect copies. A drug is a molecule. You only know if it is real if you put it in your body and if 

it treats a disease or does not. 

Mr. BURR. Is it not therefore important that the chain of custody 

of that product be something that is impeccable as it relates to the 

FDA’s records? 

Mr. HUBBARD. That is correct. 

Mr. BURR. Thank you. I thank the Chair. 

Mr. BILIRAKIS. I thank the gentleman. I believe that completes, 

finally, the inquiry. 

Mr. Hubbard, you have always been available every time we 

have called upon you. We appreciate it. We have learned a lot. 

That is what these hearings should be all about, and that is a 

learning process. If we come in here and basically know it all, then 

what is the sense? We are wasting time. Then it would be appalling, I think. 

There will be questions submitted to you, as per usual, but also 

there have been requests for some of the language that has been 

promised quite some time ago. Do yourselves a favor, help us to 

help you, so to speak, to be able to do a better job with the concerns of Mr. Sanders and those so many others have raised. 

58

Thank you very much. 

Mr. HUBBARD. Thank you for having me, Mr. Chairman. 

Mr. BILIRAKIS. The next panel consists of Dr. Marv Shepherd, 

with the University of Texas in Austin, College of Pharmacy; Dr. 

Elizabeth Wennar, President of the United Health Alliance, from 

Bennington, Vermont; Mr. Peter Barton Hutt, Covington & Burling, on behalf of PhRMA here in Washington; and Mr. Don 

Copeland, President and CEO of Associated Pharmacies, from 

Scottsboro, Alabama. 

Before I open up your testimony, I just wanted to make a comment regarding the panel and the comments made by Mr. Brown 

and others when we started. 

The staff has worked to put together a balanced panel that will 

present expert testimony from both sides of this issue. Two witnesses will outline the pros of reimportation, as I understand it, 

and how we may be able to set up a system to allow this practice 

in a safe manner, and the other two witnesses will outline some 

of the potential dangers of reimportation. This balanced panel will 

afford us the opportunity to gain valuable insight that we can use 

as we develop any legislation in this arena. 

Again, this hearing was put together to help us come to some solutions on reimportation. I think we have already realized that 

even if we solve the problem of high cost of drugs, which would 

lower the need, if you will, for so many people, particularly senior 

citizens, to go over the border, there are still many instances of 

drugs being reimported, counterfeit drugs being reimported into 

this country that find their way into the corner drugstore. So the 

concern of reimportation is there and will continue to be there even 

if we ever get to the point of solving the other problem that people 

on the other side of the aisle have mentioned. 

I did not want to have a hearing on drug prices, even though we 

know, as I said before, reimportation is a system of high drug costs. 

That is going to be at another time. I have already told the ranking 

member that we are going to have hearings in September. 

At any rate, I would like to reiterate that I wanted this hearing 

to help us gather expert testimony on reimportation, and not focus 

on scoring political points in relation to high drug prices, which we 

all already realize exist. For that reason, we have worked up this 

particular panel. 

Mr. Brown did ask for that additional witness late Tuesday afternoon; it might have been Tuesday evening even. The staff brought 

it up for the first time late Tuesday afternoon, so we are not talking about a request having been made on a real timely basis here 

insofar as a consumer advocate. 

In any case, having said that, Dr. Shepherd, again, your written 

testimony is part of the record. We would ask you to sort of complement that, supplement it orally. 

59

STATEMENTS OF MARV SHEPHERD, COLLEGE OF PHARMACY, 

UNIVERSITY OF TEXAS AT AUSTIN; ELIZABETH A. WENNAR, 

PRESIDENT, UNITED HEALTH ALLIANCE; PETER BARTON 

HUTT, COVINGTON & BURLING, ON BEHALF OF PhRMA; AND 

DON COPELAND, PRESIDENT AND CEO, ASSOCIATED PHARMACIES, INC. 

Mr. SHEPHERD. Thank you. My name is Marv Shepherd. I am the 

Director of the Center for Pharmacoeconomic Studies. For the last 

decade I have been involved in doing research on the Rio Grande 

border looking at personal reimportation of pharmaceuticals from 

Mexico. 

Mexico obviously is a little bit different than—or the Rio Grande 

Valley is quite a bit different from the Canadian border, but coming from Michigan, my home State, I am pretty well aware of the 

problems on both borders. But I have been concentrating in the last 

decade on the Mexican border problems. 

I want to thank you for inviting me, and I will make my comments brief, but I want to touch on a few things. You do have my 

statements there in writing for you. 

I am not convinced that reimportation will solve our problem. It 

may add costs to us, the costs of controlling the safety or trying to 

bring in the safety aspect of it. I am not convinced that reimportation would stop people from going to Mexico at all. I will explain 

that in a little bit. I still think we would still have a tremendous 

amount of American residents going down to Mexico to buy drugs. 

There are a couple of good reasons. 

No. 1, Texas has faced a problem of Mexican drugs for decades, 

along with New Mexico, Arizona, and California. But in my work, 

it is just not Texas, I want to emphasize this. Forty percent of the 

people who go to Mexico are not Texans, and they come back with 

drugs. Forty percent of the people who are going to Mexico come 

back with drugs, but the people who go to Mexico, they represent 

other States. They represent Maine and Washington, all the way 

down to New England. So they are not just Texans or Arizonans, 

they are from everywhere in the States. We found 37 States represented in a sample of 5,000, to give you an example. 

As I said, 25 to 40 percent of the people go to Mexico and bring 

back a pharmaceutical product one way or another. There are three 

reasons why they do it. We have heard price, price, price, but I will 

tell you, there is a big one in Mexico and that is called access, because you don’t need a darn prescription. You can go down there 

and you can buy Erythromycin, tetracycline, Premarin; you name 

it and you can buy it, except for controlled substances, over the 

counter. If you have a dollar bill in your pocket, you can buy it, so 

you don’t need the prescription. That way, you have got a lot of 

money you save. You don’t have to go to a doctor’s office. You can 

buy your hypertensive medication, you can buy anything you need 

in any quantities and bring it across the border. 

Customs now is allowing 90 days’ supply, but I have seen a 180 

days’ supply coming back from Customs. I have seen people walk 

across that border six times a day with 90 days’ supply. I have seen 

people in the stores with lists: Uncle Fred needs this, and Aunt 

Jeanne needs this, my neighbor needs this. They will pull out 

60

$2,000 or $3,000 and buy everything in these 90-day supply lots 

and come back across the border. 

I have seen Oxycontin come across the border multiple times on 

one person. Three times I saw one young lady go across the border 

and get it and come back. I watched her come back and declare it, 

no questions asked. She would come right back and go across and 

get another one. Next time she would come back with a different 

drug, with three or four controlled substances, 50 units each. 

In Laredo I think it is a little different than the McAllen area 

and the Brownsville area. But in the Nuevo Laredo area, the senior 

citizens are not the frequent purchasers of drugs. The purchasers 

of drugs there are young people, 20 to 35. Fifty percent of the 

group is under 36 years of age. Only 10 percent of the group was 

over 55 when we did the work, so it wasn’t seniors. If you go to 

McAllen and Brownsville it may be a different percentage, but 

there is still a lot of youth going down there and buying pharmaceuticals. 

The pharmaceutical business in Mexico is big business on the 

borders, big business. There are more pharmacies than any other 

store in the streets. It is a huge profit-making business. There are 

300 or 400 pharmacies in a five-block area of Tijuana, and there 

have to be 20 pharmacies in a two-block area of Nuevo Laredo. 

They are open pharmacies, dusty and dirty, and there is no pharmacist working in them. There is no law that says a pharmacist 

has to work in them. They are clerks and merchants selling drugs. 

They don’t even use packaging. 

When I see people buy drugs across the border and bring them 

across, the first thing I notice, and this is terrible to say, they lie. 

The agent will ask them, did you buy any pharmaceuticals over 

there? And they will say no. If they have a shopping bag, a plastic 

shopping bag and they can see the pharmaceutical in it, they will 

say yes. 

The honest people say yes, I bought drugs. That is where I get 

my data from for my research. The not honest people who got some 

probably controlled substances or other stuff in their bag say no, 

and Customs really just lets them walk on through, unless they are 

really suspicious looking characters. Then they will pull them 

aside. 

But anybody in this room in our age group can walk down there 

and buy anything, come back, and you can say, I didn’t buy anything, and you can walk on through. So there is really no big control over it. 

They do control narcotics, they do control controlled substances 

to some degree. They will get you if you bring back more in any 

one of those, if they believe you fit that profile. We have seen them 

tear cars apart. They will do that. 

But they lie. People lie because it is cheaper and no doctor’s appointment. ‘‘I can get any hypertensive medication they want. This 

does not work for me, I will try this one. So and so is using this 

one, so I will try this one here.’’ They don’t have to go to the doctor 

to get that changed, so the access really drives a lot of it; not only 

the price, but the access of trying something that may work better. 

I have seen the same person, as I said before, cross many times. 

I don’t mean to bash the U.S. Customs. They have a tough job, 

61

they have limited resources, and it is very difficult. There are better ways of doing what they do, especially collecting data. They are 

doing everything by hand, pencil and paper. I don’t understand 

that. Nothing is coded. There are no computers. It is just all by 

hand work. It is just archaic, as far as I am concerned. 

I will summarize on two things. First, counterfeiting. We cannot 

tell the difference, as we saw, whether it proves to be FDA-approved or are counterfeits. I have seen some good counterfeits coming out of Mexico. I have seen some other counterfeits and I could 

tell by the packaging. There is a little error in the packaging. 

The documenting, we need data and we need it fast. We don’t 

know what proportion of imported products are counterfeit or substandard. We do not know what the ill effects are, and to what extent do people mix U.S. drugs and Mexican drugs. 

I have raised a lot of questions, but we just don’t have the data 

to make up any kind of good determination or open up the border 

to any more than we already had. It is a very difficult situation. 

Thank you, Mr. Chairman. 

[The prepared statement of Marv Shepherd follows:]

PREPARED STATEMENT OF MARV SHEPHERD, DIRECTOR, CENTER FOR

PHARMACOECONOMIC STUDIES, COLLEGE OF PHARMACY, UNIVERSITY OF TEXAS

It is pleasure being here today to discuss the issue of the importation of pharmaceutical products. I have been involved with this area for close to a decade, but my 

involvement has been mainly on the issue of Mexican prescription drugs entering 

the U.S. I applaud you for taking on the task of searching for ways to provide affordable and effective pharmaceuticals to the American public. However, there with 

the importation of pharmaceuticals it is my belief that the costs may not be worth 

the risk. There are many social, legal and medical issues to address, but my main 

concerns involve patient safety and lack of control. 

This nation is facing a health care crisis. The health care crisis revolves around 

1.) limited or no access to health care for some population groups, 2.) high cost of 

health care services and products especially pharmaceutical products, and 3.) lack 

of quality in services as exemplified by the high degree of medical and medication 

errors being documented. All three areas are not limited to but do involve some aspect of pharmaceutical products. But, I am here today to tell you that in my opinion 

the re-importation of pharmaceuticals will most likely add to the problem list. It will 

most likely increase the overall costs and most likely contribute to poorer quality 

of care due to lack of monitoring and management of products and patient care. Let 

me explain my reasoning. 

Texas has faced the problem of drug importation from Mexico for decades, but in 

the last five to ten years the practice has escalated. It is estimated that from 25 

to 40 percent of all U.S. residents who travel to Mexico bring back prescription 

pharmaceutical products. With the present bill, I can imagine that a higher proportion of U.S. residents will return with Mexican pharmaceuticals. Some will return 

with products that are safe and effective and others will not. 

Personally I do not think the bill will curtail the number of people going to Mexico, because the pharmaceutical product will most likely still be cheaper in Mexico 

than if the Mexican drug is shipped to the U.S. for sale. The reason is the costs 

associated with assuring quality, if done prudently and correctly, re-labeling and the 

profit taking by members of the U.S. distribution system. Remember, the U.S. distributors of foreign acquired drug products only have to offer the product at a lower 

price than what is currently being offered. The profit takers will be the wholesalers, 

retail pharmacies, managed care and pharmacy benefit managers not to mention 

other health care providers who would use the product. In essence, I am not convinced that the savings will be passed on to the consumer. 

Studies have shown that many people repeatedly visit Mexico to obtain drug products for themselves, family and friends. There are many social, legal and medical 

issues to address, but the main concerns I have involve patient safety, lack of control and lack of data to address the practice. 

The main reasons why U.S. residents go to Mexico to obtain their prescription 

drug products are: 1.) Easy Access, most products do not require a prescription in 

62

Mexico, 2.) Lower Prices, some products do have substantial price savings, but not 

all and 3.) drug products are not available in the U.S. Of course under this proposed 

bill the latter category could be ignored. 

The pharmaceutical business in Mexican border towns is a huge tourist attraction 

and generates hundreds of millions of U.S. dollars to the Mexican economy. There 

are over 1,400 Farmacias in Tijuana while in near by San Diego are there are just 

over a hundred. The number of Mexican Farmacias and mail order drug houses will 

grow even more with this legislation making access easier and more difficult to control. 

My major concerns are the lack of medical supervision, the patient’s lack of understanding on how to use the product correctly, the indiscriminate use of products. Finally, I have a concern about the assurance of product quality and safety. To me, 

all of these have a potential to harm, severely injure or kill people. The wording 

of the present bill states the drug ‘‘appears to be approved by the Secretary’’ . . . appears to be manufactured, prepared, propagated, compounded or processed in an establishment registered pursuant to section 510.’’ I can assure you that 

many of the counterfeit products I have seen all ‘‘appear’’ to be the ‘‘real thing.’’ Making this determination from world-wide distribution systems of drug manufacturers distributors, shippers, wholesalers and sellers will not be an easy task. Plus 

it will be an expensive task. 

The question you have to answer is ‘‘do we sacrifice safety for economic savings?’’ It is a difficult question mainly because we are unsure of the safety profile. Data 

are lacking on the safety profile of drugs currently being brought into this country 

through personal importation. We need studies on imported product quality and the 

extent counterfeit products reach the U.S. public. FDA has done some quick, preliminary work and I have worked with them on collecting these data, but more comprehensive research needs to be conducted. In my opinion, the FDA data are weak 

and it is very difficult to make generalizations based on the limitations of their 

studies. More comprehensive research is drastically needed; there are too many 

risks for the American public just to open up the borders and expect the FDA and 

Customs to monitor the situation. 

Obviously, the more we open the borders the more we give up safety and the assurance of high quality drug products. Currently, I believe we have an extremely 

safe pharmaceutical distribution system. Sure it can be improved; we do have some 

problems that need to be addressed such as improve the access to pharmaceuticals 

for seniors, and develop some strategies to address drug price increases without the 

sacrificing of research and development within the industry. But when you open up 

the borders to importation, it is my contention that you will sacrifice safety. Pharmaceutical products become more difficult to monitor and control. The U.S. could 

turn into a ‘‘dumping ground’’ for substandard drug products because this is where 

the money is. To do this function of monitoring and assuring drug quality will require a huge investment in resources for the FDA and Customs. For example how 

do you monitor millions of drug products coming through the mail each month? How 

do you monitor hundreds of thousands of people returning from Mexico on a Saturday afternoon? How do you monitor the millions of dosage forms and drug units 

being purchased by a drug chain in one week from foreign drug distributors? Most 

likely we will not be able to find the necessary resources to do the monitoring and 

checking and in the end, someone will get hurt, you can count on it. 

To put this task in a better perspective, let me give you my experiences in watching people come across the border from Mexico after they purchase pharmaceuticals. 

Many times people do lie when asked by the Custom’s agent ‘‘did you purchase any 

drug products while in Mexico?’’ I have seen the same people buy drug products, 

cross the border and lie when asked by the agent. They just put the product in their 

pocket, purse, bag or under their shirt/blouse. So when you collect data at these 

points you only get data from the honest people. When you have a long line of people or cars coming back from Mexico, you do not have the time to question the importer. I have seen the same person cross the border multiple times a day bringing 

their 50 units per drug of controlled substances every time. (No prescription is needs 

if you bring 50 tablets per controlled substance). I have seen confusion on the part 

of Custom’s agent as to how much and what is allowed to cross the border for a 

controlled substance. I have seen a 90-day supply and at times even more for controlled substances with and without a prescription come into the U.S. I do not mean 

to ‘‘bash’’ U.S. Customs; they have a huge complex task and they lack proper resources to get the job done correctly. 

When I ask people how the product works for them I have heard answers such 

as it works great I just need to take two tablets instead of one to get the same effect. I have talked to people in Farmacias who have had long lists of drugs not for 

themselves but for their family, relatives, and friends. One time I asked the cusVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00066 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
63

tomers do you drink the water while you are here in Mexico and she said ‘‘no way.’’ I asked, ‘‘will you eat while you are here?’’ Her response was, ‘‘No, No, too risky.’’ I said. ‘‘you will not drink the water or even eat while you are here but you would 

buy your drug products here, why?’’ Her answer was ‘‘because they are the same 

as U.S. products look at the label.’’ I showed here that the product was not made 

in the U.S. but in Mexico. It still did not register with here. Just because it has 

the name of a U.S. manufacturer most people believe it is manufactured in U.S. For 

your information, the vast majority of drug products sold in Mexico are manufactured in Mexico and very, very few have an FDA approval. 

In conclusion, it is my belief that some safety will be sacrificed if you open the 

borders to the American public for pharmaceuticals. I am not convinced that the 

cost saving will be present, there are many profit takers in the drug distribution 

system. The cost of monitoring the program and assuring high quality products will 

be tremendous. Finally, data are lacking on the safety profile of drugs currently 

being brought into this country through personal importation. I really think we need 

to examine what products are coming into the U.S.? What proportion of imported 

products is counterfeit or substandard? What are the ill effects of imported products? To what extent do people mix U.S. made products with imported products? I 

know I raised many questions and concerns, but I do hope I added some insight into 

the problems associated with Mexican drugs coming into the U.S. I will be happy 

to entertain any questions.Thank you so much.

Mr. BILIRAKIS. Thank you very much, Dr. Shepherd. 

Dr. Wennar. Is that correct, Wennar? 

STATEMENT OF ELIZABETH A. WENNAR 

Ms. WENNAR. Correct. Wennar. 

My position is, I am the President and CEO of United Health Alliance, which is a physician health organization located in southwestern Vermont. That organization is made up of about 115 physicians, a rural hospital, a nursing home, and a home health agency. 

By way of just—I wanted to give you that information so I could 

help you understand what MedicineAssist is. That is the initiative 

that we sponsor. We started that initiative about 3 years ago. We 

started it in response to bus trips that were being made by patients 

that we were serving going up to Canada to access their medications. 

One of the things that I want to point out here, I have heard a 

lot of talk here about safety and about quality. Now, let me just 

tell you from the perspective of a provider what that means. 

That word is ‘‘compliance,’’ in our minds. In our minds, if a patient cannot comply with the treatment plan as prescribed, and 

that means being able to take the medications, then we have very 

little chance of them being able to have a good outcome. That is 

a physician’s major concern, compliance. 

They make an assumption when the patient comes in and they 

write a prescription that they are going to be able to get them, and 

that they are going to be safe. They also make the same assumption about those samples that are in their offices, that they are 

safe. 

So one of the things that we began to realize is that our patients 

weren’t complying with their treatment plans. Guess where they 

end up when they don’t comply? In the emergency room, back in 

the physician’s office, and being admitted to the hospital. 

So our physicians decided to step up to the plate on this issue. 

I heard a lot of talk today about the pharmacists being involved, 

which is certainly true, the pharmacists have to be involved. We 

want them engaged in this conversation. But we do want the physicians engaged in the conversations, too, for two reasons: one, qualVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00067 Fmt 6633 Sfmt 6602 W:\DISC\81494 81494
64

ity; and two, because they need to be at the tables when we are 

having these discussions. 

With the kinds of discussions you are having right now, you can’t 

just talk to the pharmaceutical industry, you must have the physicians engaged in this, because they write those orders. 

Having said that, we decided that we could not ask or expect 

people to get on a bus. Not everybody can. One, they cannot afford 

to, maybe physically or monetarily, so we decided that there must 

be a way that we could step up to the plate at a grassroots level 

and develop some type of initiative that would help facilitate the 

process. 

I say ‘‘facilitate’’ because, remember, physicians in this country 

may not write prescriptions to be filled in another country, in most 

instances, unless they are licensed in that country. 

In this country right now, we know there are some 300-plus physicians that are duly licensed in Canada and in the United States. 

Having said that, we decided that we were going to figure out a 

way for our patients to be able to comply with their treatment 

plans. Now, we designed the program so that there would be layers 

of quality in place. I can certainly go into much detail about 

MedicineAssist, but I would like to sort of quickly skip to something, since I only have 5 minutes. I have outlined quite a bit of 

this in my written testimony that you have before you. 

I would like to talk about something we recently did in the process. We are involved with three pharmacies in Canada in three different provinces, and have been for 3 years. We have facilitated the 

process. We feel quite good about this now, because we feel like we 

have put things in place, that extra quality parameters do exist, 

and people are taking their medications and complying with their 

treatment plans. 

One of the things we did recently was we took it upon ourselves 

to poll pharmacies in Canada, even those that are not participating 

through our program, to try to get some sort of idea about the 

numbers of people who are actually using this in the United States. 

We wanted some demographic information. We wanted to see what 

we could identify there. 

We finally had to stop counting because we do not have the resources, to tell you the honest truth, to do all the counting. We 

stopped at 1.1 million U.S. citizens currently bringing in their 

medications and using this mechanism to access safe, affordable 

prescriptions. 

They are with pharmacies, those pharmacies who are working 

with physicians there and physicians here. The physicians there 

act as consultants to the physicians here. The physicians here are 

the prescribing physicians. They may not have their written prescription up there, but they complete the medical profile information, they work with the Canadian physician, they work with the 

Canadian pharmacist. 

I would challenge anybody to show me a program that completely 

works so well here in the United States for senior citizens right 

now. We are very proud of it. 

Now, let me tell you, from the standpoint of things, what we 

have identified here is, one, I have heard discussions today about 

antibiotics and about a whole litany of other medications: Viagra 

65

and whatever. Let me tell you, that is not what our senior citizens 

and our elders are looking for. They go for maintenance drugs. 

Those maintenance drugs are drugs that are life-sustaining drugs. 

They are going to have to take them for chronic conditions probably 

for the rest of their lives. There is probably a list of maybe 25 

medications that they pretty much take. 

Now, Mr. Brown, I have heard Mr. Brown say that his constituent could not be here today. I am telling him, his constituent 

is sitting here today, because we serve these individuals every day. 

We feel very comfortable. We do believe that there has to be structure in place. 

Having said that, and I am using Canada as a case study, we 

feel very comfortable with what goes on in Canada. The pharmacists there are working very well with the physicians here. The 

physicians here are working very well with physicians there. Now, 

there is a Federal level there, there is a provincial level. We have 

a Federal level here and we have a State level here. We are mimicking things. 

I am here to tell you, maybe Mr. Hubbard could not tell you that 

it is as good in Canada, but we feel from the provider’s side it is 

as good there. 

I have heard a lot of talk today about the Medicare coverage. We 

would love that, but we don’t have it. We don’t have it. From a 

grassroots level, let me tell you what it is like to look into the eyes 

of people who are just trying to survive. They want to live, and 

they have taken this upon themselves. 

Would they like the medications down the block? Absolutely. But 

do you know how it feels when you know they are there and you 

can’t get them? You want to talk about living in terror, that is living in terror, because all you want to do is live. 

So I am here to tell you that if you really want to do this, we 

will be glad to sit down with Mr. Hubbard and to tell him how to 

put the safety things in, and we will tell you how it can save costs 

for the American taxpayer. We are willing to take it on. 

Mr. BILIRAKIS. Your time has expired, but this committee would 

welcome any suggestions you or any others would have. You don’t 

have to go to Mr. Hubbard, if you don’t choose to, if he does not 

inquire. We are inquiring. 

Ms. WENNAR. We would welcome the opportunity. 

[The prepared statement of Elizabeth A. Wennar follows:]

PREPARED STATEMENT OF ELIZABETH A. WENNAR, PRESIDENT AND CEO, UNITED

HEALTH ALLIANCE

Mr. Chairman, and Members of the Committee: Thank you for inviting me to discuss re-importation of prescription drugs as a means of accessing safe, affordable 

prescription drugs for US consumers and particularly our elders not currently covered under Medicare. 

As you are aware today’s healthcare market presents many challenges for consumers, purchasers and our political leaders. None is more controversial than that 

of technology in the form of a ‘‘pill’’. Pharmaceutical spending has almost doubled 

in less than a decade. More often than ever, our policymakers and physician providers are being queried as to why it is that Americans, particularly the elderly, 

must pay many times more than their Canadian [and Mexican and European] counterparts for the same drug. 

66

BACKGROUND ON UNITED HEALTH ALLIANCE AND MEDICINEASSIST

United Health Alliance is a nonprofit physician health system organization located in Southwestern Vermont. Our partners include a rural hospital, nursing 

home, home health agency and just over one hundred (115) community physicians. 

We serve residents of Vermont, New York and Massachusetts. Our mission is to promote a physician-driven organization whose principle services are to provide advocacy and leadership in the areas of care management, contracting, performance improvement and educational programs to maximize value for our physician-hospital 

membership and customers [patients]. Although we have committed to ten (10) guiding principles, none is more important to us than assisting the communities we 

serve at becoming the healthiest in the nation. Approximately one year ago we 

found that although admirable, this objective was going to be very difficult to 

achieve given the circumstances that existed for some of our elderly. Very simply, 

they did not have access to affordable prescription drugs, therefore they were not 

able to comply with the treatment plans prescribed by their physicians. Although 

we had individuals that were seeking affordable medications via bus trips to Canada, we knew that this was not an option for the majority of the elderly in the communities we serve by virtue of their medical condition and/or their limited resources. One of our physicians came to us and requested our assistance at investigating how we could help a patient of his with breast cancer access her medications from Canada without having to get on a bus. Today that patient takes her 

medication because she can afford them. It cost her ninety (90) percent less in Canada. We compared the costs for 145 seniors for the first six months to see if what 

we had heard about the differences in pricing was in fact true. While these individuals would have had to pay just over $81,000 in the U.S., they paid approximately 

$22,000 for their medications in Canada (see Exhibit A). Our understanding is that 

there were no substitutions for the medications they were currently on. All medications accessed were for the treatment of chronic diseases such diabetes, heart disease and cancer. A price comparison of some of the more commonly prescribed medications for the treatment of these diseases has been provided along with this testimony. Although there is minor variation with some pricing in Canada, the savings 

are still significant and have been reported anywhere from thirty (30%) to (95%) 

percent (see Exhibit B). Although the majority of the individuals using 

MedicineAssist are the elderly on fixed incomes, with no prescription coverage, we 

are beginning to see individuals that have depleted their pharmacy benefits also attempting to access their medications from Canada. As we have conversations with 

employers located in the communities we serve about benefits and coverage for their 

employees we find many are concerned about how to continue the level of coverage 

they currently provide, particularly with the growth in their expenditures for prescription drugs. The implications are frightening for all of us. 

Brief of M: 

MedicineAssist: See website (unitedhealthalliance.com) and click on icon 

medcineassist for instructions and information on use. Maintenance drugs only and 

your personal physician must be involved. No membership fees. A Canadian licensed 

physician will review medical information and consult with your physician. 

Notation:

1. Personal Re-importation: A recent poll identified over 1 million U.S. consumers 

using this as a means to access affordable prescription medications from Canadian pharmacies. Individuals from every State in the U.S. are currently using 

this mechanism. Means: mail-order and direct. 

2. Compliance: Physicians assume that when they prescribe a medication (write a 

script) that the patient will take their medication as prescribed. They don’t have 

any interest in where you get it filled. This is not to say that they would not 

be concerned if they thought there was a safety or cost issue. They are concerned about compliance with regard to a prescribed treatment plan. 

QUALITY/OVERSIGHT AND SAFETY

Clearly as a provider network, our major concern is the ability of patients to comply with a given treatment plan. When a patient cannot afford their medications 

it is costly for all of us. Are we concerned about quality? Absolutely. And there is 

a quality issue and exist on this side of the border. When a patient cannot take 

their medications, they most definitely will consume services elsewhere in our system, such as the emergency room or by being admitted to the hospital. That simply 

is not rational. This is not about people that won’t comply with a treatment plan, 

this about individuals that can’t afford to purchase prescription drugs in the country 

they live in. Also, let’s keep in mind that we are talking about Canada not some 

third world country. Having said this, these individuals are willing to take the risk 

67

to access their medications across the border. Many of them have told us that there 

is certainly no more risk in doing this than they are at by not taking their medications as prescribed or not at all. 

From the perspective of safety and oversight clearly the FDA [and other agencies] 

must be concerned as to how any initiative that would involve re-importation of prescription drugs would be maintained under their current charge. Although challenging, it can be done. With regard to Canada it would not be that difficult to do 

(see Conclusions/Recommendations). Other countries may be more difficult to monitor and manage. 

REASONS FOR PRICE DIFFERENTIAL IN CANADA AND THE U.S. 

To put it in the simplest of terms: the Canadian government is the purchaser, 

therefore they have implemented controls over the costs. Next, they do not allow direct-to consumer advertising. My understanding is that this type of marketing is 

only allowed in the United States and New Zealand. Essentially our major mode of 

control is through the approval process by the FDA that essentially controls entry 

into the market, not pricing. In the U.S. with its non-universal coverage structure, 

cost containment is undertaken by a myriad of public and private decision-makers, 

each with their own agenda and objectives. The price differential is of course going 

to appear even greater when you compare a group that has no coverage and pays 

out of pocket. They have no purchasing power, because they have no coverage. This 

is particularly true for about one-third (30 million) of the Medicare population. 

I recently visited with health care providers in France and in Canada and they 

seemed quite perplexed by how we could rationalize the cost/benefit of allowing the 

prescription drugs to be advertised in the manner that they were on television. 

Their point was well taken on two fronts: (1) someone has to pay for the costs associated with this advertising and (2) when I proposed that it was intended to educate 

consumers so that they could be more informed about what was available for their 

treatment: they asked where’s the data to support that this was anything more than 

‘‘marketing’’ the drugs the industry wants to sell or promote. They used the example 

of a drug for chronic indigestion allowing you to continue to eat foods that are clearly not good for you. 

REIMPORTATION/IMPORTATION FROM CANADA

Clearly, there is no simple answer with regard to the issues we are discussing. 

Barring any type of regulation of the pharmaceutical industry on this side of the 

border, personal reimportation from Canada under controlled circumstances can 

provide an interim solution for those in need of access to affordable prescription 

drugs. I do believe that with the cooperation of the industry, the FDA, the Canadian 

regulators and U. S. physicians that under a controlled demonstration project we 

could achieve a policy that would prove beneficial for all the stakeholders until we 

can produce a better solution. 

CONCLUSION/RECOMMENDATIONS

Personal re-importation has for all intensive purposes, been implemented by the 

American consumer. It may or may not be a long-term solution, but it does provide 

an option, particularly for the elderly, until we can provide appropriate levels of coverage under Medicare without compromising current medical benefits. Long-term viability will depend on the development of a program that can be implemented not 

just signed into law [as evidence by MEDSA 2000]. 

Notation:

1. Canada (as does other countries) has the equivalent of the FDA with regard to 

oversight. 

2. The literature does not support fears about counterfeit drugs being dispensed (at 

least in Canada). 

3. Customer satisfaction and compliance for those currently using re-importation 

(Canada) appears high. 

4. Physicians are engaged in the process. Compliance results in better outcomes and 

potential lower costs. 

The following could/should be considered:

In order to maintain and provide an efficient means of oversight by the FDA, all 

participating pharmacies would be registered with the FDA. In order to do so, 

they would have to be accredited, much the same as the Joint Commission 

(JCAHO) accredits hospitals and other health institutions here in the US. A set 

of standards would have to be met and pharmacies would be awarded conditional accreditation during their first year of participation. Full accreditation in 

68

year two. They would also have to provide data/information to the FDA. Once 

all requirements were met, FDA would issue unique bar codes for these pharmacies to use when shipping into the US (through Custom). 

2. With regard to monitoring of the quality of drugs being shipped, a proxy with 

the country (Canada) could be established. There is no reason that we can not 

accept the standards that are equal or higher established by another country. 

No country should be allowed to participate that does not have at the very least 

a set of standards equal to ours. 

3. The role of US and Canadian physicians can be worked through the development 

of a cross-border association (licensure and protocol development). 

4. Private/Public partnerships should be developed in order to reduce the costs at 

the Federal level [while maintaining the oversight (FDA)]. 

5. In reality the economic model regarding sales for the pharmaceutical industry actually improves 1) they now get inconsistent sales (unstable purchasing currently exist). Although the new sales would be a lower price, it would result in 

stability of purchasing and consistent compliance would result, which according 

to their own mission is their objective. 2) the data that would be reported to 

the FDA could be very beneficial to research and development efforts. 

This concludes my prepared remarks. Thank you again for this opportunity and 

I would be happy to try to address your questions

Sample Drug Pricing 

[All dollar figures are reflected in U.S. Currency] 

Drug Number

of Tabs Canada U.S. Savings 

Tamoxifen 10 mg ........................................................................................... 60 $7.05 $142.44 95%

Lipitor 10 mg ................................................................................................. 90 $106.33 $230.58 54%

Plaxil 10 mg ................................................................................................... 30 $33.01 $94.57 60%

Prozac 10 mg ................................................................................................. 100 $115.93 $361.28 68%

Coumadin 5 mg ............................................................................................. 100 $25.52 $90.07 72%

Glucophage 500mg ........................................................................................ 100 $15.70 $86.26 82%

Prilosec 10 mg ............................................................................................... 30 $33.88 $144.62 77%

Fosamax 10 mg ............................................................................................. 30 $36.40 $85.99 58%

Note: U.S. prices are based on AWP plus 30%. The actual cost of U.S. prescriptions will vary based on geographic area and by individual pharmacies. 

69


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70

Mr. BILIRAKIS. Furnish it to us, whatever suggestions you may 

have. 

Mr. Hutt. 

STATEMENT OF PETER BARTON HUTT 

Mr. HUTT. Mr. Chairman and members of the committee, I am 

Peter Barton Hutt, a partner from the Washington, DC law firm 

of Covington & Burling, where I specialize in food and drug law. 

From 1971 to 1975, I served as Chief Counsel for the Food and 

Drug Administration, and I am the coauthor of the casebook used 

to teach food and drug law in law schools throughout the country. 

Each year I personally teach a full course on food and drug law at 

Harvard Law School. 

I am testifying today on behalf of the Pharmaceutical Research 

and Manufacturers of America. 

H.R. 5186, introduced by Representatives Kingston and Gutknecht, would substantially curtail FDA’s authority to keep unapproved, adulterated, and misbranded drugs out of the United 

States. It would radically change the drug approval process that 

has existed in this country for the last 40 years, and it would seriously undermine the ability of FDA to assure that only safe, effective, and high quality drugs are available to our citizens. 

The bill has two sections, one that applies to individuals and the 

other that applies to pharmacists. The first section of the bill would 

broadly authorize individuals to import prescription drugs, even 

though those drugs are or may be unapproved, adulterated, or misbranded. 

Under this provision, FDA may not prevent an individual from 

importing a prescription drug if it appears to be approved. This 

provision would eviscerate FDA’s current authority. Today, FDA 

can keep a domestic drug off the market and keep a foreign drug 

out of this country unless it is affirmatively approved by the agency. Any person attempting to bring a drug into the United States 

today has the burden to prove to FDA that the product complies 

with United States law. 

Under H.R. 5186, that burden would be switched to FDA to 

prove the product does not comply with United States law. Any 

product that merely appears to be approved by FDA would be permitted entry, and FDA would have no authority to ask for proof 

that it in fact meets our requirements. 

The bill also completely prevents FDA from keeping drugs out 

that are adulterated or misbranded. FDA’s hands are tied as long 

as the drug appears to be approved. There is no prohibition at all 

for adulteration or misbranding. 

Now, H.R. 5186 may be intended to apply only to individuals importing drugs in very small quantities for their own personal use, 

but the language in fact contains no such limitation. It refers only 

to individuals who are not in the business of importing prescription 

drugs. This would hamstring FDA enforcement. 

The second section of the bill would permit pharmacists to reimport prescription drugs. When Congress passed a reimportation 

amendment into law 2 years ago, it provided that the amendment 

would not go into effect until the Secretary of HHS demonstrated 

it would not pose new health and safety risks. Both Secretary 

71

1FDA §§ 301(d) & 505(a). 

Shalala then and Secretary Thompson now have each concluded 

that they could not make that demonstration. 

H.R. 5186 would therefore go into effect, despite the risks that 

both Secretaries concluded a reimportation provision would 

present. 

The simple fact is that FDA already is overwhelmed by the volume of drug imports coming into this country. The reimportation 

prohibition is an important tool to help FDA stem the tide of violative products. 

Just 2 months ago, Congress added another tool in the Bioterrorism Act to give FDA increased power to enforce the current 

standards for drug imports. But H.R. 5186 would reduce FDA authority over imports and invite unscrupulous parties to bring counterfeit, substandard, and inappropriately labeled and stored products into this country from all over the world, with substantial 

risks to the American public. 

[The prepared statement of Peter Barton Hutt follows:]

PREPARED STATEMENT OF PETER BARTON HUTT, PARTNER, COVINGTON AND BURLING, 

ON BEHALF OF THE PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA

Mr. Chairman and Members of the Subcommittee: Thank you for the opportunity 

to testify today on the important issue of the importation of pharmaceuticals. I am 

Peter Barton Hutt, a partner in the law firm of Covington & Burling, where I specialize in food and drug law. From 1971 to 1975, I was privileged to serve as Chief 

Counsel for the Food and Drug Administration. I have co-authored a leading law 

school textbook on federal food and drug law and have authored numerous articles 

and reviews of developments in the area. I am here today on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA) to present the industry’s 

views. PhRMA represents the nation’s leading research-based pharmaceutical and 

biotechnology companies that are devoted to inventing new life-saving, cost-effective 

medicines. 

I. IMPORTATION UNDER THE FEDERAL FOOD, DRUG AND COSMETIC ACT

Section 801(a) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) requires 

FDA, working with Customs, to prevent the importation of any drug that ‘‘appears’’

to be ‘‘adulterated,’’ ‘‘misbranded,’’ or ‘‘unapproved.’’ See 21 U.S.C. § 381(a). 

The adulteration provisions in section 501 of the FD&C Act apply where, for example, a drug has been manufactured under unsanitary conditions; it has not been 

manufactured in accordance with ‘‘current good manufacturing practice’’ (the standard used to ensure drug quality); it contains an unsafe color additive; it fails to meet 

requirements for purity and strength; or its container is made from a poisonous or 

deleterious substance. See 21 U.S.C. § 351. 

The misbranding provisions in section 502 of the FD&C Act apply where, for example, a drug has labeling that is false or misleading; that fails to contain adequate 

warnings against dangerous use in pathological conditions or by children or against 

unsafe dosages or methods of administration; that lacks adequate directions for its 

intended use; that is an imitation of another drug; etc. See 21 U.S.C. 352. 

The approval requirements in section 505 of the FD&C Act require that every new 

drug sold in the United States be approved in advance by FDA based on proof of 

safety and effectiveness. It is unlawful under the FD&C Act for anyone to introduce 

into interstate commerce a new drug that is not covered by an approved new drug 

application (NDA) or abbreviated new drug application (ANDA).1 Approval must be 

sought on a manufacturer-by-manufacturer and product-by-product basis. Approval 

of an application applies only to the specific drug product identified in the application and manufactured in the facilities and according to the specifications and procedures that are described in the application. When a product is introduced into interstate commerce that does not comply with an approved application, it is considered 

an unapproved new drug in violation of section 505 of the FD&C Act. It is also misbranded under section 502. 

72

2See, e.g. FDCA § 801(a). 3See <http://www.fda.gov/oc/po/thompson/medsact.html>. 

These basic rules cover importation, since importing is a form of introducing a 

drug into interstate commerce. Thus, a drug that has not been approved by FDA 

for marketing in the U.S. may not be imported, even if another country has approved it for sale in that country. There is no exemption from the requirements of 

the FD&C Act for importations of a foreign version of a U.S.-approved drug.2

II. THE DRUG IMPORTATION ACT OF 2002

Summary of Legislation 

The ‘‘Drug Importation Act of 2002,’’ introduced by Representative Kingston, 

would substantially curtail FDA’s authority to keep unapproved, adulterated, and 

misbranded drugs out of the United States. The bill has two sections, one that applies to individuals and the other to pharmacists. Each would devastate the legal 

protections currently in place for the American public against unapproved, substandard, counterfeit, and potentially unsafe or ineffective medicines. 

Section 2(a) of the bill would add a new subsection (p) to section 801 of the FD&C 

Act broadly authorizing individuals to import prescription drugs even though those 

drugs are or may be unapproved, adulterated, or misbranded. 

Under this new section 801(p), FDA ‘‘may not prevent an individual’’ from importing a prescription drug that ‘‘appears to be approved.’’ This reverses and overrides 

the burden of proof under existing section 801(a). Under existing law, FDA can keep 

a drug out if it appears to be unapproved; under the Kingston bill, FDA must let 

the drug in if it appears to be approved—even if it turns out not to be approved. 

For example, unscrupulous overseas sellers can make unapproved copies and counterfeits and sell them to unsuspecting Americans. FDA would be powerless to keep 

those drugs out of the country as long as they ‘‘appear’’ to be approved. By analogy, 

imagine a similar provision that prevented the Treasury Department from keeping 

counterfeit $100 bills out of the United States as long as they ‘‘appear’’ to be genuine. 

The bill also completely prevents FDA from keeping drugs out that are adulterated or misbranded. FDA’s hands are tied as long as the drug ‘‘appears to be approved’’—there is no reference at all to adulteration or misbranding. A drug could 

easily appear to be approved and yet be adulterated or misbranded (for example, 

it could be manufactured in violation of current good manufacturing practice or its 

labeling could fail to meet FDA requirements). FDA has made clear that even approved drugs can be adulterated or misbranded (see 21 C.F.R. § 314.170), so an approval standard alone is completely inadequate to allow FDA to enforce the law. 

The bill provides that it only covers a prescription drug that ‘‘does not appear to 

be a narcotic’’ and that ‘‘appears to be manufactured’’ in a registered establishment. 

However, these limitations are illusory because of the reversed burden of proof. Just 

as with the approval requirement, it would be a simple matter to evade these requirements through counterfeits and false paperwork so that drugs ‘‘appear’’ not to 

be a narcotic and ‘‘appears’’ to be made in registered plants. FDA would be powerless to act as long as the drugs meet these appearance standards. 

Furthermore, the bill may be intended to apply only to individuals importing 

drugs for their personal use, but the language in fact contains no such limitation. 

It refers only to individuals who are ‘‘not in the business of importing prescription 

drugs,’’ and cites section 801(g) of existing law. Section 801(g), which was added by 

the reimportation law in 2002 and has never been implemented, merely repeats the 

same language, without any definition or guidance. FDA would be hamstrung by the 

need to prove whether an individual is or is not in the ‘‘business’’ of drug importation before the agency could detain violative drugs. 

Section 2(b) of the bill would add a new subsection (q) to section 801 of the FD&C 

Act requiring FDA to establish a program allowing pharmacists to reimport prescription drugs—thereby overriding the prohibition on reimportation established 

under the PDMA. When Congress passed a reimportation amendment in to law two 

years ago (the Medicine Equity and Drug Safety Act), it provided that the amendment would not go into effect unless the Secretary of Health and Human Services 

demonstrated that it would not pose new health and safety risks. See 21 U.S.C. 

§ 384(l). Secretary Shalala and Secretary Thompson each concluded that they could 

not make that demonstration.3 The current bill contains far fewer safeguards than 

the previous law, yet it omits the demonstration requirement—hence, it would go 

into effect despite the risks it would present. 

The bill also would weaken existing labeling requirements by authorizing the use 

of ‘‘alternative labeling’’ to avoid the intellectual property rights of pharmaceutical 

73

companies (new section 801(q)(4). Such alternative labeling may or may not adequately provide for the safe and effective use of the products in question; it also may 

or may not comply with FDA approval requirements, yet the bill would allow it. 

The simple fact is that FDA already is overwhelmed by the volume of drug imports coming into the United States. The reimportation prohibition is one of the few 

tools at the Agency’s disposal to help stem the tide of violative products. This bill 

would eliminate that important tool and invite unscrupulous parties to bring counterfeit, substandard, and improperly labeled and stored products into this country 

from all over the world, with substantial risks to the American public. 

Modifications or Improvements Won’t Make Reimportation Proposals 

‘‘Safe’’

Having outlined the above concerns, proponents of reimportation believe that, 

with certain modifications, reimportation can be made ‘‘safe.’’ Such modifications 

have included the incorporation of drug testing or end-product testing requirements, 

chain of custody provisions and/or limitations to imports from Canada only. Even 

with these modifications, as explained below, the Kingston proposal, or any other 

proposal, could not guarantee safety. 

Drug Testing and Chain of Custody Requirements 

The inclusion of end product testing is not adequate to demonstrate that a drug 

was manufactured in accordance with U.S. approval standards and quality requirements. Testing at the moment of import also does not ensure the integrity of the 

drug throughout its shelf life. Drugs are highly sensitive and can become adulterated and dangerous during shipping if not properly controlled and monitored. Some 

medicines must be stored at very precise temperatures at every point in time from 

production to use. Gel capsules may melt, and liquid products can become contaminated. Any of these things could cause a drug to have a shortened shelf life, even 

if it passed testing at the moment of arrival into the U.S. 

The inclusion of a chain of custody provision, otherwise known as a drug pedigree 

requirement, also does not guarantee safety. According to the FDA in testimony on 

July 9, 2002 before the Senate Special Committee on Aging, the agency stated: 

‘‘Because we could not go certify and look in the other countries, the bill that 

they refuse to implement or decline to implement would have replaced the normal quality control system with a testing process with a paper or so-called pedigree process that attempted to follow the trail of the drugs, but both Secretaries 

found that the paper process could be forwarded by faking documents and that 

you really couldn’t adequately test these products, either economically or feasibly.’’

FDA’s position on end-product testing and drug pedigree can be better understood 

with the following explanation of the way U.S. drugs must be produced in accordance with exacting standards and detailed specifications outlined in a New Drug Application (NDA) that are extensively reviewed by the Food and Drug Administration 

(FDA). 

The individual steps and controls in U.S. pharmaceutical production are set out 

in the chemistry and manufacturing controls section (CMC) of the NDA. In addition, 

the FDA inspects the manufacturing facility prior to NDA approval to assure that 

the product can be manufactured in full compliance with the procedures described 

in the NDA. Each lot of manufactured pharmaceutical product is tested by very specific procedures using high standards to insure the product meets all quality specifications. This testing occurs prior to release into the marketplace so that the American patient receives a safe and efficacious product that will treat the underlying 

medical condition that he or she suffers from. Pharmaceutical companies face a myriad of complex issues as manufacturing processes are designed. 

All of the following areas must be carefully addressed by the company and monitored by the FDA to assure that only drug product of the highest quality reaches 

consumers. 

Personnel—People are the most important single element in assuring that the 

highest quality products are produced. Employees must be competent in their specialties by reason of academic training, experience and continuing job training, 

which include meeting all aspects of Good Manufacturing Practices (GMP) regulations. A comprehensive awareness of how to insure drug quality and an understanding of their personal contribution is essential for a company to have a total 

quality system. 

Product Design—The quality attributes of products must be ‘‘designed-in’’ during research and development, confirmed during clinical evaluations, and controlled

using well-defined systems throughout manufacturing and distribution. Effective 

74

quality control programs include continuing evaluation of marketed product directed 

toward product improvement programs. 

Facilities, Systems and Equipment—Facilities, systems and equipment must 

be designed, selected, installed and maintained to be efficient and reliable to help 

assure that finished product meets the defined quality characteristics. Automation 

may be used where it contributes to the maintenance and uniformity of quality in 

both manufacturing and testing operations. 

Specifications—Detailed specifications for obtaining and assuring the quality of 

raw materials, intermediates, packaging components, labeling and finished products 

must be described in great detail in the NDA. Even something as simple as the 

water used during manufacturing must meet exacting specifications. Companies 

must work closely with vendors who certify their products. This gives added assurance of the acceptability of purchased materials as received. 

Procedures—Written procedures are prepared and followed that describe in extensive detail all steps required to control manufacturing, to monitor support systems and for the evaluation of processes, intermediates and finished products. A 

procedure is available that describes the requirement to monitor (audit) all systems 

and operations as a further method of assuring total control and safety of the product. FDA inspections of manufacturing plants every few years confirm these activities are up to their high standards. 

Processes—The establishment of consistently effective production processes is 

critical to assuring finished product quality. These processes must be supported by 

in-process control monitoring and/or process validation. 

Lot Control—A key element in maintaining administrative control of information 

on a drug throughout its production is the lot control number system and related 

documentation. This lot identification system provides the means for establishing a 

historical record of the entire production, testing and approval procedure. This numbering system provides a necessary method for tracing product distribution and its 

retrieval if required (e.g., a recall is ordered). 

Packaging and Stability Testing—Pharmaceuticals are carefully packaged to 

insure optimal stability. Products are frequently evaluated for stability so that, as 

they are distributed to the thousands of pharmacies, doctor’s offices, and hospitals, 

their potency is not lost. Storage conditions are specified in the NDA. Each lot is 

given an expiration date that, if the appropriate storage conditions are met, assures 

that the product (in its original container) will have full potency. The labeling on 

these packages is reviewed and approved by the FDA and contains critical safety 

and use information for medical practitioners. 

Canada-only Limitations 

On its face, limiting commercial importation to drugs imported from Canada appears to be safe. In practice, a drug could be imported from anywhere in the world, 

as long as it entered into the U.S. through Canada. There is no effective way to prevent the transshipment of drugs from third world countries into Canada and then 

into the U.S. The FDA has already warned that if importation from Canada were 

enacted into law, Canada could become a gateway for counterfeit drugs. 

At a September 5, 2001, hearing before the Senate Consumer Affairs, Foreign 

Commerce and Tourism subcommittee, William Hubbard, FDA’s Senior Associate 

Commissioner for Policy, Planning & Legislation, warned, 

‘‘Even if the Canadian system is every bit as good as ours, and I don’t know 

whether it is or not...the Canadian system is open to vulnerabilities by people 

who will try to enter the U.S. market because again that’s where the money 

is.’’

During a July 9, 2002 hearing before the Senate Special Committee on Aging, 

Hubbard further warned, 

‘‘I talked to a dozen health Canada officials and I said if [importation of drugs 

from Canada] would have happened, would you take responsibility for the safety of these drugs coming into America, and they said absolutely not. Why would 

they? They are not going to their citizens.’’

Furthermore, Canadian law explicitly exempts pharmaceuticals intended for export from any regulatory oversight whatsoever. Section 37 of the Canadian Food and 

Drugs Act provides: 

‘‘This Act does not apply to any packaged food, drug, cosmetic or device, not 

manufactured for consumption in Canada and not sold for consumption in Canada . . .’’

Even if Canada had the authority to regulate exports, its regulatory system would 

be quickly overwhelmed. Currently, the Canadian drug market is less than 10% of 

the U.S. drug market. Even creating a modest U.S. demand for drugs transshipped 

75

through Canada by lifting the current importation ban would pose an enormous 

challenge to that distribution and regulatory system. 

Reimportation by Pharmacies Breaks Drug Distribution Chain Protecting 

Drug’s Integrity 

The cornerstone of pharmaceutical development in the United States is the total 

control of the process from the selection of raw materials, design of the manufacturing process, packaging of the final product, evaluation of the conditions for storage (including the establishment of an expiration date after which the medication 

should be discarded), and careful selection of the distribution pathway. The risk that 

patients will receive sub-potent or even counterfeit medicines will occur if the law 

that restricts the distribution pathway to that chosen by the manufacturer is relaxed, to allow pharmacists or wholesalers to import pharmaceuticals from other 

countries. 

Regulations established by the FDA set forth the licensing requirements for 

wholesalers, set forth minimum requirements for the storage and handling of prescription drugs and for the establishment and maintenance of records of drug distribution by wholesale distributors. These record keeping requirements also provide 

for the speedy recall of specific lots of product if necessary. Even in cases where 

drug product may have originated at the original manufacturer, there is no guarantee that the exacting storage conditions identified in the NDA have been maintained to assure product quality. 

The following cases are representative of the unforeseen problems that could arise 

if pharmaceutical manufacturers lose control of the drug distribution system: 

Drug Distribution to Foreign Countries—Pharmaceuticals destined for export 

routinely have different packaging requirements and even may be manufactured in 

different dosage forms, shape, size, and color than according to the parameters set 

forth in the FDA-approved NDA since the country of destination often will have different regulatory requirements. Clearly in the latter case, such product should not 

be permitted back in the US since it does not meet the criteria set forth in the approved FDA license and would lead to patient confusion. If the product does meet 

US specifications it must be repackaged prior to any distribution to pharmacies so 

that the packaging meets FDA labeling requirements. 

Product Recall—It is important to note that even if such repackaging efforts are 

successful, American patients are at risk in the event of a product recall. Although 

rare, such recalls need to be handled in a rapid and sometimes urgent manner. If 

a lot were manufactured for export, there are no provisions or obligations on the 

part of the foreign country to notify those American consumers who receive the reimported products. Our FDA would not be able to enforce a recall without receiving 

extensive shipping documentation prior to importation that identified the lot number, the country that the product came from, and every wholesaler and pharmacist 

that imported the product back into the US. Such an information infrastructure at 

the FDA would cost tens of millions of dollars to establish and maintain and would 

clearly be incomplete, increasing the risk to patients who could not be contacted. 

Repackaging of Pharmaceuticals—Many pharmaceuticals that are imported or 

reimported into the US will have to be repackaged to meet the standards set forth 

in the NDA. There are several difficulties associated in assuring product purity and 

potency as well as conveying important information to health care providers. The 

repackager traditionally uses materials that are not specified in the NDA. There is 

the well-documented case of bleached cotton from a supplier that contained trace 

amounts of chlorine in the cotton. This resulted in accelerated degradation of the 

active drug substance, and inactive product. A manufacturer might specify an amber 

or opaque bottle because of light sensitivity; the use of other materials might accelerate degradation. If the correct materials are not used the patient is at risk of receiving sub-potent pharmaceuticals. Use of non-specified container-closures or repackaging may occur in a facility without appropriate environmental controls and 

could lead to accelerated degradation because of increased exposure of the pharmaceutical to excessive water vapor. New safety information is often being added to 

the drug label by the manufacturer following FDA approval. There is no provision 

for repackagers or importers to keep up with critical label changes that are mandated by the FDA, so that many repackaged goods would be incorrectly labeled. 

Unknown Storage Conditions—Not all pharmaceuticals come in pill or tablet 

form. There are capsule formulations, liquid formulations for oral administration, 

freeze-dried powders that must be reconstituted, transdermal patches, powders, 

creams, and lotions for external use, drops for ocular administration, and liquid concentrates for intravenous formulation. Some timed-release pills are designed to carefully control the release of drug following administration. Every product that is approved by the FDA is individually evaluated for stability and potency over the peVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00079 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
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riod from time of release from the manufacturer to the expiration date. Conditions 

for storage in the manufacturers’ original container are specified in the NDA in detail so that the product that the consumer receives will be both safe and efficacious 

when taken as prescribed. As noted above, the PDMA specifies minimal conditions 

for storage and handling by distributors. There is no ready way for the consumer 

or the FDA to know whether the product that is imported into this country has been 

stored appropriately. Extremes in temperature, humidity, or the repackaging process are likely to result in a product that deviates markedly from the original specifications. Testing may reveal the current potency of a product but would not be predictive of future potency if the pharmaceutical has been inappropriately handled or 

stored. 

Paper Trail and Authenticity Testing—Reimportation proposals rely on importers to provide the FDA with documentation regarding the source of the pharmaceutical being brought into the US. As discussed above, it is inappropriate and dangerous to rely solely on such documents, which can be easily forged. Several years 

ago a company was victimized in the United Kingdom by a large counterfeit operation that utilized two separate sets of accounts to hide the illegal transactions. The 

addition of ‘‘authenticity’’ and degradation testing will not provide American consumers with assurance that products are safe and effective. There is no regulatory 

definition for ‘‘authenticity.’’ Simple appearance or even presence of the active ingredient is false comfort that the drug is identical with that made by the ethical pharmaceutical company. A simple degradation test will not reveal whether the product 

was properly stored. All drugs marketed in the US must be required to adhere to 

the same standards of safety, efficacy, and quality in order to insure the safety of 

American patients. 

Safety Issues—Counterfeit preparations are not manufactured in accordance 

with the original NDA. Counterfeiters may use different starting materials, intermediates or additives that are not acceptable. The counterfeit products are not manufactured in accordance with GMPs. It is extremely difficult to document any of 

these violations. As the result of a tragic incident of distribution of contaminated 

cough syrup to Haiti in the mid-1990s, the World Health Organization (WHO) has 

made the need to test all starting materials and the importance of GMP compliance 

a priority. The sophisticated counterfeiter is not concerned with the letter of the law 

or public health. The quality of a medicine is a measure of numerous factors including reproducibility of the physical state in terms of particle size, crystal structure, 

color, density, and other characteristics. The ability of the active ingredient to be 

manufactured into the final dosage form with all the other materials (usually 5 to 

30 other substances called excipients) as well as the amount of impurities present 

is the measures of its quality. Pharmaceutical companies have large numbers of personnel and many departments to insure that the necessary procedures are carried 

out and the standards of drug quality are met. There is no tolerance for impurities 

or deviation from specifications for injected medicines that must be sterile and pure, 

as the injection into the blood stream of preparations with small amounts of glass 

or other contaminants could cause significant medical harm. Sophisticated counterfeiters can and have manufactured pharmaceuticals that look every bit like the ones 

made by the ethical pharmaceutical company. However, even if the pill or other 

pharmaceutical preparation has the same active ingredient, there is no guarantee 

that there won’t be dangerous impurities present or that the medicine will have the 

same clinical activity. Even differences in particle size are critical to the drug’s safety and effectiveness. Such differences caused, for example, the lack of activity in a 

number of aspirin products manufactured and marketed during the 1960s and 

1970s. 

Hopefully all of these examples illustrate that legalizing importation by pharmacists or other parties other than the manufacturer opens up an avenue for unscrupulous counterfeiters that does not presently exist. Such products may have no 

active drug ingredient, sub-potent amounts of active ingredient, or potentially toxic 

additives any of which will place American patient’s lives in danger. Even drugs 

produced by the original manufacturer pose risks if they have not been appropriately stored prior to reimportation. Extremes in temperature and humidity accelerate the deterioration of the pharmaceutical substance. In addition, it is difficult 

to conceive how a recall could be mounted if the imported products were subject to 

a safety recall in a foreign country. The manufacturer would not have any knowledge of the distribution system for these imported products. 

In order to continue assuring American patients medicines are safe, effective, and 

meet the highest quality standards, the current controls on manufacturing and distribution must be maintained. Only the full battery of quality testing conducted by 

the manufacturer coupled with complete knowledge of the domestic distribution 

process can assure the margin of safety Americans expect. 

77

III. THE MEDICINE EQUITY AND DRUG SAFETY ACT OF 2000

In October 2000, Congress passed legislation to permit the reimportation of prescription drugs by commercial importers. The law did not take effect, due to concerns about whether it could be implemented safely. 

The Medicine Equity and Drug Safety Act of 2000 (MEDSA) amended section 

801(d)(1) of the FDCA and added a new section 804 to the Act. Under the new section 804, an importer or wholesaler—in addition to the original manufacturer—may 

reimport U.S.-manufactured drugs into the United States. 

The MEDSA went further than the Kingston bill in an attempt to address safety 

issues and included the following provisions:

• Section 804(b) states that FDA’s reimportation regulations must contain safeguards to ensure that imported products comply with section 505 of the FD&C 

Act (e.g., they must be approved, and they must be safe and effective for their 

intended uses), as well as sections 501 and 502 (which prohibit adulteration and 

misbranding); • Section 804(d) requires importing pharmacists and wholesalers to provide information and records to FDA, including the results of testing necessary to assure 

compliance with specifications; • Section 804(e) states that testing required by section 804(d) must be performed 

by the importer or the manufacturer, and—if the testing is performed by the 

importer—requires the manufacturer to provide information needed to authenticate the product and to confirm that the labeling complies with the FD&C Act; • Section 804(g) requires FDA to suspend the importation of specific products or importation by specific importers if the agency discovers a pattern of importation 

of counterfeit products or products that violate section 804, 

Even with these explicit so-called safeguards in place—safeguards that went far 

beyond those contained in the Drug Importation Act of 2002—two HHS Secretaries 

refused to implement MEDSA because they could not demonstrate that its implementation would impose no additional risk to the public’s health and safety or that 

it would result in a significant reduction in the cost of covered products to the American consumer. 

Specifically, in December 2000, Secretary Shalala declined to implement MEDSA, 

citing flaws in the legislation that could ‘‘undermine the potential for cost savings 

associated with’’ prescription drug reimportation and ‘‘could pose unnecessary public 

health risks.’’ In July 2001, Secretary Thompson also declined to implement MEDSA 

on the ground that the safety of prescription drugs could not be adequately guaranteed if reimportation were permitted under its provisions. ‘‘Opening our borders as 

required under this program would increase the likelihood that the shelves of pharmacies in towns and communities across the nation would include counterfeit drugs, 

cheap foreign copies of FDA-approved drugs, expired drugs, contaminated drugs, 

and drugs stored under inappropriate and unsafe conditions,’’ he wrote. Accordingly, 

section 804 of the FD& C Act, added by MEDSA, is not in force. 

IV. PERSONAL USE

Notwithstanding the preceding, FDA has had a ‘‘personal importation’’ policy 

since the mid 1980s. This policy advises FDA inspectors that they may exercise enforcement discretion to permit the importation of an unapproved new drug for personal use in certain situations. In particular, enforcement discretion may be applied 

if the drug is intended for the treatment of a serious condition for which effective 

treatment is not available in the U.S., provided the individual seeking to import the 

product affirms in writing that a U.S.-licensed doctor has assumed responsibility for 

the individual’s treatment with that product. Further, there can be no known commercialization or promotion of the product to U.S. residents by those involved in its 

distribution. Finally, the product must be imported for personal use, meaning the 

individual may import no more than a 90-day-supply. The personal importation policy does not permit the exercise of enforcement discretion to permit the importation 

of cheaper versions of FDA-approved drugs. It was intended solely to allow unapproved medications into the U.S. for compassionate use. In explaining the origins 

of this policy, FDA’s Deputy Commissioner Bill Hubbard emphasized in testimony 

before the Senate Special Committee on Aging on July 9, 2002: ‘‘. . . the FDA at that time attempted to carve out an exception to allow patients to bring in a 90-day supply of a drug that is unapproved for which there 

is no therapy in this country . . . so if you had a treatment for a given disease 

already here, you couldn’t bring it in, but if you had a disease like a cancer or 

AIDS that had no treatment, FDA would use its enforcement discretion to allow 

that in. It’s not in the law. It is just enforcement discretion on the agency’s part, 

and that compassionate exception has been misinterpreted...’’

78

4See, e.g., ‘‘Continuing Concerns Over Imported Pharmaceuticals,’’ hearings before the Subcommittee on Oversight and Investigations, House Energy and Commerce Committee, June 7, 

2001 (Cmte. Print No. 107-30). 5Letter of Lester M. Crawford to The Honorable Thad Cochran, July 17, 2002. 

To that end, FDA has taken the position that the personal importation policy has 

outgrown its usefulness and now presents a threat to public health. In testimony 

before the Subcommittee on Oversight and Investigations of the House Committee 

on Energy and Commerce in June 2001, Hubbard reported that ‘‘importing prescription drugs for personal use is a potentially dangerous practice,—and explained that 

‘‘FDA and the public do not have any assurance that unapproved products are effective or safe, or have been made under U.S. good manufacturing practices.’’ Drugs 

that are manufactured in the U.S., exported, and then reimported by a third party 

‘‘may not have been stored under the proper conditions, or may not be the real product, because the U.S. does not regulate foreign distributors or pharmacies.’’ Therefore, he explained, ‘‘Unapproved drugs and reimported approved medications may 

be contaminated, subpotent, superpotent, or counterfeit.’’ Patients might take a 

product ‘‘that could be harmful, or fatal.’’ He added that FDA has concluded there 

is less need for the personal importation policy now than when it was adopted in 

1988. 

The agency therefore proposed to the Department of Health and Human Services 

that it eliminate its personal use policy for mail imports: 

‘‘And the inescapable conclusion for us is that these drugs are virtually all 

unapproved in the United States. They are provided without proper manufacturing controls. They often lack instructions for safe use and they may be counterfeit or worse. These factors combined with the rapid increase in the Internet 

that has caused this explosion of these things leads us to believe that they pose 

a risk to our citizens that must be reduced. 

‘‘So accordingly, we have recommended to Health and Human Services Secretary Thompson that he approve our recommendation to request that the Customs Service deny entry of all of these drugs and return them to their sender. 

We would create one exception, for patients with serious diseases such as cancer 

who need an unapproved drug from a foreign country to save their lives or at 

least to give them hope of saving their lives. ‘‘We need to be able to make a 

blanket assessment that these things are not safe for American consumers and 

should be turned back, and I believe the Customs Service agrees with that. And 

so, if Secretary Thompson and the Administration agree, that will be the approach we intend to take.’’ 4

V. FEDERAL AGENCIES OPPOSE REIMPORTATION

After enactment of MEDSA in 2000, federal agencies charged with law enforcement and protecting the public health made clear their opposition to reimportation. 

For example, in 2001 U.S. Customs and DEA officials testified before the House Energy and Commerce Committee that thousands of counterfeit and illegal drugs are 

already coming across the borders and through the mail from other countries. These 

agency officials recommended tightening our current regulation of reimportation of 

pharmaceuticals. In a follow-up letter to the Energy and Commerce Chairman and 

Ranking Member, a DEA official wrote that the DEA opposes reimportation because 

it ‘‘would hinder the ability of federal law enforcement officials to ensure that drugs 

are imported into the United States in compliance with long-standing federal laws 

designed to protect the public health and safety.’’ In March 2002, the Administrator 

of the Centers for Medicare and Medicaid Services (CMS) told the Senate Finance 

Committee that CMS opposes the reimportation of prescription drugs into the U.S. 

‘‘We have opposed it,’’ he stated. ‘‘There is no way for FDA to monitor and regulate 

drugs coming in from Canada, Mexico, or other countries.’’

As recently noted by the FDA, the current ‘‘closed’’ regulatory system has been 

very successful in preventing unapproved, adulterated or misbranded drug products 

from entering the U.S. stream of commerce. Legislation that would establish other 

distribution routes for drug products, particularly where those routes routinely traverse a U.S. border, creates a wide inlet for counterfeit drugs and other dangerous 

products that are potentially injurious to the public health and a threat to the security of our nation’s drug supply.’’ 5

The Kingston bill would recreate the public health risk of counterfeit, unsafe, and 

adulterated drugs that Congress sought to eliminate in the late 1980s with the Prescription Drug Marketing Act. Reestablishing a system where wholesalers and pharmacists may import prescription pharmaceuticals in to the U.S., and codifying an 

79

6Dangerous Medicine: The Risk to American Consumers From Prescription Drug Diversion and 

Counterfeiting, 99th Cong., 2nd Sess. 22 (Comm. Print 99-2 1986). 7See, e.g., Prescription Drug Diversion and Counterfeiting, Part 1, Hearings before the 

Subcomm. on Oversight and Investigations of the House Energy and Commerce Comm., July 10, 

Aug. 7, Sept. 19, Oct. 31, Dec. 6, 1985 (Cmte. Print No. 99-61). 8 Uncertain Returns: The Multimillion Dollar Market in Reimported Pharmaceuticals, 99th 

Cong., 2nd Sess. 23 (Comm. Print 99-GG 1986). 9 H.R. Rep. No. 76, 100th Cong. 6-7 (1987). 

10 Id. 11Dangerous Medicines: The Risk to American Consumers from Prescription Drug Diversion 

and Counterfeiting, 99th Cong., 2d Sess. 22 (Comm. Print 99-2 1986). 12 Uncertain Returns: The Multimillion Dollar Market in Reimported Pharmaceuticals, 99th 

Cong. 2nd Sess. 32. See also, Dangerous Medicine: The risk to American Consumers From Prescription Drug Diversion and Counterfeiting, 99th Cong. 2nd Sess. 25-26 (‘‘there is little or no 

significant benefit to consumers from pharmaceutical reimportation, and there are obvious costs 

in terms of health and safety risks and the utilization of scarce FDA resources.’’). 13FDCA § 801(d)(1). 

expanded personal importation policy, would recreate the very public health risk 

that the PDMA was designed to eliminate. 

VI. THE PRESCRIPTION DRUG MARKETING ACT (PDMA)

In closing Mr. Chairman, while legislative efforts to eliminate the current reimportation restrictions under the FD&C Act may be new, the health and safety 

problems posed by counterfeit, subpotent, superpotent or contaminated reimported 

pharmaceuticals are not. The perils of lax oversight of reimportation from abroad 

had been examined in a series of groundbreaking Congressional oversight hearings 

in the mid 1980s by the House Energy and Commerce Committee’s Oversight and 

Investigations Subcommittee, chaired by Mr. Dingell. One well-publicized example 

uncovered by Subcommittee investigators involved importation and sale to consumers of more than one million counterfeit, ineffective birth control pills, complete 

with counterfeit packaging and labeling.6 The Subcommittee also uncovered numerous instances of reimported products having exceeded their expiration dates or having been improperly stored being sold into the U.S. market.7

In calling for legislation to ban the reimportation of FDA-approved drugs sent 

abroad, the Subcommittee described the public health and safety concerns of allowing ‘‘American goods returned’’ policies as follows: ‘‘[T]he clear and present danger 

to the public health from reimported pharmaceuticals is the threat that subpotent, 

superpotent, impotent or even toxic substances labeled as U.S.-produced legend 

drugs will enter the distribution system.’’ 8 The House Energy and Commerce Committee concluded that permitting reimportation of American drugs ‘‘prevents effective control or even routine knowledge of the true sources of merchandise in a significant number of cases.’’ 9 As a result, ‘‘pharmaceuticals which have been mislabeled, misbranded, improperly stored or shipped, have exceeded their expiration 

dates, or are bald counterfeits, are injected into the national distribution system for 

ultimate sale to consumers.’’ 10 Indeed, ‘‘the very existence of the market for reimported goods provides the perfect cover for foreign counterfeits.’’ 11

Investigators also were not persuaded that allowing greater reimportation would 

lead to lower priced prescription drugs available to U.S. consumers. 

Pharmaceuticals reimported by diverters displace full price sales in the 

wholesale market. Moreover, prices to ultimate consumers are generally not 

lowered as a result of diversion. Rather, the profits go to the various middlemen, here and abroad, while consumers bear the risk.12

In response to the abuses uncovered, the Energy and Commerce Committee reported, and Congress passed, the Prescription Drug Marketing Act (PDMA), which 

added section 801(d)(1) to the FD&C Act, in order to protect U.S. consumers from 

the ‘‘wholesale market’’ and the ‘‘diversion market’’ that were bringing in drugs that 

had been improperly stored, handled, and shipped, and from counterfeit and unapproved products. 

Under section 801(d)(1) of the FD&C Act, a drug that is manufactured in the U.S. 

pursuant to an approved NDA and shipped to another country may not be reimported into the U.S. by anyone other than the original manufacturer.13 This prohibition on reimportation applies even if the product fully complies with a U.S. new 

drug application or abbreviated new drug application. The provision restricting the 

right to reimport U.S.-drugs to the original manufacturer was designed to ensure 

that only the party that can truly vouch for the pedigree of a drug is allowed to 

bring that medicine back into the country. This gives FDA an important tool to preVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00083 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
80

vent substandard and counterfeit medicines from coming into the United States 

under the guise of American goods returned. 

The ‘‘closed’’ U.S. drug regulatory system is undoubtedly the most protective in 

the world. But even this system has not kept unscrupulous criminals from successfully importing unapproved, adulterated or misbranded drug products into the medicine cabinets of American consumers. Easing restrictions on the importation of 

drugs will make the current situation worse and offers consumers nothing more 

than a more dangerous drug supply in exchange for the false hope that prices will 

be lowered. I urge this Subcommittee to reject efforts to erode the ability of the FDA 

to ensure the safety and efficacy of the drugs sold in the U.S. by easing the current 

restrictions on the importation of pharmaceutical products. 

Thank you for the opportunity to testify. I would be happy to answer any questions you may have.

Mr. BILIRAKIS. Thank you very much, Mr. Hutt. 

Mr. Copeland. 

STATEMENT OF DON COPELAND 

Mr. COPELAND. Mr. Chairman, my name is Don Copeland. I have 

been a pharmacist in Scottsboro, Alabama, for over 30 years; since 

1987, the President of Associated Pharmacies, Incorporated, a buying cooperative of some 750 pharmacies in 43 States. I will provide 

an oral summary to my written statement, which I ask to be placed 

in the record. 

Either because they cannot afford the cost of prescription drugs 

in the United States or simply that they like to save money, a 

number a growing number of Americans are purchasing drugs from 

foreign sources. 

Through previous hearings, this committee is well aware of the 

dangers of drugs obtained through shadowy Internet companies 

whose true country of origin may be unknown, and the quality of 

drugs obtained from Mexico has also been shown to be uneven. 

That is why my board and I have been looking into drugs supplied from pharmacists in Canada, where the integrity of the drugs 

and the regulatory system is beyond question. We have studied this 

subject, and we support legislation that would allow U.S. consumers to have their prescriptions filled by pharmacists in Canada, 

with the assistance of their local pharmacy here. 

Only non-narcotic U.S.-approved drugs for the consumer’s own 

use would be allowed to be imported. We believe this proposal, 

which would involve State or provincially licensed physicians and 

pharmacists, both here and in Canada, is a simple and straightforward way to assure that the patient receives a drug that is safe, 

effective, and dispensed with care regarding the drug-to-drug or 

other patient specific conditions. 

Here is how our system would work. The local pharmacist would 

respond to the customer inquiries or bring to the attention of the 

customer the potential to fill a prescription in Canada for a savings 

usually averaging between 30 and 50 percent off U.S. prices. 

If the customer wished to order from a Canadian pharmacy and 

gave permission, the pharmacist would notify the patient’s doctor 

and discuss this desire. The pharmacist would assist the customer 

in providing the information required by Canada, including the 

prescription, the name, and contact information of the prescriber, 

the customer’s current health condition, and all medications being 

taken and, with the customer’s consent, transmit this information 

to the Canadian pharmacy. 

81

The U.S. pharmacist would provide drug utilization review for 

the patient, to make sure that the prescription is compatible with 

other drugs the patient is taking, and counsel the customer as to 

the use of the drug, the proper dosage, and any other information 

that is usually provided for by the pharmacist. 

The pharmacist would notify the customer to return to the pharmacy to receive the drug if it was sent directly to the U.S. pharmacy, or to visit the pharmacy to have the drug checked if the customer chooses to receive it at home. The pharmacist would receive 

payment for these services from the customer, which would be fully 

disclosed. 

The Canadian pharmacy would provide the valid U.S. prescription and the medical history form to a Canadian doctor who would 

review the information, and, after calling the U.S. physician, if necessary, write a Canadian prescription. The Canadian pharmacy 

would fill this prescription and send it to the U.S. consumer or to 

their local pharmacist. 

We presented our model to the Mississippi State Board of Pharmacy and sent a copy to the FDA. Even though many Americans 

are importing drugs from Canada and elsewhere, the FDA told us 

that such imports are illegal. So we as pharmacists cannot lawfully 

assist consumers in the importation, and no State board would approve such a plan. 

The FDA’s own enforcement policy provides for a compassionate 

use import exemption which allows individuals to bring in drugs 

from foreign countries if these drugs are not approved for sale in 

the United States and there is no comparable drug here. 

In practice, the FDA is not enforcing the law or the exemption, 

as written, and allows individuals to import foreign source drugs. 

If the FDA did not allow this, the bus trips to Canada would stop. 

In closing, we believe that neither the law as currently drafted 

nor the FDA policymakes sense, and in fact, exposes Americans to 

a significant risk from drugs whose origins are unknown or which 

are not obtained through or from a licensed pharmacist. 

By allowing individuals, with local pharmacists’ assistance, if 

they wish, to import drugs that are approved in the United States 

from licensed pharmacists in Canada, and enforcing the law 

against other drug imports, the FDA can fulfill its role of protecting 

American consumers while licensed pharmacists here do what they 

are trained to do, which is to provide expert advice on drug labeling, dosage, interaction, and other safety and efficacy-related matters to their customers. 

Finally, State and provincial pharmacy boards, all of which are 

associated with the National Association of Boards of Pharmacy, 

can, if they wish, regulate the practice as necessary. 

Thank you. I will be glad to answer any questions. 

[The prepared statement of Don Copeland follows:]

PREPARED STATEMENT OF DON COPELAND, CHIEF EXECUTIVE OFFICER, ASSOCIATED

PHARMACIES, INC. 

Mr. Chairman, members of the Committee. My name is Don Copeland. I am a 

licensed pharmacist in the state of Alabama and I am the Chief Executive Officer 

of Associated Pharmacies, Inc., a buying cooperative of over 750 pharmacies in 43 

states. Sitting behind me here is one of our owner members, Fred Sharpe, the pharmacist owner and operator of U-Sav-It Drugs with ten stores in Georgia. 

82

We support legislation that would allow consumers to have their prescriptions 

filled by pharmacists in Canada with the assistance of their local pharmacy, if they 

wish. Such legislation should be limited to non-scheduled (i.e., non-narcotic or habitforming) pharmaceuticals approved for marketing in the United States. We believe 

the benefit of our proposal is it involves a physician and a pharmacist, both in the 

United States and in Canada. This assures that the patient-customer is prescribed 

the correct drug and dispensed the correct drug. 

Our members and customers became interested in the importation of prescription 

drugs from Canada as they became aware through the media that a growing number of consumers in the United States are now accessing prescription drugs by mail 

or by visits across the U.S. border—primarily Canada and Mexico. We believe no 

one would question the integrity of the Canadian drug system and so that is where 

we focused our attention. And we all know that many prescription drugs are available from Canada at prices that are 30-50% lower than the lowest available prices 

in the United States from local, chain or mail order pharmacies. These savings are 

so substantial that it is folly to argue with consumers who want to buy from Canada, many of whom are forced to so for economic reasons. 

The cost of prescription drugs, especially for the uninsured, has become a serious 

health problem. As this Committee may be aware, patients often leave prescriptions 

with their pharmacists and then fail to pick up the filled prescription. It is the experience of our member pharmacists that over 75 percent of these prescriptions are 

from cash paying patients. Their inability to afford these drugs obviously puts their 

health at risk, and may end up costing taxpayer funded programs, like Medicare, 

much more in hospitalizations than the cost of the prescriptions. 

The question my Board of Directors asked is how can our pharmacies and pharmacists help consumers who choose to purchase drugs from Canada. We see a void 

in pharmaceutical care because Canadian mail order pharmacies do not have access 

to the patient profiles that are now routinely kept by pharmacists in the United 

States. Additionally it is left to the patient to verify that the medication they receive 

from Canada is the same drug and dosage that their physician prescribed. And 

while most pharmacists will answer a phoned-in question from their customers, 

even about a drug they did not buy from that pharmacist, consumers who buy from 

Canada may be inhibited from calling. Finally, my Board members have seen advertisements from companies in Washington State and Kansas City offering to obtain 

drugs from Canada for consumers. We were informed that it is presently illegal to 

have this kind of commercial operation in the United States and we have notified 

the Food and Drug Administration and urged that they take enforcement action. 

To be responsive to the financial situation faced by patients who must pay for 

their own drugs (usually those who are retired, unemployed or underinsured), API 

pharmacies in the Southeast developed a professional service model intended to 

bring Canadian-priced drugs to their customers along with local pharmacy services. 

We presented that model to the Mississippi Board of Pharmacy and we sent a copy 

to the Food and Drug Administration. Mississippi cannot approve it because FDA 

says it is not lawful. And FDA cannot approve it because they say their ‘‘compassionate’’ importation rule only applies if individuals are seeking to bring in a drug 

not approved or available in the United States, a policy that is, thank goodness, not 

enforced. And, since even personal importation of a prescription drug from Canada 

may be a crime under the Federal Food, Drug, and Cosmetic Act, a pharmacist assisting a customer in doing so could be considered by FDA to be in a conspiracy to 

violate the law. I and my members would rather be legal and so would most people. 

We are therefore here to recommend legislation that would simply allow consumers to order prescription drugs from Canada and for them to do so through their 

local pharmacy if they wish. 

While we are in favor of wholesale re-importation of drugs from Canada, we are 

not here to argue that point. We are here in support of a much more modest proposal—that individuals be allowed to do so for their own benefit and that their 

pharmacist be allowed to help them, if they wish, and to charge them a fee for service, if they wish. Here is how we see this system working with respect to pharmacists and their customers. 

LOCAL PHARMACIST ROLE

• The pharmacist would respond to customer inquiries or bring to the attention of 

customers prescriptions that would result in significant savings to the uninsured—usually 30-50%, but in some cases even more. 

• The pharmacist would educate the customer on the availability of such savings 

by ordering through a pharmacy in Canada and would, if permitted by the customer, notify and discuss with the patient’s physician that this is being done. 

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• The pharmacist would assist the customer in filling out the information required 

for Canada including the name of the prescribing physician, the customer’s 

health conditions and the medications the customer is taking, and, with the customer’s written consent, transmit this information and the customer’s prescription to the Canadian mail order pharmacy. 

• The pharmacist would provide drug utilization review for the customer to make 

sure the prescription sent to Canada is compatible with other drug regimens. 

• The pharmacist would counsel the customer as to use of the drug, the proper dosage and other information that is provided for that drug in the usual course of 

that pharmacist’s practice. 

• The pharmacist would notify the customer to return to the pharmacy to receive 

the prescribed drug which could be sent from Canada to the pharmacy, or in 

the alternative, to visit the pharmacy to have the drug checked if the consumer 

chooses to receive it at home. 

• The pharmacist would receive payment from the customer on behalf of the Canadian pharmacy, along with a service fee that is fully disclosed to the customer. 

It is possible that Canadian mail order pharmacies would absorb that fee into 

their charge for the drug and pay it to the pharmacist. 

CANADIAN PHARMACY ROLE

It is our understanding that the scenario described below is lawful in Canada and 

that this mirrors the methodology followed by Canadian pharmacies today. Here is 

what the Canadian pharmacy would do: 

• Receive the customer prescription and customer information from the customer or 

the customer’s local pharmacy. 

• Provide the customer information and prescription to a Canadian physician who 

reviews the patient information, the United States’ prescription (and the Canadian physician calls the United States’ physician where appropriate), and writes 

a Canadian prescription for the patient and sends it back to the Canadian pharmacy. 

• Fill the prescription and mail the prescription back to the local pharmacy or directly to the customer accompanied by the patient’s physician’s prescription. 

In Canada this model is controversial but, as we understand it, lawful. For example, the Ontario College of Physicians and Surgeons questions whether physicians 

should rewrite prescriptions without examining the patient and the Ontario College 

of Pharmacy has expressed concern about the filling of such prescriptions. And there 

are different degrees of concern in the various Canadian provinces. But the bottom 

line as we understand it is that a Canadian pharmacy may fill a prescription written by a Canadian licensed physician for a United States patient. In light of this, 

and in light of the demand from United States consumers, there are many Canadian 

physicians and pharmacies engaged in this practice. 

Our pharmacists want lawfully to be a part of this scenario—to provide professional services to their patients and to communicate with the physicians who treat 

those patients—and to address any patient protection and professional care issues. 

TO WHAT PRESCRIPTION DRUGS SHOULD THIS LAW APPLY?

This program should apply only to prescription ‘‘drugs’’ approved for use by the 

Food and Drug Administration. It is often the case that the ‘‘drug product’’ (pharmaceutical, label and package insert) found in Canada is not identical to the drug product approved for use in the United States. The differences are almost exclusively 

in the label and package insert, rather than in the ‘‘drug’’ or pharmaceutical itself. 

Technically, the ‘‘drug product’’, i.e., the ‘‘drug,’’ its label and package insert, is not 

the ‘‘drug product’’ approved in the United States for this reason. The important fact 

that the ‘‘drugs’’ are identical can be checked by comparing the description of the 

pharmaceutical in the labels for each product, something that every licensed pharmacist in this country is trained to evaluate. And if FDA wants to argue this point, 

ask them to tell you exactly how any differences are material to the safety and effectiveness of the drug. 

It is not intended that this program would extend to any ‘‘drugs’’ that are not the 

same as those available here in the United States. Thus, Canadian-approved generic 

versions of United States-approved prescription drugs would not be available under 

this program if such versions were not also approved in the United States. 

Canadian pharmacies buy pharmaceuticals directly from manufacturers and from 

prescription drug wholesalers, the same sources that are used by pharmacies in this 

country. Canada has a first class drug regulatory scheme and no questions have 

been raised with respect to the integrity of the Canadian drug supply. 

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We believe the legislation should not apply to any pharmaceuticals that are controlled substances. 

CONCLUSION

We now live in a global environment. Citizens of Detroit and Buffalo can cross 

a bridge and obtain drugs at prices radically lower than available anywhere in 

United States. Consumers can order such low priced drugs through the internet or 

by fax or by mail. Pharmacists and pharmacies want to provide their patients with 

these opportunities and with the added protection of the professional services they 

provide their patients every day. Pharmacists are trained, licensed and in the patient’s community. They should be allowed to bring their skills to the table and to 

be part of any personal importation program. 

The program outlined above is meant to address legitimate treatment and patient 

safety concerns. There is a valid prescription that is seen by the local pharmacist. 

The patient and the patient’s physician are fully informed as to the nature of the 

program. The prescription is entered into the patient’s profile. The prescription is 

reviewed by a Canadian physician (who may call the local prescribing physician) 

and written in Canada. The prescription is filled by a pharmacy licensed in Canada. 

And the filled prescription is received or can be reviewed by the local pharmacy. At 

the end of this process, United States’ consumers can save 30-50 percent on the cost 

of their prescriptions. 

Thank you very much for your consideration of this presentation.

Mr. BILIRAKIS. Thank you very much, Mr. Copeland. 

Dr. Wennar, on your website you offer patients the options of ordering drugs from pharmacy A, pharmacy B, pharmacy C. Why 

don’t you inform your patients of the names and addresses of the 

pharmacies? 

Ms. WENNAR. We intentionally did that because we did not want 

to do any direct marketing for any particular one pharmacy. There 

are toll-free numbers there. This is really a facilitation process. 

This is the patient, their physician, the pharmacist in Canada, the 

consulting physician in Canada that actually—this whole transaction takes place, but the consumer is given the option to be able 

to shop without having those names. When they make the phone 

call, it is answered in terms of the names of the pharmacies, but 

we would not on our Web site promote them. We would not promote them by name. 

Mr. BILIRAKIS. They are given the names of the pharmacies? 

When? 

Ms. WENNAR. Yes. The first time they make contact they are 

given the name of the pharmacy. 

Mr. BILIRAKIS. You give them the telephone calls——

Ms. WENNAR. Toll-free numbers. There is a number where they 

may reach the pharmacist, there is a number for the customer 

service unit, and there is a number for physician-to-physician discussion. 

Mr. BILIRAKIS. Your definition of ‘‘safety’’ appears to be rather 

narrow. Do you mean to say that from a provider medical perspective that safety is equivalent to compliance, and not adverse health 

outcomes? 

Ms. WENNAR. No, I am talking about quality here. I think we are 

mixing words a little bit from the perspective of quality. 

Physicians make an assumption. Remember, they write a prescription. They do not usually try and direct you to any particular 

pharmacy. They make the assumption that you are going to have 

access to safe, affordable prescription drugs, and that you are going 

to take them when they write the prescription. 

85

Mr. BILIRAKIS. Well, in the cases where you are helpful to people 

in terms of getting their drugs, prescription drugs, from Canada—

is it limited to Canada, by the way? 

Ms. WENNAR. Yes, it is. 

Mr. BILIRAKIS. Might any of those drugs be counterfeit? 

Ms. WENNAR. Well, I guess I would ask you the same question 

from the standpoint of—I think we just heard earlier that local 

pharmacists in our own area could not identify a counterfeit drug. 

Might any of those drugs be counterfeit? 

To tell you the truth, I guess what I am having a problem here 

with is that none of the literature supports anything in Canada 

that I can find that they have had these major issues with counterfeit drugs. 

These drugs are coming out of the same bottles that are being 

prescribed for Canadian citizens. Are we to imply that Canadian 

citizens are being sold counterfeit drugs? Are we to imply that the 

drugs that are being sold to American citizens are coming out of 

a different bottle? 

I would tell you no. The reason I will tell you no is because I 

have been to those pharmacies. We do site visits. 

Mr. BILIRAKIS. We have heard from the FDA, and they are there 

to protect us. The testimony was from a person who was not a political appointee, he has been there for many, many years. He did 

tell us that those problems do exist. 

Ms. WENNAR. But what I am having a problem with here is that 

there is just a huge amount of what I can only classify as propaganda, and this propaganda is intended to scare people. 

I have to tell you, I have traveled the roads in Canada. The people in Canada are not afraid to take their medications. We have 

the equivalent in Canada. If we want to get smart and we want 

to do this, we have some very brilliant people here in this country 

and in Canada, and pharmacists in Canada. All the ones we work 

with have told us they would welcome an opportunity to register 

with the FDA. They would welcome an opportunity to register on 

a State-by-State level. 

They are more than willing to be held accountable. They are willing to let you do site visits. They are willing to be held to the highest standard. I don’t know what more you could ask. 

Mr. BILIRAKIS. You are a good witness. 

Mr. SANDERS. She comes from Vermont. What else? 

Mr. BILIRAKIS. Dr. Shepherd, you have described for us the drugs 

that come in from Mexico, and based on your personal observation—it is not statistics, it is your personal experience—you have 

indicated that many people who—that the prescriptions are not required in Mexico. They do not require registration or licensing or 

whatever of pharmacists, et cetera. Anybody can dispense these 

drugs. Is that right? 

Mr. SHEPHERD. That is correct. The only prescriptions required 

in Mexico for a drug is for a controlled substance drug, and you 

have to have a pharmacist on your payroll within the pharmacy to 

dispense controlled substances. He does not have to be present at 

the pharmacy. 

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Mr. BILIRAKIS. You have told us that many of the people, Americans who come across the border to pick up drugs, do so mainly for 

convenience, that they do not need a prescription? 

Mr. SHEPHERD. That is right. It is more economical. They don’t 

have to go to the doctor. 

Mr. BILIRAKIS. Just very quickly, do you expect reimportation to 

decrease substantially if the high cost of prescription drugs is addressed satisfactorily in the eyes of the beholder? But in any case, 

if we are able to do something about that particular problem, and 

it is a problem, do you expect that reimportation will substantially 

decrease? 

Mr. SHEPHERD. Definitely, I think it would. Except for seniors—

with the seniors, but not for the youth. 

Mr. BILIRAKIS. Among the seniors, it would decrease substantially, in your opinion, but not among the youth? 

Mr. SHEPHERD. That is right. 

Mr. BILIRAKIS. We are concerned about the youth as well as we 

are the seniors. 

Mr. Brown to inquire. 

Mr. BROWN. Thank you, Mr. Chairman. 

Mr. Hutt, the drug industry—actually, the Secretary’s Planning 

Office in the Department of HHS issued a report in late June, early 

July, saying that if prices come down in the U.S. that research and 

development by the drug industry will begin to dry up. That report 

was not too dissimilar from the PhRMA Web site, which claims, 

amazingly enough, if prices come down in the U.S. then R&D will 

dry up. 

We did a little research and found, and this was even more 

amazing, that the Deputy Secretary—the Secretary in the Secretary’s Planning Office is a woman named Ann Marie Lynch, who 

used to work in PhRMA. I did some more looking around and found 

there were many people from your organization in the White 

House, in the President’s transition staff at HHS. 

So sometimes in this committee we have begun to—rather than 

having to look at HHS reports, we just look at PhRMA Web sites. 

But that is more editorial comment than anything else. 

What struck me is that you claim that if prices come down in the 

U.S., R&D will dry up. I guess you are saying that prices are too 

low in other countries because of so-called price controls, or for 

whatever reason. 

If that is the case, why do your member companies, why do 

Medicare and Pfizer and all these companies, why do they sell in 

markets where there are so-called price controls? 

Mr. HUTT. Mr. Brown, let me begin by pointing out that my area 

of expertise is food and drug law. I have spent my entire career 

both implementing and advising clients on how to comply with the 

Federal Food, Drug, and Cosmetic Act. I am not an expert on foreign drug pricing or, indeed, on domestic drug pricing. 

I will be happy to take your questions back to PhRMA and ask 

them to respond to that particular question, but I am not an employee of the association. I am not familiar with the report you just 

cited, but I will be happy to answer any question you have about 

the Federal Food, Drug, and Cosmetic Act. 

87

Mr. BROWN. I was afraid that would be your answer. We don’t 

get very many chances—PhRMA never comes to my office and 

talks to me. I am not sure why that is. I don’t get much chance 

to talk to PhRMA. I just saw that this guy from PhRMA was here. 

I see your television ads, usually under a different name. I see the 

information that you send out on the Hill. I see your Web site. 

But I was kind of excited—we could not get a chance to see a 

consumer on the panel, and I was excited about PhRMA. I will ask 

a couple of questions. You could pass them on to the people in the 

second or third row. 

Mr. HUTT. I would be more than happy to do that. I am sure they 

are listening very closely. 

But let me emphasize, I would have welcomed any number of 

consumer advocates here today, because I don’t think these are 

issues that ought to be hidden. They ought to be brought right out, 

as this committee is doing today. 

If you would like to arrange it, I would be happy to meet personally with Ms. Tubbs. 

Mr. BROWN. I am glad that you would welcome consumer advocates, because my Republican friends apparently did not, and I 

know the kind of influence that PhRMA has on my Republican 

friends, so perhaps you could talk to them prior to the hearing next 

time and convince them to have some consumer advocates. 

My questions really do detail this. Why do drug companies sell 

in markets where there are price controls, although their definition 

of price controls is different from mine? I don’t think it is price controls when you have compulsory licensing, which brings in competition and lowers prices. I don’t think it is price controls when Canada negotiates with the drug companies and gets lower prices. I 

don’t call those price controls. 

Price controls might be, in fact, what we do in the medical device 

industry in this country, where Medicare, HCFA, CMS, says to the 

wheelchair manufacturers, the stent manufacturers, here is what 

we are going to charge, here is what we are going to pay, here is 

what you are going to get. I call that price controls, I wouldn’t call 

the other. 

What puzzles me, on drugs—they say they can’t make a profit in 

these other countries, but they are selling lots of prescription drugs 

in other countries, to their credit, and I imagine they are making 

money. They have earned $40 billion worldwide in profits. I can’t 

believe they are all off U.S. sales. 

So my question really is if you would ask the PhRMA people to 

give me some answers on those issues: Why are they selling abroad 

if they can’t make money? Can they make money? Of the $40 million, is it all U.S. sales? 

Let me ask one question of all four of you, since that one didn’t 

work right. Let’s assume an individual has a life-threatening disease and requires a prescription drug but cannot afford it in this 

country. 

If you were in that situation where you could not afford the drug 

and you had to make a choice, you either didn’t get the drug in a 

life-threatening situation or you bought it in Canada, where some 

people have said that Canadian drugs might not be as safe as the 

88

drugs that you could get in Lorraine, Ohio, what would your response to that be, if each of you—which would you do? 

I really want, quickly——

Mr. BILIRAKIS. You used all of your time editorializing that. 

Mr. BROWN. I did. I often do that, Mr. Chairman. I just want a 

4- or 5-word answer from each. 

Mr. BILIRAKIS. I will allow it. 

Mr. BROWN. Get a drug in Canada, or not get it. 

Mr. SHEPHERD. I get that question a dozen times a week. I will 

answer and say if your probability of dying is higher if you stay 

here, you are better off going to Mexico. 

Mr. BROWN. Canada or not get the drug? 

Ms. WENNAR. What do you think? 

Mr. BROWN. I am asking the questions. 

Ms. WENNAR. I am there already. 

Mr. BROWN. That is the way Bernie always answers it, he answers a question with a question. I am tired of it, so give me an 

answer. 

Ms. WENNAR. Canada with a big C. 

Mr. BROWN. Mr. Hutt. 

Mr. HUTT. I might answer it in a different way. Everyone in this 

room, including PhRMA, agrees that there should be a direct approach to improving access for all Americans to the prescription 

drugs they need. People should not be forced to that kind of choice. 

But, Mr. Brown, where you and I disagree is we should not try 

to solve that problem indirectly by destroying the American drug 

regulatory system. We shouldn’t try to solve that problem by setting up a two-tier system of drugs, those that meet the FDA gold 

standard and those that are substandard. We shouldn’t put up a 

big sign on the United States ‘‘all drugs welcome.’’ We ought to 

keep our current regulatory system, and we ought to set up a system so no one has to make that choice you are talking about. 

Mr. BROWN. For a guy who did not have any opinions, Mr. 

Hutt——

Mr. BILIRAKIS. Four or five words. 

Mr. HUTT. You asked for my area of expertise. 

Mr. COPELAND. I think the gold standard aptly describes the situation in the United States, because it takes a lot of gold to buy 

it. I have absolutely no qualms whatsoever about getting my medication from Canada. 

Mr. BILIRAKIS. Okay. You got your answers. 

Mr. Burr. 

Mr. BURR. Thank you, Mr. Chairman. 

Mr. Copeland, I know you did not mean it the way it sounded 

to me. Because I think if we degrade in any way, shape, or form 

the benchmark that we set in this country you put far more American lives at risk. 

I only hope, and I have worked pretty diligently in the 8 years 

that I have been here, to make sure that there is a drug benefit. 

I am sorry that some up here want to make it political. Every hearing is political. The reality is that if they would spend as much 

time trying to come up with solutions and work on the process—

they had an opportunity to vote for a drug bill. They decided not 

89

to because it was not theirs. It was not perfect. It did not provide 

everything. 

Do you know who loses? The seniors that are waiting for drug 

coverage. 

Let me ask you, Mr. Hutt, you are an expert on food and drug 

law. Do we currently, under U.S. Code, protect the patents of pharmaceutical companies for products that they apply for that patent 

protection? 

Mr. HUTT. We grant patents, and the Food and Drug Administration, under very specific conditions, will not approve a competitive 

product until the patent expires. 

Mr. BURR. And if, because reimportation in fact breaks the patent protection, we allow under some new law reimportation to happen, what type of protection exists for that manufacturer? 

Mr. HUTT. The current law would clearly be overridden by the 

legislation under consideration here. 

Mr. BURR. Therefore, what incentive would exist in the marketplace for the pharmaceutical companies, to the degree that they do, 

to enter the U.S. market earlier than any other market in the 

world with cutting edge technology and pharmaceuticals and biologics? Is there any incentive left? 

Mr. HUTT. It certainly reduces that incentive. 

Mr. BURR. Dr. Wennar, are you an advocate of the plan that we 

passed in the House of Representatives for drug coverage? 

Ms. WENNAR. I am an advocate of anything that is going to get 

access to safe, affordable prescription drugs. So if you can come up 

with an answer, I am an advocate for it. 

Mr. BURR. Are you an advocate for price controls in the United 

States, Federal price controls? 

Ms. WENNAR. I haven’t been. 

Mr. BURR. I am glad to hear that. Do you believe U.S. pharmacists, pharmacies, should be able to import drugs from anywhere 

in the world? 

Ms. WENNAR. Anywhere in the world? 

Mr. BURR. Yes, ma’am. 

Ms. WENNAR. I think if you have the appropriate standards in 

place and you hold people to those standards, I don’t care where 

it is in the world, as long as those standards are equal or better 

than ours. 

And let me just finish. Let me finish. There are places, believe 

it or not, that do do things that we would learn from. 

Mr. BURR. Oh, I agree with you totally. As we worked on the 

Fedoma legislation in 1997 we looked extensively at some of the 

European marketplaces and what they did, and some do certain 

things better than we do here. 

The EU, when it came into existence, one the universal standards that they follow is that they harmonized the EU partners 

process for drug approval which meant that the German process, 

even though it was more stringent than the Italian process to harmonize, they said we will accept whatever the Italian standard is; 

and Italian product flows into Germany. 

Now, all of a sudden, we realize, and certainly there are tremendous case studies on the problems that certainly countries have, 

many of them, as part of this EU harmonization. 

90

Under the legislation that we are talking about in the House, 

where it is basically open to anywhere in the world, all of a sudden 

we bring into the mix manufacturing in China, we bring into the 

mix facilities that aren’t inspected by the Food and Drug Administration, we bring into the mix sources for raw materials that don’t 

go through any process of verification as to the integrity of the 

product or whether in fact it is an active ingredient. 

I would only ask you this, in concluding, wouldn’t that alarm you 

if we didn’t have controls enough to assure that whatever product 

came in for our patients, in fact, didn’t have contaminants from the 

raw materials, in fact, had the degree of active ingredient that, in 

fact, doctors were prescribing for their patients? 

Ms. WENNAR. I couldn’t agree with you more. But what I would 

say again is that I am going to assume that, in the process of doing 

this, that you would put those kinds of requirements in place. You 

would have that expectation. 

I do not believe that anybody is suggesting here that we should 

open the doors to the world with no restrictions at all in terms of 

standards being met. I mean, we pointed out here that there is to 

be a gold medal standard of approval. If we are using that standard, then we should hold everybody else to that standard that 

wants to participate in this process. 

Mr. BURR. I assure that you that would be the intent of this committee, I think; and that certainly is the standard that we set when 

we passed reimportation language. We required the Secretary to 

verify that all of the things you just talked about could, in fact, be 

substantiated. In that particular case she said she couldn’t, and 

now we are criticized because of that. 

Ms. WENNAR I am very much aware—— Mr. BURR. Not by you. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

Dr. Wennar, I am just trying to be considerate here. I understand you have a 5:30 flight out of National. 

Ms. WENNAR. I have to tell you this is an important enough subject that I will stay over tonight. I will miss my flight. 

Mr. BILIRAKIS. We appreciate that. 

Let’s see. Mr. Pallone. 

Mr. PALLONE. Thank you. I am glad you are not leaving. Really, 

I am serious. 

When we had Mr. Hubbard up before and I asked him specifically—I mean, on the one hand, he was saying, you know, we are 

getting all of these counterfeit drugs. But, on the other hand, when 

I said to him, is there any problem, with, you know, a bus load of 

seniors going to a specific pharmacy in Canada that they know and 

he said, no, there really isn’t a problem there—so I sort of suggested, well, you know, you seem to be critical of the Kingston-Gutknecht legislation, but on the other hand you say that, you know, 

if people go to pharmacies in Canada, there is not a problem. So 

why don’t you give us some ideas about how to maybe change or 

amend the Kingston legislation so we can get something that would 

allow people to go to places where they don’t have any real risk? 

Now, you seem to be suggesting in your written testimony at the 

end some kind of quality parameters, I think you described them. 

But I wasn’t clear how we could do that legislatively. I mean, do 

91

you have suggestions about how we could legislate a program that 

would be—that would be not pose too many risks? 

Ms. WENNAR. Well, let me use an example here, okay? I think 

that you have a wealth of opportunity around this. I mean, first of 

all, historically, you have to remember CMMS, AKA, HCFA has 

historically been able to do demonstration projects to demonstrate 

that something actually can work. Unfortunately, the FDA doesn’t 

have the authorization to do demonstration projects. But, by proxy, 

personal reimportation has been a demonstration project for the 

last years. 

Mr. PALLONE. Right. But let’s say we want to legislate that. 

Ms. WENNAR. Now, having said that, this is a perfect opportunity 

for a public-private partnership to occur here. 

Right now, the United States—I am sure you are all familiar 

with the Joint Commission on Accreditation for Health Care organization who, under the AMA and the American Hospital Association, sponsors that. They accredit health care systems, and you 

must meet a certain level of standards to be accredited. In the 

process of being accredited, you, if you are not accredited you can’t 

receive certain type of reimbursement from the Federal level or the 

State level, Medicaid or Medicare. 

I think that there is a clear opportunity here for a similar organization to exist that would create standards that would actually do 

the accreditation of any entity that wanted to participate in something like this. Once they meet those standards, in concert you 

could work with the FDA. The difference is the FDA wouldn’t have 

to fund it, nor would the American taxpayer. It could be done in 

the private sector. 

Mr. PALLONE. So we could essentially take the Kingston legislation and put in that type of accreditation program and then anything that was imported from some pharmacy or group that had 

the accreditation we wouldn’t have the problem. 

Ms. WENNAR. You need the accreditation process. It could be set 

at the bar. You can place the bar anywhere you want. You can 

have the FDA involved in helping to set those standards. But the 

fact is that they could say you will register with the FDA but you 

could not register unless you had met those standards and had 

been accredited. That would mean——

Mr. PALLONE. We simply authorize that. 

Ms. WENNAR. It would mean site visits. It would mean a variety 

of things, anything they wanted to put into it. You can develop 

standards for it. But they don’t need—I heard something about 

how many more people do you need. You don’t need a single more 

person to be working at the FDA to do this. 

Mr. PALLONE. Now that is kind of what Mr. Copeland was suggesting. 

Ms. WENNAR. Correct. 

Mr. PALLONE. You want to elaborate a little? You had a similar 

suggestion about doing this with the pharmacies. 

Mr. COPELAND. Actually, we were concerned because we are not 

just talking about seniors. In other words, I have heard the committee talking about passing the Medicare bill; and I support that. 

Mr. PALLONE. Yes, but at the end of your——

92

Mr. COPELAND. And it needs to go beyond that. It needs to go to 

the other 20 percent or 15 percent of the people that are paying 

cash out of their pocket that aren’t seniors. 

Mr. PALLONE. Mr. Copeland, you said at the end—I think it was 

in your written statement—that you had proposed legislation that 

would accredit the pharmacies. It seemed like similar to what Dr. 

Wennar was talking about. I wanted you to explain that. 

Mr. COPELAND. In other words, in the United States—and I am 

a registered pharmacist. My store is going to be licensed and approved. The wholesalers I buy from are licensed and approved. In 

Canada, it is the same thing. Now if we go to reimportation, then 

I still don’t have a problem with reimportations just basically from 

Canada because that is what we really studied. But it would need 

to be from a regulated, licensed wholesaler that is approved to 

maybe our wholesalers in the United States. 

But also, as a quicker thing, our pharmacies—we have met with 

the Canadians, and we have met with the pharmacies up there. So 

it could be established our computer system goes to their computer 

system. In other words, it——

Mr. PALLONE. Well, I know we are running out of time, but I just 

want to suggest to my Republican colleagues, you know, your bill 

has gotten a lot of criticism here today from Mr. Hubbard directly 

and indirectly and some of your colleagues, too, on the Republican 

side indirectly. But, I mean, it is very easy to adopt what these—

what Dr. Wennar and Mr. Copeland are suggesting and then the 

criticisms go away. I mean, it is not magic from what I can see. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

Mr. Buyer. 

Mr. BUYER. I have a question for Mr. Copeland. You said that 

almost with a smile that you would have no problem getting drugs 

from Canada. 

Mr. COPELAND. My personal drug. 

Mr. BUYER. I think it was the smile that bothered me more than 

the statement. Let me tell you why. 

Mr. COPELAND. Okay. 

Mr. BUYER. Because I am not so certain if I were a pharmacist 

I would be comfortable with the liability question, and we are going 

to have to deal with this one. Now we have testimony here from 

the FDA, and the FDA—I wrote down this quote: Pharmacists can’t 

tell the difference in drugs. Now, if a pharmacist can’t tell the difference in the drug, and you like going to Canada to get that drug 

because you can get it at a lesser price and you get a higher markup on it so, therefore, you make greater profit—I tell you what. As 

a lawyer going into the courtroom, I am now smiling. 

Mr. COPELAND. I understand liability. 

Mr. BUYER. Are you with me? 

Mr. COPELAND. I understand liability. 

Mr. BUYER. So, help me, how do we work through the liability 

thing here? 

One last statement. I am going to let you speak. 

Mr. COPELAND. Okay. 

Mr. BUYER. Because if the manufacturer—at some point, if we do 

this, then do we then sever the liability to the manufacturer and 

93

we say to the pharmacist, if you want to do this, then you accept 

the responsibility and the liability to do that to your consumer? 

Mr. COPELAND. I am sorry, Mr. Buyer. I guess I don’t—— Mr. BUYER. It is pronounced Buyer. It is French. 

Mr. COPELAND. Okay. In other words, we are dealing with a 

pharmacist in Canada; and I am—first of all, I am with Dr. 

Wennar. I am talking about a very limited number of drugs. In 

other words, I only want to deal with the drugs that Pfizer and 

Merck and whatever make. I don’t want to open this up to any 

drug. It needs to be a very limited formulary of life-saving, necessary drugs. So I would only want to deal with those drugs that 

came direct from that manufacturer, direct to that supplier up 

there, direct to that patient; and that limits your liability. 

Mr. BUYER. So you believe if you have limited pathways of distribution that we could keep the liability all on the manufacturer 

and somehow absolve the pharmacist. 

Mr. COPELAND. Well, no, we are always going to have some liability. I understand that. I have liability in my store in case something gets screwed up out of place. But at least that liability, if you 

keep it within this regulatory process, it is a minimal liability; and 

I would be very much concerned with maintaining that regulation. 

Mr. BUYER. All right. Thank you for your answer. 

In the Kingston language in the bill, there is a quote: Individuals 

not in the business of importing drugs to personally import such 

drugs. 

How would anybody here define what that means? Let me start 

with you, Mr. Hutt. 

Mr. HUTT. I personally am unable to define that. It is used in 

the prior legislation of 2 years ago, but it is not defined in that legislation either. It has no known source of definition in any other 

statute that I am aware of; and, therefore, it has an added element 

of ambiguity and uncertainty. 

Mr. BUYER. Do you know how you would define it? 

Mr. HUTT. Well, it appears to me that someone who, say, is in 

the business of importing food but hides drugs in hollowed-out food 

products would not be in the business of importing drugs, which 

does not make sense to me. 

Mr. BUYER. Mr. Hutt, how about Mr. Copeland here? Mr. 

Copeland’s pharmacy—if he wants to work out a deal with somebody up in Canada, is he now an individual in the business of importing drugs? 

Mr. HUTT. Well, if that were his source of income, outward 

source of income, presumably, yes. But a counterfeiter, presumably, 

it would not apply to. It is very confusing to me. I regret I can give 

you no answer. 

Mr. BUYER. You know, sometimes when I look back to my years 

as a prosecutor, defense lawyer on the Judiciary Committee here 

in Congress, we always have to be careful. Not every one is honorable, Mr. Copeland, you know. 

Mr. COPELAND. I guess I deal from my own—— Mr. BUYER. You know, and I like your testimony when you said, 

hey, I have specific people that I deal with that I trust. And because of your care, because you know your people that you serve, 

that is why we love pharmacists in our communities. We are all 

94

completely tied to you. But, you know, we are all—we end up making laws not because of the 90 percent, generally. Sometimes it is 

because of that 10 percent, too. 

I just wanted to throw that out there. I yield. 

Mr. BILIRAKIS. Thank you. 

Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

I want to welcome Dr. Shepherd, and I enjoyed your testimony. 

I guess the concern I have is—the only reason we are considering 

this bill is because of the price problems we have in our own country and in—you are right. This is really not a substitute. But, right 

now, my constituents are voting with their feet or their bus ticket 

or however to go to Mexico. 

In your testimony, you said that the limit of what could be 

brought back with prescription—explain to me what the DEA’s 50 

dosage rule regarding controlled substances is. And you said the 

enforcement of that is spotty at best. 

Mr. SHEPHERD. That is correct. Currently, the way it was amended, I think it was 11⁄2, 2 years ago, that a person may go and bring 

back 50 units of a controlled substance without a prescription and 

no questions will be asked at the border. 

Mr. GREEN. Okay. 

Mr. SHEPHERD. And it is not 50 units of multiple drugs. It is 50 

units of each drug. However, I haven’t found uniformity amongst 

Customs agents in the interpretation of that. 

Mr. GREEN. Does that require a written prescription——

Mr. SHEPHERD. Yes, it does. 

Mr. GREEN. [continuing] for the 50 units, the controlled substance? 

Mr. SHEPHERD. Right. A written prescription. 

Mr. GREEN. Okay. Are you seeing dangerous, potentially highly 

addictive drugs such as Oxycontin or something like that? 

Mr. SHEPHERD. I see a lot of Oxycontin. There is a lot of 

Oxycontin coming across. The top 15 drugs—when we did the study 

in 1997, the top 15 drugs coming across from Mexico were controlled substances. 

Mr. GREEN. So it is not just me getting my——

Mr. SHEPHERD. No, it is not your hypertension or your cholesterol——

Mr. GREEN. [continuing] antibiotic to take care of my sinus infection. 

Mr. SHEPHERD. But they are a part of the group, but it is not 

just those. Correct. 

Mr. GREEN. Let me talk about drugs from Mexico particularly. 

Do you think—who owns those pharmaceuticals? Because when I 

have been to those pharmacies and actually taken my daughter, 

who is now in her residency, and her husband, they are amazed 

that the trademarks are from U.S. companies. They are PhRMA 

members. 

Mr. SHEPHERD. Yeah. There are about 60 international pharmaceutical firms in Mexico and about 120 national firms in Mexico 

working. The international firms are subsidiaries of many home 

companies here in the United States, but they are also subsidiaries 

of European companies. 

95

But let’s be clear that these companies are really owned and operated by themselves. They are subsidiaries and under the license 

of the Pfizers or the Mercks and stuff, but they are whole entities 

of themselves. 

Mr. GREEN. Okay. Is there any—seeing all these U.S. namebrand drugs in these hundreds of pharmacies, who is behind the 

drugs and are making them? Are they companies in Mexico? And 

have you had any evidence that maybe there is organized crime behind some of those pharmacies? 

Mr. SHEPHERD. The companies themselves? 

Mr. GREEN. The companies themselves that may be incorporated 

in Mexico, but they are a subsidiary of—— Mr. SHEPHERD. No, I don’t have any evidence of any subsidiaries. 

I have had evidence and seen and worked with some pretty shaky 

national companies in Mexico, and I have been in—quite frankly, 

I have visited a couple of counterfeit operations and seen how they 

work in Mexico. 

Mr. GREEN. Do you believe any of the drugs, particularly those— and we have seen drugs that have Pfizer drugs or Glaxo drugs— are they, in fact, Pfizer pharmaceuticals and Glaxo, or do you think 

they are counterfeit or something else? 

Mr. SHEPHERD. Well, we have found Pfizer products to be counterfeited in Mexico, but we don’t believe that Pfizer made them. We 

think that another firm makes them. The counterfeit trade is globally right now—by the World Health Organization’s estimate, between 8 to 10 percent of the whole world pharmaceutical market 

is counterfeit. 

Mr. GREEN. But there are subsidiaries of Pfizer and Glaxo in 

Mexico licensed? 

Mr. SHEPHERD. Yes. They are legitimate national companies, and 

normally they produce—I would say I don’t have many problems 

with their products. I mean, I think they are good companies. 

Mr. GREEN. Do they export from those facilities to the United 

States? 

Mr. SHEPHERD. No. I don’t think—personally, I don’t—there are 

very few products that are FDA approved and manufactured in 

Mexico. There is a handful. There are not very many products, 

even if they are manufactured by that company in Mexico City. 

Pfizer is probably manufactured in the United States, but very few 

products are FDA approved in Mexico. I had a list of them. I think 

there were 17 or 18 2 years ago. There was very few. But more and 

more companies are going that way. 

Mr. GREEN. Should FDA and others attempts to analyze the 

quality of these drugs, particularly since they are presenting in 

large quantities in the U.S. market, particularly with border residents or people who are close enough to the border? 

Mr. SHEPHERD. That is my recommendation, that they should, 

but I haven’t seen the data on it. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. BILIRAKIS. Mr. Strickland. 

Mr. STRICKLAND. Thank you, Mr. Chairman. 

This has been an interesting, interesting day; and I appreciate 

all of your testimonies. And Dr. Wennar——

96

Ms. WENNAR. Wennar. 

Mr. STRICKLAND. Wennar. 

Ms. WENNAR. That is close enough. 

Mr. STRICKLAND. You are a very effective witness, I must say. 

I am sitting here thinking that the problem is the price, and if—

and I want to ask your personal opinions. If this Congress were to 

pass the Allen bill, which basically would take the average price of 

any particular drug, the average price at which it is sold across five 

markets that are similar to ours, industrialized national markets, 

and required that those drugs or that particular drug be available 

in this country at the average price, that is cost control, I would 

admit. But, in your judgment, would that go a significant way toward solving this dilemma that we are trying to discuss or find a 

solution to today? 

Dr. Shepherd would you give us your opinion? And then each of 

you, as briefly as you could. 

Mr. SHEPHERD. I think this would solve the problem. If you can 

make the medicines affordable, I think it would solve a lot of your 

problems right off of the top. 

Mr. STRICKLAND. Dr. Wennar. 

Ms. WENNAR. You know, I wish it were just a simple yes-or-no 

answer. I have to tell you honestly I think it is more complicated 

than that. I have to tell you I am not completely convinced that 

that will address the issue completely. 

Mr. STRICKLAND. Would it be a significant part of the solution, 

in your judgment? 

Ms. WENNAR. It could be a beginning. 

I have to tell you the reason I am hedging on this is because I 

think that the issue here is that, as you have all mentioned today 

very eloquently, that the real objective here is to have a comprehensive benefit under Medicare for the elderly. We clearly have 

another population that needs access to safe, affordable drugs. 

Mr. STRICKLAND. Absolutely. But what I am trying to get at is 

the cost issue, and even if we have a comprehensive benefit for the 

elderly that does not address the cost issue. 

Ms. WENNAR. The point I was going to make is take a lesson 

from the commercial insurance population from the standpoint of 

what has gone on there. What they have had to do is they have 

had to cut medical benefits in order to be able to continue to do 

the things that they are doing under their prescription drug benefits or they have had to cut back on their prescription drug benefits. Because, even for them, with their large group purchasing 

power, their prices, their cost is still going up. So——

Mr. STRICKLAND. But is their—excuse me for interrupting you, 

but is their purchasing power cost as low as it would be if we were 

to implement the Allen bill? 

Ms. WENNAR. I guess I would have to say no. I guess if I—you 

know, if I have to give you an absolute yes-or-no answer, I am 

not—I have not historically been a proponent of price controls and 

regulations. But, to answer your question, I guess I would have to 

say yes. It would go toward something. 

Mr. STRICKLAND. Yes. And I am not asking for your, you know, 

your personal feelings regarding price controls. I am just asking for 

97

your opinion regarding the possible effect if we were to have this 

approach to price controls. 

Dr. Hutt. 

Mr. HUTT. In my judgment, that is not the right way to go, because it does not approach the basic issue of comprehensive coverage; and I agree with Dr. Wennar. 

Mr. STRICKLAND. Please excuse me for interrupting, but I understand that that may be the case, and that is really not my question. Because you may think that it is totally the wrong thing to 

do. But what I want to know from you is if you think it would have 

a certain effect even if that effect may have negative consequences 

associated with it. 

Mr. HUTT. Mr. Strickland, the first question one would need to 

answer, before I could give you a good clear opinion on that, would 

be, would drug companies withdraw from foreign markets where 

they have price control in order to then make the average price 

higher. 

Mr. STRICKLAND. Should that be the major consideration of 

American legislators? 

Mr. HUTT. Yes, it should be struck. 

Mr. STRICKLAND. Should not the first concern of American legislators be what is right for the American citizens? 

Mr. HUTT. My point is that by imposing this average price, that 

average price is going to go up dramatically if American manufacturers drop out of these foreign markets. 

Mr. STRICKLAND. Are these companies making money in these 

other countries? 

Mr. HUTT. I have no idea whether they are making money or not. 

Mr. STRICKLAND. Well, then if you don’t know that, you would 

have no way of knowing that the companies would withdraw from 

these markets. 

Mr. HUTT. I didn’t say that they would. I said the first question 

you would have to answer would be that question. I cannot answer 

that question. 

Mr. BILIRAKIS. The gentleman’s time has expired. 

Mr. STRICKLAND. I didn’t get my last response, but thank you, 

Mr. Chairman. You have been wonderful in your treatment of me, 

and I appreciate it. 

Mr. BILIRAKIS. Thank you. Thank you for that. 

Mr. Greenwood to inquire. 

Mr. GREENWOOD. Thank you, Mr. Chairman. 

Dr. Wennar, I believe in your testimony—I think this is a quote 

from your testimony. You said, with regard to monitoring, that the 

quality of drugs being shipped to proxy when the country (Canada) 

could be established. There is no reason that we cannot accept the 

standards that are equal or higher established by another country. 

No country should be allowed to participate that does not have at 

the very least a set of standards equal to ours. That is your view. 

Ms. WENNAR. Correct. 

Mr. GREENWOOD. Well, how, then, do we prevent substandard, 

dangerous, nonpotent drugs from China, Vietnam, some other 

country coming into Canada being relabeled and then coming 

across the border into the U.S.? How would we know? How would 

we protect against that? 

98

Ms. WENNAR. I guess I am having a hard time—do you not think 

Canada does that? 

Mr. GREENWOOD. Pardon me? 

Ms. WENNAR. You don’t think Canada does that—— Mr. GREENWOOD. Canada does what? 

Ms. WENNAR. —in terms of the way that they regulate things 

coming into Canada? We would be working with them. I mean, as 

I said, the fact of the matter is the standard should be equal to or 

higher, so you would be working with an entity that you are absolutely convinced has a standard that is equal to or higher. And in 

this regulated country I can tell you they have more layers than 

we do. 

Mr. GREENWOOD. Okay. Mr. Hutt, you are shaking your head ‘‘no.’’ Why is that? 

Mr. HUTT. Any drug that is made in Canada for export is exempt 

from Canadian law. Any drug. 

Mr. GREENWOOD. Miss Wennar is shaking her head. 

Mr. HUTT. Any drug that is brought into Canada for transshipment to another country under section 37 of the Canadian 

Food and Drug Act is exempt from Canadian law. 

Ms. WENNAR. Do you honestly believe that—and we are talking 

pharmacies, okay, here. We are talking pharmacist to pharmacist. 

Do you believe that they are going to put bottles in a pharmacy in 

Canada and say, aha, that goes to the U.S.; let’s open those and 

send them. We are not going to use those for Canadian citizens because there may be adulterated products there. So the risk for U.S. 

citizens we don’t care about. 

This is a totally ridiculous conversation to be having. You are 

talking about—— Mr. GREENWOOD. Whoa, whoa—wait. Excuse me. Excuse me. I 

will give you all the time in the world you want, okay? 

Ms. WENNAR. Okay. 

Mr. GREENWOOD. Okay. There is nothing ridiculous about me 

trying to learn something from you, all right? I am asking a question. 

Ms. WENNAR. Okay. But what I am trying to say—— Mr. GREENWOOD. I would like it if you just help me out to understand the question. 

Ms. WENNAR. Okay, I will help you out. I will help you out from 

the provider’s side. A licensed pharmacist takes pride in what they 

do, and they are licensed, and we are talking about meeting those 

standards. If they are a licensed pharmacist, do you believe that 

they differentiate? They don’t have ask you where you are from. 

They are trying to provide access to safe medications. That is their 

objective. They are trying to help you comply with the treatment 

plan. For us to make any kind of assumptions around Canadian 

pharmacists as being different than pharmacists in our own country——

Mr. GREENWOOD. I don’t think that my question was about that. 

Ms. WENNAR. I understand that. But what I am saying, if you 

are talking about—you are talking about things that sometimes, 

from a provider perspective, they don’t—they are sitting here saying, what is the problem here? What we want to do is help the people that we serve. 

99

Now, the fact of the matter is that if what we are talking about 

here, as I have heard people say earlier, that a pharmacist couldn’t 

differentiate from something that was adulterated or not, that nobody could just by looking at it. The fact of the matter, in terms 

of putting that bottle on the shelf, when they pull it off, they are 

pouring from the same bottle for the Canadian citizen and the U.S. 

citizen. 

Now, if we think that this has been occurring, why isn’t it substantiated in the literature out of Canada to show us that there are 

counterfeit medications being dispensed to Canadian citizens? 

Now, on the other side I guess I would say, be careful how we 

cast stones. Because in our very country here we have already 

identified that people have been doing this. There are entities that 

have intentionally adulterated things. And I find that offensive, 

and other countries do, too. They find it offensive. 

In Canada, when I talk to pharmacists, they can’t believe that 

a pharmacist would do that to somebody with cancer. 

Mr. GREENWOOD. I am just about out of time. That is very instructive. Thank you. There was nothing ridiculous about it at all. 

Mr. Hutt, do you have a different point of view on this or do 

you——

Mr. HUTT. I do indeed. Because I think focusing on the pharmacist or, as Mr. Pallone said, the pharmacist and the wholesaler 

is the wrong focus. The focus has to be on the drug and the standards required under United States law currently for drug manufacture and distribution in this country. 

There is only one way that we can keep up our standards for imported drugs. If people want to bring them into this country, they 

ought to meet the requirements of the Federal Food and Drug and 

Cosmetic Act that exists today. They—if it is adulterated, it ought 

to be illegal, if it is misbranded, not as it appears to be. But there 

ought to be the burden of proof on an importer to make certain 

that there is a new drug application that FDA has approved for the 

product. It is in compliance with that, it is in compliance with the 

adulteration provisions under section 501, the misbranding provisions under 502 and the NDA provisions under section 505. That 

is where the focus should be. 

I don’t in any way deny the good faith of the pharmacist, but 

that is not the right place to look. 

Mr. BILIRAKIS. Dr. Wennar is shaking her head and apparently 

agrees with your statement. 

The gentleman’s time has expired. 

All right, we have three guests here; and I have been trying to 

be courteous. We are—you know, we are about three and a half—

well, we have been at this all afternoon; and we do want our good 

people to be able to leave relatively soon. So I am going to give 

Messrs. Kingston, Gutknecht and Sanders 2 minutes each to inquire of you and then excuse you as a panel. 

Mr. Kingston. 

Mr. KINGSTON. Let me just go down the line. 

Dr. Shepherd, if right now you could legally import drugs from 

Canada over Mexico, would you be—what would your comport level 

be on a scale of 1 to 10? 

Mr. SHEPHERD. Seven or 8. 

100

Mr. KINGSTON. Seven or 8. Dr. Wennar,just a number. 

Ms. WENNAR. Ten. 

Mr. KINGSTON. Mr. Hutt, I am going to respectfully skip you because we know where you—I mean, you know, it is fine, but you 

are——

Mr. HUTT. I do not feel insulted. 

Mr. KINGSTON. No. That is okay. I have another question for you. 

Mr. Copeland. 

Mr. COPELAND. If handled by a wholesaler, a reputable wholesaler similar to ours, a 10. 

Mr. KINGSTON. Okay. So now do the three of you think that this 

can happen, that it can be done safely? I mean, you know what 

really worries me in America today we have this, oh, God, we are 

going to be sued; oh, gosh, someone is going to be hurt. 

I think about the great story about the Panama Canal where, 

doggone it, we said, we are Americans; we can do anything we 

want to. 

Mr. Hutt, the problem is with your vocation, noble vocation, I 

hope—and I married into a family of lawyers myself. I am not one. 

But the problem is you can get a lawyer to take any position you 

want. And you know, we are Americans, by golly. We can make 

this work for the safety of the people, for the Mrs. Tubbs of the 

world, for the Ms. Burrows. I mean, am I wrong on that, Dr. 

Wennar? 

I wanted to start—let me start easy. I don’t know if I want to 

go to Mr. Hutt yet or not. 

Mr. BILIRAKIS. You only have a couple of minutes. 

Mr. KINGSTON. Yes. I have got 2 minutes, so make it quick. 

Ms. WENNAR. I honestly believe that we have the intelligence 

and the no—I mean, we know how to do this. We have just got to 

step up to the plate and do it. 

As I mentioned to you, you have already had the demonstration 

project done for you. You have—in every one of those dots right 

now there are individuals that are bringing medications into the 

United States for personal use, in every one of those dots. These 

people are testing it for you. They have taken the risk. They have 

tested it for you. You just need to give them a little bit more help. 

Mr. KINGSTON. Mr. Copeland, you feel it can be done? 

Mr. BILIRAKIS. Very briefly. 

Mr. COPELAND. Yes. 

Mr. KINGSTON. Okay. 

Mr. BILIRAKIS. Thank you. 

Mr. Gutknecht. 

Mr. GUTKNECHT. Well, again, thank you, Mr. Chairman, for having this historic hearing. I think this is an important hearing, and 

it is an important first start. 

Dr. Wennar, I want you to talk a little bit, because you never 

came back to this chart at the top of the differences between what 

our consumers can pay for the same drugs in Canada versus the 

United States. 

Ms. WENNAR. The reason I didn’t go to that chart is because I 

heard that we weren’t talking about cost. 

Mr. GUTKNECHT. Well, we are. 

101

Ms. WENNAR. Okay. This actually represents something that we 

did in the first 6 months when we started this. Because we had 

quite a few physicians that were saying it couldn’t be possible, that 

the cost was that much lower in Canada. So what we did was 

tracked the first 145, 146 individuals in terms of accessing their 

medications from Canada. There were no substitutions. In other 

words, nothing was substituted. If the actual medication that was 

ordered was Lipitor, it was Lipitor that they got. 

We tracked it for the first 6 months, and the reality is represented here. You can see what they would have paid on the local 

market versus the savings that were represented in accessing from 

Canada. They would have paid probably a little—I think it was a 

little over $81,000 they would have paid. They ended up paying 

about $22,000. 

Mr. GUTKNECHT. For about a 70 percent savings. 

Ms. WENNAR. Well, that was the average, yes. Our physicians 

took a look at that and basically said, you are joking, not really. 

After that we had requests from all over the country for this onepager. 

Mr. GUTKNECHT. Which really brings us back to the question of 

this hearing and that is how safe is safe. How much will we pay 

for that little tiny increment of safety? I think that is a question 

that consumers are answering every day. 

Mr. Chairman, I just want to say that, according to our own Congressional Budget Office, over the next 10 years seniors in America 

will spend $1.8 trillion on prescription drugs. Now if we could save 

35 percent, we could save $630 billion. Now I think that people are 

willing, and consumers are making that decision every single day, 

that they are willing to take an incrementally minor, tiny, little additional amount of risk to make those kinds of savings. 

I would just say, Mr. Chairman, that it is not the Statue of Safety that sits in New York harbor. It is the Statue of Liberty. We are 

a tough people. We have taken risk, and it is high time that we 

allow Americans to have access to world-class drugs at world-market prices. 

I yield back the balance of my time. 

Mr. BILIRAKIS. Thank you. 

Mr. Sanders, 2 minutes. 

Mr. SANDERS. Thank you very much, Mr. Chairman; and I do appreciate your allowing me to be here. 

Mr. Hutt, you are with Covington and Burling, and I know that 

the pharmaceutical industry has spent a few hundred million dollars in the last couple of years making sure that our people pay the 

highest prices in the world. How much do they pay your law firm? 

Mr. HUTT. I have no idea. 

Mr. SANDERS. Okay. Dr. Wennar, the bottom line is, I think, in 

terms of the wonderful work that you do in Bennington, is how 

many people, roughly speaking, do you think purchase their drugs 

in Canada and can you tell us how many safety problems that you 

are aware of? In other words, after all is said and done, what is 

going on? Are you hearing a whole lot of people saying that the 

drugs that they are getting from Canada are adulterated or counterfeit? What is the reality? 

102

Ms. WENNAR. No, I am getting calls from physicians across the 

country saying that their patients are now taking their medications 

as they were prescribed and complying with their treatment plans. 

Mr. SANDERS. How many folks do you figure you deal with? 

Ms. WENNAR. Well, as I mentioned earlier, we did the recent poll 

in Canada province by province, even with pharmacies that we 

don’t deal with; and, needless to say, they were a little bit skeptical 

and concerned as to why we were trying to count numbers. But the 

reality was, by the time—we don’t have a lot of resources. We spent 

about a week doing this, and we stopped counting at 1.1 million elderly people. 

Mr. SANDERS. 1.1 million elderly people and how many instances 

have you heard of counterfeit or adulterated drugs? 

Ms. WENNAR. Well, we have had no reports from individuals. 

Mr. SANDERS. 1.1 million people and you haven’t heard any instances? Oh, my goodness. And how many millions and millions of 

dollars do you think people have saved and have been——

You and I were in Bennington and we have talked to physicians 

who say, I am a physician, and I write out prescription drugs, but 

I am wasting the paper that I am writing on because my patient 

can’t fill it. I am wondering how many senior citizens in this country die so that Mr. Heimbold, the former chairman and CEO of 

Bristol Myers, can receive $74 million in compensation in 2001. I 

know it is very funny for our lobbyists from the drug industry. 

There is $76 million in stock options, but they have to charge our 

people the highest prices in the world. 

Thank you for your time. 

Mr. BILIRAKIS. The gentleman’s time has expired. All time has 

expired. 

Mr. Brown, I will give you an additional couple of minutes. 

Mr. BROWN. Mr. Chairman, I really just have one brief question 

for Dr. Shepherd. Do you believe that the 50 dosage policy should 

be radically changed, such as lowering the amount of controlled 

substances that are allowed in the United States? And if so, what 

effect might lowering the amount have on seniors and are seniors 

purchasing controlled substances? 

Mr. SHEPHERD. Seniors aren’t big purchasers of the controlled 

substances. There may be some instances of it, but they are very 

small. I think I recommended last year at this hearing that we ban 

controlled substances coming across from Mexico, and I will stand 

on that one. My personal recommendation is to stop them altogether. 

Mr. BROWN. Okay. 

Mr. BILIRAKIS. Any opinion? Mr. Hutt, do you have an opinion 

on that? 

Mr. HUTT. I think it is extremely dangerous to allow our youth 

to go into—whether it is Canada or Mexico or any other place and 

bring back controlled substances. 

Mr. BILIRAKIS. So they should be banned. You agree with Dr. 

Shepherd. 

Mr. HUTT. I agree with him completely. Of course, I would go 

further than that, but I certainly agree with that. 

Mr. BILIRAKIS. Dr. Wennar, you don’t agree. 

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Ms. WENNAR. No, I am saying you couldn’t get them even if you 

wanted to, because they would not ship them. 

Mr. BILIRAKIS. We can get them from Mexico. 

Ms. WENNAR. Okay, well, you are not going to get them from 

Canada. Even if you authorized it, it wouldn’t be sent. 

Mr. BILIRAKIS. Okay, all right. Well, listen, there will be a number of questions, as you might imagine, in writing that will be submitted to all four of you; and we would appreciate this, you know, 

a timely response to them. 

And our gratitude. The hearing has turned out the way I had intended it to turn out, where we concentrate on reimportation and 

the advantages, the pluses and the minuses and what not. I think 

that that has been satisfied and no small thanks to you all. Thank 

you very much. 

Dr. Wennar, sorry you have to spend the night. The hearing is 

not over, however. Just you are excused. 

Unanimous consent to submit a statement by Congressman John 

Thune into the record dated July 25, 2002. Without objection, that 

will be the case. 

[The prepared statement of Hon. John Thune follows:]

PREPARED STATEMENT OF HON. JOHN THUNE, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF SOUTH DAKOTA

Thank you, Mr. Chairman for the opportunity to join you today and provide an 

opening statement at this important hearing on importation of prescription drugs. 

I am an original cosponsor of H.R.5186 with my friend and colleague Congressman Kingston because constituents in South Dakota are demanding that Congress 

address not just access to prescription drugs but also the price of prescription drugs. 

I have supported reimportation for years and strongly believe this legislation will 

lower prescription drug costs for all Americans by increasing competition. It’s simply 

not fair that the same prescription drugs are less expensive in Canada, Europe and 

other countries than they are here in the US. 

H.R. 5186, the Drug Importation Act of 2002 will simply allow individuals and 

pharmacies to import prescription drugs manufactured in Food and Drug Administration (FDA) approved facilities. As we all know, people in South Dakota and 

across our nation already travel to Canada to purchase low cost prescription drugs 

and bring them back into the U.S. This bill would make that practice legal and expand it to allow community pharmacies as well. Both of these pieces are critical to 

my state where too few people have health insurance, too many people can’t afford 

needed medications and too many small town pharmacies are going out of business. 

Congress has already acted to improve access to prescription drugs by providing 

a generous prescription drug benefit for all seniors. 

Now, it is time for Congress to address the price of prescription drugs. By enacting this legislation and allowing the reimportation of prescription drugs we can provide immediate help to seniors. As we all know prescription drugs are essential to 

the health of millions of Americans and reimportation will improve access to lifesaving drugs. Congress should do what it can to help seniors afford the drugs they 

need to stay healthy. 

Thank you again, Mr. Chairman for this opportunity. I appreciate your consideration and I hope that we can work together to ensure that people in South Dakota 

and across the nation can have access to prescription drugs at an affordable price.

Mr. BILIRAKIS. By agreement with the minority, Mr. Kingston is 

afforded 5 minutes to use as he pleases to make statements or 

whatever the case may be regarding, apparently, his legislation. 

That will be the case. 

Mr. KINGSTON. Thank you very much, Mr. Chairman; and let me 

say to you and to Mr. Brown and all the members of the panel, this 

hearing was great. We really appreciate the opportunity for some 

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good, honest dialog. I think that I was just truly impressed with 

the members’ interest in this issue and so thank you very much. 

I wanted to say this issue a couple of years ago was one about 

price. I think today it is actually one about safety. The reason why 

I say that, the market has already decided the price issue. We are 

the market. 

Our constituents in the United States of America have said, Canada has cheaper drug costs; therefore, I am going to go through 

Canada. Man, I am going to go through other groups. I am going 

to mail orders. I am going to get on a bus. I am going to find a 

way to get to those drug costs, those cheaper drug costs. 

In fact, Canada Med, which is available on the Internet, picks up 

300 new American customers each and every day. So the price 

issue is resolved. The only issue that is left is, how are we going 

to do it safely? 

It seems to me that the drug companies—and I have respect for 

drug companies, but they spend a lot of time, Mr. Chairman, doing 

things like this advertisement that went out on the radio today: 

Imported prescription drugs may be dangerous to your health. This 

went out on radio shows coast to coast. They have somebody who— I am sure they hired an ex-FBI agent. They have somebody else, 

and they are kind of really broadly quoting and misquoting the 

FDA and other government agencies, and they are saying that reimportation will increase the potential for terrorists targeting 

America. 

Now, is that productive at this time? I mean, is that really—does 

anybody really think that drug companies are concerned suddenly 

about terrorism in America? I mean, drug companies are great citizens, but I do think that is probably not the motivation for this 

going out and the money that went behind it. 

I would like to submit this for the record. 

Mr. BILIRAKIS. Without objection, that will be the case. 

Mr. KINGSTON. I appreciate it. 

[The material referred to follows:]

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Mr. KINGSTON. I guess the only question to me remains—and I 

think there have been some valid criticism and concerns about the 

language in the bill as introduced. I think this committee in its 

wisdom can perfect that language and find a way to move the reimportation issue safely forward. 

I think the Senate actually has not lived up to it. They passed 

the bill, as you know, but they put a wink in there that would 

eventually make sure that it never became reality. I think the 

House can do a better job; and I am confident that, working together on a bipartisan basis, we can do that. 

So, again, let me just close with, to me, this is a safety issue. The 

market has already decided the price issue. The Ruth Tubbs, the 

Ruth Burrows, the Merlene Frees and all of our seniors and the 

good folks in Florida and Ohio and everywhere else are already 

doing this. It is our duty to find a way to protect them. 

So thank you very much. 

Mr. BILIRAKIS. And you are yielding the balance of your time to 

whom? 

Mr. KINGSTON. To Mr. Gutknecht. 

Mr. GUTKNECHT. Mr. Chairman, yield back. 

Mr. BILIRAKIS. Yield back. 

Mr. Sanders, anything you would like to add? 

Mr. SANDERS. Thank you very much for allowing me to participate today. 

Mr. BILIRAKIS. You are welcome. 

All right, I guess this hearing is adjourned. 

[Whereupon, at 5:30 p.m., the subcommittee was adjourned.] 

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF RONALD J. STRECK, PRESIDENT AND CEO, HEALTHCARE

DISTRIBUTION MANAGEMENT ASSOCIATION

My name is Ronald J. Streck and I am President and CEO of the Healthcare Distribution Management Association (HDMA). I want to commend the chairman and 

the members of the subcommittee for holding this important hearing, ‘‘Examining 

Prescription Drug Reimportation: A Review of a Proposal To Allow Third Parties To 

Reimport Prescription Drugs.’’

HDMA is the national trade association representing pharmaceutical and 

healthcare product distribution. HDMA’s active member companies operate over 240 

distribution centers throughout the country that serve every state, the District of 

Columbia and U.S. territories. HDMA’s distributor members provide services to approximately 129,100 pharmacy settings, including: 19,400 independent pharmacies; 

18,500 chain pharmacies; 9,300 food stores; 10,600 hospital pharmacies; 6,400 mass 

merchandisers; 5,200 long-term care and home health facilities; 58,300 clinics; 1,100 

HMOs; and 300 mail-order pharmacies. By concentrating healthcare products, dispensing them in economic quantities and then transporting them to thousands of 

pharmacies, hospitals, clinics and other healthcare delivery sites, distributors reduce 

the overall number of transactions required and save the healthcare system an estimated $146 billion annually. 

In the United States today, the great majority of all pharmaceuticals are distributed through healthcare distributors. Pharmaceutical distributors are a vital part 

of the system that is charged with ensuring product integrity and this is a responsibility that HDMA members take very seriously. If these drugs are not properly 

stored, handled and accounted for throughout the healthcare distribution system, 

the results can be troublesome at best, devastating at worst. 

It is with these thoughts in mind, that HDMA is opposed to permitting the reimportation of pharmaceuticals. Reimportation, whether restricted to just Canada or 

not, significantly increases the likelihood of counterfeit or adulterated drugs entering the U.S. market and reaching our medicine cabinets. And we do not believe it 

will result in the level of savings for the American consumer assumed by many reVerDate Jan 22 2003 14:53 Jan 27, 2003 Jkt 010199 PO 00000 Frm 00113 Fmt 6633 Sfmt 6621 W:\DISC\81494 81494
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importation supporters because of the many ‘‘hidden’’ costs that have not been 

factored in. 

Prescription Drug Marketing Act 

Congress recognized the dangers of reimportation when it enacted the Prescription Drug Marketing Act (PDMA) in 1988 (P.L. 100-293). PDMA was the result of 

congressional investigations, led by the House Energy and Commerce Committee, 

that found that, ‘‘A significant volume of pharmaceuticals are being reimported...These goods present a health and safety risk to American consumers because they may have become subpotent or adulterated during foreign handling and 

shipping.’’ PDMA’s overall purpose is to ‘‘decrease the risk of counterfeit, adulterated, misbranded, subpotent or expired prescription drugs reaching the American 

public.’’ As a result of PDMA, national standards for the storage and distribution of pharmaceuticals in the United States have been established. All distributors are required to meet numerous federal and state regulations to ensure the integrity and 

security of pharmaceutical products that reach the American public. Every distributor must be licensed in every state in which they have a warehouse facility. 

Additionally, 42 states have further licensure requirements for distributors doing 

business in their state, even if their warehouse(s) is located in another state. Every 

distribution center is subject to inspection by the Food and Drug Administration, 

Drug Enforcement Administration, Environmental Protection Agency, Department 

of Transportation, Occupational Safety and Health Administration and the state 

agency counterparts. 

Under PDMA, all licensed distributors must have in place detailed storage and 

handling procedures that address:

• Temperature and humidity control and documentation 

• Inspection of incoming and outgoing product shipments 

• Rotation of product to prevent expiration 

• Employee training in storage and handling of pharmaceuticals 

• Extensive background checks on employees 

• Facility and product security 

• Procedures for handling recalls and returned goods 

• Sanitation of facility 

• Disaster plans for both inside and outside the facility 

• Comprehensive written policies 

PDMA has worked. The extensive handling and storage standards, backed up 

with strong oversight, have resulted in the ‘‘gold standard’’ when it comes to ensuring product integrity. Overall, the closed method of distribution from manufacturer 

to distributor to pharmacy to patient has resulted in a system in which Americans 

do not question the authenticity of the prescription drug they are about to take. 

As of this writing, two major reimportation initiatives have been introduced in 

this Congress and below are HDMA’s comments: 

Prescription Drug Price Parity for Americans Act (H.R. 4614/S. 2244) 

The ‘‘Prescription Drug Price Parity for Americans Act’’ (H.R. 4614/S. 2244) would 

allow pharmacists and pharmaceutical wholesale-distributors to reimport prescription drugs from Canada into the United States for resale. Proponents of this legislation, who laud potential cost savings, believe that reimportation will not threaten 

the safety or health of Americans. They are wrong on both counts. 

Canada’s prescription drug regulatory system appears to have served its 30 million citizens well. However, what will happen when Canada’s market expands to 

serve an additional 287.4 million Americans? Last year, the number of prescriptions 

filled in the United States was more than ten times the number filled in Canada 

( 3.3 billion vs. 320 million. Where will the drugs come from to meet the new demand? 

If reimportation becomes the law of our land, Americans would expect unlimited 

access to cheaper drugs. In an environment of over-demand and under-supply, 

criminals will be given a new opportunity to make a quick buck by infiltrating the 

U.S. market with counterfeit, subpotent, diverted and/or adulterated drugs through 

Canada. For example, in light of recent changes in U.S. law, Canada has become 

the leading supply route for the raw ingredients needed to make the illegal drug 

methamphetamine. American and Canadian law enforcement officials agree that 

criminals are taking advantage of the lax Canadian regulations and a vast border. 

(‘‘U.S. Moves to Close Canadian Drug Route For Illegal Stimulant,’’ The New York 

Times, 3/5/02) 

Proponents of this legislation contend that they have addressed these concerns by 

including a provision in the legislation that requires the importer to test the product 

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for ‘‘authenticity and degradation.’’ Commenting specifically on this provision, the 

FDA stated in a July 17, 2002 letter to Senator Thad Cochran, ‘‘As a practical matter, meeting these requirements would be an enormous undertaking, and the testing 

required under the bill would be costly and time consuming, both for the government and importers. Moreover, some of the testing requirements cannot even be 

met, as there is no testing that can ensure that a shipment of drugs does not contain counterfeits...For most drugs there is no simple laboratory test that can verify 

the authenticity of the product...’’

Putting aside the very serious questions about the validity of testing for ‘‘authenticity and degradation,’’ there are significant costs that need to be considered to 

meet this requirement. The importer would be required to provide capitalization for 

constructing, equipping and staffing certified testing facilities or contracting with 

approved laboratories for the testing. 

Another additional cost(liability insurance(must also be considered. Currently, 

most domestic wholesalers are indemnified by the drug manufacturers they do business with due to the controlled nature of the U.S. supply system. However, if reimportation becomes a reality, this indemnification would disappear. Manufacturers 

understand that reimportation, even if it is limited to Canada, will diminish the 

oversight and protections that characterize the U.S. prescription drug supply system. U.S. manufacturers would not, nor should they be expected to, indemnify distributors dealing with products that may or may not have been manufactured by 

them. 

The additional costs do not stop there. Other potential costs are associated with 

establishing systems and means for relabeling, repackaging, product tracking, documentation, recordkeeping, customs’ fees, insuring compliance with patent and trademark regulations and implementation of processes to deal with returns, recalls and 

withdrawals. 

Since the mid-1990’s, the industry’s net profit margin has been less than one percent. Our most recent data indicates that it was 0.72% last year. Operating in a 

highly competitive marketplace, distributors pass on their savings from lower operating costs through to their customers. The costs of the additional responsibilities, 

regulatory burdens and liability exposure that would result from implementation of 

H.R. 4614 would ultimately have to be passed along—distributors simply do not 

have the margins to absorb these types of additional expenditures. 

Limiting reimportation to Canada does not eliminate the threat to health and 

safety to Americans. Indeed, Canada would become the gateway for those looking 

to introduce counterfeit drugs into our country. Therefore, this legislation should be 

vigorously opposed. 

Drug Importation Act of 2002 (H. R.5186) 

The ‘‘Drug Importation Act of 2002’’ (H.R. 5186) would allow pharmacists to reimport FDA-approved drugs for resale in the United States. As it was just introduced on July 23, 2002, HDMA has not had time to conduct an in-depth analysis. 

However, our initial review indicates that it does nothing to address our overriding 

health and safety concerns as it relates to how reimported product was stored and 

handled outside of this country or counterfeit product being able to work its way 

into the U.S. marketplace. Furthermore, while the ability to do actual reimportation 

would be limited to pharmacists, there are still practical, operational issues that 

would have a very direct impact on distributors. 

For example, how are returns, recalls and withdrawals to be handled? Certainly, 

a distributor should not be expected to process product and issue credits for drugs 

it did not distribute. The issue of liability exposure is another factor that would be 

of concern to HDMA members. Regretfully, experience has taught us that distributors would be among those cited in lawsuits filed due to injuries resulting from 

‘‘bad’’ product. New and potentially expensive inventory control systems would have 

to be put in place, both at the pharmacy and distributor level, to differentiate pharmacist-imported product from those that passed through a domestic distributor. 

These are just two concerns we would have regarding this legislation. 

While HDMA cannot support this bill, we do agree with its supporters who have 

cited the central role that pharmacists can have in helping a patient with their 

medication therapy management. HDMA has been a longtime advocate for recognition of the important role pharmacists have in the healthcare system and that there 

should be fair and appropriate reimbursement for the pharmaceutical therapy management services they provide. 

Conclusion 

As the committee knows, legislation was passed by the last Congress that would 

have allowed for reimportation by pharmacists and wholesaler-distributors. That 

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legislation required the Secretary of Health and Human Services to certify that reimportation would not result in an increased threat to the health and safety of 

Americans and that there would be cost savings for the patient before it could be 

implemented. After an extensive review, then-Secretary Shalala announced that she 

could not certify these two factors. Her successor, Secretary Thompson, undertook 

his own investigation and reached the same conclusion. 

Limiting reimportation to Canada or ‘‘pharmacist-only’’ would not change these 

findings. HDMA concurs with the FDA when it states that, ‘‘Legislation that would 

establish other distribution routes for drug products, particularly where those routes 

transverse a U.S. border, creates a wide inlet for counterfeit drugs and other products that are potentially injurious to the public health and a threat to the security 

of our nation’s drug supply.’’ In a time when we are working to tighten our border 

security due to terrorist threats, now is not the time to loosen them to reimported 

drugs. 

On June 11, 2002, Health and Human Services Secretary Thompson stated, 

‘‘Opening our borders to reimported drugs potentially could increase the flow of 

counterfeit drugs, cheap foreign copies of FDA approved drugs, expired and contaminated drugs and drugs stored under inappropriate and unsafe conditions. That is 

a risk we simply cannot take.’’

The stated intent of prescription drug reimportation measures introduced in Congress is to increase consumer access to medications through lower costs. Not only 

will this not happen to the extent hoped for, but it will in actuality greatly endanger 

the health and safety of the American public. 

The issue is coverage, not price. The reason some seniors are paying higher prices 

is that they are not in a program that negotiates on their behalf. HDMA supports 

comprehensive reform of the Medicare program to include an appropriate pharmaceutical care benefit and wants to work with Congress to achieve this end. Thank 

you. 

Æ