U.S. GOVERNMENT PRINTING OFFICE

65–846CC WASHINGTON : 2000

COUNTERFEIT BULK DRUGS

HEARINGS

BEFORE THE

SUBCOMMITTEE ON

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

JUNE 8 and OCTOBER 3, 2000

Serial No. 106–164

Printed for the use of the Committee on Commerce

(

2

COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

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

RON KLINK, Pennsylvania

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

JAMES E. DERDERIAN, Chief of Staff

JAMES D. BARNETTE, General Counsel

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

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

FRED UPTON, Michigan, Chairman

JOE BARTON, Texas

CHRISTOPHER COX, California

RICHARD BURR, North Carolina

Vice Chairman

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

ROY BLUNT, Missouri

ED BRYANT, Tennessee

TOM BLILEY, Virginia,

(Ex Officio)

RON KLINK, Pennsylvania

HENRY A. WAXMAN, California

BART STUPAK, Michigan

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

3

C O N T E N T S

Page

Testimony of:

Baker, Dennis, Associate Commissioner for Regulatory Affairs, U.S. Food

and Drug Administration ............................................................................. 241

Henney, Hon. Jane E., Commissioner; accompanied by Dennis E. Baker,

Associate Commissioner, Regulatory Affairs, Food and Drug Administration ............................................................................................................ 296

Kelly, Hon. Raymond, Commissioner, U.S. Customs Service ....................... 304

Maher, Patricia L., Deputy Assistant Attorney General, Civil Division,

Department of Justice .................................................................................. 308

Mehringer, Nikki, Area Quality Control Leader, Eli Lilly ............................ 361

Taylor, John, Acting Director, Office of Compliance, Center for Drug

Evaluation and Research, U.S. Food and Drug Administration ............... 253

Material submitted for the record by:

Pendergast, Mary, memo dated November 13, 1997, to Jon Hunt ............... 273

Plaisier, Melinda K., Associate Commissioner for Legislation, Department

of Health & Human Services:

Letter dated July 25, 2000, to Hon. Fred Upton, enclosing response

for the record .......................................................................................... 274

Letter dated August 10, 2000, to Hon. Fred Upton, enclosing response for the record ............................................................................. 276

Letter dated December 11, 2000, to Hon. Fred Upton, enclosing response for the record ............................................................................. 373

Reitz, John T., President and CEO, Isotag Technology, Inc., prepared

statement of ................................................................................................... 272

(III)

(1)

COUNTERFEIT BULK DRUGS

THURSDAY, JUNE 8, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE ON COMMERCE,

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS,

Washington, DC.

The subcommittee met, pursuant to notice, at 11 a.m., in room

2322, Rayburn House Office Building, Hon. Fred Upton (chairman)

presiding.

Members present: Representatives Upton, Burr, Bryant, Stupak,

and Strickland.

Staff present: Alan Slobodin, majority counsel; Anthony Habib,

legislative clerk; Chris Knauer, minority investigator; and Brendan

Kelsay, minority research analyst/press assistant.

Mr. UPTON. Good morning, everybody.

We have a number of subcommittee meetings and full committee

hearings going on, and we expect a number of members coming in

the next few minutes, but in the interest of time we will get started.

Today we are here to dissect the issue of the influx of counterfeit

bulk drugs. There is an increase in concern that drug ingredients

made overseas that are either counterfeit, unapproved or poorly

made are entering our Nation’s health care system and endangering patients’ health and even their lives.

Here is a case in point. Several years ago, 89 Haitian children

died after taking cough medicine made with contaminated glycerin

traced to China. We may think that tragic events like this can’t

happen here in our country with its sophisticated regulatory system, but our committee’s investigation reveals that our system does

have major flaws, and it could happen here all too easily.

Recently, our committee’s investigation revealed that FDA had

linked the adverse reactions of 155 American patients to

gentamicin sulfate made by Long March Pharmaceutical, a Chinese

drug company. It may well be that other patients died from unknown impurities in this drug as well. FDA’s own forensic tests

showed unexplained discrepancies between the chemical fingerprints of the drug taken from Long March at different times.

FDA’s inspection revealed data integrity problems and other serious deficiencies with Long March. Despite FDA inspections in quality control by the U.S. drug companies that use this material, the

suspicious bulk drug still infiltrated our health care system without detection. This is just one example of other instances that have

confirmed that counterfeit, substandard drug imports are getting

into our prescription drug supply and harming patients.

2

To substantiate our concerns about counterfeit bulk drugs infiltrating our Nation’s health care system, I now ask unanimous consent to place FDA correspondence, internal FDA documents and articles on drug counterfeiting into the record documenting the counterfeit bulk drug problem.

Without objection, that is done.

[The information referred to follows:]

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Mr. UPTON. Copies are provided to the witness as well.

Some of the FDA internal documents reveal that over the last

few years key FDA officials believe counterfeit imported bulk drugs

to be associated with deaths and other serious adverse events in

American patients. This is the first time many of these documents

have come to light.

The international community is also increasingly concerned. Just

last month, the World Health Organization and international pharmacists and international drug manufacturers publicized their concerns about counterfeit drugs. Some have estimated that 50 to 70

percent of the drugs in some developing countries are counterfeit.

It would be wrong to assume that the U.S. is immune to the documented counterfeiting in international pharmaceutical trade. The

World Health Organization and some industry analysts estimate

that about 5 to 8 percent of drug products shipped to the U.S. are

counterfeit, unapproved or substandard.

Counterfeit bulk drugs are ingredients in human prescription

drugs which are deliberately and fraudulently mislabeled or misbranded with respect to its identity or source. Without knowledge

of the source, there is no product history. Without product history,

the safety and efficacy of the product cannot be assured because

there is no information about impurities, the age, the storage, the

manufacturing environment or even the synthesis of the product.

It is extremely difficult to detect counterfeit bulk drugs because

there is no single chemical test for all impurities that may be in

the product.

Counterfeit bulk drugs can represent a serious threat to the public health. A bulk quantity of as little as 50 kilograms can be used

in the production of millions of tablets or capsules. Therefore, only

one counterfeit bulk that contains an impurity or is synthesized improperly could cause immediate death or injury to numerous people.

The result of a counterfeit could be that the medication will not

be as effective or could produce a long-term disease or injury. For

example, these pictures being shown over here to the right show

the differences at a microscopic level between the authentic drug

and the counterfeit drug. The difference in this case lies in the particle size. Such a difference in the particle size could mean that the

drug doesn’t get absorbed into the blood stream and therefore

doesn’t work.

There is still much we do not know about the public health

threat. The FDA has not made any public health assessment of the

issue. Even if the FDA attempted such an assessment, the FDA

has no ability to make an assessment with its current data.

In its March 5, 1999, letter to Congressman Klink and myself,

the FDA stated that it does not collect data to assess the amount

of unacceptable or adulterated active pharmaceutical ingredients

shipped to the United States from foreign sources.

With what information the FDA does have, the FDA has linked

counterfeit or unapproved bulk drugs to deaths and other adverse

events in the United States. Last year, when FDA’s Forensic

Chemistry Center conducted a focused, in-depth study of just a

handful of Chinese drug imports, evidence was uncovered which led

in part to targeted inspections, resulting in an import alert for one

232

plant and warning letters for two other plants. We know we are

seeing only the tip of the iceberg.

Lured by high prices and potential profits in the United States,

counterfeit bulks can get into our prescription drugs in several

ways: one, as imported ingredients to the U.S. manufacturers; two,

as imported ingredients to pharmaceutical compounders; and three,

as source ingredients for Internet pharmacies marketing to the

United States.

The counterfeiters use sophisticated methods, such as preparing

false labeling, containers, seals and certificates of analysis, or using

a manufacturing process that differs from the filed manufacturing

process.

Here are two examples; the first example involves three pictures.

The first picture shows a document dated around 1989 from an industry consultant, laying out a scheme to market unapproved Chinese trimethoprim under the approved label of a German company.

The second picture shows that the signature from the first document belongs to Dr. Jose Gomes.

The third picture shows that Dr. Gomes, in 1999, was the consultant for Long March Pharmaceutical, the firm that made

gentamicin sulfate that I talked about a little bit earlier.

The second example is a diagram of how a drum of bulk drugs

shipped to Australia was counterfeited. A layer of authentic drug

on the top, milled sugar in the next layer, followed by a layer of

authentic drug, et cetera.

The public policy implications are enormous. Public health is

threatened by unapproved, substandard or counterfeit bulk drugs.

Counterfeits could have direct impact on the integrity of the adverse drug event report system. Counterfeit bulk drugs not only

hurt patients but defraud Medicare and Medicaid programs that

pay for these drugs as if they are authentic.

There is also speculation that an unknown influx of counterfeit

unapproved drugs is leading to more drug and chemical allergies

and more antibiotic resistance.

Even after years of plans and recommendations from internal

working groups, the FDA remains largely unable to detect or control imported counterfeit bulk drugs from entering the U.S. The

FDA has not worked with the Customs Service to investigate imported counterfeit bulk drugs since 1996 and, as far as I know,

does not have any ongoing criminal enforcement action or even a

known strategy to deter or prevent crimes connected to counterfeiting bulk drug imports. Instead, the FDA relies on a regulatory

system of inspections, import policies and post-marketing surveillance.

However, the FDA’s testimony on this system is not great. To illustrate this point, here are some direct quotes from the documents.

‘‘The agency is hindered by not having a complete list of foreign

facilities manufacturing drugs products for the United States.’’

That’s not acceptable. Those are my words.

‘‘We still don’t have systems that can effectively and efficiently

communicate across the agency or readily provide field staff with

critical information.’’

Again, that’s not acceptable.

233

‘‘The drug listing data base also does not interface with OASIS,

which would assist import officers by automatically comparing

manufacturers and listed pharmaceutical products to products offered for importation.’’ Again, that’s not acceptable. ‘‘FDA has identified the need to establish enhanced procedures to

better assure that an import alert notice for a product or company

will, in fact, prevent the violative products from reaching the U.S.

consumer.’’ Again, the same response.

‘‘The drug listing does not ensure authentic sources or authentic

material, as described in new drug applications, is in fact being offered for admission.’’ In addition, the FDA told us that they only have information on

18 percent of the foreign drug manufacturers that ship to the

United States. Only 18 percent. The FDA has no information on

623 importing drug firms from China and 409 importing drug firms

from India. No information.

These kinds of weaknesses and others cause me to conclude that

the FDA cannot assure the American people that prescription

drugs are free from counterfeits and poorly made, unknown ingredients. The FDA has told this committee that its safety net is being

stretched by the increasing global nature by the pharmaceutical

commerce. At some point, FDA’s safety net will in fact break, and

I fear that it already may be broken.

It is urgent that the FDA shift to a new model to deal with counterfeit bulk drug imports. I am ready to do more than just hold

FDA accountable; I am committed to working for a solution to this

serious and dangerous problem. I intend to fully work with Commissioner Henney and the FDA to develop and implement new, effective protections, but the FDA needs to be forthright today about

the threat and what it will really take to deal with the problem.

I look forward to the testimony and further discussion and action

by the Congress, Republicans and Democrats, and the administration.

At this point, I yield to my friend and colleague from the great

State of Michigan, Mr. Stupak.

[The prepared statement of Hon. Fred Upton follows:]

PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN, SUBCOMMITTEE ON

OVERSIGHT AND INVESTIGATIONS

Today we’re here to dissect the issue of the influx of counterfeit bulk drugs. There

is increasing concern that drug ingredients made overseas that are either counterfeit, unapproved, or poorly made are entering our nation’s health care system and

endangering patients’ health and even lives.

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

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

that tragic events like this can’t happen here in our country, with its sophisticated

regulatory system. But our Committee’s investigation reveals that our system has

major flaws—and, it could happen here—all too easily.

Recently, our Committee’s investigation revealed that FDA had linked the adverse

reactions of 155 American patients to gentamycin sulfate made by Long March

Pharmaceutical, a Chinese drug company. It may well be that other patients died

from unknown impurities in this drug. FDA’s own forensic tests showed unexplained

discrepancies between the chemical fingerprints of the drug taken from Long March

at different times. FDA’s inspection revealed data integrity problems and other serious deficiencies with Long March. Despite FDA inspections and quality control by

the U.S. drug companies that used this material, this suspicious bulk drug still infilVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00237 Fmt 6633 Sfmt 6621 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
234

trated our healthcare system without detection. This is just one example of other

instances that have confirmed that counterfeit, substandard drug imports are getting into our prescription drug supply and harming patients.

To substantiate our concerns about counterfeit bulk drugs infiltrating our nation’s health care system, I now ask unanimous consent to place FDA correspondence, internal FDA documents, and articles on drug counterfeiting into the record documenting the counterfeit bulk drug problem. Some of the FDA internal documents

reveal that over the last few years key FDA officials believe counterfeit imported

bulk drugs to be associated with deaths and other serious adverse events in American patients. This is the first time many of these documents have come to light.

The international community is also increasingly concerned. Just last month, the

World Health Organization, international pharmacists, and international drug manufacturers publicized their concerns about counterfeit drugs. Some have estimated

that 50-70% of the drugs in some developing countries are counterfeit. It would be

wrong to assume that the United States is immune to the documented counterfeiting in the international pharmaceutical trade. The World Health Organization

and some industry analysts estimate about 5-8% of drug products shipped to the

U.S. are counterfeit, unapproved or substandard.

Counterfeit bulk drugs are ingredients in human prescription drugs which are deliberately and fraudulently mislabeled or misbranded with respect to its identity or

source. Without knowledge of the source, there is no product history. Without product history, the safety and efficacy of the product cannot be assured because there

is no information about impurities, the age, the storage, the manufacturing environment, or the synthesis of the product. It is extremely difficult to detect counterfeit

bulk drugs because there is no single chemical test for all impurities that may be

in the product.

Counterfeit bulk drugs can represent a serious threat to the public health. A bulk

quantity as little as 50 kilograms can be used in the production of millions of tablets

or capsules. Therefore, only one counterfeit bulk that contains an impurity or is synthesized improperly could cause immediate death or injury to numerous people. The

result of a counterfeit could be that the medication will not be effective or could

produce a long term disease or injury. For example, these pictures show the differences at a microscopic level between the authentic drug and the counterfeit drug.

The difference in this case lies in the particle size. Such a difference in the particle

size could mean that the drug does not get absorbed in the bloodstream and therefore doesn’t work.

There is still much we do not know about this public health threat. The FDA has

not made any public health assessment of this issue. Even if FDA attempted such

an assessment, the FDA has no ability to make an assessment with its current data.

In its March 5, 1999, letter from Congressman Klink and me, the FDA stated that

it does not collect data to assess the amount of unacceptable or adulterated active

pharmaceutical ingredients shipped to the U.S. from foreign sources. With what information the FDA does have, the FDA has linked counterfeit or unapproved bulk

drugs to deaths and other adverse events in the U.S. Last year when FDA’s Forensic Chemistry Center conducted a focused, in-depth study of just a handful of Chinese drug imports, evidence was uncovered which led in part to targeted inspections

resulting in an import alert for one plant and warning letters for two other plants.

We know we are only seeing the tip of the iceberg.

Lured by high prices and potential profits in the U.S., counterfeit bulks can get

into our prescription drugs in several ways: (1) as imported ingredients to U.S. manufacturers; (2) as imported ingredients to pharmaceutical compounders; and (3) as

source ingredients for interact pharmacies marketing to the U.S. The counterfeiters

use sophisticated methods such as preparing false labeling, containers, seals and

certificates of analysis, or using a manufacturing process that differs from the filed

manufacturing process.

Here are two examples. The first example involves three pictures. The first picture shows a document dated around 1989 from an industry consultant laying out

a scheme to market unapproved Chinese trimethoprim under the approved label of

a German company. The second picture shows that the signature from the first document appears to belong to Dr. Jose Gomes. The third picture shows that Dr.

Gomes in 1999 was the consultant for Long March Pharmaceutical, the firm that

made the gentamicin sulfate I talked about earlier. The second example is a diagram of how a drum of bulk drug shipped to Australia was counterfeited. A layer

of authentic drug on the top, milled sugar in the next layer, followed by a layer of

authentic drug, etc.

The public policy implications are enormous. The public health is threatened by

unapproved, substandard or counterfeit bulk drugs. Counterfeits could have direct

impact on the integrity of the adverse drug event report system. Counterfeit bulk

235

drugs not only hurt patients, but defraud Medicare and Medicaid programs that pay

for these drugs as if they are authentic. There is also speculation that an unknown

influx of counterfeit, unapproved drugs is leading to more drug and chemical allergies and more antibiotic resistance.

Even after years of plans and recommendations from internal working groups, the

FDA remains largely unable to detect or control imported counterfeit bulk drugs

from entering the U.S. The FDA has not even worked with the Customs Service to

investigate imported counterfeit bulk drugs since 1996 and does not have any ongoing criminal enforcement action—or even a known strategy—to deter or prevent

crimes connected to counterfeiting bulk drug imports. Instead, FDA relies on its regulatory system of inspections, import policies, and postmarketing surveillance. However, the FDA’s testimony on this system is devastating. To illustrate this point,

here are some direct quotes from FDA documents.

‘‘The Agency is hindered by not having a complete list of foreign facilities manufacturing drugs products for the U.S.’’

This is not acceptable,

‘‘[W]e still do not have systems that can effectively and efficiently communicate

across the Agency, or readily provide field staff with critical information they need.’’

This is not acceptable.

‘‘The Drug Listing database also does not interface with OASIS, which would assist import officers by automatically comparing manufacturers and listed pharmaceutical products to products offered for importation...’’

This is not acceptable.

‘‘FDA has identified the need to establish enhanced procedures to better assure

that an import alert notice for a product or company, will, in fact, prevent the violative products from reaching the U.S. consumer.’’

This is not acceptable.

‘‘The drug listing does not ensure authentic sources or authentic material as described in New Drug Applications (NDAs) is in fact being offered for admission.’’

This is not acceptable,

In addition, the FDA told us they only have information on 18% of the foreign

drug manufacturers that ship to the U.S. The FDA has no information on 623 importing drug firms from China and 409 importing drug firms from India. These

kinds of weaknesses, and others, cause me to conclude that the FDA cannot assure

the American people that prescription drugs are free from counterfeits and poorly

made, unknown ingredients. The FDA has told the Committee that its safety net

is being stretched by the increasingly global nature of pharmaceutical commerce. At

some point the FDA’s safety net will break, and I fear it may already be broken.

It is urgent that the FDA shift to a new model to deal with counterfeit bulk drug

imports.

I am ready to do more than just hold FDA accountable. I am committed to working for a solution to this serious and dangerous problem. I fully intend to work with

Commissioner Henney and the FDA to develop and implement new, effective protections. But the FDA needs to be forthright today about the threat and what it will

really take to deal with the problem. I look forward to the testimony, further discussion, and action.

Mr. STUPAK. Thank you, Mr. Chairman. I want to thank you for

holding this hearing, and I will be brief.

You certainly in your outline—in your testimony, it was outlined

that we cannot tolerate the sale of illegal and potentially adulterated pharmaceuticals in the market. Obviously, patient safety is

compromised when drugs are imported that are manufactured

without quality controls and inspections.

I am interested to hear, Mr. Baker, about the Food and Drug Administration’s attempts to prevent and punish illegal bulk drug

sales. In addition, I am interested to learn what the FDA is doing

to combat illegal compounding and radiological diagnostics. We

need to understand what FDA’s plan is for—what its plan is for enforcing current law. If the FDA feels it needs more resources, then

they need to request them and they have to tell us what exactly

they need. Otherwise, there is no excuse for the FDA not performing its mission.

236

As I listened to your testimony, Mr. Chairman, on the bulk sale

of drugs here, I am concerned about what is happening on the

Internet. As you know, Mr. Klink and I have been working on the

On-line Pharmacy Consumer Protection Act, and we have been

working with the administration to come up with a bill that can

be acceptable to both sides because we feel it is a huge problem.

So now you take these counterfeit bulk drugs—and you say we

know about 18 percent of them. How many more and are they

being sold on the Internet? In fact, I have no reason to think they

are not being sold over the Internet. I think this hearing has so

much more we can explore, and I think it will be a very, very interesting hearing.

So I thank you for holding this hearing, Mr. Chairman.

Mr. Chairman, I am going to close with that, but before that, I

would like to ask unanimous consent to place Mr. Dingell’s statement into the record. He is currently at a meeting on the patients’ bill of rights. Otherwise, he would be here, because I know Mr.

Dingell is very interested in counterfeit bulk drug sales.

So with unanimous consent I would submit his statement forward, please.

Mr. UPTON. Without objection, his statement will be made a part

of the record, and all members of the subcommittee’s statements,

in fact, will be made a part of the record.

Mr. STUPAK. I yield back the balance of my time.

Mr. UPTON. Thank you.

[The prepared statement of Hon. John D. Dingell follows:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Chairman, I have long been concerned about counterfeit, substandard, misbranded, and adulterated drugs entering this country from abroad. Previous investigations conducted by this Subcommittee more than a decade ago ultimately led to

the passage of the Prescription Drug Marketing Act, which added measures to protect consumers from potentially dangerous foreign drug sources. But protecting consumers from questionable and dangerous drug products manufactured abroad remains a formidable challenge.

I remain concerned that the Food and Drug Administration (FDA) has yet to develop a suitable framework, in the face of potentially greater risks, for protecting

the public. The Agency remains alarmingly behind in foreign inspections of firms

sending drug products into the United States. And it still lacks the ability to track

and measure the counterfeiting problem.

The FDA is supposed to inspect firms for Current Good Manufacturing Practices

(CGMPs) before they are approved to ship a drug product into the United States.

Nevertheless, just last week FDA reported to us that approximately 4,600 foreign

drug firms have shipped to the U.S., but have never been inspected by the FDA.

Cause for added concern is the fact that firms in two countries with historic drug

counterfeiting problems, China and India, are prominent on that list. According to

FDA’s records, 623 firms from China that have shipped drug product to the U.S.

have never been inspected by the FDA. The figure for India is 409.

To make matters worse, the problem of tracking dubious manufacturers seems to

be getting worse, not better. FDA still lacks the basic information technology to

allow it to efficiently communicate with the Agency’s many other databases to provide staff with mission-critical information. A workable system for tracking who

sends what and when to this country, and whether their manufacturing practices

are acceptable, should already have been implemented. Commissioner Henney

should immediately determine the Agency’s information technology requirements for

such a system and implement the system as soon as practicable.

I also remain troubled that the FDA still lacks the ability to gather information

about counterfeit, substandard, or even adulterated materials on a real-time basis.

It is my understanding that, in recent staff discussions with the Agency, FDA officials agreed that it might be useful to require manufacturers to report immediately

237

to the FDA if they discover any counterfeit bulk in their manufacturing processes.

Currently, there is no such requirement, and that unnecessarily leaves other manufacturers and consumers at some risk. The implementation of such a requirement

should allow FDA to develop a ‘‘real-time’’ database that could not only warn other

companies if a particular product from a particular supplier is in question, but also

allow the Agency to better understand and address this problem.

Mr. Chairman, I believe that drug counterfeiting is a very real problem that will

likely grow worse in the future. With the introduction of now hundreds of Internet

sites selling prescription drugs with almost no regulatory framework in place, the

environment and the incentive for using fake bulk drugs, making fake drugs and

selling them directly to consumers is obvious. FDA lacks a credible framework for

addressing these public health risks, and that is very worrisome.

Mr. UPTON. Mr. Burr.

Mr. BURR. Thank you, Mr. Chairman.

Let me take this opportunity to welcome our colleague, Mr. Stupak, back. We have missed him, and I am sure that his participation in this will help to enlighten this issue.

Mr. Baker, let me welcome you. Let me suggest to you that the

way to get started with this committee is to fulfill the requirements

of the rules of the committee. Your testimony was turned in at 3

p.m. yesterday. The committee rules require those who testify to

submit their testimony, I think, 48 hours in advance, so that members actually have an opportunity to read it, to study it, to understand what it is that Federal agencies are trying to do, understand,

engage their level of passion and commitment to the issues.

I think you have done a very good job of trying to lay out what

the scenario is at the FDA. It would have been better, quite honestly, if the Commissioner were here. I am sorry that there was a

conflict and that she had a week of travel; but clearly, if she got

back yesterday, she could have also submitted testimony at 3 p.m.

the day before the hearing.

So I don’t see that there is a tremendous amount of advantage,

but I look optimistically at your testimony and the opportunity to

go through some questions with you.

Let me just read one part of your statement here. You say, ‘‘It

is important to distinguish between counterfeit drugs and products

that are contaminated or otherwise improperly manufactured.

While each of these conditions may’’—may—‘‘pose a threat to public

health, counterfeiting is quite different and a much more rare occurrence in the drug manufacturing industry. The FDA Act states

that a counterfeit drug,’’ and you go into a very specific definition.

If your intent is to come here and to debate what the specific definition of counterfeit or threat is to the drug market in this country, I hope you will change before we start.

We are not here to debate definitions. We are here because, one,

a problem exists; two, the FDA agrees a problem exists; three, the

FDA has not done everything within its power to solve the problem. For that reason, there is an appropriate role for the Oversight

and Investigation Subcommittee to play in the solution of this problem.

Let me go on in your testimony, if I can, to import alerts. Page

22, near the end, ‘‘While counterfeit drugs continue to be an issue

of concern, it was determined that there was no specific need for

a Commissioner’s Office initiative.’’

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That tells me that the level of concern about the issue is not as

great at the end of your testimony as it was at the beginning of

your testimony.

I hope that you will have an opportunity to set the record

straight on what the level of commitment at the Food and Drug

Administration is on solving this issue of counterfeiting or contamination, this issue of a public health question to an agency that I

quite honestly have spent a tremendous amount of time trying to

make sure that the gold standard that the American people expect,

that the FDA employees have worked aggressively to maintain, is

maintained in every piece of legislation that goes out of this institution.

I certainly hope that we will continue to do that and that you

will enlighten us on what we can do legislatively to make sure that

everything possible is done at the FDA to assure the safety and efficacy of everything that goes into pharmaceuticals.

Mr. Chairman, I thank you and I yield back.

Mr. UPTON. Thank you.

Mr. Bryant.

Mr. BRYANT. Thank you, Mr. Chairman.

I might first thank you for having this hearing and thank our

witness, our distinguished witness, for being here today. I look forward to his testimony.

As you explained, there are many competing factors for our time,

and we may be in and out a little bit during the hearing, but I do

appreciate your coming today.

I think this is a good subject for a hearing and I want to commend our chairman for having this. I would echo his remarks, as

well as my friend from Michigan, Mr. Stupak’s remarks, as well as

Mr. Burr’s remarks; and would add that as I understand, in reading from some of the preparatory materials for this hearing, the

issue that we are concerned with today and we would like to hear

from you is: Does the use of counterfeit, unapproved bulk drugs

pose a threat to the safety and efficacy of other finished drugs?

Mr. Burr sort of touched on that, and maybe what I hear him

saying is his impression that the FDA does not consider this to be

a significant problem. Maybe I misunderstood what he said, but I

think that was his construction of what your statement says.

But if there is a legitimate threat out there, what does the FDA

do in its regulatory system to ensure that that does not happen?

And second, does the FDA have any initiative, anything to put forward today to us, to explain what you are doing to ensure that U.S.

prescription drug supplies are free from counterfeit or unapproved

bulk drugs?

I think those are the issues. Is there a problem? And if you agree

there is a problem, what are you doing about it?

As I read other materials—our chairman mentioned some of the

statistics that are involved here; and I know, like all agencies, or

I suspect, you will plead that there are not enough people to go

around and FDA needs more people to help enforce this. Nevertheless some of the statistics are mentioned here. Again our chairman

has mentioned some of them already, but I will mention a couple

more.

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There are approximately 310 points of entry in the United

States, but in fiscal year 2000, the FDA has only 68 full-time

equivalents in the field allocated to human drugs. They mentioned

the 4,600 foreign drug manufacturers who have never been inspected by the FDA. Only about 18 percent of the total number of

foreign drug manufacturers are shipping to the U.S. at this time— in 1998, I should say—that the FDA has information on. The tracking system, foreign inspection force, does not include reports which

relate to manufacturing violations with a product from a country,

and so on.

These are generally admissions, I think the FDA has made in the

letter to Chairman Bliley.

One final comment in regard to all of this, and I say this as a

former U.S. Attorney—and I know Bart Stupak is a former law enforcement officer and probably has seen this: It is a phenomenon

out there among our investigative agencies, called TURF. And I

found that as a U.S. attorney, who sort of helped run investigations

with the idea that we would gather facts from the FBI and the

DEA and all of those investigators out there in our office and help

prosecute the bad guys. But I found this concept of turf battles.

In reading through these materials, I see where the FDA—and

I would like maybe to hear from you if this is true or not—the FDA

has not worked with the Customs Service to investigate imported

counterfeit bulk sales or bulk drugs since 1996 and does not have

any ongoing criminal enforcement action or strategy, for that matter. I think this gets into something else, but again the issue of

whether you are working cooperatively with other agencies that

have a similar jurisdiction and a similar goal to prevent this type

of conduct from happening.

Again, realizing that we don’t call it turf battles, but that is what

it is, I would like to know why the FDA is not working with Customs and maybe any other agency that would have, again, similar

jurisdiction that would help by combining resources, and maybe

even a task force or something like that, to stop this.

I guess in the end, as I close, we have got to agree, first, if there

is a significant problem or not; and that is what I would like to

first hear, too.

With that, I would yield back my time.

Mr. UPTON. Thank you.

[Additional statement submitted for the record follows:]

PREPARED STATEMENT OF HON. TOM BLILEY, CHAIRMAN, COMMITTEE ON COMMERCE

Mr. Chairman, this hearing is of vital importance. On June 23, 1999, at a hospital

in Los Angeles, a 10-year old boy was given a dose of an antibiotic called gentamicin

sulfate. After he finished getting this dose, he got unexpected side effects of chills,

shaking, and 102 degree fever. The drug he took was made of ingredients that came

from a bulk drug plant in China called Long March Pharmaceutical. This 10-year

old boy was just one of what turned out to be 155 American patients in 1998 and

1999 who suffered from these reactions that were linked to the Long March ingredient. Some of these reactions were life-threatening. While none of the 155 patients

died from these reactions, there are other patients who may have died from unknown impurities in counterfeit or substandard gentamicin. Whatever was wrong

with this drug ingredient, it slipped through the FDA and the U.S. drug companies.

Could the FDA have prevented the gentamicin problem? The FDA years ago had

tips about counterfeit gentamicin and had opportunities to prevent the gentamicin

problem. In 1994, FDA investigated counterfeit bulk gentamicin sulfate, but dropped

the investigation because the suspicious lots were no longer available. Nothing was

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done on the regulatory side, not even taking samples of gentamicin sulfate from various U.S. firms to test for impurities or counterfeiting. Based on a 1996 memo from

one of its criminal investigators, the FDA had information from a case involving

Long March-labelled counterfeit drugs for animals that told them that counterfeit

gentamicin sulfate for humans was being sold in the U.S. In addition, FDA had recommendations in 1996 to deter, detect, or interdict counterfeit gentamicin sulfate

and other counterfeit bulk drugs. Many of these key recommendations were not implemented. Lack of FDA action left American patients vulnerable to imported bulk

drugs like the Long March gentamicin.

The FDA’s record on controlling counterfeit bulk drugs so far is a record of failure.

That is an outrage. As far back as 1991, the FDA had evidence from its field force

that suggested widespread availability of counterfeit bulk drugs in both human and

animal drug industries. In 1996, then-FDA Commissioner David Kessler established

a counterfeit bulk drug initiative and a working group to deal with this issue. A

year later, the FDA disbanded the Commissioner’s working group and downgraded

the priority of counterfeit bulk drugs. Since the FDA has downgraded the priority

of counterfeit bulk drugs, international authorities including the World Health Organization (WHO) last month have recognized the growing problem of counterfeit

drugs. While the FDA has taken some small steps in improving some of its systems,

much remains to be done.

As the Committee’s investigation has revealed, the FDA’s regulatory system used

to protect Americans from counterfeit or substandard drug ingredients has significant holes. For example, many times FDA will allow drug products into our country

not based on proof of authenticity, but merely on the representations of an international broker, who could in fact be the counterfeiter. FDA has only partial information, if that, on the original source to determine authenticity. The FDA’s own

people acknowledge that the import alert system is broken and that using drug listings for admitting drug imports has had a dismal record. The FDA admits it has

information on only 18 percent of the foreign drug manufacturers shipping to the

U.S. The FDA admits there are about 4,600 foreign drug manufacturers that have

shipped to the U.S. since October 1997 but have never been inspected by the FDA,

including 623 in China and 409 in India. At the time of entry at the ports, the inspectors do not have the ability to know where the drug shipment is going in the

U.S. and what will really happen to it.

What has been truly disappointing has been FDA’s apparent lack of interest in

using the authority and resources the Congress gave the FDA specifically to investigate counterfeit bulk drugs. In 1993 the FDA’s Office of Criminal Investigations

was created specifically to give the FDA the capability to investigate counterfeit

drugs. By statute, FDA has special enforcement powers related to investigating

counterfeit drugs.

But what has been the record? How has the FDA used this authority? In May

1996, one of FDA’s criminal investigators wrote a memorandum to his supervisors

at the FDA’s Office of Criminal Investigations about evidence from a criminal investigation showing the threat of counterfeit bulk drugs imported into the USA. But

his supervisors did nothing to follow-up on the investigative leads or to implement

or suggest improvements in criminal investigations of counterfeit bulks. In its June

2, 2000 letter to me, the FDA admits in the area of counterfeit bulk drugs the Office

of Criminal Investigations has no open investigations, has not initiated even one investigation, and has not worked with any other federal agency investigating counterfeit bulk drugs. There is no criminal investigative strategy included in the FDA’s

draft 1999 Work Plan on counterfeit drugs. None.

Ladies and gentlemen, bulk-drug counterfeiting and the acts that perpetuate the

fraud are federal crimes. These crimes threaten the public health and the integrity

of the pharmaceutical industry, place law-abiding bulk suppliers at a competitive

disadvantage, and victimize U.S. drug companies. Just last month, the WHO, international pharmacists, and international drug manufacturers issued public statements about the major problem of drug counterfeiting. It seems that imported drug

counterfeits are increasingly recognized as a major problem.

In some of its statements to the Committee, the FDA assumes there must be no

major problem even though it has not conducted a public health assessment of the

counterfeit bulk drug issue and has little quantifiable information on the subject.

However, the FDA told Committee staff that they had learned from an investigation

about 10 years ago that Americans had died from counterfeit bulk antiseizure medicine. The FDA told staff as well that there are public health concerns with introducing counterfeit and unapproved bulk drugs into our medicines. This is why FDA

has in place regulations and inspections to deal with bulk drug ingredients.

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Mr. UPTON. Our witness today is Dennis Baker, Associate Commissioner for Regulatory Affairs at the Food and Drug Administration.

Mr. Baker, welcome. As you know, we have a long-standing tradition of taking testimony under oath. Do you have any objection

to that?

Mr. BAKER. None whatsoever, sir.

Mr. UPTON. Committee rules also allow you to have counsel, if

you wish to have counsel represent you as well.

Do you wish to have counsel?

Mr. BAKER. No, I do not.

Mr. UPTON. If you would stand and raise your right hand.

[Witness sworn.]

Mr. UPTON. You are now under oath and your testimony is made

a part of the record in its entirety, and the time is yours. Thank

you.

TESTIMONY OF DENNIS BAKER, ASSOCIATE COMMISSIONER

FOR REGULATORY AFFAIRS, U.S. FOOD AND DRUG ADMINISTRATION

Mr. BAKER. Thank you, Mr. Chairman, and good morning, Mr.

Chairman, and members of the committee.

I am Dennis Baker, Associate Commissioner for Regulatory Affairs at the U.S. Food and Drug Administration.

Mr. UPTON. If you could just put the mike a little closer.

Mr. BAKER. Is that better?

Mr. UPTON. That’s better.

Mr. BAKER. Thank you.

With me today, I have Mr. John Taylor. He is Acting Director of

our Office of Compliance at the Center for Drug Evaluation and

Research within FDA. Together, our offices are responsible for regulating the importation of foreign drugs.

I appreciate this opportunity. I am rather new to FDA. I have

been on board about a year now. I came on board from the State

of Texas, so I have had some eye-opening experiences, as you might

guess, and coming here today is another eye-opening experience.

But what we are here today about is imported counterfeit bulk

drugs, and the Agency’s actions to protect the American public

from the risks of those drugs.

I want to preface my remarks by noting that while we take very

seriously the counterfeiting of drug products, we still believe the

overall quality of drug products in the country to be very high. The

public, we think, can be confident that the drug products they use

are safe and effective.

Although FDA takes many steps to protect American consumers

and patients against unsafe drugs, we recognize that more can be

done and should be done. There is room for improvement in our

abilities both to quantify the potential for the entry of counterfeit

bulk into the U.S. market and, when warranted, to strengthen our

regulatory or enforcement activity.

In this testimony, I will highlight FDA’s efforts to ensure that

imported bulk drugs meet the requirements of the Food, Drug and

Cosmetic Act. More detail on FDA’s programs and activities in this

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area is provided in my written statement, and I request that it be

included in the record.

Mr. UPTON. Yes.

Mr. BAKER. Simply put, the Food, Drug and Cosmetic Act defines

a counterfeit drug, as we mentioned earlier, as a drug that bears

a false identification of its manufacturer, processor, packer or distributor. The definition applies to active pharmaceutical ingredients, APIs, as well as finished dosage forms that are deliberately

and fraudulently mislabeled or misbranded with respect to their

identity and source.

Counterfeit APIs pose a real or potential health hazard because

their manufacturer is often unknown, which makes it impossible to

establish an accurate product history.

As a result, the safety, quality and efficacy of the product cannot

be assured. Central to FDA’s system of protection for the integrity

of prescription and nonprescription drugs are the standards for

safety and effectiveness in manufacturing that are established by

the Center for Drug Evaluation and Research.

It is important to note that a key element of this system of protection is the responsibility that a drug manufacturer has to test

and validate the safety, purity and consistency of the APIs it uses

in the manufacture of its products.

Some of the strategies employed by FDA to maintain these

standards include the rigorous scientific evaluation of all marketing applications for new innovator and generic drug products

and monitoring the quality of APIs in finished dosage forms manufactured in and imported into the United States; collecting and

evaluating information on adverse events associated with marketed

products; and conducting inspections to ensure that manufacturers

produce high-quality pharmaceutical products.

Over the last decade, FDA has taken a close look at the issue of

counterfeiting, and we have engaged in wide-ranging discussions

on whether our regulatory enforcement programs were up to the

task or needed reworking.

Let me emphasize that many of our discussions in the earlier

part of the decade were based on the fact that our information resources were far less capable than what we have today. Although

there is still room for improvement, and I would say much improvement, most of the information systems in use today were established during the 1990’s in response to our need for better information.

The task before us now is to better integrate the various information resources into a unified environment, a unified information

technology (IT) environment. We fully recognize that we have been

working from a collection of independently developed data bases,

all of which contain critical information, but they clearly need to

be integrated; they have to be linked. This unified environment will

make better information available to the field, where we must

make quick decisions on the admissibility of products, and it will

allow us to reconcile the data now contained in our various existing

systems.

We have a program of technology upgrades in place. Those upgrades have already resulted in the roll-out of the FACTS system

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which incorporates data from the OASIS import registry and the

COMSTAT compliance information system.

In an effort to begin to address the weakness in IT available to

import inspectors, a pilot was initiated in the Philadelphia district

to provide import inspectors with access to CDER’s EES system,

which tracks drug applications. This allows the import inspectors

to increase the probability of confirming authentic sources of APIs.

The goal is to ultimately have access to a single data base that includes all the information needed and houses a true foreign establishment inventory.

The FDA has also restructured its foreign inspection program in

order to better target those firms and products that have the most

potential for problems, including counterfeiting.

While the bulk of our foreign plant inspections are still in support of new drug applications, we have instituted a tiered inspection system based on potential risk to the consumer. In spite of our

best strategies, however, resource limitations will prevent us from

conducting universal foreign drug inspections.

Now, that being said, could we do a better job with the resources

we have? Certainly.

FDA has also revised the sampling of products under the drug

product surveillance program, and these samples are analyzed by

our Forensic Chemistry Center. Since 1998 we have been focusing

on collecting a greater number of samples of targeted APIs to determine if a product is authentic and meets specifications. Building

this data base for API information will be helpful to our field inspectors in identifying possible counterfeit APIs. Currently, this

data base contains information on approximately 400 to 500 APIs.

Another aspect of our program emphasizes a stronger cooperative

effort with foreign governments and industry.

Mr. Chairman, FDA is alert to the fact that our protections

against counterfeit drugs are in need of improvement. Building and

maintaining a strong regulatory framework and providing the tools

to ensure the integrity of imports is a complex and resource-intensive undertaking that requires flexibility in response to the constant growth and changes of the global market.

While our agency has done much in recent years to meet these

demands, clearly more can be done. Today, I would like to announce five additional new initiatives we are undertaking to further improve this system. Just last January, I allocated funds to

the Forensic Chemistry Center for analytical work in assessment

of APIs gathered through targeted inspections of importers. The

FCC API data base will be made available electronically to all field

inspectors by January 2001.

While the Philadelphia pilot does not fix the entire IT problem,

in the interim, it clearly provides a benefit to our field force. By

the end of the year, we will expand this pilot nationwide so all of

our field force has access to the EES data, a real-time reading of

the data.

Exporters to the U.S. are required by FDA to provide the name

of the foreign manufacturer upon entry to the U.S. This information has been inconsistently provided by importers and the agency

has not enforced this requirement. Effective immediately, we are

going to put all importers on notice that this information must be

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accurately provided and the entry of their products into the U.S.

will be contingent upon it.

At the suggestion of Mr. Dingell and Mr. Klink, we considered

requiring domestic manufacturers to provide information to FDA

when they discover that bulk materials they receive are substandard, ineffective or appear not to be from the approved source.

We did consider this idea. We believe it will provide us with useful

information, and we are looking at regulatory approaches for implementing this requirement.

A vigorous and effective system requires sufficient resources that

provide the necessary expertise, scientific methodologies, tools for

testing and integrated information systems. We are committed to

ensure the Agency has what it needs. We look forward to working

further with the committee as we strive to provide the American

public with the protections it expects and deserves.

This concludes my testimony, and we will be happy to answer

any questions you may have.

[The prepared statement of Dennis E. Baker follows:]

PREPARED STATEMENT OF DENNIS E. BAKER, ASSOCIATE COMMISSIONER FOR

REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION

Good morning, Mr. Chairman, and Members of the Committee. I am Dennis E.

Baker, Associate Commissioner for Regulatory Affairs (ACRA) at the United States

(U.S.) Food and Drug Administration (FDA or the Agency). With me today is my

colleague, John M. Taylor, Acting Director, Office of Compliance, Center for Drug

Evaluation and Research (CDER). I am pleased to come before the Committee to

discuss your concerns about imported counterfeit bulk drugs and the Agency’s ac- tions designed to protect the American public from the possible risks that such

drugs may pose.

It is important to note that the overall quality of drug products in this country

is very high. However, FDA takes very seriously allegations regarding the counterfeiting or adulteration of drug products. We recognize that more can be done to

quantify the scope of the problem counterfeit bulk drugs may pose in the U.S. market, and strengthen our regulatory or enforcement activity, when warranted. In this

testimony, I will describe efforts the Agency has taken to ensure that imported bulk

drugs meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act.

‘‘Bulk drugs’’ are active or inactive ingredients used in the manufacture of finished

dosage drug products. While safety issues clearly apply to all products that are classified as bulk drugs, at the Committee’s request, this testimony will generally focus

on issues related to the importation from foreign sources of active pharmaceutical

ingredients (APIs), which was the subject of Chairman Bliley’s May 8, 2000, letter

to the Agency.

It is important to distinguish between counterfeit drug products and products that

are contaminated or otherwise improperly manufactured. While each of these conditions may pose a threat to public health, counterfeiting is a quite different, and

much more rare, occurrence in the drug manufacturing industry. The FD&C Act

states that a counterfeit drug is: ‘‘A drug which, or the container or labeling of which, without authorization,

bears the trademark, trade name, or other identifying mark, imprint, or device,

or any likeness thereof, of a drug manufacturer, processor, packer, or distributor

other than the person or persons who in fact manufactured, processed, packed,

or distributed such drug and which thereby falsely purports or is represented

to be the product of, or to have been packed or distributed by, such other drug

manufacturer, processor, packer, or distributor.’’

More simply stated, a drug that identifies itself as the product of a drug manufacturer, processor, packer, or distributor other than the actual manufacturer, processor, packer, or distributor of such drug is counterfeit under the FD&C Act. This

definition applies to active pharmaceutical ingredients, intermediate pharmaceuticals, and finished dosage forms that are deliberately and fraudulently mislabeled or misbranded with respect to their identity and source. Counterfeiting can

apply to innovator or generic products.

Counterfeit APIs pose a real or potential health hazard because their manufacturer is often unknown. The fact that the manufacturer is unknown means that

245

there is no product history. Therefore, the safety and efficacy of the product cannot

be assured, the impurity profile is unknown and the age, storage, manufacturing environment, and/or the synthesis of the product cannot be determined. Moreover, the

failure to have a product history means that the results of research and development and the clinical trials done by legitimate pharmaceutical product manufacturers are negated.

The participants in illegal counterfeiting activity may include manufacturers of

API pharmaceuticals, manufacturers and repackers who relabel and substitute API

products in the distribution chain, importers, brokers, domestic agents, and purchasing agents either acting alone or in concert with a corporate unit. There are certain products that especially lend themselves to counterfeiting. In general, very expensive chemicals that are purchased in small quantities or less expensive chemicals that are purchased in very large quantities are particularly vulnerable to counterfeiting.

I. THE REGULATION OF ACTIVE PHARMACEUTICAL INGREDIENTS

FDA is responsible for the safety and quality of domestic and imported pharmaceutical products. Specifically, FDA’s CDER establishes standards for the safety, effectiveness and manufacture of prescription and over-the-counter (OTC) drugs. In

addition, FDA’s human drug program applies premarket review, postmarket surveillance, education, research and other strategies to ensure that all drug products are

safe and effective and that information on the proper uses of the drug products is

available to all users.

The strategies employed by FDA include:

• regulating the testing of investigational new drugs (INDs);

• evaluating the data in new drug applications (NDAs) for marketing new drugs

and abbreviated new drug applications (ANDAs) for marketing generic drugs;

• monitoring the quality of API and finished dosage drug products manufactured

in and imported into the U.S. through post market surveillance programs;

• collecting and evaluating information on adverse effects associated with the use

of marketed products;

• regulating the advertising and promotion of prescription drugs;

• establishing and monitoring standards for use, labeling and composition of both

prescription and OTC drugs;

• conducting inspections to ensure that manufacturers produce safe, pure and high

quality pharmaceutical products; and

• evaluating the conditions under which drugs are manufactured, packed, tested

and held.

FDA’s human drug program also disseminates timely and accurate product information to the medical community and the public regarding new drugs and their

uses, identifies drugs with the potential for abuse, and makes recommendations to

the Drug Enforcement Administration (DEA) for drug classification and control.

Foreign manufactured drugs imported into the U. S.—both bulk and finished

products—fit into the Agency’s regulatory framework through new and generic drug

evaluations, drug quality assurance, inspections, postmarketing surveillance and adverse drug event reporting programs.

New Drug Evaluation/Generic Drug Evaluation

The goal of the new and generic drug approval process is to ensure that 1) new

drugs brought to market are safe and effective as labeled for their intended use, and

2) generic drugs approved for marketing are safe, effective, and manufactured in a

way that ensures their continued safety, efficacy, and bioequivalence. Personnel

from the Office of Regulatory Affairs (ORA), sometimes accompanied by chemistry

or other professional staff from CDER, conduct pre-approval and post-approval inspections of the facilities manufacturing drug products that are identified by drug

sponsors in their applications.

FDA’s Pre-approval Inspections Program (PAI) provides for the investigator to

verify the accuracy and authenticity of data submitted by firms in support of the

approval of their new or abbreviated new drug applications and to assess the firm’s

compliance with current good manufacturing practices (cGMP). The program covers

both domestic and foreign manufacturers of both finished dosage form products and

APIs.

A drug manufacturer is responsible for testing and validating the safety, purity

and consistency of the APIs it uses in the manufacture of its products. In fact, all

such manufacturers are required to disclose the source of their APIs in their applications, and both domestic and foreign API manufacturers must be in compliance

with cGMPs prior to the approval of those applications. Drug Master Files (DMFs)

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are established to allow producers of active ingredients and other formulation materials to submit confidential commercial information directly to FDA. Therefore,

these bulk drug inspections are considered to be pre-approval inspections and include inspectional verification of the information submitted to the DMF by the bulk

drug manufacturer. The DMF contains manufacturing information pertinent to the

formulation material. It is referenced by an applicant for a finished dosage form and

is considered part of the application.

Foreign and domestic bulk manufacturers are reevaluated periodically for cGMP

compliance, either during pre-approval inspections for a different product, or by a

routine drug process cGMP inspection under the API program.

Drug Quality Assurance Program

Without proper process validation and control, marketed drugs may be deficient

in many ways such as being subpotent, superpotent, or contaminated with other

drugs or microorganisms. CDER is responsible for conducting postmarketing assurance monitoring of the overall manufacturing quality of drugs and maintaining drug

establishment registration and drug products listing. In conjunction with ORA,

CDER must also ensure that the manufacturing, processing, packing, and holding

of drugs are such that the highest quality products will be marketed.

FDA inspections and product analyses are conducted to ensure that firms are validating their manufacturing processes. Comprehensive cGMP evaluations of drug

products or dosage form are conducted. These inspections include domestic and foreign API and finished dosage form manufacturers.

In addition, CDER initiates drug sampling surveys that involve the collection and

analysis of imported bulk drug substances and finished products that are then analyzed by Agency field labs for quality and forensic laboratories for evidence of counterfeiting. Selection of drug products for FDA sampling and testing under the Drug

Product Survey Program is based on the following criteria: therapeutic significance;

emerging problems; impurities; stability concerns; results of previous drug surveys;

economic importance; and compliance history of the firm. Foreign active pharmaceutical ingredients have been added as sampling/testing targets. CDER strives to

obtain voluntary support from the pharmaceutical industry whenever possible, informing firms of problems with their products or manufacturing processes so that

correction may be made as expeditiously as possible, but takes regulatory action

when necessary to effect the required changes.

Postmarketing Surveillance and Epidemiology

FDA employs other surveillance programs, including drug listing review of imports and the Drug Quality Reporting System under MedWatch. ORA is establishing

a library of authentic bulk drug substances to use in investigations to identify counterfeit drugs.

II. FOREIGN INSPECTION WORKING GROUP

The continuing increase in international trade has turned the world into a global

marketplace. The number of API and finished drug products manufactured abroad

for the U.S. market is growing. It has been reported that as much as 80 percent

of the APIs used to manufacture and produce prescription drugs in this country is

imported from other countries. Therefore, over the last decade, FDA has substantially increased its worldwide inspectional and import monitoring operations, but

the rapid expansion of the world market will continue to challenge our ability to

direct appropriate levels of resources and operations to the foreign arena. FDA must

continually recalculate its enforcement tools to ensure that the American public is

protected from adulterated and unsafe products entering the U.S. market.

To keep pace, FDA has stepped up its inspectional and import-monitoring activities since the early 1990s, however, the Agency recognized that it needed to do

more. In 1995, the FDA formed a Foreign Inspection Working Group (FIWG), comprised of representatives from all parts of the Agency, in an effort to evaluate the

Agency’s current foreign inspection program and related import product monitoring.

The working group devoted months to understanding and identifying FDA’s

strengths and weaknesses in its foreign inspection program. The FIWG issued a

summary report in June 1997. This evaluation cuts across Agency program areas,

however, I will focus on the drug program and how it relates to bulk drugs, the findings, and the Agency’s subsequent actions over the past three years.

Inspection Planning

Prior to Fiscal Year (FY) 1997, FDA’s foreign inspection program in large part focused on pre-approval inspections. In the early 1990s, foreign inspections resulted

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ative to domestic facilities. These findings indicated a need for more post-approval

surveillance coverage to help assure that imported drug products are produced in

accordance with cGMPs.

CDER addressed this issue by structuring its foreign post-approval inspection

scheduling using a risk-based strategy that allows it to more effectively utilize limited resources. Specifically, assignments are still primarily application driven, in

that all foreign inspections of firms that are part of an application are conducted

during the course of the application review. Additional post-marketing surveillance

inspections are scheduled based on risk as assigned by a four-tiered system:

• Tier 1—firms needing reinspection due to a previous finding of ‘‘official action indicated’’; • Tier II—firms manufacturing sterile bulk or finished dosage products; • Tier III—firms with a higher number of applications and firms manufacturing

bulk drugs for use in injectable dosage forms; and • Tier IV—all other firms.

The tiered system has had the beneficial effect of focusing our limited resources

on the firms that pose the highest risk to the American consumer. We have maintained a level of inspecting about 250 foreign firms per year for cGMP compliance

and pre-approval acceptance. The inspections performed have been in the Tier I and

Tier II categories.

The negative consequence, however, is that by continually emphasizing these

high-risk firms we are not able to get to the Tier III and Tier IV firms, thereby

lengthening the gap between inspections. CDER has recognized this problem and

has identified and provided to ORA a priority list of 24 firms in China and 32 firms

in India that have not been inspected but, according to the Operational and Administrative System for Import Support (OASIS) data, have shipped product in the last

two years into the U.S. ORA is working these firms into inspection planning as resources permit and travel plans make opportunities available. For example, inspections of these priority firms can be added to pre-approval inspection trips.

Official Establishment Inventory

The Agency’s Official Establishment Inventory (OEI) is a compilation of firms

FDA has inspected, firms that have shipped products to the U.S., as indicated by

the OASIS database, and firms that have listed as part of the Agency’s drug listing

program. FDA has completed evaluations of entry data from OASIS and is using

this information to supplement the inventory of firms in the OEI. This is an ongoing

process. FDA recognizes that there are weaknesses in this data, due in part to the

fact that the OASIS system is user-driven. The Agency is using broker evaluations

in part to increase the integrity of the submitted data and eventually included in

the OEI.

The Agency is hindered by not having a complete list of foreign facilities manufacturing drug products for the U.S. market. This finding indicates a need to improve

the Agency’s information database on foreign firms exporting drug products to the

U.S. The Food and Drug Administration Modernization Act (FDAMA) of 1997, requires the registration of foreign establishments. Once we have completed the rulemaking process and put the technology in place to implement this requirement, the

Agency will have available to it a comprehensive listing of foreign establishments

exporting drugs to the U.S.

Having a complete OEI, however, is only one step. We also must have the information technology to be able to more fully utilize the data we already have to the

Agency’s benefit. Therefore, FDA has begun a process of upgrading its hardware and

software systems to move beyond the fragmented and independent systems of the

past into an integrated information environment where data is more readily available and more easily manipulated to provide information and analyses that has not

been possible before.

The Agency recognizes while we have made great strides in improving our information technology, we still do not have systems that can effectively and efficiently

communicate across the Agency, or readily provide field staff with critical information they need.

FDA is implementing the upgrade of our information technology systems to utilize

wide area network (WAN) technology, which will support the availability of much

more information to inspection officers. We are evaluating both the technology, as

well as the cost, or further integrating our various sources of data into unified databases.

The OASIS system uses information input by filers (Custom House Brokers and

importing firms) to facilitate the screening and/or inspection of imported products

that are subject to FDA regulation. OASIS began as a pilot program in the Seattle

District in 1992. It interfaced with the U.S. Customs Service Automated Commercial

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System (ACS), screened entries (using ACS) and provided the initial operational

support to FDA users. The interface with ACS and the screening subset of the system (known as EEPS) was implemented nationally by June 1995, and use of the

OASIS system by industry became mandatory in December 1996. The baseline of

the current version of OASIS with full basic operational functionality was implemented nationally by October 1997. The system has undergone continuous improvement of operational support. A major change in September 1999, moved screening

from ACS to OASIS and expanded screening to cover all data elements.

As a user-driven system, OASIS depends upon import brokers to provide complete

and accurate information. While the OASIS system provides the majority of the information it was designed to provide, it only contains 2 years worth of data, and

does not electronically interface with other systems which contain additional information which would be of value to our field staff.

One of FDA’s major upgrades in information technology is the establishment over

the last year of the Field Accomplishment and Tracking System (FACTS), which

performs a number of functions, including the ability to request, manage and report

on inspections and other field assignments such as sample collections and analyses,

and compliance cases. FACTS incorporates data from the Compliance Status Information System (COMSTAT) system, described below, as well as OASIS, and will

eventually provide the resident environment for the foreign OEI. We also are actively working on integrating the Establishment Evaluation System (EES), which

provides information on inspection requests and outcomes to compliance officers,

drug reviewers and field personnel, with the FACTS database.

COMSTAT provides the compliance status of foreign manufacturers based on the

results of cGMP inspections. COMSTAT data is shared with other Federal agencies

and foreign inspectorates to ensure that pharmaceutical products purchased or

cleared for import meet acceptable standards. Ideally, this data should be readily

available to FDA’s import inspectors making admissibility decisions. COMSTAT

does not include the drug listing identification number FDA assigns to each manufacturer in the Drug Listing database, which lists the products of drug firms registered with CDER. FDA is pursuing the linkage of information in the Drug Listing

database with COMSTAT so that we can easily match foreign manufacturers who

have ‘‘listed’’ with their compliance status. The Drug Listing database also does not

interface with OASIS, which would assist import officers by automatically comparing manufacturers and listed pharmaceutical products to products offered for importation, and this is another area where we are working on establishing a linkage.

Finally, we are also actively working on connecting the current EES with the import data available in OASIS, as described more fully later with regard to a pilot

project in our Philadelphia District.

Import Alerts

FDA has identified the need to establish enhanced procedures to better assure

that an import alert notice for a product or company will, in fact, prevent the violative products from reaching the U.S. consumer. We have begun this process by making import alerts available to interested parties on FDA’s Internet site.

International Information Exchange

The Agency needs to strengthen and improve communication with the public

health and regulatory components of foreign governments. FDA foreign inspections

are ‘‘pre-announced,’’ because FDA must obtain permission to enter the foreign

country. Therefore, it is difficult for FDA to assure that the firm is operating under

normal conditions during the inspection.

Establishing strong relationships with the foreign governments will facilitate both

access to the country and a fair and frank exchange of information regarding the

regulatory status of facilities in that country. The Agency has negotiated a Mutual

Recognition Agreement (MRA) with the European Union. This agreement involves

an upfront investment of resources on the part of FDA that should result in expanded inspectional coverage of foreign firms by foreign inspectional body counterparts. On a parallel track, FDA has a number of Memoranda of Understanding

(MOUs) with foreign countries to obtain inspectional information that will supplement what FDA is already doing.

Sampling

Evidence of product quality problems has not been identified during current surveillance sampling activity. We will continue to target high-risk drug products for

sampling.

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III. COUNTERFEIT DRUG INITIATIVE

In 1995, the Agency began a closer examination of the issue of counterfeit drugs.

For just over 2 years a cross-cutting group reviewed both the Agency’s knowledge

of the extent of counterfeiting and the adequacy of the systems in place to handle

it when it occurred. While the work of this group is certainly related to the work

of the FIWG as described above, the findings and observations were specific to counterfeit drugs.

Meetings with Representatives from Foreign Governments and Industry

The Agency has and continues to strengthen its international collaborative efforts

with other inspectorates outside the MRA process. We have given priority to Canada, Australia, and Mexico for more development and have worked with Latin

American countries on educational efforts, for example, the University of Puerto

Rico project. These efforts also include a semiannual scientific exchange meeting

with representatives from the United Kingdom, Germany, Canada, Australia, and

the Netherlands.

The Agency has met with pharmaceutical industry representatives from innovator

and generic drug companies to discuss the importance of sharing information that

they may have regarding counterfeit drug products. Discussions are held regarding

the most productive ways to enhance cooperation by exchanging information and

providing assistance during future investigations. Companies that produce high demand products that tend to be counterfeited often do not elaborate on the actions

they are taking to combat the counterfeiting problem. While such secrecy is understandable, sharing such information would create efficiencies for both the Agency

and the industry in efforts to combat counterfeiting.

In addition, in 1997, the Office of Criminal Investigations (OCI) began to coordinate international efforts aimed at identifying, investigating, and prosecuting pharmaceutical crime through liaison with international efforts that had been formed by

the Forensic Chemistry Center. In 1998, OCI formally established a liaison with its

international counterparts within the Medicines Control Agency (MCA) in the

United Kingdom, and the German National Police, Bundeskriminalamt (BKA). This

collaborative effort of sharing criminal intelligence has now grown into the Permanent Forum on International Pharmaceutical Crime (PFIFC). This working group is

an international enforcement forum aimed at exchanging intelligence and ideas to

foster mutual cooperation in combating pharmaceutical crime. The following countries have representatives on this forum: USA, United Kingdom, the Republic of Ireland, Northern Ireland, Spain, Germany, Canada, Singapore, Brazil, Belgium, South

Africa, the World Health Organization, and the World Customs Organization. The

PFIPC meets once a year and facilitates ongoing dialogue among member nations

throughout the year.

Postmarket Sampling of Imported Products

As we noted above, a key element of post-marketing surveillance is the Drug

Product Surveillance program. While this program provides the Agency with valuable information about the quality of drugs marketed in this country through sampling and analysis of imported and domestic drug products, the volume of imports

dictates that only a small fraction of the entries are examined.

That said, there is concern that the current sampling strategy is not using the

Agency’s resources most effectively. Increased sampling and testing of foreign produced bulk pharmaceutical chemicals and finished dosage forms have revealed very

few problems. Two changes have been made to our sampling strategy as a means

to address these concerns.

1. The sampling of APIs for analysis by the Forensic Chemistry Center (FCC) to detect counterfeits was revised in 1998. The sampling now calls for the collection

of five batches per year for each of the last 5 years (25 samples total) for each

source of API at each finished dosage manufacturer. In the past, we received

a few samples each of a large number of different drugs that was a kind of

‘‘shotgun’’ approach, hoping for a random hit. The new program is more focused

and more likely to detect counterfeits, however, of necessity, only a few drugs

can be addressed each year. Three drugs were selected for sampling in FY 1998,

five drugs were selected for FY 1999, and three are targeted for FY 2000.

2. CDER’s compliance program now directs FDA investigators as part of its inspection assignment at a foreign API manufacturer to ask the manufacturer to provide the FCC authentic samples of its APIs, labeling, certificates of analysis,

container information, batch numbering information, size, and amounts of API

produced and shipped to the U.S. The authentic information is entered into the

API database and used for comparison to suspect samples.

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Increased Training for FDA Import Inspectors

FDA inspectors and investigators need accessible information to help them determine the authenticity of pharmaceutical products. The Agency recognizes the need

to provide training to investigators and inspectors on conducting effective API inspections while providing specific information on issues involving counterfeit and

unapproved sources of drugs as well as poor cGMP compliance. Intensive training

sessions will be conducted in July 2000, with U.S. Customs Service officers collaborating with FDA to provide the training. These sessions will focus on U.S. Customs

Service laws and regulations, enforcement techniques that can be used at U.S. ports

of entry, and a U.S. Customs Service strategic problem solving-program that targets

willful violators. While not totally focused on bulk drug imports, this additional

training will be highly applicable to field activity in this area.

Drug Listing

The Drug Registration and Listing System provides information on foreign pharmaceutical manufacturers, based on the statutory requirement that they list the

drug products that they ship into the U.S. However, anyone can obtain a drug labeler code and therefore submit a drug listing form. The drug listing does not ensure

that authentic sources or authentic material as described in NDAs is in fact being

offered for admission.

To begin to address the weaknesses in the current system, a pilot program was

initiated in the Philadelphia District to provide import inspectors with access to additional databases. Using CDER’s EES, which tracks drug applications, inspectors

increase the probability of confirming authentic sourcing of APIs. The pilot was setup in cooperation with CDER, who donated a stand-alone computer to provide the

import inspector access to the EES and IND databases and other inspection databases. The system allows inspectors to retrieve additional important data in about

three to four minutes on any API entry.

The Philadelphia District Office is a relatively small API importing area compared

to New York or Los Angeles. Nonetheless, this pilot has enabled Philadelphia to

verify information on API entries on-line, and has resulted in approximately 50 less

telephone calls to CDER seeking this information. Based on the success of this pilot

program, the Agency is planning to expand this pilot program in stages until it provides nationwide EES access to all import inspectors.

Enhancing Analytical and Forensic Methodology to Analyze APIs

It has been observed that counterfeiters are becoming more sophisticated with respect to the counterfeiting of labeling, containers, seals, and documents. Therefore,

to detect counterfeit APIs it will be necessary to conduct forensic analysis of the

API.

The FCC continues to improve its ability to detect counterfeit APIs by enhancing

its expertise, forensic methodologies, and instrumentation. Numerous APIs have

been collected and chemically fingerprinted. Last year, based in part on these types

of analyses, special targeted inspections were conducted in China, which resulted in

one firm being placed on import alert and warning letters being issued to two others.

Develop a Strategy for Inspection of U.S. Import Agents and Brokers

The Agency is currently inspecting these facilities on a ‘‘for cause’’ basis in response to leads it receives about specific importers. A proposal to begin inspecting

these facilities on a routine basis is in the FY 2001 workplan.

In addition, FDA has already established a broker/filer evaluation program to

audit the integrity of data submitted by customs brokers. These programs have encouraged import filer compliance, and FDA is hopeful that planned enhancements

to these programs will provide additional intelligence and subsequently increase enforcement actions in the areas of counterfeit and unapproved drugs.

Targeted Collection and Testing of Selected Imported APIs

As described above in the discussion of FIWG actions, despite increased sampling

and testing of foreign produced bulk pharmaceutical chemicals and finished dosage

forms, very few problems have been detected. Changes have been made to our sampling strategy as a means to address these concerns.

Import Alerts

The sheer volume of imported products precludes the Agency from physically examining every entry into the U. S. Therefore, other tools must be used to help control the entry of products where historical data suggests products are likely to be

violative. One approach the Agency has taken is to use Import Alerts as a means

to disseminate information to interested parties regarding problems with imported

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products. Import alerts have been made available on FDA’s website. These alerts

can be used to identify problem commodities, problem shippers, or problem importers, in addition to providing guidance for import coverage. An alert may cover an

individual manufacturer, supplier or a particular product from an entire country. As

a follow-up to an inspection, import alerts may also issue where it is determined

that a manufacturer is in violation of cGMPs and the firm’s status is determined

to require ceasing distribution in the U. S. These products can be detained without

physical examination or analysis because there is a violation of the FD&C Act.

The counterfeit drug initiative working group was disbanded last year. While

counterfeit drugs continue to be an issue of concern, it was determined there was

no specific need for a Commissioner’s Office initiative and that ORA and the Centers are the appropriate components to manage the potential for counterfeit products as part of their on-going workload.

Challenges

Building and maintaining a strong the regulatory framework and tools to address

the entries from foreign countries is complex, and the Agency needs to have the

flexibility to change as the global market changes. A healthy regulatory and enforcement system requires significant staff and resources, staff expertise, scientific methodologies and the tools to conduct testing, information systems, and access to information via established networks with both other countries and the industry.

While FDA has done much in the past few years to address both the general challenges in having a strong and viable foreign inspection program and the specific

tools needed to combat counterfeit drugs, clearly more can be done. We look forward

to working with you as we continue to strive to provide the protection the American

public expects and deserves.

I would be happy to answer any questions you might have.

Mr. UPTON. Well, thank you. As you may know, we are now

going to have questions, and I am going to try to keep strict time

with our questions. I am sure we will do a couple of rounds, 5 minutes apiece, and we will alternate between sides, Republican and

Democrat. The clock is now running.

As you talked about in your statement—I guess the thing that

grabbed me the most in your statement was that a number of us

in the Congress, particularly this committee, have asked for more

action taken. It seems as though a basic instinct would be that if,

in fact, one of our domestic pharmaceutical industries, if they actually came upon tainted compounds coming into the country, that

the first, the very first thing that you all ought to be required to

do is to, in fact, go after the source, inspect it and take corrective

action, whatever it may be, so that it never happens again.

Admittedly, the task is large: thousands of companies around the

world sending tons of stuff into this country, without even an inspector, at virtually every port; the documentation coming in so

that you don’t even know necessarily that it is going to a pharmaceutical company, but instead it is a supplier—it is a middleman,

it is going to some warehouse and not necessarily being traced beyond that.

But your statement at the end, that Mr. Dingell and Mr. Klink—

and I would add Mr. Upton and Mr. Burr and Mr. Bliley and others—would think that one of your first requirements would be that

if one of those pharmaceutical companies identified a bad supply

coming in, you ought to have the requirement to be notified so that

you can go find the source.

Now, that’s been out there for, what, a year? Why wouldn’t that

be an immediate source of review, particularly in light of your comment today, which I have a copy of, which you probably read in the

Wall Street Journal. It says the FDA was taken aback by numbers;

the Commerce Committee had specifically asked the Agency to

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check its computer records for the number of foreign drug manufacturers that hadn’t been inspected. When the answer came back as

4,600, FDA officials conceded that they were surprised, and then

you are quoted as saying, ‘‘Surprised is probably an understatement. Concerned, definitely, and we are on it.’’

Well, if you are on it, you should make it incumbent upon our

manufacturers to say they have got some bad stuff, can you do

something about it. Yet you haven’t even taken up the first step,

marching down the field, of saying you have got a requirement to

tell us where it is coming from.

Knowing that your staff is limited to do inspections in other

countries—and, you know, you look at the numbers that I cited in

my testimony, India and China and other places as well; and we

showed documents of bad things happening—why isn’t that the

first thing that would come to your mind?

Mr. BAKER. It is difficult to explain why that wouldn’t come to

mind. It probably is because we look at the overall bulk product

from the standpoint of contaminants and so forth: Is there some

reason for rejection by the manufacturer other than counterfeiting?

Mr. UPTON. That ought to be your first line of defense. If Merck

or Pharmacia—Upjohn or any major company, with all the different things that they do and they are certainly committed toward

safety from top to bottom, they ought to be your front-line defense

in terms of what is going on. To not even require them to notify

you when something comes in—you know, the pictures that I

showed earlier on of the counterfeit supply and the one that’s traditional.

Let’s say that was an epilepsy drug and one of them works and

one of them doesn’t. One of them is going to an individual who will

have a seizure and perhaps die and the other one is going to be

okay. I mean, these are life-and-death decisions, and we have to

trust you all to make sure that it is done right.

We see this sad case of what happened in Haiti. My sense is that

we have got some other problems that have occurred in this country, maybe not—without the headlines, maybe we don’t know, but

someone has got to have that Good Housekeeping Seal of Approval

which you have. To me, the most basic thing is when someone is

suspected of sending something in, that somebody is on top of it.

Mr. TAYLOR. Mr. Chairman, I agree with everything that you

have said.

Mr. UPTON. I have to swear you in now. You should have probably stood up when we did this in the beginning. But if you would

identify yourself again for the record.

Mr. TAYLOR. My name is John Taylor and I am the Acting Director of the Office of Compliance at the Center for Drug Evaluation

and Research.

Mr. UPTON. If you would stand, I will swear you in.

[Witness sworn.]

Mr. UPTON. You are now sworn in as well.

Just in a minute, time is gone, but if you would give an answer

and then we will continue to rotate.

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TESTIMONY OF JOHN TAYLOR, ACTING DIRECTOR, OFFICE OF

COMPLIANCE, CENTER FOR DRUG EVALUATION AND RESEARCH, U.S. FOOD AND DRUG ADMINISTRATION

Mr. TAYLOR. Okay. Right now, as a part of the GMP regulations—those are the quality control and quality assurance regulations that dictate how pharmaceutical products are supposed to be

manufactured to ensure their safety and efficacy—the manufacturer is supposed to determine whether or not the bulk product

they are getting is from the approved supplier. So they are supposed to have in their files information regarding the bulk products

that they are getting. If they run an analysis and it determines

that there are impurities or that the product is subpotent, that information is supposed to be in their files; and as a part of our GMP

inspections, we are looking at that and have access to this.

Mr. UPTON. I know you have access to it. The question is, if you

have got the red flag that’s up there, why aren’t they required to

tell you, so that you can take action like that, to go after them to

make sure it doesn’t happen again versus, oh, it is—you know, it

is the third year of our inspection process, and here we are, and

maybe we find it and maybe we don’t, and—you know?

Mr. TAYLOR. I agree with you. That’s the reason why I think it

is a good idea because it gives us the opportunity on a real-time

basis to have information regarding whether or not a product that

is received is of poor quality; and instead of waiting between our

regulatory inspections to discover that information, this gives us an

opportunity to do regulatory follow-up right away, whether it be

civil or criminal. So I think it is a very good idea.

Mr. UPTON. Well, why can’t we get it done? This has been before

you. Again, I know Mr. Dingell is not here, but it has been before

you for more than a year. He is not exactly a silent individual. He

usually carries a big stick.

Mr. TAYLOR. I do think we should follow up and we should follow

up on it quickly. I know the idea was brought up before. I apologize

for the fact that we did not run with it, but we think it is a good

idea, and we are prepared to run with it and offer it. What we

want to do is find the right place in the regulations where it should

fit.

But that’s something we think is a good idea and will help us.

Mr. UPTON. Mr. Stupak.

Mr. STUPAK. Thank you, Mr. Chairman.

Mr. Baker, if I may, if you would bear with me for a minute, I

would like to ask you a question or two, and I appreciate your help

in fully understanding this issue and a related issue.

First, I understand the tremendous strain that the implementation of the 1997 FDA Modernization Act has put on the resources

of the FDA. However, this issue before the committee disturbs all

of us here today. When I couple this issue with the other information I have been given on another potential drug safety concern, I

am perplexed.

Mr. Baker, are you aware that some pharmacies are importing

nonpharmaceutical-grade radioisotopes and illegally manufacturing

and selling radioactive diagnostic drugs under the guise of the

practice of pharmacy?

Are you aware of that going on?

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Mr. BAKER. I will defer to Mr. Taylor on that. We do have information on that, yes, sir.

Mr. TAYLOR. Yes, sir.

Mr. STUPAK. How have you responded then to the concerns of the

legitimate manufacturers whose FDA-approved drugs are being

copied by these pharmacies, since they have brought this problem

to your attention about a year ago?

Mr. TAYLOR. Well, my response would be, the Modernization Act

obviously carved out some exceptions for compounding. For example, the fact that you don’t have to register as a manufacturing facility, you don’t have to follow GMPs; but that same exception was

not carved out for radiopharmaceuticals.

Mr. STUPAK. So there is no exception for them?

Mr. TAYLOR. Right. As a result, radiopharmaceutical manufacturers still have to register with the Agency.

Mr. STUPAK. Right.

Mr. TAYLOR. And still have to follow good manufacturing practices.

Mr. STUPAK. You admitted a year ago they brought this to your

attention, right? I have some letters here from June 1999, August

1999, May 12, 2000 to a Lana Ogram. Have you succeeded her in

that office now?

Mr. TAYLOR. Well, she actually works for me.

Mr. STUPAK. Okay. In the Office of Compliance, right?

Mr. TAYLOR. Yes.

Mr. STUPAK. So they work for you. So if it is your policy then to

ensure that patients are protected from potentially unsafe and ineffective drugs, why has no one responded in the last year to the concerns brought forth by these manufacturers?

Mr. TAYLOR. Well, sir, I have been there 6 weeks, and when I

first arrived, I realized that these letters were before the office.

And we are preparing responses, not only to letters that we have

received from manufacturers about radiopharmaceuticals, but also

letters we have received from compounders seeking clarification on

our policy.

Mr. STUPAK. I realize you have been there for 6 weeks. You said

this lady, Lana—— Mr. TAYLOR. Lana Ogram.

Mr. STUPAK. [continuing] Ogram works for you, right?

Mr. TAYLOR. Yes.

Mr. STUPAK. So has she followed up with these people?

Mr. TAYLOR. Well, I know that we have drafted responses that

are now before our attorneys and are ready to go out. She has spoken to some of these people. We have actually done, quite frankly,

some investigatory follow-up to investigate some of the allegations

that are in the letter, and some of that is actually ongoing right

now.

Mr. STUPAK. Okay.

Mr. TAYLOR. So we think there will be further steps in the future.

Mr. STUPAK. If you would, after this hearing sometime, and in

the real near future, could you get with us? Because I would like

to follow up more on this detail.

Mr. TAYLOR. Sure.

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Mr. STUPAK. If you are doing something, we want to know what

it is, so we can get back to these folks. I want to follow up that

part of it. I am really interested in this very serious allegation

here.

They use the radioisotopes, I am sure you know, for very serious

illnesses and diseases and for detection, and I just want to make

sure we are doing all we can so those who are faced with a serious

injury are getting the best possible coverage.

Mr. TAYLOR. Sure.

Mr. STUPAK. Mr. Baker, if I can jump back to you then, in June

2 correspondence to this committee, you reported that—and I am

quoting—‘‘The number of foreign drug manufacturers that have

shipped to the U.S. but have never been inspected by the FDA is

approximately 4,600.’’ You go on to say, in a quote again, ‘‘The

number of such firms located in China is 623 and the number located in India is 409.’’ Mr. Baker, isn’t there evidence that both China and India have

had significant problems with drug counterfeiting in the past?

Mr. BAKER. Yes.

Mr. STUPAK. Okay. What can you tell us about the 623 firms located in China that are apparently shipping or have shipped to the

U.S., but have never been inspected?

Mr. BAKER. Right now, we are going through the entire 4,600

list. That’s one of the things that I instructed the staff to do. I

wanted answers, and I wanted answers right away. We should

have some basic information on anyone that is shipping into the

country.

One of the things we are dealing with here is, a lot of these APIs

may have been entered and then they would be in the system as

entered from an API source, but it goes to a nonpharmaceutical

source. So we are looking at the issues associated with those entries right now.

Mr. STUPAK. Okay. Do you know if any of the 623 Chinese firms

mentioned above are tier 2 or tier 3 firms? Do you know?

Mr. BAKER. Yes, they may be, certainly.

Mr. STUPAK. Okay. Do we know if they meet all the current good

manufacturing practices?

Mr. BAKER. No, we don’t.

Mr. STUPAK. We don’t know that. Okay.

So we should be concerned then, without that knowledge, about

products some of these companies are shipping here to the U.S.

then, right?

Mr. BAKER. Yes, sir.

Mr. STUPAK. Okay. What about the Indian firms, the 409, are

they tier 2, tier 3?

Mr. BAKER. Yes, sir, I am sure they are.

Mr. STUPAK. Again, we don’t know if they are—the current good

manufacturing practices, we don’t know if they follow that standard?

Mr. BAKER. That’s correct, sir.

Mr. STUPAK. Okay.

You indicated in your statement that you appreciate the support

of Congress, and then trying to do your investigation, and I mentioned in my opening statement that—what are the resources you

256

need? If we are not providing you sufficient resources, what exactly

do you need to really get at this issue?

I am hearing here this morning already that letters are about a

year old; they are not being answered; attorneys are looking at

them; we don’t know if these Chinese or Indian firms are following.

What do you need specifically to really enforce this, to correct some

of these problems?

Mr. BAKER. A combination of things. Obviously, part of the solution would be the FTEs to do a better job of inspecting. It is also

having that comprehensive and linked computer system to adequately assess data to make sure that we are able to quantify information that’s coming in. We are trying to pull it now from several independent data bases. It is not an efficient system.

Then, obviously, we need a targeted approach to criminal investigations, both through our Forensic Chemistry Center and our Office of Criminal Investigations.

Mr. STUPAK. Can I ask you one more—if I may, Mr. Chairman?

Do you know now if any of this material is being sold through

some of the Internet Web sites to U.S. citizens that’s already counterfeited drugs or are substandard drugs?

Mr. BAKER. I am not aware of that, no, sir.

Mr. STUPAK. Okay.

Have you done a review of it, a screening?

Mr. BAKER. We have done some purchasing of products offered

on the Internet, and we have done some analytical work associated

with those products. Thus far, the products have proven to be

mostly from domestic suppliers. But then, given the scope of the

Internet, the number of places potentially offered and our ability

to analyze, I wouldn’t rule out that being a problem; just simply,

we haven’t uncovered it at this point.

Mr. STUPAK. You said they were from U.S. products, but when

we had our hearing on the Internet sales, most of the Web sites

are from other countries. Very few are from the U.S. So have you

checked any of the Web sites that are located——

Mr. BAKER. We have been checking Web sites, yes, sir.

Mr. STUPAK. Because most of those are not U.S. products; they

are other countries.

Thank you, Mr. Chairman.

Mr. UPTON. Mr. Burr.

Mr. BURR. Mr. Baker, does the FDA believe that Americans have

died or been injured because of counterfeit or unapproved bulk ingredients?

Mr. BAKER. We have information that there were certainly injuries associated with counterfeit products, yes, sir.

Mr. BURR. Is that answer yes?

Mr. BAKER. Yes, sir.

Mr. BURR. Mr. Taylor, you work in what capacity at the FDA?

Mr. TAYLOR. I am the Acting Director of the Office of Compliance.

Mr. BURR. Would the Office of Compliance come under the Office

of Regulatory Affairs?

Mr. TAYLOR. No. I report to the Director of the Center that approves drugs; I report to Dr. Woodcock. We are peers. We are a sister organization of Mr. Baker.

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Mr. BURR. Okay.

Mr. Baker, I understand that on Monday you met with the committee staff.

Mr. BAKER. That’s right.

Mr. BURR. At that meeting, the staff presented you with a confidential report on counterfeit and fraudulent practices in the bulk

drug industry. You said, if I understood them correctly, you had

never seen that document; is that correct?

Mr. BAKER. Yes, sir.

Mr. BURR. Well, my understanding is that the Office of Criminal

Investigation, which reports to you, had a copy of this report, but

didn’t share it with you, even in your preparation for this hearing.

Is that correct?

Mr. BAKER. I did have it in preparing for this particular hearing

today.

Mr. BURR. Why wasn’t it shared with you if they report to you

and you are in charge of this?

Mr. BAKER. The information was shared with me. I didn’t recognize the document as it was presented to me. The basic information

was shared with me in February 2000. At that point, I allocated

funds to do some targeted inspections and analytical work associated with APIs and importers.

Mr. BURR. Is there a communications problem at the FDA?

Mr. BAKER. No, sir, I don’t believe so. I think we have got good

communications across the various programs.

Mr. BURR. Let me ask you about a memorandum that we entered

into the record. It was a memorandum from Carl Nielsen. I believe

he is the Director of Import Operations. I believe you appointed

him. Is that correct?

Mr. BAKER. Yes, sir, that’s correct.

Mr. BURR. It was a memo from him to Frank Forgon?

Mr. BAKER. Forgione.

Mr. BURR. Forgione. Excuse me.

This is on counterfeit imported human Rx bulk drugs. In this

memo, Mr. Nielsen states, ‘‘It appears there have been deaths associated with the use of generic prescription drugs made from counterfeit bulk drugs supplied by Flavine.’’

Is that the documentation that you were referring to when you

said the FDA believed that, in fact, Americans had died?

Mr. BAKER. That actually was referring to that documentation

and then to adverse events that have been associated with some of

them.

Mr. BURR. So is there more than this memo that would suggest

that there is a health problem?

Mr. BAKER. I don’t know that I can answer that without looking

at a number of documents to see what we have.

Mr. BURR. Well, I would hope that your staff, in preparation for

this hearing, would have at least shared with you the documents

that existed that might deal with deaths that had occurred from

contamination or counterfeiting of drugs.

You believe that that is taking place?

Mr. BAKER. Well, we have certainly investigated a number of

deaths and injuries associated with counterfeit drugs and allegations of counterfeit drugs, yes, sir.

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Mr. BURR. He also observed in this memo—let me read it, and

I quote—’’There is, in effect, little or no FDA control of bulk drugs

coming into this country, and there is currently no ongoing enforcement action to serve as a meaningful deterrence to the trafficking

and use of counterfeit or unapproved bulk drugs.’’

Have you read that statement?

Mr. BAKER. Yes, sir.

Mr. BURR. Is that the case?

Mr. BAKER. At this time, we do not have a specific enforcement

action going on. We do have investigations open.

Mr. BURR. Can you share with me what the date of this memorandum was?

Mr. BAKER. August 1996, I believe.

Mr. BURR. May 15. Of what year?

Mr. BAKER. I am sorry, 1996.

Mr. BURR. Okay. It has been 4 years since this revelation was

made at the FDA. How long should we wait?

Mr. BAKER. I don’t think we should wait. We have to be

proactive, and that’s what we are attempting to do now is, be

proactive and identify——

Mr. BURR. How long have you been in your capacity?

Mr. BAKER. About a year.

Mr. BURR. About a year?

Mr. BAKER. Yes, sir.

Mr. BURR. So I can’t date back to 1996 and ask you from 1996

to a year ago why something didn’t happen. That is unfair. But

clearly the FDA, in their own memoranda, knew in 1996, May 15,

that they had a problem; they had a problem and they had deaths.

What has happened since you have been there that assures this

committee that this is not continuing?

Mr. BAKER. Our ongoing efforts to improve the overall processes.

Mr. BURR. What are those efforts? What are those improvements?

Mr. BAKER. Well, some of them we just covered in my testimony.

Mr. BURR. Those are in response, I believe, to the fact that Congress now has this on their front burner, that John Dingell and

Bart Stupak and Ron Klink and Fred Upton and Tom Bliley are

concerned with this and we have come up with a series of things

that we are going to run to the Hill and present. This is 1996, Mr.

Baker.

Mr. BAKER. Yes, sir.

Mr. BURR. What initiatives happened before Congress got interested in the deaths of Americans and the counterfeit of drugs and

the contamination of bulk drugs coming into the country?

Mr. BAKER. Well, one of the initiatives that occurred before I

knew this was going on was in February of 2000 when I directed

the funding of the initiative out of our Forensic Chemistry Center

to do specific, targeted inspections and sampling and analytical

work at specific import sites.

Mr. BURR. I hope you understand my frustration.

Mr. BAKER. Yes, sir, I surely do.

Mr. BURR. And this is today’s news article, and the chairman has

already referred to it, when your quote is, ‘‘Surprise is probably an

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understatement,’’ surprise that there are so many entities out there

that are uninspected.

Gosh, 4 years ago; a year ago you came in, we are still in the

mode where we are surprised? I am hopeful that through this hearing you will understand the urgency of a solution to this problem.

Mr. BAKER. Yes, sir.

Mr. BURR. Mr. Chairman, I yield back.

Mr. UPTON. Mr. Strickland.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. Baker, much of the inability to detail precisely who these foreign firms are, when they were last inspected, whether they are

manufacturing in accordance with current good manufacturing

practices and so on, is because of an information technology problem.

The FDA has a multitude of data bases that don’t properly interact with each other; is that correct?

Mr. BAKER. Yes, sir, that is correct.

Mr. STRICKLAND. Isn’t that mainly the problem with the OASIS

system, or are there other systems who are at fault here?

Mr. BAKER. There are several systems that interact, that we use

information from, in order to make assessment of products. In addition to the OASIS system, which is the entry system for FDA,

where we actually have items come in on a screen and our people

look at the items for approval of entry into the United States, we

have a FACTS data base which is our data base which covers foreign establishments and domestic establishment inventory. That

latest upgrade came on-line last September. We are developing the

data base there.

The OASIS system feeds information into the FACTS system; as

an example, whenever a firm offers a new product for entry into

the United States, it automatically updates FACTS with the information that this is a new manufacturer, and it creates an FEI,

Federal Establishment Number, there.

Mr. STRICKLAND. Okay. The FDA obviously has had problems for

years with these foreign inspection data bases. You have apparently been telling this subcommittee—I am fairly new to this subcommittee, but I think you have been telling this subcommittee for

years that the problem is soon to be fixed. So I guess a fair question to ask you would be, when is it going to be fixed?

Mr. BAKER. We are making efforts at this time to go to a Windows-based environment. I have been advised that that will be in

place by the end of 2001. That way we will be able to work better

across the data bases structurally.

In addition to that, I have asked—I beg your pardon?

Mr. STRICKLAND. I am sitting here thinking, when you said the

end of 2001, I am thinking we could plan, execute, carry out, conclude a war in that length of time. It just seems like an unreasonable period of time. Is it impossible for you to accomplish this sooner than the end of 2001?

Mr. BAKER. Well, our Chief Information Officer basically drives

the structure of the information systems within FDA. I don’t have

a good answer for you why it would take that length of time.

Mr. STRICKLAND. I would like to yield to my colleague.

Mr. STUPAK. On this IT problem——

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Mr. BAKER. Yes, sir.

Mr. STUPAK. On this IT problem, can you get back to this committee within a month and tell us formally what you are going to

do and how it is going to be fixed and what needs to be done to

fix it?

Mr. BAKER. Yes, sir.

Mr. STUPAK. This has been going on for some time. I certainly

agree with my colleague here that the end of 2001 just doesn’t

seem right.

I would think that within 30 days you could come back to this

committee, under the chairmanship of Mr. Upton, and tell us exactly what you are going to do, what has to be done, how we do

it—and hopefully it is not going to be 2001—in writing.

Mr. BAKER. Very definitely, yes.

Mr. STUPAK. Thanks for yielding.

Mr. STRICKLAND. Yes. And if you can’t do it, you need to come

back and tell us you can’t do it and why you can’t do it. That seems

to be a fair request on our part.

Mr. BAKER. Yes, sir.

Mr. STRICKLAND. Mr. Baker, does the FDA have a timetable—

well, the 2001, that’s your current timetable, the end of 2001?

Mr. BAKER. That’s for the overall architecture of the system to

be completed and carried out across the Agency, on the wide area

network.

Mr. STRICKLAND. That’s the architecture. That doesn’t mean——

Mr. BAKER. Individually, it doesn’t——

Mr. STRICKLAND. I assume architectural plans, but does that

mean that there would be—even under your current plans, that

this would be accomplished by the end of 2001?

Mr. BAKER. I have been advised that it is due to be accomplished

by the end of 2001. That doesn’t mean we can’t do some things

with our current systems, which is what I am proposing here

today, and the information I gave you in some of my oral testimony

of things we are going to do—we are going to do immediately.

Mr. STRICKLAND. Mr. Baker, what percentage of the bulk raw

material used to manufacture these drugs globally would you consider to be counterfeit?

Mr. BAKER. I don’t know that I can quantify that, the amount

that may be counterfeit, of a global nature. I have seen reports

from WHO and others that indicate it could be quite high, 50 to

70 percent.

Mr. STRICKLAND. Fifty to 70 percent? And then there may be

other of these drugs that are substandard, or in other ways adulterated; is that correct?

Mr. BAKER. Yes, sir.

Mr. STRICKLAND. Which countries are the most problematic when

it comes to selling these substandard counterfeit bulk ingredients?

Mr. BAKER. There are quite a few countries that have been discussed. Specifically, we have had problems with China and India,

in fact.

Mr. STRICKLAND. So you would say China and India would be

near the top of the list if you were making a judgment on that?

Mr. BAKER. Certainly they would be on the list, yes, sir.

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Mr. STRICKLAND. What countries are the most problematic, in

your judgment, when it comes to selling substandard or counterfeit

finished products, not the bulk materials, but the finished products?

Mr. BAKER. I don’t know that I would have a good answer for you

there because the capability in any number of countries is such

that they can market counterfeit drugs. It is an ongoing problem.

We even see it from Mexico.

Mr. STRICKLAND. One final question, Mr. Baker, and perhaps

this has already been asked; I am not sure.

But in your judgment, should the FDA require that all U.S. firms

that import raw pharmaceutical ingredients certify in writing that

each of their sources meets current good manufacturing practice requirements; and, if not, why not?

Mr. BAKER. Right now, we do require that they provide a certificate of analysis or they have ongoing records, laboratory records,

to indicate that the product meets the standards for manufacturing

in accordance with the approval of their product.

Mr. STRICKLAND. But you have told us that you can’t know for

sure if these firms meet current good manufacturing practice requirements. Apparently, that is a particular standard that is a recognized standard.

Would it not make sense to require these firms to provide you

with assurance in writing that the materials they are using have

been manufactured under these conditions?

Mr. BAKER. That may be helpful. I will defer to Mr. Taylor here,

but I will say that they are required to, by laboratory analysis,

demonstrate that the products are meeting a standard of purity

there.

Mr. STRICKLAND. But not necessarily meeting the standard of

current good manufacturing practices? Is that right?

Mr. TAYLOR. Well, I just want to expand on his answer.

For prescription drugs, as a part of the approval process, when

an approval packet is submitted to the Agency, one of the pieces

of information that also must be submitted is the name of the supplier of the bulk product, essentially the active pharmaceutical ingredient. When that information is provided to the Agency, the

Agency is then required to go to that facility and inspect to determine whether or not they are in compliance with good manufacturing practices. If they are not, then not only does the approval

not move forward, they are not allowed to import that product into

the United States. That’s for prescription drugs.

Now, obviously we have talked today about the fact that there

are some facilities that we don’t know about and we have to do a

better job with that; and some of those facilities might be supplying

materials for over-the-counter products, which would not fall within this preapproval rubric.

But my point is that they are supposed to be in compliance with

GMPs. They are supposed to provide that information to the Agency about the compliance with GMPs so that we can go out and

make sure that their statements are correct.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. UPTON. Mr. Bryant.

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Mr. BRYANT. Thank you, Mr. Chairman. And we are going to

have to be subject to leave here and vote, and I want to be very

brief in my questioning.

Understanding that you have only been in your position a year,

I mentioned in my opening statement my concern about not—since

1996, not coordinating with Customs. And perhaps you could, if you

don’t know the answer as to why that’s not ongoing, you could later

file a letter as an exhibit to your testimony with an explanation as

to why that’s not being done; and hopefully, maybe, some indication that your office might reconsider that. Is that fair?

Mr. BAKER. Yes, sir.

Mr. BRYANT. Now, in your position, are you the person that has

the authority to control the agents out in the field, the ones at the

places of entry in this country and wherever else you have investigators trying to work on this problem of counterfeit bulk drug imports?

Mr. BAKER. Yes, sir.

Mr. BRYANT. You are the person responsible?

Mr. BAKER. Yes, sir, the field operations report to me.

Mr. BRYANT. Now, where does Mr. Taylor fit into this with you?

If you could be brief.

Mr. TAYLOR. Sure.

I head the Office of Compliance within the Center for Drugs. The

Center for Drugs is a sister agency within FDA, and we help ORA

determine whether or not a specific manufacturer or a specific

product is in compliance with Federal law.

Mr. BRYANT. Okay.

Now, Mr. Baker, is your job 100 percent dedicated to this particular problem, or do you have other responsibilities in the area

of regulation?

Mr. BAKER. We regulate all foods, drugs, medical devices and cosmetics, and the attendant problems associated with those. So we

cover the spectrum.

Mr. BRYANT. Do you have somebody in your office whose job it

is to be 100 percent dedicated to this particular problem of importing counterfeit bulk drugs?

Mr. BAKER. No, sir.

Mr. BRYANT. Where I am going with this is trying to find within

the scheme, the chain of command, who can come in here and we

can complain to. We have got a lot of responsibilities and we cover

the land up here. We expect people like you, or whoever in your

office is in charge of this problem, dedicating 100 percent of their

time and assets to that to do a better job in this situation; and it

is not happening.

So every year or two we have to drag you folks in and gripe and

moan at you; and then nothing seems to happen, particularly in

this case, since we are going back to 1996.

I am just wondering, if that was my job, 100 percent of the time,

to make sure that we have enough agents out there at the ports

and doing these inspections and operating the computers so that

the data bases can come together and maybe working with other

agencies like the Customs to do this, that’s who I want to know.

Whose job is it to do that? Because obviously they are not doing

a good job. And if we could get those people motivated, maybe we

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wouldn’t have to do this, you know, devote our time to this oversight.

Mr. BAKER. We do have a Director of Import Operations. That’s

Mr. Carl Nielsen, as they mentioned earlier, and that covers our

import activities. Our foreign inspections are covered another component within ORA. There is ongoing communication between

those.

Mr. BRYANT. I would like to know if Mr. Nielsen is concerned

with the fact that of the 310 points of entry we have only got 68

full-time equivalents in the field. And I am sure that—at the 68

that are covered, I am sure we have several at one location, so

probably more than——

Mr. BAKER. Actually, sir, that’s the way they set it out, based on

funding. We have about 254 people in the field reviewing all FDAregulated products. About a quarter of their time is spent reviewing drug imports, and so that’s where the 68 came out as an FTE

figure. We actually have about 254 people in the field.

Mr. BRYANT. I am going to read you a couple of quick questions

because my time is running out, and we have got a vote. You can

again late-file your answer to these.

Would you favor assigning agents from the Office of Criminal Investigations or other FDA personnel to post in Asia and Europe for

the primary purpose of gathering information in support of this

counterfeit drug initiative?

Second, has the FDA considered a joint FDA industry effort to

develop a program to eliminate counterfeit bulk drugs?

Third, would you favor developing new systems within the FDA

to identify counterfeit drugs and other unapproved or illegal drugs

that enter the country?

Fourthly, does the FDA favor exploring new technologies to help

ensure the safety and security of our drug supply, such as tagants

and drugs on containers or labels.

And finally, this is important, what in your opinion can this committee or Congress do to approve your ability, the FDA’s ability, to

further assess the problem and investigate, interdict and control

counterfeit drugs?

If you could maybe get a copy of this testimony and answer those

specific questions, as well as this issue of the Customs, I would appreciate it very much.

Mr. BAKER. Yes, sir.

Mr. UPTON. I would just note that we do have about 5 minutes

left in the vote, so we will temporarily adjourn here and we will

come back at 12:45.

[Brief recess.]

Mr. UPTON. Welcome back. We are not expecting a vote for a couple of hours, but I don’t expect this subcommittee hearing to go on

for a couple hours more either. So I think we will be okay in terms

of the timing.

I know a couple of members are on both sides of the lanes here,

and again we have other subcommittees within our committee

meeting, and many of us are on multiple committees. And we have

an important piece of legislation on the floor; I know that I have

an amendment that will be up a little bit later this evening as well.

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Mr. Baker, I don’t know if you saw this article a couple of weeks

ago, it was in Dickinson’s FDA Webview. There is an article entitled ‘‘Counterfeit Bulk Drugs Not a Health Issue for United States,

FDA Says.’’

The article went on to say that ‘‘Counterfeit bulk drugs entering

the U.S. are not a public health problem for this country, FDA Center for Drug Evaluation and Research Director Janet Woodcock told

FDA Webview yesterday.’’ The article went on to further say that

Woodcock said that ‘‘Counterfeit APIs have a low priority at FDA

because U.S. manufacturers have not expressed heightened concern

about them and finished dosage form makers are the ones responsible for assuring the integrity of drugs sold in the United States.’’

All of that being in quotes.

What is your reaction to the statements attributed to Ms.

Woodcock? Are they accurate?

Mr. BAKER. Well, Mr. Chairman, I would have to say, obviously

we believe there is a counterfeit problem, both in this world and

potentially within this country. We have had problems quantifying

that, obviously.

What I think Dr. Woodcock was speaking to was simply the controls within the domestic supply whereby the manufacturers are

doing heightened testing and certificates of analysis associated

with the products. So I don’t believe she was saying that coming

into the country, that this may not be a problem. I think she was

saying—addressing the domestic supply.

Mr. UPTON. Now, you all, as I understand, agreed to spend some

money to investigate this; is that right?

Mr. BAKER. Yes, sir.

Mr. UPTON. How much money was that that you——

Mr. BAKER. The recent one was $59,000 for purchasing of products for analytical work.

Mr. UPTON. Tell me exactly what the money was to be used for.

I mean, what was the money supposed to do?

Mr. BAKER. We are going to be targeting specific importers, particularly those that have a heightened profile for importing and distributing counterfeit product, plus targeting and sampling for analysis and analyzing product that would fit the profile of a potentially counterfeited drug.

Mr. UPTON. Are you going to look at India and China as part of

that?

Mr. BAKER. Yes, sir. Their products would be some of those that

would be looked at, yes, sir.

Mr. UPTON. All right. When you begin to look into those two, and

I think it was Mr. Stupak who raised the large number of firms

over there that, in fact, there are no inspections.

Are you having trouble with the governments of those two countries? What is the access to those facilities like?

Mr. BAKER. We have been provided access to the facilities that

we have asked to inspect. We do go through the process of notifying

the foreign government, establishing the travel, and then conducting the inspections.

Mr. UPTON. Have you ever been denied access? Is there a case

where you have been denied access to look at some of those firms?

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Mr. BAKER. I am not certain. I would have to check. I am not

aware of it, though.

It is no. I am told it is no.

Mr. UPTON. It has never happened. According to the June 1998

gold sheet, William Grosse, quality assurance director at Eli Lilly,

spoke about the growing threat of counterfeit bulks at the meeting

of the Drug Information Association. He said, ‘‘sooner or later, we

are going to have a catastrophe’’ in the United States. He mentioned that the sale of counterfeit products worldwide is increasing

at a rapid rate. He cited figures suggesting that 40 to 60 percent

of drug products sold in Malaysia and Indonesia, 25 sold in Mexico

and 78 percent sold in the United States are counterfeit.

He went on to say that manufacturers are collecting a lot of information on the problem but do not have a very good place to take

it.

That sort of goes back to my initial question at the beginning.

In light of that article, is Dr. Woodcock’s assertion that U.S.

manufacturers have not expressed a heightened concern an accurate one?

Mr. BAKER. They have expressed the concerns to us about the

overall counterfeit situation. We do have ongoing dialog with their

security chiefs, and we have routine meetings to discuss issues associated with counterfeiting and other problems in the drug industry.

Mr. UPTON. Has there been an outcry by the pharmaceutical industry that they would like to have you all regulate or get an announcement, some notification, information, when, in fact, they

suspect that they have received tainted compounds?

Mr. TAYLOR. Not that I know of, Mr. Chairman.

Mr. UPTON. You know, we thought on this panel that it is a wise

idea. I am just wondering if they have voiced such support independently as well.

Mr. TAYLOR. No, sir, and even though I think it is a good idea,

I am not sure how that good idea will be received. When we put

the idea out, we are going to have to do so as a part of rulemaking,

and that will give industry and others an opportunity to comment.

But I have not heard anything as of this date as to whether or not

industry likes that idea.

Mr. UPTON. Okay.

Mr. Strickland.

Mr. STRICKLAND. Thank you, sir.

Mr. Baker, how often is the FDA supposed to be inspecting foreign firms that export drugs or drug products to the U.S. for GMP

practices?

Mr. BAKER. Well, it would be great if we could impose the same

standard on them that we do on our own domestic suppliers. The

reality of our inspections, is that they are driven by the application

process, that is, to get a drug approved, and then we go to the

tiered process after that as a follow-up surveillance, or going in for

cause.

Mr. STRICKLAND. What is the practice for our own domestic

firms?

Mr. BAKER. We try to get in there at least every 2 years, more

often for cause.

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Mr. STRICKLAND. Two years?

Mr. BAKER. Yes, sir.

Mr. STRICKLAND. Now, it has been confirmed with your staff that

there are several incidents where firms, these foreign firms that export to us, haven’t been inspected by an FDA official in at least 7

years. Why is that?

Mr. BAKER. Quite honestly, sir, a good bit of it has to do with

the resources available to do the overseas inspections.

Mr. STRICKLAND. Do you think 7 years is too long?

Mr. BAKER. Yes, sir.

Mr. STRICKLAND. What if a foreign firm makes significant

changes in their practices during this extended intervening period

of time between inspections; how would the FDA know such

changes have occurred if it doesn’t inspect more frequently? It

wouldn’t, would it?

Mr. BAKER. No, we may not. They are obligated to tell us about

any changes in the processes, and hopefully, if it is an API firm,

the final dosage manufacturer will be notified and they will know

about any changes.

Mr. STRICKLAND. What are the implications of these infrequent

inspections on public health?

Mr. BAKER. Well, again, that’s hard to quantify, but it certainly

would be an at-risk situation.

Mr. STRICKLAND. So we can reasonably conclude that because

these inspections are not occurring, that American citizens who

purchase products which may be made from these imported goods

are at risk; is that a reasonable conclusion?

Mr. TAYLOR. I am not sure we can draw that conclusion.

Mr. STRICKLAND. Do you conclude that they are not at risk?

Mr. TAYLOR. No, I cannot conclude that, either. I think that by

not having regular inspections at a shorter interval, obviously it

does not serve the same deterrent effect as if we were in there over

and over again, but I am not sure I could draw the conclusion that

negatively——

Mr. STRICKLAND. Well, if there aren’t health and safety implications to the inspection process, why have an inspection process?

And if the inspection process is not occurring in a timely manner,

it seems very reasonable to be able to say here today that American citizens are being placed at risk due to a lack of inspection.

Is that—I am not trying to be unreasonable.

Mr. TAYLOR. Right.

Mr. STRICKLAND. But I don’t want us to be fuzzy about our conclusions when we don’t have to be.

Mr. BAKER. The potential is there, yes, sir.

Mr. TAYLOR. That’s right, and that’s why we have those regulations in place in the first place.

Mr. STRICKLAND. The FDA has clearly defined its resource limitations in the area of conducting these GMD inspections on foreign

firms. What are the limitations, in your judgment, and specifically,

and if you could be as candid as possible, what do you need in

order to do an adequate job, what resources? If you can name an

estimated amount of money or a number of inspectors, what is it

specifically that you need that would enable you to come before us

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a year from now, and we would all be very pleased with what had

happened in the intervening 12 months?

Mr. BAKER. Fine. Right now we have 175 FTEs that are available to do foreign drug inspections, that are drug inspectors available for foreign drug inspections. I would like to add that they also

have domestic responsibilities, so they have to cover the domestic

side as well. We are pulling personnel out of the domestic side any

time we do these foreign inspections. That’s one issue.

Having the IT available, which we have discussed earlier, where

we can get meaningful data and have it real-time available to our

inspectors is another issue. When I came on board here a year ago,

we didn’t even have all of our investigators equipped with laptop

computers, which they are now.

Mr. STRICKLAND. Mr. Baker, I don’t see why you just don’t, if

necessary, contract with some firm that has the expertise necessary

to do this, bring them in and in perhaps 2 months, that seems like

a reasonable period of time, have this IT problem solved. It just

seems that this is a problem that doesn’t need to drag on and on

and on.

Mr. BAKER. Absolutely. I totally agree.

Mr. STRICKLAND. I want to ask you, sir, if you would provide to

us, and Mr. Chairman, I would like your support on this request,

if I could have it. It seems reasonable that we would ask for a formal plan within 2 months as to how you plan to accomplish this,

and in that plan, you lay out your problems and lay out your lack

of resources, if there is a lack of resources. That seems like a reasonable request from us, and I would like for you to agree today

to do that.

Mr. BAKER. We will do that, yes, sir.

Mr. STRICKLAND. One final question, Mr. Chairman.

I am intrigued by the problems with China and India, especially

that have been noted here. Do you know that if China was a part

of the World Trade Organization, that our ability to prohibit them

from sending in these materials into our country would be inhibited—that our enforcement ability would be inhibited because of

their membership in the World Trade Organization, if we could

keep that from happening simply because their firms did not meet

FDA inspection or approval or standard? Could you answer that for

me.

Mr. BAKER. I don’t know if I can. I don’t know what the impact

is of them entering the WTO and the problems associated with

GMPs. I don’t know. I am not a trade lawyer.

Mr. TAYLOR. I don’t know the answer, either, but we certainly

can get back to you with an answer.

Mr. BAKER. Yes, certainly.

Mr. STRICKLAND. If you would, I would find that very helpful,

and one further question. Why don’t we just decide that if a country is engaging in these practices, or foreign firms in these countries are engaging in these practices and they are identified, that

we just simply say we are not going to allow business with you in

the future?

Mr. BAKER. Well, there are Customs laws and there are also, of

course, the FDA laws that drive appeal rights and everything else

associated with entering products into the country, and importers,

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like anyone else, would have their day in court. So it would be a

difficult situation to stop it out of hand. I don’t know that anybody

has the authority just to make that declaration.

Mr. STRICKLAND. Well, I fear that China’s involvement in the

WTO may make the ability to regulate and enforce even more difficult. So if you would get back with me on that issue, I would appreciate it.

Mr. TAYLOR. Certainly.

Mr. BAKER. Sure.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Mr. UPTON. Thank you.

Mr. Baker, in the letter that was sent to Chairman Bliley May

31, the FDA says, at this time there are neither specific allegations

concerning bulk counterfeit drugs nor any concern of a systematic

problem.

I want to just refer again to some of these letters, which I think

you have a copy of. Maybe you can turn them around. You will see

the same, just so that Mr. Baker can see them.

This is a fairly clear case, I think you can see, of a firm trying

to repackage, actually the other letter you will see it has the same

signature, but they are actually trying to show the original source

of these compounds to be from West Germany, which, of course,

would have been prior to 1990—instead of coming in from China.

In light of the poor inspection in China, and this being a problem, I just find it difficult to believe that you weren’t aware of any

systematic problem, and that this should not have been—or this

should have been referred to the IG or to somebody who actually

could have begun to look into this. I mean, we are frustrated on

this panel, Republicans and Democrats alike, with trying to make

sure that, in fact, there is a safety net out there. You all have that

responsibility. Yet, there are literally thousands of companies that

we don’t know about. We saw the well-publicized deaths, the 89

deaths in Haiti; your admission that, in fact, we have had problems

in this country, and just some basic investigatory tools that ought

to be utilized, it just seems, haven’t been done. That’s our frustration up here. I know I speak for Republicans as well as Democrats

when I say that.

We want to make sure that you have the tools, that you have the

FTEs, full-time equivalents, the people that are in power. We want

the pharmaceutical companies to be able to tell you with 100 percent certainty whether, in fact, the material they are getting is safe

or not, and not only the big players, the Eli Lillys, the Mercks, the

Pharmacias, the Upjohns, but the generics, too. They make billions

of pills for a variety of different medicines—whether it be aspirin

or a number of other things, particularly when the patents expire.

It seems as though there has been ample evidence, whether it is

the materials here or others, that, in fact, the FDA should have

acted on, should have promulgated some regulations, should have

been able to get some feedback, particularly in light of the fact that

you admit that there are problems that are out there. That’s what

frustrates us.

Mr. BAKER. Well, we have taken the situation seriously. We have

initially trained, we have completely trained 30 FTEs, specifically

in the area of counterfeiting, and we are taking that training out

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beyond that 30. In addition, in July, we are going to be doing Customs training with our staff, and the Customs Service is going to

be instructing on their laws. We are going to do some strategic

problem-solving and a number of other things so that our people

are better able to work jointly with Customs and can use authorities vested in Customs law to get at some of these various counterfeit issues here.

So we are taking it very seriously. I can tell you we also have

some frustration and we will move forward with these things.

Mr. UPTON. Now we have more port of entries for these products

than we have inspectors looking out for it, is that right?

Mr. BAKER. Yes, sir, that is true. In the instance of APIs, though,

we have about 90 percent of them going into roughly 8 to 10 ports.

So we are able to concentrate some resources to deal with APIs in

certain areas, but it doesn’t solve the overall situation, and as you

are aware, we do get APIs in all of those ports, although maybe not

in large numbers.

Mr. UPTON. As I understand it, as these products come in from

overseas, they are not necessarily saying they are going to Merck

or Pharmacia or Upjohn. It is going to ABC warehouse, you know

ABC trucking firm—I mean, it is going to some, I almost want to

say ‘‘generic,’’ I won’t, but perhaps some nonpharmaceutical name

and once it is there, it is gone, right? I mean, you can’t really track

it, is that right?

Mr. BAKER. It makes it most difficult, yes, Mr. Chairman. In fact,

we are dialoguing right now to see what our regulatory authority

is to require the identification of the ultimate consignee. That is

something we are looking at to see if we do have the regulatory authority to do it.

Mr. UPTON. Could you let us know? When do you expect to come

up with a conclusion to that question?

Mr. BAKER. I hope to have it within the next 3 or 4 weeks.

Mr. UPTON. I think we would like to know what that answer will

be.

Mr. BAKER. We will be happy to inform you, yes.

Mr. UPTON. Where can we be helpful? What roadblocks do you

see? I mean, are there some other things that have been identified

that we have not touched on today?

Mr. BAKER. No, we have done a pretty good job of touching on

things today.

Mr. UPTON. Yes. This was something I was going to ask. What

about the ability to get criminal records from law enforcement

agencies from across the land, across the ocean, from foreign law

enforcement authorities on Custom brokers?

Do you have that authority?

Mr. BAKER. We have had good working relationships with a number of the foreign entities and have been able to get records, but

obviously you can’t always get records, depending on the country.

Mr. TAYLOR. Yes. I believe our experience is varied, depending on

what country we are dealing with. So there have been instances

where it has been difficult to get that information in the past.

Mr. UPTON. What countries have been particularly difficult?

Mr. TAYLOR. Well, at one point in time, and this has improved

dramatically, so this isn’t the case today, when we were invesVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00273 Fmt 6633 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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tigating Flavine several years back, we had problems with the German authorities sharing information with us. But our relationship

with them is strong today, and that’s no longer the case, and we

used that case as a good stepping stone to building a better relationship.

Mr. UPTON. Going back to the problem with the Haitians’ deaths,

what was the FDA’s reaction to those 89 deaths? Was there any

tracking here in terms of those same substance coming from China

that may have tainted our supply at all? Was there any red flag

that went up right away?

Mr. TAYLOR. Sir, I apologize. I don’t know. I wasn’t intimately involved.

Mr. UPTON. You weren’t there.

Mr. BAKER. I was in the State of Texas. I can tell you that there

was quite a bit of investigative activity at the Federal and State

levels when that occurred, to ensure that we didn’t have product

in our markets, but I was not at the FDA at that time.

Mr. TAYLOR. I was just informed that we did put an import alert

in place and we followed up on the shipments. The import alert

was put in place so that the product could not continue to come in

from China, and there was other follow-up to trace the shipments

of the product itself at that time.

Mr. UPTON. Was any found?

Mr. TAYLOR. Apparently, the answer is yes.

Mr. UPTON. I knew the answer. And what happened?

Mr. TAYLOR. It was destroyed, apparently.

Mr. UPTON. So it could have happened here?

Mr. BAKER. Yes.

Mr. TAYLOR. It is possible, yes.

Mr. UPTON. Do you know—and I don’t know the answer to this.

Do you know how much was found? How many shipments? What

the size of the product was? And where was it found? Where in the

pipeline was it?

Mr. BAKER. One in California and on the East Coast. There were

two shipments that we found that were basically in the pipeline at

the time.

Mr. UPTON. I mean, I just can’t imagine a greater nightmare for

a family, you know, to find out that something that they might buy

over-the-counter or prescribed by their physician, usually an individual of great trust, just to find out that it was tainted, and, you

know, may cause some serious illness or even death. That’s why

this subcommittee feels very strongly that we want protection, and

it has got to be perfect. When we are able to identify, whether it

be documents like this or stories of what has happened in other

countries and by chance, thank God, find them before they impact

Americans, that you have the tools to protect us all.

Again, it goes back to the pharmaceutical companies don’t want

to have a tainted product out there. No way. I would like to think

that the Agency would, in fact, deliver on what is a request by a

number of us here to make sure that that communication channel

is wide open, and that when there are serious threats or uncovering of evidence to suggest that a certain firm or a certain plant

anyplace in the world is delivering a product that’s less than adequate, that you have the tools to go right away to make sure that

271

it is stopped, that there are consequences for that firm as well as

perhaps individuals, and that we have an Iron Curtain of preventing that stuff from getting into the mainstream.

That’s your role and from up here on this dais we want to make

sure that you have the tools to do that. So I would suggest your

message back to the people that work for you and the people that

you work for is that that message be heard loud and clear when

you get back to your office this afternoon. This is something that

I think we want to continue to follow up on, and whether it be July

or September, to have another hearing to find out exactly what is

going on. And that we do a job as well listening to some of the

pharmaceutical firms and others to find out how we can better help

you make sure what happened in Haiti, and has happened in the

United States—maybe we have discovered it, maybe we haven’t— the system is in place so that we don’t have any questions.

I guess one last question here. We have got an e-mail that was

dated November 1997 from then-Deputy Commissioner Mary

Pendergast concerning an international drug trader called Helm. I

don’t know if you are familiar with that. Do we have that that we

can share with them? I don’t know if you are familiar with this offhand.

She writes, and I quote here, that ‘‘Helm Voss are notorious in

other parts of the world for not telling the truth about what they

are shipping. ‘‘Apparently several countries around the world have blacklisted

them because of adverse health consequences resulting from their

products about which they have lied or concealed the truth. Apparently, they are big’’—this is all quoted. ‘‘Apparently they are big

into switching labels and the like.’’ Do you know if the FDA has ever looked into that e-mail or the

allegations as to whether it is true or accurate or not?

Mr. BAKER. Mr. Chairman, I am familiar with the Helm issue.

I am not familiar with the details of the case. I wasn’t anticipating

testifying on that.

Mr. UPTON. Would you be able to respond—— Mr. BAKER. Yes, sir.

Mr. UPTON. [continuing] in writing back to the committee within

a week or so and we will share it with both sides?

Mr. TAYLOR. Absolutely.

Mr. BAKER. That will not be a problem.

Mr. UPTON. Here is a copy of the e-mail for you. I think that will

be helpful.

Again, I appreciate you coming up today. Next time we would

like to have your testimony so I can take it home a night or two

before the hearing.

I want to compliment the staff on both sides for making sure

that we were prepared and have been able to walk through this,

and the members that were here today, and we look forward to

having you again—— Mr. BAKER. Mr. Chairman.

Mr. UPTON. [continuing] to talk about the progress, Dr.

Henney—and to talk about the progress that’s been made from

today knowing some of the details that we were alerted to.

Do you have a closing statement that you would like to make?

272

Mr. BAKER. Mr. Chairman, I would like to thank you and thank

the committee for having us here today and for listening. There are

a number of issues clearly that have to be resolved. There are problems. We fully acknowledge that. The one thing I do is solve problems. That’s part of my job. I am here today because I am the new

guy on the block and these people report to me. And I am prepared

to take the hits for that. We will correct these problems to the extent we can, and you will know what our problem areas are and

what our resource needs are. It’s our duty to let you know.

Mr. UPTON. Well, we want to make sure that you succeed. It will

require some follow-up. Thank you.

[Whereupon, at 1:20 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

PREPARED STATEMENT OF JOHN T. RIETZ, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, ISOTAG TECHNOLOGY, INC.

Mr. Chairman: My name is John Rietz and I am President and CEO of Isotag

Technology Inc., with offices in Texas, Florida, and New Mexico. Thank you for the

opportunity to submit this statement for the record and I commend you for convening this important hearing.

ISOTAG Technology, Inc. provides the world’s leading covert identification products and services. Our patented technology, which was originally developed at the

Los Alamos National Laboratory (LANL), offers economic solutions for anti-counterfeiting, anti-diversion, product liability protection and quality and process control

management.

ISOTAG’s unique combination of technology, detection, data management, decision support, and enforcement will effectively and conclusively solve the counterfeiting of bulk drugs. We believe that our comprehensive, complete solution offers

the best assurances for the purity of medicines taken by all Americans.

ISOTAG’s products and services include:

1. Molecular Tagging—ISOTAG provides a unique, covert molecular fingerprint,

introduced during the drug manufacturing process, which provides forensic proof of

authenticity and purity.

2. Inviable Inks—ISOTAG recently acquired invisible ink technology, which was

developed by Eastman Chemical Company, called Clircode. This patented technology

operates in the Infrared area of the spectrum, which overcomes some of the inherent

problems associated with invisible UV inks. Clircode can be applied at multiple

points in the drug distribution process such as packaging, boxes, labels or holograms

and are detected via hand-held readers and cameras.

Clircode, in conjunction with the molecular ISOTAG, provides cost-effective and

complete protection against all potential counterfeiters and diverters.

I would be most pleased to present our state-of-the-art technology and a proposal

providing a solution to the current bulk drug counterfeiting problem to the committee at your convenience. Additionally, we would be pleased to make a presentation to the appropriate officials at the Food and Drug Administration to assist in

their efforts to stop the flow of counterfeit drugs coming across our borders.

In conclusion Mr. Chairman, I want to thank you again for the opportunity to participate in this important hearing. I would be pleased to respond to any questions

you might have as you continue in your efforts to protect the health of all Americans.

273

274

DEPARTMENT OF HEALTH & HUMAN SERVICES

FOOD AND DRUG ADMINISTRATION

July 25, 2000

The Honorable FRED UPTON

Chairman

Subcommittee on Oversight and Investigations

Committee on Commerce

House of Representatives

Washington, D.C. 20515-6115

DEAR MR. CHAIRMAN: Thank you for your interest in the safety of pharmaceutical

drugs in the United States (U.S.). This is in follow-up to the Subcommittee’s June

8, 2000, hearing on counterfeit bulk drugs. Mr. Dennis Baker, Associate Commissioner for Regulatory Affairs at the Food and Drug Administration (FDA or Agency)

was asked to provide information for the record.

We have restated the questions in the order they were asked, followed by our response.

1. Mr. Stupak—Provide information on the status of actions taken regarding the

importation of non-pharmaceutical grade radioisotopes and the manufacturing and

sale of radioactive diagnostic drugs under the guise of the practice of pharmacy.

FDA has been evaluating how to treat the compounding of radiopharmaceuticals

in light of statutory changes mandated by the Food and Drug Administration Modernization Act of 1997 (FDAMA), Public Law 105-115. Specifically, FDAMA added

a new Section 503A to the to the Federal Food, Drug, and Cosmetic Act (the Act)

which creates exemptions for compounded products from certain provisions of the

Act. Section 503A(e)(2), however, provides that Section 503A does not apply to radiopharmaceuticals.

We expect to issue responses to a number of inquiries on this matter very soon,

and we will, at that time, be able to provide the Committee with more detailed information regarding our enforcement policy.

2. Mr. Bryant—Why is FDA not working with the Customs Service on counterfeits

and will FDA reconsider that position?

FDA has worked with the U.S. Customs Service (USCS or Customs) on specific

counterfeit drug investigations in the past, and will continue do so in the future

when warranted.

The Flavine counterfeit investigation and prosecution, completed in 1996, was a

long-term joint investigation worked by FDA’s Office of Criminal Investigations

(OCI) and Customs. The reason OCI has not worked with Customs on counterfeit

bulk drugs since 1996 is because no substantive information identifying a counterfeit bulk drug entering the U.S. has been brought to the attention of OCI or Customs since that time.

OCI has a cooperative working relationship with Customs, including a Memorandum of Understanding with Customs providing for all OCI agents to be crossdesignated as Customs officers. OCI currently is working a number of on-going investigations with Customs involving unapproved and counterfeit finished human

drugs and adulterated or misbranded medical devices and foods. The Customs Service in recent testimony before the Committee on May 25, 2000, stated, ‘‘Customs

also has several ongoing investigations involving U.S. persons operating foreign

pharmaceutical websites. All of these investigations are being worked jointly with

the FDA’s OCI. The Customs Office of Investigations has a great working relationship with FDA investigators.’’

OCI is willing to work with Customs on a criminal investigative task force, if warranted. However, the establishment of a task force is predicated on identifying a

large number of specific criminal violations that are occurring and the need to respond to those violations with the resources of a number of agencies. A good example of this is the USCS High Intensity Drug Trafficking Area Task Force at the Dulles International Mail Facility where OCI is represented.

In the case of counterfeit bulk drugs, no large number of specific criminal violations has been identified. Accordingly, FDA has concluded that a joint standing task

force with Customs for counterfeit bulk drug investigations is not warranted at this

time.

If credible new information regarding counterfeit bulk drugs is obtained, criminal

investigations will be initiated in the appropriate venue and worked jointly with

Customs. The Committee should be assured that when information is received concerning suspect counterfeit activity, OCI will work closely with Customs and other

law enforcement agencies to conduct a thorough investigation, and OCI will provide

FDA officials with any information developed regarding possible public health implications.

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FDA also is providing additional training to its import inspection cadre that includes an effort to improve our effectiveness in working with Customs’ field personnel. During the period of June 19 through July 14, 2000, approximately 80 FDA

field and supervisory staff involved with imports each received 36 hours of advanced

training, including instruction from Customs personnel on that agency’s statutory

authority, regulations and operating procedures. Another 40 staff is receiving the

training during the week beginning July 24, 2000. The training included strategic

problem-solving exercises in working with Customs personnel to jointly address

problems encountered in the field regarding the importation of counterfeit bulk

drugs.

3. Mr. Bryant—Please respond to the following five questions.

A. Does FDA favor posting OCI agents in Europe and Asia regarding counterfeits?

The permanent posting of one or more OCI agents overseas has been considered

a number of times over the last decade, but the Agency has, in each instance, concluded that the large additional expense would outweigh the potential benefits. FDA

has requested funding in its FY 2001 budget that would be partially used to support

a criminal investigator assigned to Interpol. This would support and facilitate OCI’s

criminal investigations and provide the Agency with a point of contact for international police intelligence information related to terrorism.

B. Does the Agency favor a joint FDA/industry effort regarding counterfeits?

Yes, we do. FDA already meets with the security directors of the various pharmaceutical manufacturers to discuss ways to more productively cooperate through the

exchange of information and the provision of information relevant to investigations.

FDA believes our relationship with industry on the issue of counterfeiting should

be improved, and the Agency will enhance our relationship with top management

of the pharmaceutical industry, particularly those individuals who oversee the security and regulatory affairs departments. This was an agenda item for the most recent meeting of the Field Drug Committee, which is a group of senior Office of Regulatory Affairs and Center for Drug Evaluation and Research managers who make

decisions related to FDA’s drug inspection program.

FDA has already met with top officials of Johnson & Johnson, DuPont Pharmaceuticals and representatives of CEFIC (the European Bulk Drug Industry). We will

also meet with the New Jersey Health Counsel, which consists of top officials of the

pharmaceutical industry in New Jersey, on July 27, 2000, to discuss our anti-counterfeiting initiative and encourage their cooperation in this effort.

As noted in Mr. Baker’s testimony of June 8, 2000, manufacturers are already required to test and validate the safety, purity and consistency of the active pharmaceutical ingredients used in their products. We are exploring some new actions that

manufacturing firms might be able to take in order to better detect counterfeits.

C. Do you favor developing new systems in FDA to identify counterfeit drugs and

other unapproved or illegal drug that enter the country?

Yes, we do, and the Agency has already begun this process. FDA has begun to

implement certain recommendations in the 1999 Draft Plan, such as evaluating a

trace-back procedure for bulk products and a procedure for the submission of information from industry regarding suspicions that bulk products are counterfeit, substandard, or from outside approved sources.

In addition, FDA has re-established an Agency-wide Working Group on counterfeit bulk drugs, in order to further refine FDA’s strategy on bulk drug importation

and to develop additional systems to prevent, deter and interdict the importation

of counterfeit drugs.

D. Submit plan on implementation of new technologies such as taggants.

The new Working Group on counterfeits, described above, is considering this issue

and the possible use of taggants or similar technologies will be discussed with industry as part of our joint FDA/industry efforts described above.

E. What can the Committee and Congress do to help FDA?

FDA is making a full assessment of its needs and areas for improvement in handling counterfeit bulk drugs. We will submit a detailed plan of action to the Committee, as requested by Chairman Upton, in the near future. As requested, we will

address our resource and/or legislative needs in detail at that time.

4. Mr. Strickland—Provide information on whether allowing China into the World

Trade Organization (WTO) would hamper FDA’s ability to regulate counterfeit drug

products from that country.

FDA’s laws and regulations apply to covered imported products without regard to

the products’ country of origin or the status of the importing country as a member

of the WTO or any other international organization. China’s accession to the WTO

Agreement would not change the application of FDA’s requirements to products

originating in China.

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5. Mr. Upton—Respond to the issues raised in the November 13, 1997, e-mail

from Mary Pendergast, former Deputy FDA Commissioner, regarding the Helm import company.

The referenced e-mail was written during the time period following the 1996 contamination of glycerin used in medications distributed in Haiti, in which FDA assisted the Haitian government and conducted investigations in Europe and China

to determine the source of the suspect glycerin. The e-mail from Ms. Pendergast to

the Commissioner of Food and Drugs expressed concern about the part that Helm/

Vos played in the glycerin incident.

The 1996 investigation in Haiti disclosed that the suspect glycerin (contaminated

with diethylene glycol (DEG)) used in production of liquid acetaminophen was

shipped from China to the Vos warehouse in the Netherlands and then to Haiti. In

July 1996, FDA completed an investigation at the Vos facility in Europe and at a

European trader, who purchased the glycerin from China. Information concerning

these investigations was provided to the appropriate European authorities for further investigation of the incident.

In September 1996, FDA conducted an investigation at Helm New York,

Piscataway, New Jersey, in follow-up to the glycerin problem in Europe and Haiti.

The investigation disclosed that Helm New York handled limited quantities of glycerin and a private laboratory had tested the latest lot of glycerin received by the

establishment. Since September 1996, other investigations have been completed at

the Helm New York facility to address issues concerning the establishment’s importation of active pharmaceutical ingredients.

In 1997, FDA completed investigations in China in an attempt to determine the

source of the glycerin and cause of the contamination with DEG. The investigations

disclosed that the glycerin shipped to Haiti had been manufactured in China. We

were unable to determine the point at which the contamination of the glycerin with

diethylene glycol had occurred. During the investigations, we obtained a copy of a

telefax from the European trader to the Chinese trader who handled the glycerin,

which stated that the purity of the glycerin in the suspect lot was ‘‘53.9% instead

of 98% min.’’

FDA has taken other steps to insure the safety of imported glycerin used by finished dosage form pharmaceutical manufacturers including issuing an import alert

for glycerin from China and investigating entries of imported glycerin from sources

other than China. We continue to periodically monitor glycerin exported to the U.S.

6. Mr. Upton—Does FDA believe it has the authority to require importers to identify the ultimate consignee.

Yes, FDA believes it has the authority to require importers to identify the ultimate consignee. We are now evaluating how best to establish such a requirement

without placing an unnecessary burden on industry or inhibiting trade.

Thank you for making this information a part of the public record. We look forward to working with the Committee on our mutual goal of protecting the American

public from the importation of counterfeit or otherwise dangerous drug products

from abroad.

Sincerely,

MELINDA K. PLAISIER

Associate Commissioner for Legislation

cc: The Honorable Ron Klink

Ranking Minority Member

Subcommittee on Oversight and Investigations

Committee on Commerce

House of Representatives

DEPARTMENT OF HEALTH & HUMAN SERVICES

PUBLIC HEALTH SERVICE

August 10, 2000

The Honorable FRED UPTON

Chairman

Subcommittee on Oversight and Investigations

Committee on Commerce

House of Representatives

Washington, D.C. 20515-6116

DEAR MR. CHAIRMAN: This letter is in response to the Subcommittee’s June 8,

2000, hearing, regarding counterfeit bulk drugs. As discussed at the hearing, the

Food and Drug Administration (FDA or the Agency) was asked to- report back to

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Subcommittee with a plan to improve the detection and interdiction on imported

counterfeit and substandard Active Pharmaceutical Ingredients (APIs).

Directly following the hearing, the Agency re-established a Counterfeit Drug

Working Group (Working Group) to explore issues of imported counterfeit and substandard drugs, FDA’s import operations and foreign drug inspection program. over

the past two months the Working Group had numerous meetings to devise a workable plan to assess the extent of the counterfeit drug problem in the United States

(U.S.). The Agency also has contracted with a private firm to assess the status of

FDA’s import Information Technology (IT) and to explore the most efficient way of

connecting databases to share information more readily with FDA’s field inspectors.

Since the June 8 hearing, the Working Group has had under development a plan

for detecting these products to better ensure that the public is protected from potentially hazardous drug products.

The report will outline the Agency’s plans for better handling imported counterfeit

and substandard APIs and finished drugs. The plan also will outline FDA’s training

program for import inspectors on counterfeit drugs as well as the initial use of the

Establishment Evaluation System (EES) database by import inspectors. These latter

programs have been developed since the Subcommittee hearing.

The additional resources, personnel and funding that FDA believes is necessary

to fully carry out our responsibilities for inspecting foreign drug manufacturers and

to increase the surveillance of foreign APIs and finished drugs are under review by

the Working Group. Because the scope of this evaluation needs to encompasses both

the Agency’s domestic and foreign operations, as well as the operations of various

FDA Centers, parts of this analysis are preliminary in nature. The Agency looks forward to providing more specific information on our funding needs relating to personnel and technology in the future, once a complete assessment is made and appropriate review has occurred.

A. PROBLEM STATEMENT AND SUMMARY OF ACTIONS

The increase in international trade has had an impact on the ability of FDA to

cope with the volume of regulated products, including APIs. As Mr. Dennis E.

Baker, Associate Commissioner for Regulatory Affairs (ORA), stated at the June 8

hearing, while FDA believes that the quality of drugs in this country is high, the

Agency takes very seriously any allegations regarding the counterfeiting or adulteration of drug products. The Agency realizes that more can be done to help ensure

that imported APIs and finished drug products meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act.

Diminishing or flat-lined resources, coupled with the increasing volume of APIs

from overseas, have stretched personnel and resources so thinly that FDA has been

struggling to fulfill the program mandates in these areas. Policing the global drug

marketplace to deter or interdict imported substandard drugs is a daunting task,

given the resources made available to FDA.

In response to this challenge, the Agency has developed a risk-based approach to

foreign drug inspection. The Center for Drug Evaluation and Research (CDER) developed a four-tiered approach to perform surveillance inspections of firms that FDA

has not been able to inspect. At the present time FDA is only able to inspect Tier

I (Official Action Indicated, or OAI, inspection follow-up) and Tier II (sterile bulks,

finished drugs and aerosols) firms. The required pre-approval inspections are being

conducted in accordance with the Agency’s mandate under the Prescription Drug

User Fee Act. Resources are the primary factor limiting the Agency’s ability to undertake additional inspections. The Working Group is looking at these issues and

discussing how to best utilize current resources and what it would cost, as discussed

in the June 8 hearing, to perform the inspections in all tiers of the CDER risk-based

system.

As stated previously, a Working Group has been re-established to explore the

issues raised in the June 8 hearing. The Working Group consists of representatives

from many Agency programs. These include the Office of Criminal Investigations

(OCI), the Division of Import Operations and Policy (DIOP), the Office of Enforcement, the Forensic Chemistry Center (FCC), the Division of Federal-State Relations

(DFSR) and the Division of Information Systems, and, Division of Emergency and

Investigational Operations, all of which are components of ORA, and the Offices of

Compliance within the Center for Drug Evaluation and Research (CDER) and the

Center for Veterinary Medicine (CVM).

The Working Group is in the process of assessing the effectiveness of the regulatory tools, compliance programs, staffing and procedures that already exist within

the current statutory construct to monitor imported APIs. The Agency already has

implemented the following actions:

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• FDA has contracted with a private IT contractor to assist the Agency in examining its existing technology and data. FDA has charged the firm with recommending ways to integrate its systems and expedite the availability of important data to the consumer safety officers and inspectors that are responsible for

monitoring imports at the nation’s ports of entry.

• As mandated in the Food and Drug Administration Modernization Act of 1997,

FDA has drafted a final rule requiring foreign establishments whose products

are imported or offered for import into the U.S. to register with FDA and to

identify a U.S. agent. once in place, the rule will provide for the collection of

information needed to establish an accurate Official Establishment Inventory

for foreign drug firms.

• ORA’s DIOP has engaged their counterparts at U.S. Customs Service (Customs)

to assist in putting Customs house brokers and importers on notice that they

must declare the proper manufacturer of their imported products. Accurate information will assist FDA with the difficult task of finding imported counterfeit

or unapproved APIs and preventing their use in finished drug products.

• ORA has developed a plan to establish a cadre of expert investigators and chemists that would be stationed in strategic high volume API import locations

across the country. This plan will require more resources.

• FDA has extended access to the EES database to the three FDA Districts handling the vast majority of imported APIs. Training for FDA import inspectors

already has been accomplished and accounts have been established.

The Working Group is studying many other suggestions and proposals that have

been put forward. The initiatives noted above, which will be discussed in greater

detail, represent a significant first effort at improving our foreign inspections, drug

surveillance, and import operations to better protect the American public from the

threat of imported counterfeit APIs.

B. AGENCY INITIATIVES CURRENTLY UNDERWAY

In June and July 2000, FDA conducted three Import Enforcement training

courses for FDA import personnel including Compliance Officers, Consumer Safety

Officers, and Consumer Safety Inspectors. Approximately forty students attended

each one-week course representing in total about half of all persons assigned to field

import operations. FDA and Customs attorneys jointly developed the course curriculum at the request of FDA’s Division for Import Operations and Policy. The instruction course included training in Strategic Problem Solving (SPS), a Customs

training module developed specifically to facilitate the targeting, investigation and

prosecution of willful violators. Each course included a facilitated workshop after the

pattern of SPS. In each class, two of the problems involved specific imported API

counterfeiting fact patterns. Facilitated brainstorming by the field personnel focusing on the imported counterfeit API threat produced numerous ideas for strategies

in detecting, preventing and interdicting counterfeit imported APIs. The Working

Group is assessing these proposals for viability.

FDA’s FCC and Customs have agreed to explore methods to better leverage their

respective resources in the investigation and analysis of suspect counterfeit products. The FCC is hosting the first meeting in their forensic laboratory on August

10, 2000, to demonstrate FDA’s current forensic capabilities and strategies. The two

Agencies will explore better means to coordinate their efforts by granting access to

analytical data and equipment and cross training in methodologies and emerging forensic techniques. The FCC will interface directly with Customs’ laboratories to

share information on analytical procedures FDA’s forensic experts use to detect unapproved and counterfeit APIs. The Working Group has placed a high priority on

developing with Customs a unified approach for interdicting counterfeit drugs.

Under FDA’s Compliance Program 56002F, ‘‘APIs’’, FDA requests information relating to API characterization at the conclusion of current good manufacturing practices (CGMP) inspections. The FCC collates this information into a database for the

development of a library of authentic APIs. These data will be used as one tool for

identifying suspect counterfeit APIs during FDA’s operations. The Working Group

is currently assessing the most practical means for making FCC’s data readily available for FDA personnel during import entry examinations and foreign and domestic

drug inspections.

The FCC has scheduled additional API targeted inspections at various importers

and finished dosage manufacturers throughout the U.S. Additional hands-on training is planned for investigators in other strategic locations. In February 2000, the

FCC briefed Mr. Baker of the potential threat of imported counterfeit APIs. Consequently, Mr. Baker authorized and funded FCC’s efforts to conduct targeted API

inspections at the importer and domestic finished dosage manufacturer levels. With

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these funding increases the FCC conducted six targeted API inspections. Three of

these are importers of foreign APIs, two are domestic finished dosage manufacturers

and one is a domestic animal drug manufacturer. The FCC inspectors are now reviewing imported API documents and samples of product, labeling, packaging

schemes and certificates of analyses. At each of these inspections, the FCC worked

with local FDA district drug investigators to detect suspect API shipments through

product and records examinations.

Based on unverified data from the Operational and Administrative System for Import Support (OASIS) that was originally supplied by Customs house brokers when

various drug entries were filed, there are approximately 4600 firms that appear to

be non-inspected foreign drug manufacturers. The Agency is reviewing the OASIS

data to develop an import alert for foreign establishments that appear to have exported to the U.S. an API that is normally used to manufacture a finished dosage

form which requires an approved application. A preliminary assessment by FDA’s

CDER, Office of Compliance, thus far, has identified forty-six firms in China and

Hong Kong and eleven firms in India that appear to have exported to the U.S. in

1999. These firms have never been inspected by FDA and appear to be exporting

a misbranded drug to the U.S. The Agency is developing an import alert for these

firms and expects to be able to add to this list as the OASIS data is further evaluated. The final phase of the analysis of the OASIS data will be to identify firms FDA

has not inspected but which are referenced in approved human and animal drug applications. The human drug firms will be evaluated using a risk-based analysis

stratified into one of four tiers, incorporated into FDA’s surveillance list, and subsequently scheduled for inspection.

Previously, Philadelphia District Office participated in a pilot that involved an

evaluation of imported APIs by cross-referencing drug manufacturing data submitted by importers with CDER’s EES database. EES contains information tracking

new drug applications (NDAs) and animal new drug applications (ANDAs) and relates those applications to approved sources raw materials, including APIs. FDA is

extending the EES pilot. This represents new information previously unavailable to

import inspectors. Field access to EES combined with a proposed new use of labeling

exemptions under Title 21, Code of Federal Regulations (CFR) part 201 could result

in the development of a monitoring, surveillance and enforcement model for all APIs

and other drug components. On July 10, 2000, FDA trained investigators and compliance officers from New York, New Orleans and San Juan District Offices (DO)

in the use of EES as a supplemental tool for evaluating the admissibility of APIs

from foreign sources for use in manufacturing an NDA or ANDA. The trainees have

received EES accounts and are familiarizing themselves with the use of the database in evaluating Customs entry data and providing additional training in their

home districts to other import personnel. This EES training is an extension of the

pilot to the three districts that handle the largest proportion of API Customs entries.

The Working Group anticipates combining EES with other strategies could result

in: (1) a marked increase in the prevention of non-drug manufacturing file referenced APIs being used in the manufacture of application drugs, (2) a procedure

for tracking APIs and drug components from port to end-user destination to deter

diversion within U.S. market, (3) an increase in opportunity for field exams of APIs

upon entry for evaluation of authenticity, (4) the development of leads for OCI and

‘‘for cause,’’ foreign producer, importer, and domestic end-user inspections, and (5)

the development of intelligence on international distribution channels of counterfeit

and unapproved drugs.

The Agency has placed the import industry on notice regarding the requirement

to supply the Agency with accurate data regarding the identity and location of the

manufacturer of imported drugs. Upon review of the notices made to the community

over the last several years it became apparent that these requirements had been

made clear to importers and brokers through notices issued on January 29, 1999,

and March 24, 2000. Recently, the Agency again posted an updated version of its

requirements on the Internet with links to and from FDA’s import operations pages.

Additionally, on July 28, 2000, a Customs Automated Broker Interface (ABI) Administrative message was issued to all filers with a reference to the Internet site containing these requirements and a physical mailing address where a filer may request a hard copy from the Agency. A copy of the July 28, 2000, ABI notification

is enclosed.

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C. ADDITIONAL STRATEGIES AND IDEAS FOR HANDLING IMPORTED COUNTERFEIT AND

UNAPPROVED DRUGS/APIS

The Agency has been developing and implementing strategies for assessing the

scope of the threat of imported counterfeit APIs to the U.S. consumers. The Working

Group has identified three major operational components for evaluation: foreign inspections, domestic inspections and import operations. In order for FDA to ensure

the integrity of APIs from place of manufacture to place of use and sale in the U.S.,

and to assure those drugs are manufactured and held in conformance with good

manufacturing practices (GMPs), information from these three components must be

integrated and made readily available. Furthermore, when the Agency intends to

conduct a foreign inspection, relevant data obtained from the Agency’s domestic operations must be available to the foreign domestic operations must be available to

the foreign inspectors for verification or development of additional evidence where

suspect activity has been identified. These interfaces require a more comprehensive

and integrated use of IT to increase the speed and accessibility of relevant data. An

additional evaluation by the Agency is underway to determine how the industry

could participate in combating the potential threat of counterfeit drugs internationally and domestically.

1. IT Proposals and Solutions.

On July 1, 2000, ORA engaged the services of an IT contractor to assess the Agency’s overall IT needs and to propose changes which will accomplish the following

goals.

The IT contractor was charged with determining the information that FDA import

inspectors need to fully assess admissibility of all FDA regulated commodities. The

contractor consulted with import inspectors and compliance officers with expertise

in FDA and Customs laws and regulations, GMPs and IT import applications.

The contractor has used a comprehensive data gathering and assessment framework to analyze the functional process, infrastructure, and IT systems used by ORA

to support import operations. The data gathering involved a workshop with the import operations staff, onsite visits to relevant FDA centers and to a DO, system

demonstrations, interviews with system and infrastructure managers, and review of

documentation on ORA operations provided by FDA. Analysis involved an iterative

approach to development of processes, issues and recommendations. Each iteration

consisted of a team analysis, followed by a group session to compare and validate

each team’s assessment. To identify the most appropriate technology, the contractor

conducted extensive technology scanning, arranged for vendor presentations, reviewed FDA plans and discussed possibilities with FDA staff.

The contractor also was charged with developing strategies for converting information currently on paper into an electronic format form. This information is necessary for the import inspector to make a more efficient admissibility decision. The

contractor was asked to develop short and long term proposals for integrating the

FDA’s databases and for creating a secure electronic environment in which large

amounts of data may be securely transmitted and accessed by authorized Agency

personnel. These proposals are to take into account anticipated growth of the regulated industry, the dramatic increase of cross-center products entering interstate

commerce, and the need for flexibility to maximize the Agency’s enforcement and

surveillance efforts.

Finally, the contractor has been charged with assisting the Agency in assessing

the viability of countermeasure technology to detect and deter import violations.

The Agency expects a final report from the contractor in August 2000.

2. Joint Industry/Agency Efforts.

Members of the Working Group conferred with the FDA’s Field Drug Committee

(FDC) on counterfeit API issues. The FDC historically has maintained networks

with drug industry personnel and trade associations and has utilized these relationships for furthering the important message of health and safety through consistency

in GMP compliance. The FDC has agreed to assist the Working Group in developing

avenues through which industry could join forces with the Agency in combating

counterfeits in the market place.

Beyond this initial approach through the FDC, the Agency is exploring additional

routes for encouraging and receiving intelligence on counterfeit drugs in the world

market. Historical experience in prior counterfeit API investigations has demonstrated that foreign API manufacturers whose products are being counterfeited

can provide substantial assistance in developing tests for authenticity and intelligence regarding suspected counterfeiting operations. The Agency is aware that intelligence gathering from the trade is a critical element to successfully identifying

suspect counterfeits in the market.

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In connection with the IT contractor’s evaluations, the Agency may be able, with

appropriate funding, to establish a secure Internet environment to encourage manufacturers to provide confidential and sensitive information to the Agency. Depending

upon the intelligence received, the Agency may be able to identify sources of counterfeits or substandard products or evidence of other related criminal activity.

3. Foreign Inspection Component.

Since 1990, the Agency has shifted resources from domestic to foreign programs

to increase presence in the foreign drug manufacturing market place recognizing the

shift in global markets. For the Fiscal Year (FY) 2001 foreign work plan, the Agency

will focus on the manufacturers that have not been inspected as identified through

the analysis of unverified OASIS data. Resources necessary to fully implement the

four-tiered inspection system are being evaluated by the Working Group and will

be provided when available.

The foreign drug inspection program for the current FY is on track for accomplishing approximately 450 foreign inspections. This represents more foreign inspections than the Agency has ever accomplished in a single year. Because the program

continues to be primarily application driven, the priorities associated with the product approval process have impacted on our ability to conduct drug surveillance inspections. For FY 2001, ORA is projecting approximately 500 foreign drug inspections. This projection includes substantial increases in drug surveillance inspections,

which should result in increased coverage of firms in tiers three and four. The Agency is attempting to accomplish this increase through reallocation of existing resources. This will result, however, in a reduction in domestic inspection programs.

Due to resource restrictions, the Working Group is examining other avenues for

developing evidence that a foreign firm is complying with GMPs. Although there is

no true substitute for a physical GMP inspection, there may be critical production

or validation records which, through an Agency review, may provide a minimum

level of assurance that the firm is aware of and making efforts to comply with

GMPS. The Working Group is examining modification of the procedures for submitting Drug Master Files.

For instance, under current Agency regulations, validation of a drug manufacturer’s process is not required for obtaining an approval, however, it is required prior

to shipment in interstate commerce. Under the current paradigm, due to inadequate

resources, the Agency often cannot verify a foreign manufacturer’s validation

records prior to the first shipment to the U.S. Requiring the production of such

records in conjunction with or prior to shipment of drugs to the U.S. may permit

the Agency to review the firm’s validation. Overall such a review may assist the

Agency in focusing its resources toward firms that appear to lack adequate control

and validation systems. Such a program could be extended to the importation of

over-the-counter drugs under the same authority.

Compelling the production of such GMP required documents for imported drugs

may require FDA rule making. Such a program would assist the Agency in

leveraging its human resources to complement foreign inspections,

4. Domestic Inspection Component.

The Working Group has identified a need for integrating the foreign and domestic

inspection programs together with the Agency’s import operations. For instance, the

Working Group is recommending the use of ‘‘Process Mapping’’ or ‘‘System Re-engineering’’ within ORA to identify areas of internal procedural overlap and disconnects that may contribute to the lack of information exchange among these inspection programs. The IT contractor is expected to assist in assessing the viability

of an integrated data system which will permit access and data submission based

upon personnel role definitions.

Current instructions for performing domestic finished dosage manufacturer GMPs

have not focused on authenticity of warehouse API stock. The inspector will generally track a randomly selected API or other raw material from receipt through

quarantine and quality control testing, into production, verifying that proper batch

numbers are recorded throughout the process. Assuming that this review demonstrates no discrepancies, these aspects of the manufacturing processes are presumed to be within the limits of GMPs. Therefore, the Working Group is evaluating

the need to add components to and modify domestic inspection procedures to provide

comprehensive coverage of APIs during inspections of end users.

5. Import Operations Component.

FDA’s DIOP is responsible for providing policy guidance to the field relating to

import procedures, overseeing the development and operation of the Agency’s Import

Alert system, and for maintaining the Agency’s OASIS system.

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The Working Group is reviewing DIOP’s procedural and system operations and

is assessing the Agency’s personnel and equipment needs to better monitor U.S.

ports of entry. During the June 8 hearings, Customs designated over 300 ports of

entry. OASIS data indicates that approximately 100 ports have seen entries of APIs.

FDA has a notable presence in over 40 ports. The ports where FDA conducts the

bulk of its work represent those through which the vast majority of drugs enter.

The Working Group is considering whether current FDA or Customs authority

would sustain a restriction on which ports of entries certain commodities, such as

drugs, may be offered for import based upon a health and safety assessment. Other

approaches might be available to accomplish a similar effect. For instance a proposal to restrict entry of certain commodities to certain times of the workday or

week rather than by geographical criteria.

The Working Group reviewed Import Alert 68-09, which covers over 50 veterinary

APIs. Although this alert was originally issued in 1993, it remained largely unutilized due to inadequacies in FDA’s product coding system. Consequently, CVM,

CDER and ORA components are reviewing a Working Group proposal to merge all

human and animal drugs into a common ‘‘drug’’ FDA product code. This will align

the CVM product code system with CDER’s system enabling criteria to be set in

OASIS to make CVM import alerts more effective. Because many APIs have application in both human and animal drug industries, the Working Group is considering

consolidating human import APIs into Import Alert 68-09.

6. Possible new use of drug labeling requirements.

The Working Group is examining the development of a new use of the drug labeling requirements found at 21 CFR Part 201. CVM’s Import Alert 68-09 currently

addresses imported API drug labeling noting ‘‘[b]ulk new animal drug substances

labeled for further manufacturing or processing, which do not bear any indications

for veterinary use, may be misbranded under section 502(f)(1) [of the FD&C Act]

if they are intended for veterinary use or for further processing as animal drugs.’’

The Import Alert continues ‘‘21 CFR 201.122 exempts a drug from adequate directions for use when labeled for further manufacturing and processing and when used

to manufacture a new animal drug, which is covered by an approved application.

‘‘. . . 21 CFR 201.150 exempts a drug, which is intended to be further processed or

manufactured, from adequate directions when it is shipped under the terms of a

written agreement which, if followed, will assure the finished product is not adulterated or misbranded.’’ This Import Alert was revised on July 12, 2000, and has been

the basis of Working Group discussions for extension of the drug labeling regulations to control imported APIs and drug ingredients generally.

7. Proposal for assessing the existence or extent of imported counterfeit and substandard drugs.

ORA has proposed a plan for assessing the extent of the potential threat that imported counterfeit and unapproved APIs may pose to the health of the unsuspecting

American consumer. This plan would require an increase in ORA’s current staff,

equipment and supplies for forensic analyses, and operational funds for domestic

and foreign inspections that would target imported APIs. The plan could generate

leads for criminal and civil enforcement actions and provide concrete factual and analytical data upon which the Agency could plan its next course of action.

The proposal consists of establishing a team of experts to detect counterfeit and

substandard APIs. This specialized team would be stationed in strategic locations

identified by high import or manufacturing activities. They would conduct focused

API inspections of domestic and foreign manufacturers, importers, and conduct forensic analyses of resulting samples. The overall resource requirement for this plan

includes additional full-time equivalents and funding for equipment, domestic travel

and operational costs. Foreign inspection costs would increase these funding needs.

ORA is assessing the viability of the proposal.

8. Possible International Collaboration.

The Working Group is investigating whether collaborations with foreign governments could increase the Agency’s ability to verify the existence and the compliance

status of manufacturers, shippers, repackers or relabelers of drugs of other countries. Such collaboration would involve counterpart foreign government agencies authenticating the source and quality of APIs imported into the U.S.

9. Possible Security Measures.

The Working Group is engaged in discussions with the Customs’ Applied Technology Division which has considerable experience in tracking shipments within

U.S. commerce to verify and document cargo diversion. The Working Group will

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evaluate the currently available technology in terms of levels of surveillance capabilities, cost of equipment and implementation.

The Working Group has asked the IT contractor to explore low cost security devices for use by foreign manufacturers such as chemical taggants in labeling, glue,

ink or packaging materials to detect suspect counterfeit drugs. The Agency is considering a wide array of available technology including encrypted bar code technology in labeling and Certificates of Analysis containing manufacturing information already submitted by the foreign manufacturer through a secure web-based environment. Other possible solutions include radio frequency tags for detection during examinations at ports of entry.

The Working Group will continue its assessment of the extent of the counterfeit

drug problem in the U.S. The strategies outlined above will be further developed

and enhanced. Additionally, other potential strategies will be examined.

Thank you for your continued interest in these important issues. We hope this information is helpful, please contact us if you have further concerns or questions.

Sincerely,

MELINDA K. PLAISIER

Associate Commissioner for Legislation

Enclosure

cc: The Honorable Ron Klink

Ranking Minority Member

Subcommittee on Oversight and Investigations

Committee on Commerce

The Honorable Thomas J. Bliley, Jr.

Chairman, Committee on Commerce

The Honorable John D. Dingell

Ranking Minority Member

Committee on Commerce

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COUNTERFEIT BULK DRUGS AND RELATED

CONCERNS

TUESDAY, OCTOBER 3, 2000

HOUSE OF REPRESENTATIVES, COMMITTEE ON COMMERCE, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, DC.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room

2322, Rayburn House Office Building, Hon. Fred Upton (chairman)

presiding.

Members present: Representatives Upton, Cox, Burr, Bryant, Bliley (ex officio), Waxman, Strickland, and Dingell (ex officio).

Also present: Representative Coburn.

Staff present: Alan Slobodin, majority counsel; Anthony Habib,

legislative clerk; and Chris Knauer, minority counsel.

Mr. UPTON. Good morning, everyone. Today the subcommittee

continues its oversight and investigation of counterfeit bulk drugs

and other issues related to imported drugs. On June 8 of this year

this subcommittee held a hearing on FDA’s failure to take adequate actions concerning imported bulk drugs. Several key findings

emerged from that hearing.

One, for the first time the FDA publicly disclosed that it knew

4 years ago that the deaths of Americans were in fact linked to a

counterfeit bulk drug. Two, in 1996 the FDA and Centers for Disease Control determined that 89 Haitian children died from taking

cough medicine made with poisonous antifreeze traced to China but

labeled as glycerine. The FDA’s follow-up investigation of the Haitian cough medicine case uncovered shipments of suspected glycerine that made their way into the United States. The FDA linked

toxic adverse reactions to 155 American patients on an antibiotic

called gentamicin sulfate made by a Chinese bulk manufacturer,

Long March Pharmaceutical. Even with a system of safeguards

such as FDA inspections and manufacture testing, the Long March

bulk drugs still reached and harmed unsuspecting American patients.

The FDA had little or no information on about 4,600 firms that

had shipped bulk drugs into this country, including 623 from China

and 409 in India. This lack of information showed the inadequacies

in FDA’s information systems and the real risks of uninspected

firms shipping counterfeit or substandard drugs into the U.S. .

Since the June 8 hearing there have been more key findings in

developments on the counterfeit drug import front. Because of the

committee’s investigation the FDA magazine so far identified at

least 46 firms in China and 11 firms in India that appear to have

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exported misbranded drugs to the United States in 1999 and have

never been inspected. The FDA recently advised committee staff

that as many as 242 firms worldwide appear to have shipped misbranded drugs to the United States in 1999 and yet have never

been inspected.

In July committee staff visited the port of Laredo, Texas and on

the U.S.-Mexican border to learn about the U.S. Customs Service

and FDA controls of commercial and personal imports of prescription drugs. The staff visit showed the lack of controls over Mexican

pharmacies and the wide availability of suspicious counterfeit or

substandard prescription drugs imported from Mexico.

Last month committee investigators accompanied Dennis Baker,

FDA’s Associate Commissioner for Regulatory Affairs, to China and

India to observe FDA inspections of bulk drug firms and to gather

additional information on issues related to the counterfeit drugs.

Here are some of the important findings from that trip:

Committee staff obtained evidence that Chinese firms are secretly manufacturing drugs that are still under U.S. patent. The

firms market these violative drugs using secret price lists.

In another interesting counterfeiting example a Chinese pharmaceutical company is marketing products allegedly as food, but these

products actually contain the active ingredients of Viagra. It is difficult to track counterfeiting in China because counterfeiting factories use a day shift for making a legitimate drug and sometimes

a night shift for the counterfeit version. Some local government authorities are complicit in the counterfeiting and thwart operations

that could expose these practices. Chinese government authorities

who are not corrupt often lack the resources to investigate. Another

difficulty is the inability to track product flow because distribution

in China is very complicated.

Two developments that make China a bigger time bomb of drug

counterfeiting are these: China’s joining the WTO and Internet

sales. But India may be the biggest counterfeiting problem because

of the lack of patent laws and the lack of centralized regulatory

control of the pharmaceutical industry. According to FDA inspectors, the plants in China and India visited by the committee staff

seem to be representative of most of the drug plants inspected in

China and India. But if that is so, these plants use outdated technology and procedures no longer used in the West.

In addition, it is difficult to believe that these plants can remain

compliant since these plants are normally operating outside of U.S.

regulations when they manufacture for their domestic market and

are not pressured by environmental or other safety laws such as

firms here in the United States. There are major obstacles to FDA

foreign inspections being able to assure the same safety standards

as domestic inspections. Unlike domestic inspections, FDA foreign

inspections in China and India cannot use samples of microbiological testing because the samples would lose their integrity by

being shipped for testing to a U.S. lab. Unfortunately, no field testing is available.

Even when an FDA inspection teams includes a Mandarin speaking FDA inspector, the language barrier remains a major problem

in China because there are difficulties in translating technical

terms and the firm’s interpreter can sometimes lack that scientific

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knowledge. Where the firm’s interpreter has scientific training,

these interpreters sometimes tend to go beyond interpreting and

suggest answers or provide leading questions to employees.

Also, FDA inspection teams try to work efficiently and split up

to look at different parts of the firm. As a result FDA inspectors

often are still relying on the firm’s interpreter even when another

FDA inspector on the team in fact knows the language.

Beyond some of the new information obtained by the committee

there has been another important development: Legislation on an

appropriations bill that would change FDA laws to ease reimportation of U.S.-made prescription drugs. Much of the debate has focused on safety. These concerns are a reflection of the investigative

work of this subcommittee in the 1980’s, and today. This subcommittee will continue its oversight work to ensure that the FDA

can control the current flow of drug imports and that the FDA not

implement schemes that would in any way jeopardize the safety requirements of drug imports.

Last, since the June 8 hearing the FDA has reported back to the

subcommittee on actions and strategies to improve its scrutiny of

imported drugs. The Department of Justice has reported back to

Chairman Bliley on proposals to strengthen investigation and prosecution of crimes involving counterfeit drug imports. We will hear

in some detail at this hearing about these actions, plans and proposals from the FDA and the Department of Justice.

We talked a lot at the June 8 hearing about what was wrong

with the FDA. Today I want to mention something right with the

FDA. His name is Dennis Baker, and he is FDA’s Associate Commissioner for Regulatory Affairs. He has had a very tough job, testified for FDA at the June 8 hearing. But from what I have been

told by staff, he I know is a dedicated public servant who is genuinely committed to improving the FDA. And Dr. Henney, I hope

you will send a strong and loud message of support for him and

for the upgrading of information technology that he seeks and that

the FDA badly needs. Welcome, today’s distinguished witnesses.

We are particularly honored that Raymond Kelly, U.S. Customs

Service Commissioner, is joining us today. Certainly I want to extend a very warm welcome to the FDA Commissioner, Dr. Jane

Henney, who is making her first appearance before this subcommittee. I look forward to discussing these vital issues and working with you to find effective solutions. I yield to——

Mr. COBURN. Mr. Chairman, as a member of the full committee

and a former member of the O&I Subcommittee, I would ask unanimous consent to participate in this hearing.

Mr. UPTON. Is there any objection to that? Hearing none, the

gentleman is allowed.

Mr. DINGELL. I’ll defer to the chairman.

Mr. UPTON. Mr. Bliley, the chairman of the full committee.

Chairman BLILEY. Thank you, Mr. Chairman. You held a hearing

last summer on imported counterfeit drugs and today we will look

at some very serious questions about FDA’s ability to assure that

all drugs manufactured here or abroad meet safety requirements.

Congress is about to enact permanent changes to the Food, Drug

and Cosmetic Act as part of the agricultural appropriations bill.

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I regret that these kind of policy changes are being made without

action in the Commerce Committee. Relaxing the laws governing

the importation and reimportation of prescription drugs into the

United States will have far-reaching consequences, some potentially dangerous. Unfortunately, a full vetting of this issue has not

occurred. I am very concerned that the Congress is legislating

changes to a public health law that may be unwise and may erode

the gold standard that exists for the quality and efficacy of drugs

consumed by Americans.

I think all my colleagues in the administration would agree it is

completely unacceptable to have two safety standards for the drugs

that Americans consume, one for the drugs made here and a lower

one for imports. When it comes to safety, there should be no compromises. This committee has been vigilant on drug safety. Imported or reimported drugs should meet the same rigorous standards. Avoiding this double standard is important because in many

cases drug imports can not be assumed as safe as U.S. drugs.

Under my authority investigators from this committee last

month went with the FDA to China and India to see firsthand the

bulk drug plants and the problems with inspecting them. While

China and India have a wealth of human labor and scientific talent, these drug plants lack resources and systems to assure safety.

The plants that the staff observed had major problems meeting

such basic safety requirements as clean water, good ventilation,

and methods to avoid contamination. In the opinion of the investigators and the FDA inspectors, these kinds of plants could not

exist in the United States because they would be unable to compete.

Beyond these plant visits, investigators also obtained information

and evidence related to fraud and counterfeiting that are a reality

in the international pharmaceutical trade. FDA already cannot assure against the double standard because of weak import controls

and inadequate information systems.

Prompted by this committee’s investigation, the FDA has reviewed its records on drug imports and found that 242 firms may

have shipped misbranded drugs to the United States in 1999 and

have never been inspected. The total of 242 includes at least 46

firms from China and 11 from India.

FDA must upgrade its enforcement and information systems to

assure the safety of imported drugs. In addition to these improvements, there must be effective criminal enforcement against fake

drug imports.

After the June 8 hearing, I wrote to Attorney General Janet

Reno about the Justice Department’s view on improving ways to investigate and prosecute crimes related to counterfeit drug imports.

In response to my request, the Department has suggested some legislative proposals such as requiring certain records as part of a foreign drug inspection and ensuring extraterritorial application of

the Food, Drug and Cosmetic Act. These proposals seem reasonable

in concept and I support them. I would be pleased to have the committee work with the FDA and the Justice Department on developing legislative language.

As the reimportation of prescription drugs is eased, this committee has worked and will continue to work to strengthen protecVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00294 Fmt 6601 Sfmt 6601 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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tions for consumers against imports of fake drugs. Today’s hearing

to get more information on the problem and on proposed solutions

and action is yet one more example of this committee working to

protect consumers.

I welcome today’s witnesses and look forward to the testimony.

Mr. UPTON. Thank you, Mr. Chairman. Mr. Dingell.

Mr. DINGELL. Mr. Chairman, I thank you. I have a longer statement which I ask to be inserted in the record.

Mr. UPTON. Without objection, all members of the subcommittee

will be allowed to introduce and offer their statements in their entirety.

Mr. DINGELL. Mr. Chairman, it is amazing to me how many

times this Congress must relearn the same lesson, how little we

profit from it and what messes we get ourselves into by failing to

address the real underlying problem. I know there is a tremendous

drive to allow reimportation of drugs or to allow importation of

drugs and pharmaceuticals and other things in a more expedited

easy fashion. This I think is in good part because my colleagues to

some degree on both sides of the aisle, but mostly on the majority

side, have found that the people are fed up with the fact that a lot

of Americans are, (A) paying too much and, (B) that our senior citizens are not able to get prescription pharmaceuticals because they

simply cannot afford them, and of course with some of the witchcraft that is coming forward on the other side of the aisle about

how we are going to pay for prescription pharmaceuticals by enriching HMOs means that my colleagues on that side have urgent

need of something to shelter them against public criticism.

In the 99th Congress, this committee looked at reimportation of

prescription pharmaceuticals. We had a long bipartisan report. We

found a number of things. We found, for example, shipments of

fake pharmaceuticals. We found unsafe packaged pharmaceuticals.

We found counterfeits. We found adulterated antibiotics from

places like China. We found prescription pharmaceuticals that had

been repackaged under unsafe conditions that had been stored

under unsafe and under conditions which created deterioration of

the prescription pharmaceuticals and which put Americans at risk.

So we passed the basic legislation to which we are inquiring

today, the PDMA, which required that the prescription pharmaceuticals be imported through licensed manufacturers. That was

because the Congress was, quite frankly, too stupid and too tight

to properly fund these programs and because OMB saw to it that

Food and Drug didn’t have the money that they needed to do the

job and didn’t have the resources and the number of people.

Now, with a growing trade in prescription pharmaceuticals from

places like China, we are going to expand the amount that comes

in. The chairman just made, I thought, a very sapient observation

in which he pointed out that there is desperate need to see to it

that Food and Drug has the resources to do the job that they have

to. We aren’t seeing to it with that situation, and I intend to ask

a few questions about it.

Now if you think that you are limiting this only to subjects like

prescription pharmaceuticals and things which will come in, you

are entirely in error, because we are talking about aerosol inhalers,

we are talking about pre-mixed-injection solutions, we are talking

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about ointments and creams, auto injectors, power inhalers, topical

gels, injection solutions, inhalation solutions, pediatric solutions,

capsules, prefilled syringes, and a wide array of other things, including syrups and nasal sprays.

Now, if you are talking about having Food and Drug catch somebody at the border when they have the array of shipments that

they have in, you are going to find that, (A) they can’t do it and,

(B) they can’t paw through to find out whether these substances

are in fact safe, whether they are deteriorated, whether they are

manufactured under good manufacturing conditions as required by

our law or whether they are doing other things. In short, you are

setting yourself up, if you pass legislation easing reimportation or

easing importation, to a situation where you are looking at a fine

calamity and some fine killings of Americans and making Americans ill because you are not doing the job that you should in terms

of seeing to it that Food and Drug has the resources to address

these problems now.

I would just call to your attention one little thing, where Food

and Drug some years back had a scare over Chilean grapes. They

pulled the whole Food and Drug administrative and enforcement

mechanism and they sent them to the ports to look and see what

was going on. They found, I think, three grapes that had cyanide

in them. But the result of this mess was that there was a prodigious lack of enforcement of all parts of the foods and drug law

because they didn’t have either the people or the resources without

this particular scare to do the job that they needed to do.

So I look forward with a great deal of interest to what we uncover today. I intend to ask about the resources and to try and recall for the benefit of those who have not learned this lesson, as

I had to learn it back in the 99th Congress, about what happens

when you turn loose an agency without proper resources, charge

them with protecting the American people and then find that they

cannot do the job that they have to do.

I think that this is particularly subject to criticism when we do

this in order to avoid criticism for failing to pass proper legislation

to address the problems of our senior citizens and having prescription pharmaceuticals made available to them at a reasonable cost.

In any event, this will be an interesting hearing. We will try and

see to it that it is lively and that all participate. In the meantime

if anybody has got any loose time I have an excellent statement

which deals with these matters and other matters in greater detail,

which I hope will be helpful to the Chair, to the committee and to

the Congress in terms of understanding the mess in which we are

injecting ourselves.

Thank you, Mr. Chairman.

[The prepared statement of Hon. John D. Dingell follows:]

PREPARED STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS

FROM THE STATE OF MICHIGAN

Mr. Chairman, I have long been concerned about counterfeit, substandard, misbranded, and adulterated drugs entering this country from abroad. Previous investigations conducted by this Subcommittee more than a decade ago ultimately led to

the passage of the Prescription Drug Marketing Act (PDMA), which added measures

to protect consumers from potentially dangerous foreign drug sources. But protecting consumers from questionable and dangerous drug products manufactured

abroad remains a formidable challenge.

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I remain concerned that the Food and Drug Administration (FDA) has yet to develop a suitable framework for protecting the public in the face of potentially greater risks. The agency still remains alarmingly behind in inspecting those firms that

send drug products here, and it still lacks the ability to track and measure the global counterfeiting problem. What is more troubling is that significant new responsibilities could soon be placed on an agency that is already underfunded and struggling to meet its current mandate.

Mr. Chairman, FDA is supposed to inspect firms for Current Good Manufacturing

Practices (CGMPs) before they are approved to ship a drug product into the United

States. Yet at the last hearing, it was disclosed that approximately 4,600 foreign

drug firms may have shipped products to the U.S., yet were never inspected by the

agency. FDA now tells us that the figure is lower, but they still cannot tell us what

it is. That inability does not instill confidence.

The lack of this kind of information stems from the agency’s reliance on an incomplete and outdated information technology system called OASIS. We have asked the

agency to address the shortcomings of this system for years, but FDA has failed.

While FDA is again trying to fix this system by hiring yet another outside contractor, the fact remains that the agency still cannot efficiently generate data critical to its foreign inspection efforts.

A workable system for tracking who sends what and when to this country, and

whether such firms meet U.S. good manufacturing practice requirements, must be

implemented, and soon. Commissioner Henney should immediately determine the

agency’s information technology requirements, and then finish the job.

Meanwhile, as FDA continues to struggle with this problem, new inspection demands are piling up. Although we cannot determine the exact size of the foreign

inspection backlog, we know that one exists and it appears considerable.

What is worse is that in the coming years increased inspection demands will only

grow. For example, staff was told that next year, as many as 10 to 15 new facilities

requiring an FDA inspection could emerge in China alone. For this single country,

FDA would have to significantly increase its inspection efforts from the previous

year, which would represent a significant resource expense to the agency. Multiply

this across the globe and the ensuing problem becomes obvious.

How will we expect the FDA to keep pace with such demand when it is already

falling behind? Further, if the agency cannot keep up, what will the effect be on

the safety of the nation’s drug supply? These are critical questions that must be

asked and properly addressed. What is also important is that we ask these questions in the context of the larger debate now taking place regarding drug pricing.

That is because the outcome of that debate could have profound consequences on

how the agency does its job, and how it allocates resources.

While it is known that I have a number of safety concerns regarding most of the

re-import proposals, I also have concerns that we are on the verge of asking an already overstretched agency to do significantly more. I remain skeptical whether we

will adequately fund FDA, or even if it is technically prepared and capable of doing

the job. I cannot think of a time when FDA was not struggling for resources, nor

do I recall that the agency did a particularly good job at stopping adulterated and

counterfeit material from reaching our shores before the Prescription Drug Marketing Act went into effect.

Policing the world’s drug supply is an expensive endeavor. Yet, while we agree

that foreign inspections are a critical component to safeguarding the nation’s health,

we still do not adequately fund them. Why? If we are going to hold the FDA responsible for being the world’s drug cop, shouldn’t we provide it with the necessary resources to do the job competently?

Let me conclude by saying that I believe that drug counterfeiting is a very real

problem that will likely only grow worse in the future. The world’s drug supply is

every bit as vulnerable to dangerous counterfeiting today as when I first began the

investigation more than 15 years ago that ultimately led to the Prescription Drug

Marketing Act. And while I have a great deal of respect for my friends at the FDA

that continually protect us from that threat, I do believe the agency is slipping behind in meeting its mandate. I would think long and hard about whether, in the

near future, we want the agency to take on even greater responsibilities, before we

have first addressed what is now broken.

I look forward to hearing from today’s witnesses, and with that, I yield back.

Mr. UPTON. Thank you. Recognize the vice chair of the subcommittee, Mr. Burr.

Mr. BURR. Thank you, Mr. Chairman. Welcome, Commissioner

Henney. Mr. Chairman, before I make my written remarks, let me

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associate with the chairman of the committee and the ranking

member of the committee with the concern that I personally hold

after a 21⁄2-year commitment through the FDAMA legislation at a

time where we worked aggressively, every member of this committee, to protect the gold standard that we recognize existed at

the Food and Drug Administration and the dismay that we go

through today with an effort to open up the market to a flow of

drugs in a way that we can’t, I believe, fulfill the commitment to

meet the same standard.

It is somewhat of an amazement that it bypassed this committee,

that the effort is stuck into an appropriations bill and that individuals responsible within this government for the safety and efficacy

of our pharmaceuticals have been supportive of this effort for reimportation and importation. I have tried to stay focused on this

hearing because it deals with counterfeit drugs. It is somewhat

ironic that we would highlight the problem that exists in America

and at the same time walk into another room and talk about how

to expand the risk to us of a current problem.

After reviewing Commissioner Henney’s testimony, I am pleased

to see that the FDA listened to several of our suggestions at the

June 8 hearing and has moved forward with some important initiatives. However, several statements in the testimony do raise some

questions. One, given that the importers were notified on January

29, 1999, March 24, 2000, July 20, 2000 and July 28, 2000, that

they must provide the FDA with the identity and location of the

drug import manufacturers, it concerns me that you have not provided us with any compliance data on the requirement today. The

first notice was given over 20 months ago.

Two, as one of the authors of FDAMA, it disheartens me to see

that a final rule on a requirement included in FDAMA has just

been sent for approval to the Office of Management and Budget. It

is very important for foreign establishments whose products are

imported or offered for import into the U.S. to register with the

FDA and identify a U.S. agent. It should not have taken FDA 3

years to issue a rule on this part of the FDAMA legislation. You

state that the Office of Criminal Investigations is working on a

number of ongoing investigations with Customs involving unapproved and counterfeit finished human drugs. I am curious to know

how many investigations are included in a number after all the

years the FDA just spoke about the potential threat posed by counterfeit drugs.

Four, the Prescription Drug User Fee Act requires preapproval

inspections of manufacturing facilities. Why are there by FDA’s

count 242 uninspected foreign manufacturers that are exporting

products to the United States of America? The bottom line in this

issue is consumer safety. It should be as it relates to the debate

on counterfeit drugs, it should be as it relates to any debate about

a stream or flow of pharmaceuticals, be them finished or bulk, to

this country and I hope that never changes.

I thank the chairman. I yield back.

Mr. UPTON. Thank you.

Mr. Bryant.

Mr. BRYANT. Thank you, Mr. Chairman. I too, as my colleague

from North Carolina did, wish to associate myself with the remarks

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of our chairman of the full committee as well as the ranking member in terms of the concern that we all have regarding the availability of prescription drugs to our population as well, and specifically to our senior citizens.

I would differ with those on the committee who raise complaint

about this Congress passing for the first time ever a prescription

drug benefit for our senior citizens, something again that has never

happened. And while it may not be the perfect bill, and rarely do

we initially pass a perfect bill out of the House, it is a good start.

It goes a long way down the road in providing universal coverage.

It is a voluntary bill, one that doesn’t make you get into the program if you don’t want to, one that provides very good access to

this benefit and at the same time provides a catastrophic type coverage for people out there who have extremely large bills. I think,

importantly, it offers this, to coin a Washington phrase, sooner

than later, this is something our senior citizens in particular don’t

need to wait years to begin receiving this type of benefit.

I would specifically thank our chairman of this subcommittee,

Mr. Upton, for a very timely hearing. I think in terms of providing

an opportunity to have the FDA in at this time as well as Customs

and Justice to talk about the importation issue is a wonderful opportunity, given several things, the Internet and sales and things

like that that are just overwhelming Congress in so many ways.

The Internet itself, sales of prescription drugs and other things

would be one of those, but so many other times I think that the

Internet and the technology that is emerging, particularly in the

pharmaceutical industry, are overwhelming Congress’s ability to

keep up and enact legislation and to regulate to the extent those

are necessary. Just deciding whether we need to regulate or legislate sometimes is a difficult decision itself.

But I do look forward to the testimony of this very distinguished

panel. Obviously the issue of the day is the importation and even

the legislation that my colleague in North Carolina referred to, the

riders to the agriculture appropriation bills that permit this. The

legislation that protects the safety and the efficacy of drugs was

put in place for a reason.

There is a concern now, again with the rising cost of drugs, that

we look at ways to lower those costs. This was one of the things

that has been passed out of the House, but again not without controversy. I do look forward to the statements from the panelists on

those opinions. And given the events of the last week with the approval of the drug RU-486, I am sure that might come out in some

examination, because that obviously has very broad implications,

too, in this arena of reimporting drugs into the country and the

safety, which I think we all agree is foremost in the minds of all

the people in this room today as well as I suspect in Washington

also.

With that said, I would be happy to give back my time, but again

my appreciation for your very timely hearing today.

Mr. UPTON. Thank you.

Mr. Waxman.

Mr. WAXMAN. I have no opening statement. I welcome our witnesses. I look forward to their testimony. I will reserve all my comments until we get into questions. But I also want to commend the

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FDA for its decision last week on RU-486 and so many other things

where I think it is doing a good job. You should hear sometimes

from us and we acknowledge that.

Mr. UPTON. Well thank you. At this point we are prepared to

have the first panel testify. We are honored to have the Honorable

Jane Henney, Commissioner of the Food and Drug Administration,

with us today; the Honorable Raymond Kelly, Commissioner of the

U.S. Customs Service; and Ms. Patricia Maher, Deputy Assistant

Attorney General, Civil Division, from the Department of Justice.

Welcome.

As you may know, your statements in their entirety are made as

part of the record. We would appreciate it if you might be able to

summarize that in about 5 minutes or so. And as you may know,

testimony before in subcommittee traditionally has always been

under oath. And do any of you have objection to us taking your testimony under oath?

Ms. HENNEY. I don’t have objection to taking it under oath, but

I would like to affirm rather than swear, affirm rather than swear

as you give the oath.

Mr. UPTON. Okay.

Mr. DINGELL. That is proper.

Mr. UPTON. Do any of you wish to be represented by counsel as

well? If not, if you would stand.

[Witnesses sworn.]

Mr. UPTON. You are now under oath, and, Dr. Henney, we will

start with you. Thank you and welcome.

TESTIMONY OF HON. JANE E. HENNEY, COMMISSIONER, FOOD

AND DRUG ADMINISTRATION; ACCOMPANIED BY DENNIS E.

BAKER, ASSOCIATE COMMISSIONER, REGULATORY AFFAIRS;

HON. RAYMOND KELLY, COMMISSIONER, U.S. CUSTOMS

SERVICE; AND PATRICIA L. MAHER, DEPUTY ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION, DEPARTMENT OF JUSTICE

Ms. HENNEY. Thank you. Good morning, Mr. Chairman, members of the committee. I am Jane Henney, Commissioner of Food

and Drugs. I appreciate the opportunity to be here today to discuss

our efforts to detect and prevent the introduction of counterfeit

bulk drugs into the drug supply of the United States and specifically to report on our actions since your hearing on this matter in

June. A more comprehensive report of these activities is in my

statement, and I appreciate your placing that in the record.

FDA believes that the quality of drugs in this country is high,

but we must take very seriously any allegations regarding the

counterfeiting or adulteration of drug products. The agency agrees

with the committee’s assessment that more can and should be done

to help ensure that imported bulk drugs or active pharmaceutical

ingredients in finished products meet the requirements of the Federal Food, Drug and Cosmetic Act.

The agency has been developing and implementing additional

strategies for assessing the scope of the threat of imported counterfeits and moving forward with activities already under way. Let me

begin by providing the committee with an update on the five initiatives FDA announced at the time of the June hearing.

297

No. 1, additional funds were allocated to the Forensic Chemistry

Center for sampling, analytical work and assessments of APIs

gathered through targeted inspections of importers. With these

funding increases, the Forensic Center has conducted 20 targeted

API inspections, including 9 at importers of foreign APIs, 10 at domestic finish dose manufacturers, and one at a domestic animal

drug manufacturer. The Forensic Center inspectors are now analyzing the information obtained during these inspections to determine whether additional follow-up by district officers, investigators

or our Office of Criminal Investigations is warranted.

Two, make the Forensic Center API data base available electronically to all field investigators by January 2001. This, as you

recall, is a data base that currently contains information or fingerprints on 330 APIs that have been collected and chemically analyzed by the Forensic Center. This information is one important

tool that FDA can use to more quickly identify whether or not a

product is authentic or counterfeit. The technology necessary to

make the Forensic Center’s API data base available to all of our

field and port and drug inspectors is being developed and planned.

We do expect to have the system in place by January 2001.

Three, expand the Philadelphia pilot nationwide by the end of

2000. The Philadelphia pilot, as you will recall, allowed inspectors

to retrieve additional drug approval data from the Establishment

Evaluation System, or EES, data base maintained by the Center

for Drug Evaluation and Research in about 3 to 4 minutes on any

API entry. Rapid access to this information increases the probability of confirming authentic sourcing of APIs.

The pilot was a success and access to this system has been expanded to three FDA districts handling the vast majority of APIs,

New York, New Orleans, and the San Juan district offices. Currently we are completing plans for the additional technology upgrades in the training for field personnel necessary to expand the

program to the rest of our districts, which we will complete early

next year.

Four, put all importers on notice that they are required to provide the name of the foreign manufacturer upon entry into the U.S.

and that the entry of their products into the U.S. will be contingent

upon it. The agency has placed the import industry on notice regarding the existing requirement to provide FDA with accurate

data regarding the identity and location of the manufacturer of imported drugs. On July 20 of this year, we posted an updated

version of these requirements on the Internet with links to and

from FDA’s import operations pages. And on July 28 a Customs

systems administrative message was issued to all files with a reference to this Internet site containing these requirements. Compliance with this requirement is assessed as the agency carries out

routine filer evaluation. Customs has informed FDA that these

types of reporting failures may be the basis for Customs civil actions. This information will be useful to the agency in better defining and identifying a universe of foreign manufacturers shipping to

the U.S.

Five, require domestic manufacturers to provide information to

FDA when they discover that the bulk materials they receive are

substandard, ineffective or appear not to be from the approved

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source. As you may know, the committee proposed this idea to the

agency last year. We are proceeding with efforts to develop a proposed regulation that would establish this requirement.

I would be pleased to also note actions that we have under way

or other actions we have taken, including foreign registration. We

have cleared and forwarded to OMB the final rule requiring foreign

establishments whose products are imported or offered for import

into the U.S. to register with FDA and to identify a U.S. Agent.

This rule will be effective 6 months after the publication of the

final rule, and it will provide us the collection of information needed to establish an accurate official established inventory.

We have reestablished our working group and this group has

spent 3 months exploring a full range of issues regarding imported

counterfeit and substandard drugs.

On the important issue of information technology needs assessment, it was one of the greatest concerns at the June hearing, for

the agency does lack a well-integrated IT system, particularly with

respect to regulation of drug imports, but as it relates to our other

information systems as well. We have had a contractor undertake

a study. Their report has recently been received by the agency and

we are currently reviewing both their recommendations and their

resource estimates. We have also begun very aggressive cross-training with the U.S. Customs Service in June and July. We’ve conducted three import enforcement training courses for our own personnel. This is a course that has been jointly developed by FDA

and Customs, who have developed the course and teach it. And it

focuses on the interplay between FDA and Customs enforcement

measures, strategic problem solving, administrative procedures and

international agreements, and one-half of the training is in Customs law and regulation. We are extending this course to additional field personnel and we will be joined by other members of

the Customs Service as well.

The other cooperative efforts we have with Customs include our

memorandum of understanding with a cross-designation of our OCI

agents as Customs officers and we are working on a number of ongoing investigations with Customs regarding unapproved and counterfeit finished human drugs, medical devices, and foods.

We have also had very aggressive discussions with Customs’ Applied Technology branch about the use of countermeasures to detect counterfeits and track shipments when warranted. We have

also been active in the international arena, which I would be glad

to spend time discussing with you if you would like in the questions and answers. And we are also working with Customs on the

leveraging of science and technology. We have met to explore methods to better leverage our respective resources in this manner.

We had hosted at the Forensic Center a meeting on August 10

with Customs officials to look at ways to use analytical data and

equipment and cross-train in methodology and emerging forensic

techniques. With respect to an import alert, we have been working

with the issue of identifying foreign API manufacturers shipping to

the U.S. who have not been inspected. As many members have

cited, this data has enabled us to produce a list of 242 manufacturers in 36 countries that appear to have exported to the U.S. in

1999 but have not been inspected. Today we have issued an import

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alert for these uninspected foreign drug establishments. We have

also had additional strategies for handling imported counterfeit unapproved drugs and APIs under consideration, which I will be

happy to discuss during the questions and answers.

Mr. Chairman, in June you asked us what additional resources,

personnel and funding may be necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs. The

agency has long recognized that we need additional resources in

the area of post-market surveillance, which would encompass many

of the activities I’ve discussed. In just the past 2 years, fiscal year

1999 and fiscal year 2000, the President’s budget included $25.8

million and $39.3 million, respectively, for post-market surveillance

activities. Neither of these requests was funded. The lack of new

funding and absence of increase for our core operations reduces the

numbers of FTEs available to perform the agency’s critical postmarketing activities.

At this time only preliminary estimates have been made of these

resource requirements, as the scope of this evaluation needs to encompass both the agency’s domestic and foreign operations as well

as the operations of the various FDA centers. Once we have assessed these needs, we will look forward to working with you and

the other Members of Congress to assure FDA has the tools it

needs to do our job for the American public.

Mr. Chairman and members of the committee, I want to assure

you that all of us at FDA remain concerned about any possibility

that counterfeit or otherwise unsafe drugs may find their way into

the American drug supply. We will remain vigilant as we refine

and improve our programs and procedures that we use to ensure

the availability of safety medications for consumers. We appreciate

your continued interest in these issues, and I will be happy to answer questions.

[The prepared statement of Hon. Jane E. Henney follows:]

PREPARED STATEMENT OF HON. JANE E. HENNEY, COMMISSIONER OF FOOD AND

DRUGS

INTRODUCTION

Mr. Chairman and Members of the Committee, I am Jane E. Henney, M.D., Commissioner of Food and Drugs, Food and Drug Administration (FDA or the Agency).

I appreciate the opportunity to be here today to discuss our efforts to detect and

prevent the introduction of counterfeit bulk drugs into the drug supply of the United

States (U.S.), and specifically, to report on our actions since your hearing on this

matter in June.

As we stated in our testimony at your June 8 hearing, FDA believes that the authenticity and quality of drugs in this country is high, but we must take very seriously any allegations regarding the counterfeiting or adulteration of drug products.

The Agency agrees with the Committee’s assessment that more can and should be

done to help ensure that imported bulk drugs or Active Pharmaceutical Ingredients

(APIs) and finished drug products meet the requirements of the Federal Food, Drug,

and Cosmetic (FD&C) Act. Since June 8, the Agency has been developing and implementing additional strategies for assessing the scope of the threat of imported counterfeit APIs to U.S. consumers and responding appropriately to that threat.

The growth in international trade over the past few decades has had a substantial

impact on the ability of FDA to cope with the volume of regulated products, including APIs. Despite an increase in overall Agency funding in recent years, those increases have been allocated to new initiatives, and the Agency’s core operations

have not received commensurate increases. Field personnel and resources have been

stretched so thin that FDA has been struggling to fulfill many of our program manVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00303 Fmt 6601 Sfmt 6621 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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dates. The increasing number of APIs from overseas makes policing the global drug

marketplace to deter or interdict imported substandard drugs a daunting task. We

have looked for additional ways in which we can use our own resources wisely, as

well as leverage with others to increase our effectiveness.

On June 8, you asked FDA for a plan to improve our ability to detect and interdict

imported counterfeit and substandard APIs. We forwarded a preliminary report to

you, Mr. Chairman, on August 10, 2000, which outlined the Agency’s plans and additional ideas under consideration for better handling imported counterfeit and substandard APIs and finished drugs.

Let me begin by providing the Committee with an update on the five initiatives

FDA announced at the June hearing.

1. In February 2000, additional funds were allocated to the Forensic Chemistry Center (FCC) by the Office of Regulatory Affairs for sampling, analytical work and

assessments of APIs gathered through targeted inspections of importers.

With these funding increases, the FCC has conducted 20 targeted API inspections,

including nine at importers of foreign APIs, ten at domestic finished dosage manufacturers and one at a domestic animal drug manufacturer. The FCC inspectors are

now reviewing imported API documents and samples of product, labeling, packaging

schemes and certificates of analyses obtained during these inspections. Information

derived by these analyses will be used to help determine whether additional followup by district office investigators or the Office of Criminal Investigations is needed

and to support any enforcement actions that may be warranted. At each of these

inspections, the FCC worked with local FDA district drug investigators to detect

suspect API shipments through product and records examinations. This activity also

provided an opportunity for FCC staff to train field investigators and raise the

awareness of District Investigation Branches to the problem of counterfeit API’s. Additional hands-on training is planned for investigators in other strategic locations.

2. Make the FCC API database available electronically to all field inspectors by January 2001.

This database currently contains information or ‘‘fingerprints’’ on 330 API’s that

have been collected and chemically analyzed by FCC. This information is one important tool which FDA can use to more quickly identify whether or not a product is

authentic or counterfeit.The technology necessary to make FCC’s API database

available electronically on a real-time, searchable basis to field import and drug inspectors is being developed, and training for field personnel is being planned. We

expect to have this system in place by January 2001.

3. Expand the Philadelphia pilot nationwide by the end of 2000.

A pilot program was begun in the Philadelphia District office in 1997, to evaluate

the value of providing drug approval information to import field personnel. The pilot

provided import inspectors in the Philadelphia District with access to information

contained in the Establishment Evaluation System (EES) database maintained by

the Center for Drug Evaluation and Research (CDER). EES tracks information related to the approval process for drug applications. The program allows inspectors

to retrieve additional important data in about three to four minutes on any API

entry, which increases the probability of confirming authentic sourcing of APIs.

In light of this success, access to the EES system has been expanded to the three

FDA Districts handling the vast majority of APIs—New York, New Orleans and San

Juan District Offices. Training for these inspectors has been completed and accounts

have been established. The system has been up and running for approximately two

months, and our inspectors in these districts report that the EES information is

very useful in helping to assure that the declared destinations of imported APIs are

appropriate. Currently, we are completing plans for the additional technology upgrades and training for field personnel necessary to expand the program to the rest

of our districts, which we plan to complete early next year.

4. Put all importers on notice that they are required to provide the name of the foreign manufacturer upon entry into the U.S., and that the entry of their products

into the U.S. will be contingent upon it.

The Agency has placed the import industry on notice regarding the existing requirement to provide FDA with accurate data regarding the identity and location

of the manufacturer of imported drugs. These requirements were previously made

clear to importers and brokers through notices issued on January 29, 1999, and

March 24, 2000. However, this requirement was not being fully met. Therefore, on

July 20, 2000, the Agency again posted an updated version of its requirements on

the Internet with links to and from FDA’s import operations pages. On July 28,

2000, a U.S. Customs Service (Customs) Automated Broker Interface (ABI) system

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administrative message was issued to all filers with a reference to the Internet site

containing these requirements and a physical mailing address where a filer may request a hard copy from the Agency. A copy of the July 28, ABI notification was provided in FDA’s August 10, letter to the Subcommittee.

Compliance with this requirement is assessed as the Agency carries out routine

filer evaluations and is one of the factors considered in providing continued electronic filing privileges on Operational and Administrative System for Import Support (OASIS). Customs has informed FDA that these types of reporting failure may

be the basis for Customs civil actions. This information will be useful to the Agency

in better defining and identifying the universe of foreign manufacturers shipping to

the U.S.

5. Require domestic manufacturers to provide information to FDA when they discover

that the bulk materials they receive are substandard, ineffective, or appear not

to be from the approved source.

As you know, the Committee proposed this idea to the Agency last year. We stated in June that we agreed this is a promising approach, and FDA is examining what

would be required to develop a proposed regulation that would establish this requirement.

Agency Examination of Imported Counterfeit Bulk Drugs

Immediately following the June 8 hearing, FDA established a Counterfeit Drug

Working Group (Working Group) which has spent the past three months exploring

the full range of issues concerning imported counterfeit and substandard drugs. The

Working Group has looked carefully at FDA’s import operations and our foreign

drug inspection program, and has been developing a plan to better assess the extent

of the counterfeit drug problem in the U.S. The Working Group also has been examining ways the Agency can more readily detect these products to better ensure that

the public is protected from potentially hazardous drugs.

FDA’s Counterfeit Drug Working Group consists of representatives from many

Agency components, including: the Office of Criminal Investigations (OCI), the Division of Import Operations and Policy (DIOP), the Office of Enforcement, the Forensic Chemistry Center (FCC), the Division of Federal-State Relations (DFSR), the Division of Information Systems (DIS), and the Division of Emergency and Investigational Operations (DEIO), all of which are components of the Office of Regulatory

Affairs (ORA), as well as the Offices of Compliance within the Center for Drug Evaluation and Research (CDER) and the Center for Veterinary Medicine (CVM), and

the Office of Chief Counsel (OCC).

While FDA is still in the process of assessing the effectiveness of the regulatory

tools, compliance programs, staffing and procedures that already exist within the

current statutory construct to monitor imported APIs, the Agency already has implemented a number of program initiatives, including the following actions.

Foreign Registration—FDA has cleared and forwarded to the Office of Management and Budget (OMB) a final rule requiring foreign establishments whose products are imported or offered for import into the U.S. to register with FDA and to

identify a U.S. agent. As you know, this requirement was mandated in the Food and

Drug Administration Modernization Act of 1997. It will provide for the collection of

information needed to establish an accurate Official Establishment Inventory for

foreign drug firms.

Information Technology Needs Assessment (IT)—As you know, one of the issues

of great concern at the June hearing was the Agency’s lack of a well-integrated IT

system for the regulation of drug imports. We acknowledged that FDA has been

working with several independently developed databases of critical information that

need to be integrated. We also understand the Committee’s frustration that this

problem has not yet been remedied.

In early July, FDA engaged the services of a private IT contractor to assess the

Agency’s IT needs for drug imports and to propose changes to accomplish the goals

described below. The contractor was charged with determining what information

FDA import inspectors need to fully assess the admissibility of all FDA regulated

commodities. The contractor consulted with import inspectors and compliance officers with expertise in FDA and Customs laws and regulations, good manufacturing

practices, and IT import applications. The contractors’ report was recently received

by the Agency, and we are currently reviewing both the recommendations and the

estimated resource requirements.

Cross-training with U.S. Customs Service—In June and July 2000, FDA conducted

three Import Enforcement training courses for FDA import personnel including

Compliance Officers, Consumer Safety Officers, and Consumer Safety Inspectors. A

total of 120 students attended one-week courses representing in total about half of

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all persons assigned to field import operations. FDA and Customs jointly developed

the curriculum and taught the course. The course included training in Strategic

Problem Solving (SPS), a Customs training module developed specifically to facilitate the targeting, investigation and prosecution of willful violators. Each course included a facilitated workshop after the pattern of SPS. In each class, students analyzed and provided recommendations for specific imported API counterfeiting fact

patterns. These facilitated brainstorming sessions by the field personnel focused on

the imported counterfeit API threat and produced numerous ideas for strategies in

detecting, preventing, and interdicting counterfeit imported APIs. The Working

Group is assessing these proposals for viability.

This training course is being extended to additional field personnel in three sessions that began this week.

Other Cooperative Efforts with Customs—FDA’s OCI has a close working relationship with Customs, including a Memorandum of Understanding providing for all

OCI agents to be cross-designated as Customs Officers. OCI currently is working a

number of on-going investigations with Customs involving unapproved and counterfeit finished human drugs, and adulterated and misbranded medical devices and

foods.

OCI and Customs cooperated in a joint operation targeting the Internet sales of

unapproved pharmaceuticals by Thailand-based organizations. In cooperation with

Thai authorities, Customs arranged for the consolidation and diversion of international mail deliveries of these products to JFK Airport, where FDA personnel

were assigned exclusively for review and processing of these entries. In the period

February to August 2000, approximately 300 such shipments were reviewed, found

to be non-admissible, and returned to Customs for forfeiture.

FDA has also had discussions with Customs’ Applied Technology branch and we

will be meeting with them this month to explore the use of countermeasure devices

to detect counterfeits and track shipments where warranted.

International Collaboration—OCI, through liaison with their international law enforcement counterparts and other regulatory agencies, is a key Agency component

in cooperative international efforts aimed at identifying, investigating and prosecuting drug crime. OCI participates in the Permanent Forum on International

Pharmaceutical Crime (PFIPC), an international enforcement forum aimed at exchanging information and ideas on combating pharmaceutical crime. PFIPC works

in conjunction with a Forensic Group that provides scientific expertise. OCI also

maintains contact with their counterparts at the World Health Organization, the

World Customs Organization, Interpol, and FDA’s counterparts such countries as

the United Kingdom, Germany, Spain and Australia. Additionally, the FCC participates in the International Laboratory Forum on Counterfeit Medicines.

Forensic Chemistry Center Initiatives—The FCC and Customs have agreed to explore methods to better leverage their respective resources in the investigation and

analysis of suspect counterfeit products. The FCC hosted the first meeting in their

forensic laboratory on August 10, 2000, and demonstrated FDA’s current forensic capabilities and strategies. The two agencies will explore ways to grant access to analytical data and equipment and cross training in methodologies and emerging forensic techniques. The FCC will interface directly with Customs’ laboratories to share

information on analytical procedures FDA’s forensic experts use to detect unapproved and counterfeit APIs. FDA has placed a high priority on developing with

Customs a unified approach for interdicting counterfeit drugs.

Review of Data on Uninspected Firms—In response to a request from Chairman

Bliley earlier this year, FDA produced a report based on unverified data from

OASIS, which identified listings for approximately 4,600 firms that appeared to be

non-inspected foreign drug manufacturers. It should be noted that the OASIS data

was input by Customs house brokers at the time that drug entries were filed.

This number of 4,600 ‘‘uninspected firms’’ was the subject of great concern at the

June hearing. As explained in our previous testimony, that number was the best

estimate we were able to provide on short notice, and was derived by comparing raw

data input by import brokers into OASIS with a known list of inspected firms. FDA

has reviewed the OASIS data and manually cross-checked it with other information

sources to weed out duplicates and incorrect entries and establish a much more accurate list of uninspected foreign drug manufacturers that appear to have exported

to the U.S. an API that is normally used to manufacture a finished dosage form

which requires an approved application. So far, the review of this data has enabled

us to produce a much more reliable list of 242 foreign API manufacturers, in 36

countries, that appear to have exported to the U.S. in 1999, but have not been inspected, according to the EES database. The Agency is developing an import alert

for these uninspected foreign drug establishments. The 242 identified firms include

forty-six firms in China and Hong Kong and eleven firms in India.

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The final phase of the analysis of the OASIS data will be to identify firms FDA

has not inspected but which are referenced in approved human and animal drug applications. The human drug firms will be evaluated using a risk-based analysis

stratified into one of four tiers, incorporated into FDA’s surveillance list, and subsequently scheduled for inspection.

Additional Strategies for Handling Imported Counterfeit, Unapproved

Drugs and APIs

Joint Industry/Agency Efforts—Members of the Working Group conferred with

the FDA’s Field Drug Committee (FDC) on counterfeit API issues. The FDC historically has maintained networks with drug industry personnel and trade associations

and has utilized these relationships for furthering the important message of health

and safety through consistency in the Good Manufacturing Practice compliance. The

FDC will assist in developing avenues through which industry could join forces with

the Agency in combating counterfeits in the market place.

Beyond this initial approach through the FDC, the Agency is exploring additional

routes for encouraging and receiving intelligence on counterfeit drugs in the world

market. Historical experience in prior counterfeit API investigations has demonstrated that foreign API manufacturers whose products are being counterfeited

can provide substantial assistance in developing tests for authenticity and intelligence regarding suspected counterfeiting operations. The Agency is aware that intelligence gathering from the trade is a critical element to successfully identifying

suspect counterfeits in the market.

Foreign Inspection Component—When faced with the challenge of a steadily increasing volume of needed foreign inspections, coupled with limited resources, a

risk-based approach to foreign drug inspection was developed. CDER established a

four-tiered approach to prioritizing and performing surveillance inspections of firms

that FDA had not previously been able to inspect. At the present resource level,

however, FDA is only able to inspect firms in Tier I (Official Action Indicated, or

OAI, inspection follow-up) and Tier II (sterile bulks, finished drugs and aerosols).

It should be noted that pre-approval inspections are required by the Prescription

Drug User Fee Act and most are conducted in accordance with the Act’s mandate.

Thus, resources are the primary factor limiting the Agency’s ability to undertake additional inspections. As I am sure your Committee staff reported back to you after

their trip to China and India to observe foreign inspections, foreign inspections are

extremely resource intensive—requiring not only highly trained investigative and

scientific personnel, but linguistically and culturally competent staff, as well. The

time needed to conduct a foreign inspection is also magnified by travel requirements.

The Agency is reassessing these issues and discussing how to best utilize our current resources given current constraints. We hold fast to the belief that there is no

substitute for an eyes and hands-on inspection.

Even with these limitations, I would hasten to note that since 1990, the Agency

has shifted resources from domestic to foreign programs to increase our presence in

the foreign drug manufacturing marketplace, recognizing the shift in global markets. The foreign drug inspection program for the current fiscal year is on track for

accomplishing approximately 450 inspections in all foreign drug program areas. This

represents more foreign inspections than the Agency has ever completed in a single

year. The program continues to be primarily application driven, and the priorities

associated with the product approval process do impact our ability to conduct drug

surveillance inspections.

For fiscal year (FY) 2001, ORA is projecting approximately 550 foreign inspections

associated with its foreign drug work plan in all program areas. The FY 2001 foreign work plan focuses on manufacturers that have not been inspected, as identified

through the analysis of OASIS data discussed previously. This includes substantial

increases in drug surveillance inspections, which would result in increased coverage

of firms in Tiers III and IV. However, to accomplish this increase, a reallocation of

existing resources would need to occur by reducing our domestic inspection program.

Import Operations Component—FDA’s DIOP is responsible for providing policy

guidance to the field relating to import procedures, overseeing the development and

operation of the Agency’s Import Alert system, and for maintaining the Agency’s

OASIS system. Customs has identified over 300 designated ports of entry. OASIS

data indicates that approximately 175 ports have seen entries of APIs. FDA has a

notable presence in over 40 ports. The ports where FDA conducts the bulk of its

work represent those through which the vast majority of drugs enter. The Working

Group is reviewing DIOP’s procedural and system operations and is assessing the

Agency’s personnel and equipment needs to better monitor U.S. ports of entry.

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Security Measures—FDA is engaged in discussions with the Customs’ Applied

Technology Division, which has considerable experience in tracking shipments within U.S. commerce to verify and document cargo diversion. We will evaluate the currently available technology in terms of levels of surveillance capabilities, cost of

equipment and implementation. Additionally, we have asked the IT contractor to explore the possible use of low cost security devices by foreign manufacturers such as

chemical taggants in labeling, glue, ink or packaging materials to detect suspect

counterfeit drugs. Other possible solutions include radio frequency tags for detection

during examinations at ports of entry.

The Agency is considering a wide array of available technology, including

encrypted bar code technology in labeling and Certificates of Analysis containing

manufacturing information already submitted by the foreign manufacturer through

a secure web-based environment.

Mr. Chairman, in June you asked us what additional resources, personnel and

funding may be necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs. The Agency has long recognized that we need additional resources in

the area of post-marketing surveillance, which would encompass many of the activities I have just discussed. In just the last two years—FY 1999 and FY 2000—the

President’s budget included $25.8 million and $39.3 million, respectively, for postmarketing surveillance activities, none of which was funded. The lack of new funding, coupled with an absence of increases for core operations, reduces the number

of FTEs available to perform the Agency’s critical post-market activities.

At this time, only preliminary estimates have been made of these resource requirements, as the scope of this evaluation needs to encompass both the Agency’s

domestic and foreign operations, as well as the operations of various FDA Centers.

We look forward to providing more specific information on our funding needs relating to personnel and technology in the future, once a complete assessment is made

and appropriate review has occurred.

FDA will continue its assessment of the extent of the counterfeit drug problem

in the U.S. Over the coming weeks, the strategies outlined above will be further developed and enhanced, and other potential strategies will be considered. While the

Agency has already made a good deal of progress, we have much work remaining.

CONCLUSION

Mr. Chairman, I want to assure you that all of us at FDA remain strongly concerned about any possibility that counterfeit or otherwise unsafe drugs may find

their way into the American drug supply. We will remain vigilant as we refine and

improve the programs and procedures that we use to ensure the availability of safe

medications for consumers.

We appreciate the continued interest of the Subcommittee in these important

issues. Thank you again for the opportunity to discuss these issues with you, and

I will be happy to answer any questions.

Mr. UPTON. Thank you.

Mr. Kelly.

TESTIMONY OF HON. RAYMOND KELLY

Mr. KELLY. Thank you, Mr. Chairman, members of the committee, for the opportunity to testify today. The Customs Service is

an agency of almost 20,000 employees stationed at 301 ports of

entry and 165 other locations across the country. Many know Customs as the Federal Government’s primary drug interdiction agency. One of our greatest challenges is sifting illegal narcotics from

the $1 trillion in trade and half a billion travelers we process each

year. But the scope of Customs’ responsibilities goes well beyond

drug interdiction to include money laundering, copyright and trademark infringement, the import and export of weapons of mass destruction, prohibited technologies, forced child labor investigations,

child pornography and criminal exploitation of the Internet. We

also enforce over 400 regulations for 40 other Federal agencies at

our borders, including the laws that prohibits the importation of

counterfeit pharmaceutical products.

305

As we are all aware, legislation is currently pending to allow the

U.S. pharmacists and wholesalers to reimport American manufactured, FDA approved drugs from abroad. This morning, I’d like to

discuss our concerns about the potential resource implications for

our agency.

Customs has experienced a significant spike in investigations

and seizures of counterfeit pharmaceuticals over the last few years.

One factor in this development is the Internet. We consider the

problem serious enough to make it a top priority of Customs’

CyberSmuggling Center, which is our new state-of-the-art facility

devoted to combating Internet crime.

Part of the mission of the center is to search for foreign companies marketing prohibited or unsafe drugs to U.S. consumers. That

information is passed on to our Office of Investigations, which has

successfully concluded a number of counterfeit pharmaceutical

cases in recent years. Prescription drugs are most commonly sent

through U.S. mail. Customs inspectors staff 14 international mail

branches at various postal facilities across the United States to

deal with these shipments.

To state that finding counterfeit drugs hidden amongst hundreds

of millions of parcels is like finding needles in a hay stack would

be an understatement. In fact, finding any form of contraband in

postal shipments presents a massive challenge.

Our limited resources require a risk management approach,

through which we utilize advance intelligence, records of past seizures, and other factors to zero in on packages that present the

most significant threat. Customs laboratories also play a critical

part in our investigations. Their expertise in analyzing everything

from textiles to foreign oil, to food products to determine point of

origin and composition is world-renowned.

We maintain fully equipped labs at the following locations: New

York, Chicago, Savannah, New Orleans, Los Angeles, San Francisco and San Juan. In addition, we have three mobile labs that deploy at any point along our borders. We are confident in the forensic capability of our labs to find discrepancies in shipments of bulk

and finished pharmaceuticals. But where we do require assistance

specifically from the Food and Drug Administration is in determining effective national standards for interdiction of these products. These standards will be critical especially in light of the pending legislation.

To that end, Customs initiated a request to the FDA last January for further guidance on detaining suspect pharmaceuticals. In

addition, we formed a joint task force with FDA in August to examine shipments of online drug purchases. The task force’s work will

include the set-up of a pilot examination program in Los Angeles

beginning on October 23.

We’ve asked the FDA to develop interim guidelines to cover the

illegal shipments we are taking in now for both online and bulk

pharmaceuticals. Customs has already begun examining shipments

of pharmaceuticals as part of Operation Safeguard, our ongoing enforcement program with FDA. The first phase began September 25

at the Customs mail facilities in Oakland, California and here in

Washington at Dulles Airport. So far we’ve detained 200 shipVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00309 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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ments. To give the members an example, our seizures included a

3000-tablet shipment of Prozac with an expiration date of 1980.

In addition, our Office of Investigations maintains a close relationship with its FDA counterpart. We have a memorandum of understanding, as the Commissioner mentioned, in place with the

FDA at our field locations that cross-designates their special agents

as Customs officers. Customs has also provided training to FDA officials on import enforcement. We will continue do so throughout

the course of the next fiscal year.

Mr. Chairman, our biggest concern in the face of new legislation

is obtaining adequate resources to enforce it. From an overall Customs perspective, a spiraling volume of goods at our borders has

put immense pressure on our ability to facilitate international

trade while enforcing our Nation’s laws. We’ve taken many steps

to address anticipated challenges, including refinement of our targeting approach and development of a Resource Allocation Model to

project future staffing needs across the country. Though this study

has not been finally approved by OMB and the Treasury Department, once it is it will allow flexibility in building in new resource

needs like the one we are discussing today.

We just received the resource package FDA has developed and

we are reviewing it right now. That analysis and the development

of the national standards I referred to will help us greatly in determining our own requirements.

Customs encounters many travelers in our borders returning

from trips expressly for the purpose of purchasing drugs. We are

very familiar with the lengths to which our citizens will go to obtain savings on health costs. I should note that for the public’s information implementation of the Medicine Equity and Safety Act

would not affect individuals who travel across our northern and

southern borders to obtain prescription drugs. They would continue

to be subject to existing laws that apply to such purchases. Nor

would online purchases by consumers be impacted. They too would

be regulated according to current guidelines.

Mr. Chairman, I want to thank you and the members of the committee for considering the Customs Service in your discussions of

the importation of pharmaceuticals. This is an issue that speaks directly to our mission. We will continue to make every effort possible to work with the Congress and our fellow inspection agencies

to address the health and safety concerns of the American people.

Thank you.

[The prepared statement of Hon. Raymond Kelly follows:]

PREPARED STATEMENT OF HON. RAYMOND KELLY, COMMISSIONER, U.S. CUSTOMS

SERVICE

Mr. Chairman, members of the committee, thank you for this opportunity to testify.

As Commissioner of U.S. Customs, I oversee an agency of 20,000 employees stationed at 301 ports of entry across the country. Many know Customs as the federal

government’s leading drug interdiction agency. One of our greatest challenges is

sifting illegal narcotics from the 1 trillion dollars in trade and half a billion travelers we process each year.

But the scope of Customs responsibilities goes well beyond drug interdiction to include: money laundering; copyright and trademark infringement; the import and export of weapons of mass destruction and prohibited technologies; forced child labor

investigations; child pornography; and criminal exploitation of the Internet.

307

We also enforce over 400 regulations for 40 other federal agencies at our borders,

including the laws that prohibit the importation of counterfeit pharmaceutical products, the topic I am here to discuss with you today.

As you are all aware, legislation is currently pending to allow U.S. pharmacists

and wholesalers to re-import American manufactured, FDA approved drugs from

abroad. This is an effort to lower prescription drug costs for consumers. This morning I would like to discuss the bill and its impact on our agency.

Customs has experienced a significant spike in its investigations and seizures of

counterfeit pharmaceuticals over the last few years. One factor in this development

is the Internet. We consider the problem serious enough to make it a top priority

of Customs’ Cybersmuggling Center, our new, state-of-the-art facility devoted to

combating Internet crime.

Part of the mission of the Center is to search for foreign companies marketing

prohibited or unsafe drugs to U.S. consumers. That information is passed on to our

Office of Investigations, which has successfully concluded a number of counterfeit

pharmaceutical cases in recent years.

Prescription drugs are most commonly sent through U.S. mail. Customs Inspectors staff fourteen international mail branches at various postal facilities across the

United States to deal with these shipments.

To state that finding counterfeit drugs hidden amongst hundreds of millions of

parcels is like finding needles in a haystack would be an understatement. In fact,

finding any form of contraband in postal shipments presents a massive challenge.

Our limited resources require a risk management approach, through which we utilize advance intelligence, records of past seizures, and other factors to zero in on

packages that present the most significant threat.

Customs laboratories also play a critical part in our investigations. Their expertise in analyzing everything from textiles, to foreign oil, to food products to determine point of origin and composition is world-renowned. We maintain fully-equipped

labs at the following locations: New York; Chicago; Savannah; New Orleans; Los Angeles; San Francisco and San Juan. In addition, we have three mobile labs to deploy

at any point along our borders.

We’re confident in the forensic capability of our labs to find discrepancies in shipments of bulk and finished pharmaceuticals. But where we do require assistance,

specifically from the Food and Drug Administration, is in determining effective national standards for interdiction of these products.

These standards will be critical especially in light of the pending legislation. To

that end, Customs initiated a request to the FDA last January for further guidance

on detaining suspect pharmaceuticals. In addition, we formed a joint task force in

August to examine shipments of on-line drug purchases. The task force’s work will

include the set-up of a pilot examination program in Los Angeles beginning on October 23rd.

In the meantime, I’ve urged the FDA to develop interim guidelines to cover the

illegal shipments we’re taking in now. Customs has already begun examining shipments of pharmaceuticals as part of ‘‘Operation Safeguard.’’ The first phase of this

operation began September 25th, at the Customs mail facilities in Oakland, California and here in Washington, at Dulles Airport. So far, we’ve detained 200 shipments. To give the members an example, our seizures included a three thousandtab shipment of Prozac with an expiration date of 1980 on it.

In addition, our Office of Investigations maintains a close relationship with its

FDA counterpart. We have a Memorandum of Understanding in place with the FDA

at our field locations that cross-designates their special agents as Customs officers.

Customs has also provided training to FDA officials on import enforcement. We’ll

continue to do so throughout the course of the next fiscal year.

Mr. Chairman, our biggest challenge in the face of the new legislation is keeping

pace with the spiraling volume of goods at our borders while also enforcing our nation’s laws. We’ve taken many steps to address anticipated challenges, including refinement of our targeting approach and development of a strong resource allocation

plan.

We recently received the resource projections FDA has developed for its own

needs under the new legislation and we’re reviewing it now. That analysis, and the

development of the national standards I just referred to, will help us greatly in determining our own requirements.

I should note for the public’s information that implementation of the Medicine Equity and Safety Act would not affect individuals who travel across our northern and

southern borders to obtain prescription drugs. They would continue to be subject to

existing laws that apply to such purchases. Nor would on-line purchases by consumers be impacted. They too would be regulated according to current guidelines.

308

Mr. Chairman, I want to thank you and the members of the Committee for considering the Customs Service in your discussions of the importation of bulk pharmaceuticals. This is an issue that speaks directly to our mission. We will continue to

make every effort possible to work with the Congress and our fellow inspection

agencies to address the health and safety concerns of the American people.

I’d be happy to take any questions you have.

Mr. UPTON. Thank you.

Ms. Maher.

TESTIMONY OF PATRICIA L. MAHER

Ms. MAHER. Mr. Chairman and members of the committee, good

morning. My name is Patricia Maher. I am a Deputy Assistant Attorney General in the Civil Division of the Department of justice.

In that capacity one of my responsibilities is to oversee the Office

of Consumer Litigation, the Civil Division’s office that handles civil

and criminal cases brought under a number of Federal consumer

protection statutes, including the Federal Food, Drug and Cosmetic

Act.

This morning I will speak to you about our experience prosecuting traffickers of counterfeit pharmaceutical products that are

manufactured outside of the United States. I will also offer some

ideas regarding additional tools that would be helpful to combat

this problem.

Prosecutions of the type I will be discussing are both important

and difficult. They are important because the targets in these cases

introduce drugs of unknown safety and efficacy into the United

States. Successful prosecutions signal to traffickers around the

world that tainting the drug supply of the United States will not

be tolerated. But these cases are difficult because much of the evidence of unlawful activity is located overseas and thus is more difficult to obtain than evidence located within our borders.

While we have been successful in overcoming these hurdles and

obtaining convictions, we need your help to eliminate obstacles that

slow investigations and create questions regarding the applicability

of the act to the behavior that is at issue in these cases.

The Food, Drug and Cosmetic Act defines a counterfeit drug to

include a drug which without authorization bears an identifying

mark of another drug manufacturer that did not manufacture the

drug. Under the act the term ‘‘drug’’ includes both finished drug

products and components of drug products that are referred to as

bulk pharmaceuticals or active pharmaceutical ingredients.

In the pharmaceutical industry the term ‘‘counterfeit drug’’ is

generally used to refer to a compound that is not made by the authorized manufacturer but is presented to the consumer as if it

were.

Counterfeit drugs pose a number of potential public health

issues. They may contain a less potent ingredient than claimed, ingredients other than those listed or no active ingredient at all,

which makes them less effective and possibly toxic to unknowing

consumers. The World Health Organization has estimated that as

much of 10 percent of the world’s supply of branded medicines are

counterfeit, with the level rising to 50 percent in some developing

countries.

Prosecutions are necessary to reach counterfeit operations that

fall outside the regulatory system where the drugs are going to be

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introduced into the United States. Prosecutions for importation of

counterfeit products have relied primarily on evidence gathered domestically, whether the defendants are citizens of this country or

foreign nationals.

In my written testimony I provided two examples of successful

prosecutions of drug counterfeiters. One involved a ring of traffickers importing millions of counterfeit birth control pills from

Spain and Guatemala. The other case involved a company called

Flavine International, which imported counterfeit antibiotics from

China.

There are unique challenges when groups acting outside the

United States import counterfeit pharmaceutical products. Even

when extraterritorial jurisdiction exists over crimes committed

abroad, principles of sovereignty limit what measures we can take

unilaterally to investigate and prosecute such crimes. FDA currently has the authority to conduct inspections abroad. Letters rogatory are the customary method of obtaining assistance from

abroad in the absence of a treaty or executive agreement.

In order to improve our ability to investigate and pursue evidence and defendants abroad, the Department has supported extradition treaties to obtain the return of defendants and mutual legal

assistance requests to obtain documents, witness testimony, or

other evidence. Of course, even when extradition treaties and mutual legal assistance procedures are in plates with the foreign jurisdiction, they may not always ensure that we will be able to obtain

all of the international law enforcement cooperation we would like

in every case.

As I have explained in greater detail in my written testimony,

extradition treaties do not ensure that defendants will be returned

to the United States for prosecution if they are from countries that

will not extradite their own citizens, or the underlying conduct is

not a crime in the requested State.

Moreover, while we may seek to obtain the statements or deposition testimony of foreign witnesses unwilling to come to the United

States through the traditional letters rogatory method or through

our increasing number of mutual legal assistance treaties, in the

best of circumstances this can be a time consuming process. In the

worst of circumstances, legal privileges or other foreign law requirements may completely frustrate our efforts.

Despite their limitations, however, modern international extradition treaties and MLATs remain among the more effective mechanisms available for obtaining the international cooperation we

need. We ask that Congress continue to support our efforts to expand the network of such agreements. Certain measures could be

taken that would make clear that foreign manufacturers or distributors of pharmaceuticals in the United States are subject to the

same obligations and protections that apply to domestic companies.

These proposals would also aid in the prosecution of producers or

traffickers of counterfeit pharmaceuticals who know that their

products will be used in the United States.

First, we believe that foreign countries should be encouraged to

cooperate with the United States and, where appropriate, to prosecute manufacturers and distributors of counterfeit drugs in their

own courts. We ask Congress to review carefully proposals that

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might deny or restrict FDA’s authority to inspect foreign establishments. Other possible measures include amending the Food, Drug

and Cosmetic Act to make explicit what is now implicit, that foreign companies and individuals who manufacture and distribute

drugs and drug components for use in the United States are subject to the act, making cooperation by foreign firms a condition of

FDA approval of drug applications by those firms so that the approval under the act would be conditioned on the manufacturer’s

agreement to make documents and witnesses available in criminal

investigations in the United States.

Finally, Congress could require foreign exporters of drug products to provide original certificates of analysis establishing the integrity and authenticity of the drugs or drug components that

would have to be filled out by each manufacturer involved in the

production of the drug product shipped.

The Department recommends these actions and policies to provide additional tools for the detection and prosecution of those who

traffic in counterfeit pharmaceutical products. We will work with

FDA, Customs, Congress and industry to implement measures of

this type to aid prosecutions in this area. Where counterfeiting activity is uncovered we are committed to prosecuting such cases.

Thank you. I would be happy to answer any questions.

[The prepared statement of Patricia L. Maher follows:]

PREPARED STATEMENT OF PATRICIA L. MAHER, DEPUTY ASSISTANT ATTORNEY

GENERAL, CIVIL DIVISION, U.S. DEPARTMENT OF JUSTICE

Mr. Chairman and Members of the Subcommittee: Good morning. My name is Patricia L. Maher. I am a Deputy Assistant Attorney General in the Civil Division of

the Department of Justice. In that capacity, one of my responsibilities is to oversee

the Office of Consumer Litigation (OCL)—the Civil Division’s office that handles

civil and criminal cases brought under a number of federal consumer protection

statutes including the Federal Food, Drug, and Cosmetic Act (FDCA). This morning,

at your invitation, I will speak to you about our experience prosecuting traffickers

of counterfeit pharmaceutical products that are manufactured outside of the United

States. At your request, I will also offer some ideas regarding additional tools that

would be helpful to combat this problem.

Prosecutions of the type I will be discussing are both important and difficult. They

are important because the targets in these cases introduce drugs of unknown safety

and efficacy into the United States. Successful prosecutions signal to traffickers the

world over that tainting the drug supply in the United States will not be tolerated.

The cases are difficult because much of the evidence of unlawful activity is located

overseas, and thus is more difficult to obtain than evidence located within our borders. While we have been successful in overcoming these hurdles and obtaining convictions, we need your help to eliminate obstacles that slow investigations and create questions regarding the applicability of the FDCA to the behavior that is at

issue in these cases. In that connection, we will work and consult with FDA regarding needed changes in the Food, Drug and Cosmetic Act, such as those described

in this testimony.

As evidence of U.S. law enforcement’s commitment to combat the threat posed by

counterfeit pharmaceuticals, the Department of Justice, FBI, and Customs Service

hosted last month the first meeting of law enforcement experts of the G-8 countries

to address intellectual property crimes. Under the auspices of the Senior Law Enforcement Experts on Transnational Organized Crime (Lyon Group), representatives

from all G-8 countries discussed mechanisms for improved cooperation and information-sharing in responding to a variety of intellectual property crimes, including

trafficking in counterfeit pharmaceuticals.

I. THE DANGER POSED BY THE IMPORTATION OF COUNTERFEIT PHARMACEUTICAL

PRODUCTS

The FDCA defines a counterfeit drug to include a drug which, without authorization, bears an identifying mark of another drug manufacturer that did not manufacVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00314 Fmt 6601 Sfmt 6621 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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ture the drug. (21 U.S.C. § 321(g)(2).) Under the FDCA, the term ‘‘drug’’ includes

both finished drug products and components of drug products that are referred to

as ‘‘bulk’’ pharmaceuticals or active pharmaceutical ingredients. In the pharmaceutical industry, the term ‘‘counterfeit drug’’ is generally used to refer to a compound that is not made by the authorized manufacturer, but is presented to the consumer as if it were.

There are also drug products that are manufactured in whole or in part by unauthorized factories or facilities, and then shipped with the complicity of the authorized manufacturer under its name and trademark. These drugs may not technically

fit the legal definition of ‘‘counterfeit drug’’ if the authorized manufacturer has approved the use of its own trademark and the like. Nonetheless, these drugs involve

the marketing of a product where the identity of the true manufacturer is misrepresented to, or withheld from, consumers and the Food and Drug Administration

(FDA) and the drug is misbranded under the FDCA. As a consequence, some or all

of the process of manufacturing the drug could fall outside the supervision of the

FDA and could render the drug adulterated or misbranded. Because such drugs also

involve a false representation about their true place of manufacture, they can be referred to as misbranded or adulterated.

Counterfeit drugs pose a number of potential public health issues. The World

Health Organization (WHO) has found that the majority of counterfeit drugs reported to the organization contain a less potent active ingredient than claimed, ingredients other than those listed, or no active ingredient at all, which makes them

less effective and possibly toxic to unknowing consumers. WHO has estimated that

as much as ten percent of the world’s supply of branded medicines are counterfeit,

with the level rising to fifty percent in some developing countries.

Even where the product in question contains the represented amount of the drug’s

active ingredient, it can pose hazards. The effectiveness of drugs depend on a long

chain of factors that include measures in quality control, distribution, and inventory

control. The FDCA requires that all drugs in this country be manufactured under

pursuant to the good manufacturing practice regulations to ensure the consistent

safety and efficacy of the drug product.

The scope of the problem in the United States should be substantially less than

it is in the rest of the world. Several legal provisions help to assure that imported

products comply with legal requirements. Drug companies in this country are required to sample and test bulk drugs, whether obtained domestically or internationally, that will be used in finished drug products, as well as to examine the labeling

of any such shipments. (See 21 C.F.R. § 211.84.) These measures help to assure that

bogus drugs will be detected if they are sold to a legitimate finished dosage manufacturer in the United States.

Misbranded versions of a number of drug products have appeared in the United

States, nevertheless. The potential for an increase in such traffic exists because of

the increasingly global nature of the pharmaceutical business. Moreover, the ease

with which counterfeit products can be distributed by ‘‘pharmacies’’ that appear on

the Internet makes this an issue that affects consumers directly.

II. OBTAINING ASSISTANCE FROM FOREIGN GOVERNMENTS AND PROSECUTING CONDUCT

OCCURRING OUTSIDE THE UNITED STATES

A. The Need for Credible Criminal Deterrence

Underlying the FDCA’s statutory scheme to protect the public health is the requirement that regulated businesses deal truthfully with the FDA. Most businesses

do so. Because the FDA and our national scheme for drug safety rely on information

supplied by regulated businesses, it is necessary to take strong action against those

that provide false information to the FDA. The means for punishing fraudulent conduct are contained in the criminal provisions of the FDCA. The general provisions

of the criminal code that prohibit false statements to government agencies also

apply to false statements made regarding pharmaceuticals. The importation of counterfeit drugs very often involves fraud on the FDA and purchasing customers about

the true source or nature of the drug. This is classic felony conduct under the

FDCA.

Counterfeiting products can yield huge profits and is a longstanding practice in

some areas around the globe. Furthermore, the incentive to mislead FDA about the

source of a product’s manufacture may exist even where the product contains the

same active ingredients. The market for pharmaceutical drugs in the United States

is substantial, and it is only open to drug products that are properly approved. Because proper approval is rigorous and demanding, there is a strong economic incentive to mislead FDA to obtain market access without the full expense of proper testing and evaluation. Similarly, there is a strong economic incentive to get FDA apVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00315 Fmt 6601 Sfmt 6621 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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proval before other companies, and to maximize the output of a drug before other

companies obtain approval for a competing version of the drug. One way for a drug

manufacturer to maximize output within such a window is to obtain drug components or drug products from other, non-approved, facilities without notifying customers or the FDA.

Prosecutions are necessary to reach counterfeit operations that fall outside the

regulatory system, where the drugs are going to be introduced into the United

States. The operations of some drug counterfeiters are much the same as those of

the narcotics trade, crossing many borders and involving the use of clandestine facilities. In such circumstances, FDA’s regulatory measures and controls are less likely to uncover the activity and impose a punishment sufficient to act as a deterrent.

B. Previous Experience in Obtaining Evidence Abroad in Prosecutions Involving the

Importation of Counterfeit Pharmaceutical Products

Prosecutions for importation of counterfeit products have relied primarily on evidence gathered domestically, whether the defendants are citizens of this country or

foreign nationals. For example, the 1987 prosecution of a ring importing millions of

counterfeit birth control pills from Spain and Guatemala was based entirely on evidence gathered in the United States. Similarly, the Flavine International case,

which involved a group importing counterfeit antibiotics from China, also was based

primarily on evidence gathered within the United States. I will elaborate on these

examples of our experience prosecuting importation of counterfeit pharmaceuticals.

1. Example: the prosecution of importers of counterfeit birth control pills—In the

mid 1980s, approximately two million counterfeit birth control pills were imported

as part of a drug diversion scheme. A large number of the pills contained subpotent

estrogen or no estrogen. The case began when a group of traffickers acting both inside and outside the United States began importing, repacking, and distributing

counterfeit birth control pills that had been manufactured in Barcelona, Spain. The

tablets were similar in appearance and composition to genuine Ovulen-21 tablets

made by Searle. These pills were shipped from Spain to intermediary countries, and

then smuggled into the United States and sold. The proceeds of the sales, including

over $200,000 profits, were deposited in a Panamanian bank account.

Having made a substantial profit on the counterfeit Ovulen, the defendants next

solicited a small company in Guatemala to make counterfeit pills that again would

appear to be genuine, but in this case would have no active ingredient at all. The

Guatemalan company shipped 12,000 cycles of the pill to the United States in August 1984. FDA learned of the counterfeit birth control pills in October 1984. The

government gathered evidence from witnesses in the United States, including some

of the traffickers who decided to cooperate.

An Indictment filed in the Southern District of Florida in February 1987 charged

six defendants who resided in the United States. All defendants were convicted either after pleading guilty or going to trial. The defendants were sentenced to terms

of imprisonment of up to twenty-four years.

2. Example: the prosecution of counterfeit antibiotics from China—The prosecution

of a New Jersey corporation, Flavine International, Inc. (Flavine), its owner who

was a German national, and other company managers was based on the substitution

of an unapproved foreign product for an FDA-approved foreign product. The investigation, which was conducted by the United States Customs Service and the FDA,

revealed that on numerous occasions from August 1985 through November 1991, the

defendants solicited and received orders from drug manufacturers in the United

States for bulk antibiotics that are FDA-approved for use in the United States. The

drugs included oxytetracycline, gentamicin sulfate, and sulfamethazine. The drugs

were sold for use in animal and human drugs. To fill these orders, defendants

bought drugs from an unapproved overseas manufacturer, falsely declaring their origin.

Once the unapproved products arrived in the United States, the defendants, when

necessary, had the product repacked in new containers that more closely resembled

those of the approved manufacturer. Defendants removed labels from containers and

affixed fraudulent labels to containers in order to falsify the origin and manufacturer of the drug product. They also replaced the manufacturers’ certificates of analysis with fraudulent certificates of analysis that falsely claimed that the drugs were

made by an approved manufacturer. These acts were performed without the authorization of the approved manufacturer whose name was used.

In April 1997, Flavine was fined a total of $925,000, and its owner was sentenced

to two years in prison and fined a total of $75,000 for illegally importing counterfeit

pharmaceuticals from China and laundering money in a kickback scheme.

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C. Obtaining and Developing Evidence of Conduct Abroad

There are unique challenges when groups acting outside the United States import

counterfeit pharmaceutical products. Even in those circumstances in which

extraterritorial jurisdiction exists over crimes committed abroad, principles of sovereignty limit what measures we can take unilaterally to investigate and prosecute

such crimes. In some cases, law enforcement agencies in the United States, such as

the Customs Service and the Food and Drug Administration (FDA), may make requests of law enforcement agencies abroad informally or through Interpol. State ethics rules, however, may effectively prevent contact with employees of corporations

under investigation through such informal contacts. This occurs because federal law

now requires Department of Justice attorneys to comply with state ethics rules.

Such rules (see Model Rule 4.2) often can effectively bar contacts with employees

of corporations unless corporate counsel authorizes the communication. FDA also

currently has the authority to conduct inspections abroad. (See 21 U.S.C. § 374.) Letters rogatory are the customary method of obtaining assistance from abroad in the

absence of a treaty or executive agreement. (See 28 U.S.C. § 1781.)

In order to improve our ability to investigate and pursue evidence and defendants

abroad, the Department has supported extradition treaties to obtain the return of

defendants, and mutual legal assistance requests to obtain documents, witness testimony, or other evidence. Of course even when extradition treaties and mutual legal

assistance procedures are in place with a foreign jurisdiction, they may not always

ensure that we will be able to obtain all of the international law enforcement cooperation we would like in every case. For example, even our most modern extradition treaties require that an offense for which extradition is sought be a crime in

both the requesting and the requested state (the ‘‘dual criminality’’ principle). Thus,

to the extent that some foreign countries have to date not criminalized the counterfeiting of pharmaceuticals, the extradition of persons from such countries wanted for

prosecution in the United States may not be possible. In addition, some older extradition treaties do not clearly cover offenses that are perpetrated in a foreign country

yet take effect in the United States; and despite our continuing efforts, some countries still refuse to extradite their own nationals.

Moreover, while we may seek to obtain the statements or deposition testimony of

foreign witnesses unwilling to come to the United States (through the traditional

‘‘letters rogatory’’ method, or through our increasing number of mutual legal assistance treaties (MLATs)), in the best of circumstances this can be a time consuming

process. In the worst of circumstances, legal privileges or other foreign law requirements may completely frustrate our efforts.

Despite their limitations, however, modern international extradition treaties and

MLATs remain among the more effective mechanisms available for obtaining the

international cooperation we need. We ask that Congress continue to support our

efforts to expand the network of such agreements.

D. Jurisdictional Questions

Among the considerations in obtaining evidence and pursuing prosecutions in

these cases is the extraterritorial application of the FDCA. Congress has the power

to address the problem of counterfeit pharmaceutical imports even when it involves

conduct occurring overseas that has an impact in the United States. Amending the

FDCA to make the extraterritorial application of the FDCA to persons affecting the

United States by their actions abroad explicit instead of implicit would aid the investigation of criminal cases in these situations. Such an approach would be consistent with the international law principles that United States courts apply. Indeed, international law principles have expanded to permit jurisdiction upon a mere

showing of intent to produce effects in this country, without requiring proof of an

overt act or actual effect within the United States. Although cases involving intended but unrealized effects are rare, international law does not preclude jurisdiction in such instances, subject to the principle of reasonableness. Thus, we believe

that foreign manufacturers of pharmaceutical bulk materials who know that the

product will be used in the United States are subject to the jurisdiction of the

United States and the FDCA.

The FDCA prohibits the introduction into interstate commerce of adulterated or

misbranded drugs (21 U.S.C. § 331(a)), and defines ‘‘interstate commerce’’ to include

commerce between ‘‘any State or Territory and any place outside thereof,’’ (21 U.S.C.

§ 321(b)). In construing Title VII of the Civil Rights Act of 1964, which had a similarly broad statement of application, a divided Supreme Court found that such language falls short of demonstrating the affirmative legislative intent required to extend the protections of American law beyond our territorial borders. That decision,

EEOC v. Arabian American Oil Co., ultimately was superseded by statute. In this

opinion, however, the Supreme Court specifically named the FDCA as a statute with

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‘‘boilerplate’’ language that could be insufficient to convey a legislative intent to

apply extraterritorially. (See Arabian American Oil Co., 499 U.S. at 251.) The Controlled Substances Act, by contrast, contains explicit language creating jurisdiction

in the United States for manufacturing or distributing drugs abroad, where the intent is to introduce unlawful drugs into the United States. (See 21 U.S.C. § 959.)

III. PROPOSALS FOR IMPROVING THE PROSPECTS FOR CRIMINAL PROSECUTIONS

INVOLVING COUNTERFEIT PHARMACEUTICAL PRODUCTS

We believe that prosecutions of counterfeit drug producers and traffickers would

be greatly aided by amending the FDCA to make explicit what is now implicit—that

foreign companies and individuals who manufacture or distribute drugs and drug

components for use in the United States are subject to the FDCA. The application

of such a law, however, will necessarily be limited by due process considerations.

Second, we would ask that Congress review carefully treaties that might deny

FDA full authority to inspect foreign establishments. The Department supports FDA

retaining its current legal authority to inspect foreign establishments even where

FDA has entered into agreements with foreign regulatory agencies to have those

agencies conduct the inspections. In addition, the approval to manufacture and/or

distribute drugs and drug components in the United States could be conditioned on

the manufacturer’s or distributor’s agreement to make documents and witnesses

available in criminal investigations in the United States. FDA currently has the

right to inspect drug manufacturers (see 21 U.S.C. § 374), but this section does not

explicitly provide the FDA authority to secure interviews with witnesses or any

method by which the production of documents can be compelled independent of an

inspection. As previously mentioned, it is difficult to obtain testimony of witnesses

regarding conduct occurring outside the United States.

Clarifying FDA authority as outlined above would make foreign establishments

subject to the same obligations, privileges, rights, and protections that apply to domestic firms. Currently, during FDA’s regulatory investigations of foreign firms,

only certain production records and personnel are made available to inspectors. (See

21 U.S.C. § 374.) An explicit requirement that a company must provide such cooperation could authorize FDA to withhold or deny approval of drug applications,

and to withdraw a firm’s existing approved applications, if FDA finds that the foreign firm is not cooperating in an investigation. This would be analogous to FDA’s

existing authority to refuse the new drug application of an applicant that has submitted false data to the agency. (See Fraud, Untrue Statements of Material Facts,

Bribery, and Illegal Gratuities; Final Policy, 56 Fed. Reg. 46191 (1991).) Foreign

businesses choosing to market pharmaceutical products in this country should not

be able to gain better treatment than domestic firms because of their location outside of the country.

Third, the Department requests that the Congress consider legislation requiring

foreign exporters of drug products to provide original certificates of analysis establishing the integrity and authenticity of the drugs or drug components filled out by

each manufacturer involved in the production of the shipment of a drug product.

Such a change would depart only slightly from current practice. The FDCA provides

that a drug is misbranded if its labeling is false or misleading. (See 21 U.S.C.

§ 352(a).) In addition, the regulations establish that the appearance of a name on

a drug product label, without qualification, is a representation that the company is

the sole manufacturer. (See 21 C.F.R. § 201.1(h)(2).) If a manufacturer performs

more than half of the operations, it meets its obligations if it states that certain

manufacturing operations have been performed by other firms. (See id. at

§ 201.1(c)(1).) A simple means of ensuring authenticity of drug components could be

accomplished by a minimal expansion of these requirements to apply to foreign

firms.

Finally, we believe that foreign countries should be encouraged to cooperate with

the United States and, where appropriate, to prosecute manufacturers and distributors of counterfeit drugs in their own courts. Where foreign nations can prosecute

such conduct, it is in the United States’ interest to help such prosecutions go forward. Increased cooperation with foreign authorities could also facilitate the detection of such criminal activity.

The Department recommends these actions and policies to provide additional tools

for the detection and prosecution of those who traffic in counterfeit pharmaceutical

products. Where such activity is uncovered, we are committed to prosecuting such

cases.

Mr. Chairman and members of the Subcommittee, thank you for the opportunity

to testify before the Subcommittee. I look forward to answering your questions.

315

Mr. UPTON. Thank you very much. The Chair, in talking to a

number of members on both sides of the aisle, had a request that

we go to a 10-minute question period instead of the normal 5. I

need to make that formally. Does anyone have an objection to do

that? If not, that will be the course of the day, and I will first recognize the chairman of the full committee, Mr. Bliley, for 10 minutes.

Chairman BLILEY. I thank you, Mr. Chairman.

Dr. Henney, as you know, the language approved in the Senatepassed agricultural appropriations bill required that regulations

provide the Secretary of HHS a reasonable assurance that imported drugs are safe and effective. But drugs currently manufactured for consumption by Americans must meet rigorous standards

for safety and efficacy as put forth in section 505 of the Food, Drug,

and Cosmetic Act. What is the administration’s position regarding

the standards which should be applied to drugs that are reimported or imported from foreign manufacturing facilities into the

U.S.?

Would you agree with me that reimported or imported drugs

should be required to meet the same standards as drugs manufactured for U.S. consumption?

Ms. HENNEY. Mr. Chairman, I believe that both the administration, the Secretary as well, as Mr. Lew in his communications with

the committee has made clear their position with respect to this

bill, there is very strong opposition to the amendments as proposed

by Mr. Crowley and Coburn. However, the discussion I believe is

focused, as you know, particularly on the amendments offered by

Mr. Jeffords to our Senate appropriations bill.

I think there is one thing that we have stressed very strongly,

and that is the general support for the framework or paradigm that

might be put in place, but it will be totally unworkable unless the

FDA is funded to support the initiative in question, and certainly

we would expect that the kind of affirmation of the system of safety

would at least be equivalent to what we have now.

Chairman BLILEY. I think I got it straight. It was a nice long

statement, but are you saying that then you agree with me that it

should meet the same standard of safety and efficacy as drugs

manufactured in the United States?

Ms. HENNEY. I believe what I am saying, Mr. Chairman, is that

there should be no lowering of the safety net that now protects the

American citizens.

Chairman BLILEY. Well, do you believe the Senate language that

only requires a reasonable assurance of safety and efficacy meets

that standard?

Ms. HENNEY. Mr. Chairman, I don’t believe that I have undertaken a thorough analysis from the legal perspective of what that

reasonableness standard might mean. I think it is very clear that

all of us concerned with the kinds of medications that people take

in this country want them to meet at least the standard of safety

that we now have in place for our citizens.

Chairman BLILEY. In other words, they should comply with section 505, right?

Ms. HENNEY. Mr. Chairman, I believe that the safety standards

of this country with respect to prescription drugs have always been

316

to be safe and effective for their intended use. I think that that

standard should apply no matter where the drug comes from.

Chairman BLILEY. Thank you, Mr. Chairman. I’ve got to leave for

another meeting. I will try to get back.

Mr. BURR [presiding]. I thank the chairman. As we play musical

chairs, the chairman would recognize the gentleman from Michigan.

Mr. DINGELL. Mr. Chairman, I thank you. Commissioner and Mr.

Kelly, what would you need in the way of resources to properly enforce our current laws at the ports of entry? That is an answer you

are not prepared to give this morning. So will you please submit

it for the record.

Mr. KELLY. Yes, sir.

[The following was received for the record:]

The Food and Drug Administration (FDA or the Agency) is not prepared to articulate a specific resource need at this time. However, as you know, the Agency acknowledges that it lacks sufficient resources to conduct comprehensive coverage at

all U.S. borders.

In response to the Committee’s questions posed on June 8, 2000, FDA began reevaluating its use of the limited resources available for import operations by developing a resource model. FDA is re-evaluating its current operations to determine

where procedures should be updated and revised to better address dynamic industry

shifts and make better use of current resources. Any useful resource model would

depend upon this current operation evaluation which is still on going. Nevertheless,

the ratio comparisons described below may be useful in created a base line for resource discussions.

As discussed more fully later, we have implemented an import alert that focuses

on certain active pharmaceutical ingredients (APIs) that do not appear to have been

manufactured at facilities identified as an FDA approved sources in an application.

We will need to evaluate the results of the Import Alert, including the results of

inspections at the dosage form manufacturers and investigations of all intermediaries involved with the product, in order to more fully understand the magnitude of the actual and potential importation of unapproved APIs. The results of

these investigations will provide important information relevant to determining additional resources requirements.

Mr. DINGELL. Second of all, Mr. Kelly, does your agency enforce

Food and Drug laws at the port of entry?

Mr. KELLY. Yes, sir, we do, along, as I said with my prepared remarks, with the rules and regulations, the laws of 40 agencies.

Mr. DINGELL. Now, Dr. Henney, at how many of the ports of

entry do you have Food and Drug people to approve admission of

drugs and prescription pharmaceuticals?

Ms. HENNEY. Well, Mr. Dingell, I think that while we have——

Mr. DINGELL. Just how many, please? I have limited time.

Ms. HENNEY. I don’t know a precise number.

Mr. DINGELL. Would you please submit that for the record?

Ms. HENNEY. I would be pleased to submit it for the record.

[The following was received for the record:]

The U.S. Customs Service (Customs) recognizes approximately 301 ‘‘ports of

entry.’’ FDA maintains district offices or resident posts in the metropolitan areas adjacent to 94 of these ports, although only 37 offices or resident posts include staff

involved with import operations. The other 57 offices or resident posts are for the

most part small resident posts whose responsibilities are limited to domestic products.

FDA receives notification of the entry of FDA-regulated products, either through

Customs’ ACS system, or through paper entry documents collected by Customs at

all ports of entry, even those at which FDA staff are not always present. Even if

the product is ‘‘conditionally’’ released by Customs without FDA examination, it is

not released into commerce until FDA reviews the entry documentation. If FDA deVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00320 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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cides to collect a sample or otherwise examine the product after the product has left

the port area, Customs can (under the terms of the importer’s entry bond) order the

product redelivered for FDA examination.

Mr. DINGELL. Now you are behind, Dr. Henney, in your foreign

inspections. You have some, I heard the figure, 4600 plants not inspected. You’ve given us the number of 272, is that correct? Is that

a hard number or not?

Ms. HENNEY. 242. To the best of our ability, yes, that is a

firm——

Mr. DINGELL. And the number does grow. How long will it take

you to complete the inspections of those 242? How much will each

of the inspections cost you?

Ms. HENNEY. I will be glad to submit that figure for the record.

I don’t have it off the top——

[The following was received for the record:]

It is expected that very few, if any, of the 242 firms FDA has identified will require a physical inspection. The goal in identifying these firms was to identify any

firms that appear to be improperly shipping APIs into the U.S. and to determine,

based on additional information, whether any of the APIs were in fact being shipped

for a legitimate purpose.

The 242 firms described in FDA’s testimony were identified by comparing 1999

data from the OASIS database with information in CDER’s Establishment Evaluation System (EES) to determine if U.S. dosage form manufacturing firms appear to

have received an API from a source not named in their approved application. After

electronic comparison and further manual comparisons, this search revealed that

242 foreign firms, which, at this time, do not appear to be approved suppliers for

application products, shipped an API to various U.S. firms.

The 242 firms were incorporated into an import alert that issued on October 3,

2000 (IA #6666). These firms will be prevented from importing the specified APIs

into the U.S. unless they can provide documentation that the dosage form manufacturer consignee holds an approval for the use of that API in a finished human drug

product or documentation establishing that the API is intended for an authorized

use (e.g., for a non-application product).

If a firm can show that the API is used in an approved human drug product, then

a pre-approval inspection would have been performed, and CDER will search the

paper inspection records pre-dating the EES system to confirm the pre-approval or

other inspection of the API manufacturer. In other cases, investigations at the domestic firms/consignees are being conducted to determine if APIs from unapproved

sources were used to manufacture finished drug products.

While there is no definition of exactly what each investigation will require, our

past experience indicates an average of 20 hours is needed for each investigation.

We estimate that the average cost is $130.00 per hour per investigator, not including travel costs, administrative and support time.

Mr. DINGELL. How much does an inspection cost of a foreign

plant?

Ms. HENNEY. It really depends on the location of the plant, the

number of inspectors you have to take along, whether have you to

hire translators. There is a varying amount.

Mr. DINGELL. So the answer is you don’t know?

Ms. HENNEY. I don’t know a precise figure but I will be glad to

submit it.

[The following was received for the record:]

The chart below provides information on the costs of foreign human drug process

inspections conducted by the Office of Regulatory Affairs (ORA). It uses the fiscal

year (FY) 2001 Agency estimated cost of $112,000 per FTE, and travel costs and

inspection times approved by ORA as of October 23, 2000.

This information can be used to estimate costs for inspections but does not include

an estimate of CDER costs pertaining to the regulatory outcomes of inspections.

Each ORA foreign Drug Process inspection requires 2 people at 60 direct hours each.

The estimate includes all direct time and travel costs and includes all other indirect

318

costs as well. The total cost for a single inspection is estimated at approximately

$23,000 per inspection.

HUMAN DRUG PROCESS INSPECTIONS

(FY 2001 Costs 65846 $112,000 per FTE)

Hours per

Inspection

FTE per

Inspection

Salary &

Operating

Cost ($)

Travel

Cost ($)

Total Cost

($)

Lead Consumer Safety Officer (CSO) .................................................. 60 0.0645 7,224 2,500 9,724

2nd CSO or Laboratory Analyst ...................................................... 60 0.0645 7,224 2,500 9,724

Subtotal Direct inspection Cost .......................................................... 120 0.1290 14,448 5,000 19,448

ORA indirect (support) Cost (.125 FTE) ......................................... 0.0161 1,806 1,806

Total ORA Cost/Foreign GMP Inspection ............................................. 0.1451 16,254 5,000 21,254

CDER Inspection Report Review ..................................................... 0.0160 1,792 11,792

TOTAL FOREIGN INSPECTION COST ..................................................... 23,046

Mr. DINGELL. I don’t mean to be rude to you, but I’ve got a lot

of questions and a limited amount of time. You have to cooperate.

Isn’t it true that FDA has still not developed a specific timeframe

for how frequently the agency should be inspecting foreign firms

that ship to the U.S. for good manufacturing practices?

Ms. HENNEY. I believe what we would like to have as our goal

is to be able to inspect them as we do our domestic plants, which

is typically on an every 2-year cycle. Our resources have not allowed that.

Mr. DINGELL. How much resources will it take you to have the

resources you need to inspect those every 2 years?

Ms. HENNEY. I will be glad to submit that exact figure for the

record.

[The following was received for the record:]

Based on CDER’s drug listing data, we estimate that there are now approximately

1,900 foreign firms that may be offering drugs for entry to the U.S. market. If these

firms were inspected every two years (at 950 inspections per year), our annual projected costs for inspections, trip planning and evaluation of findings would be approximately $23 million. The table below describes the calculations arriving at this

amount, but does not include the cost of any necessary equipment.

This represents only a calculation of direct inspection resources. The actual costs

to support a sustained program of offshore inspections worldwide would require inspection organization enhancements and personnel management adjustments. For

example, currently we accomplish foreign inspections with inspectors based at field

offices in U.S. These inspectors are needed to inspect the domestic industry and

travel for foreign inspections part-time. A program of two-year foreign inspections

would likely require the restructuring of inspector stationing.

PROJECTED ANNUAL INSPECTIONS COST

Activity Explanation Cost

950 inspections x 0.1451 FTE per inspec. = 138 FTE

ORA Inspectors ................................................... 138 FTE x $112,000 FTE cost .............................................. $15,456,000

ORA travel planning .......................................... 10 FTE x $112,000 FTE cost = ............................................ 1,120,000

Travel ................................................................. 950 inspections x $5,000 per inspection ............................. 4,750,000

gxl950 reports x 0.016 FTE per review = 15.2 FTE .............

CDER review ....................................................... 15.2 FTE x $112,000 FTE cost = ......................................... 1,702,400

TOTAL ................................................................. ............................................................................................... $23,028,400

Mr. DINGELL. How many plants abroad have you been able to inspect more than once or meet the 2-year requirement that you are

supposed to? You are going to have to submit that for the record,

too. But I do want to know the answer.

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[The following was received for the record:]

As of October 1, 2000, FDA has conducted 1,507 inspections of the 900 foreign

facilities in the CDER database of all firms inspected since October 1, 1994. Four

hundred and ten (4 1 0) of the 900 facilities have had multiple inspections in this

six-year time period. Two hundred and seventy-five (275) have been inspected twice,

87 have been inspected three times, and 48 have been inspected four or more times

in the last six years.

Mr. DINGELL. Now, Commissioner Henney, isn’t it also the case

that many foreign firms that ship drug products to the United

States haven’t received a GMP inspection from FDA in as many as

6 to 8 years or longer? Just yes or no.

Ms. HENNEY. It is very dependent upon whether they have an active NDA——

Mr. DINGELL. The answer then is you don’t know or the answer

to the question is yes or no? Which, please?

Ms. HENNEY. It is not a yes or no answer. It is very dependent

on an active NDA or have a drug that is undergoing approval.

Mr. DINGELL. I am talking about good manufacturing practices

investigations.

Ms. HENNEY. Good manufacturing investigations are highly dependent on whether they have an application under approval or

they have active NDAs.

Mr. DINGELL. Without the 2-year inspection you don’t have the

vaguest idea of whether or not they are complying with the requirements of good manufacturing practices, do you?

Ms. HENNEY. I think that would be fair to say, that we don’t

know what goes on in the interval.

Mr. DINGELL. Commissioner, isn’t it also the case that because

FDA has not visited such facilities that it is possible that GMP conditions may have worsened since the—in such facilities since the

last FDA inspection?

Ms. HENNEY. That could always be the case.

Mr. DINGELL. Particularly in countries like China or in some of

the new developing countries that are exporting to the United

States, isn’t that so?

Ms. HENNEY. I don’t know that we see a higher rate there but,

yes, that could be.

Mr. DINGELL. Now, commissioner, isn’t it also true that FDA’s attempts to catch up on the backlog of foreign inspections will require additional moneys and resources be made available to enable

FDA, first, to catch up and, second, to meet its schedule, isn’t that

right?

Ms. HENNEY. Absolutely.

Mr. DINGELL. Of course the number of these plants is going to

increase, is it not?

Ms. HENNEY. Yes, it will.

Mr. DINGELL. China will have as many as 10 to 15 new facilities

that are going to require FDA inspections. I am informed that is

in the $15,000 and $30,000 range; is that true or false?

Ms. HENNEY. I think that is a reasonable approximation of what

an inspection there costs.

Mr. DINGELL. Now, Commissioner, isn’t it generally the case that

much of the current backlog in foreign inspections is directly attributable to the lack of sufficient resources?

320

Ms. HENNEY. Yes.

Mr. DINGELL. The Congress has not been giving you either the

money or the personnel you need to do these things, isn’t that so?

Ms. HENNEY. Not for the past several years.

Mr. DINGELL. Is it also the case as the agency attempts to inspect foreign firms overseas it risks understaffing its domestic inspections?

Ms. HENNEY. That is of great concern to me.

Mr. DINGELL. Isn’t it the case that over the past 2 years FDA always had insufficient resources in the area of foreign inspections?

Ms. HENNEY. We’ve had insufficient resources in terms of our

overall post-marketing surveillance.

Mr. DINGELL. Now, Commissioner, isn’t it the case that conducting proper foreign inspections of facilities who send drug products to the United States to determine that they meet current good

manufacturing practices is a vital function in ensuring the safety

of the Nation’s drug supply?

Ms. HENNEY. It is a critical element.

Mr. DINGELL. Now, Commissioner, if FDA is falling behind in

their foreign GMP inspections and many plants overseas have not

been recently inspected, how much money would it take to get FDA

to a point where it is satisfied that it knows the internal GMP conditions of all plants shipping drug products to the United States

are in fact complying with our laws and in fact are safe?

Ms. HENNEY. I will be glad to submit that for the record, sir.

[The following was received for the record:]

Ideally, a biennial inspection should be conducted to acquire the information needed to determine compliance with CGMP requirements. Therefore, our best projection

of the annual cost to ensure manufacturing quality of imported drugs is $23 million,

as described in the answer to question #5.

Mr. DINGELL. I think you are going to have to. Now, Commissioner, in your testimony you say that as many as 242 manufacturers in 36 countries appear to have exported to the United States

but have not been inspected. That is a reliable number, is it?

Ms. HENNEY. Yes, to the best of our ability, it is a hard number.

Mr. DINGELL. It is possible, however, that the number is larger,

is it not?

Ms. HENNEY. We have——

Mr. DINGELL. Because you really have a big problem there in

terms of keeping your data and information on these kinds of activities current, isn’t that right?

Ms. HENNEY. Yes, but that data has been processed——

Mr. DINGELL. With all respect, I’ve got to get through my questions. Commissioner, would you acknowledge that there is a rather

serious problem with counterfeiting in both bulk drug ingredients

as well as finished products in other parts of the world?

Ms. HENNEY. I think any time you have a product like this that

is very profitable, it opens itself up for counterfeiting efforts.

Mr. DINGELL. You are not able to inspect at all ports of entry nor

are you able to inspect all mail entries and things of that kind,

isn’t that right?

Ms. HENNEY. Yes, because of our resources.

Mr. DINGELL. That is true also with regard to your agency, is it

not, Mr. Kelly?

321

Mr. KELLY. Yes, sir.

Mr. DINGELL. Now, Commissioner, if a shipment of finished products were to contain 10 percent counterfeit material and 90 percent

legitimate material, isn’t it true that a batch test might have some

limitations in detecting the counterfeit part of the shipment?

Ms. HENNEY. Yes, it would depend——

Mr. DINGELL. Would you indicate whether you agree with that

statement, Mr. Kelly?

Mr. KELLY. As far as batch testing is concerned?

Mr. DINGELL. Yes. You are going to have a hard time if you’ve

got part good and partly counterfeit or part deteriorated, you are

going do have trouble telling which is good and if you only batch

test or if you only do some subject to sampling, you are going to

have trouble knowing what the real facts are with regard to that

shipment, isn’t that right?

Mr. KELLY. Yes.

Mr. DINGELL. Now, Commissioner, does batch testing give you

100 percent reliability that the product coming into United States

does not have counterfeit product mixed into it?

Ms. HENNEY. I think it would depend on the degree to—the percentage the——

Mr. DINGELL. The answer simply is no, unless you inspect it all,

isn’t that right?

Ms. HENNEY. That would give you greater assurance, yes.

Mr. DINGELL. Commissioner, does batch testing give you 90 percent reliability that a product coming into the U.S. doesn’t have

counterfeit product mixed into it or 80 percent or 70 percent? Can

you give us an idea what the figure is or do you wish to submit

that?

Ms. HENNEY. I would prefer to submit it for the record, sir.

[The following was received for the record:]

Quality testing of each batch of bulk drugs would provide some valuable information on potency, purity and other specifications. A counterfeit bulk drug, however,

might also meet these specifications and such testing could not be relied upon to

detect certain counterfeit products.

A program that includes chemical fingerprint testing and evaluation of labeling,

containers, seals, certificates of analysis, shipping records and covert markings will

be more useful in detecting and deterring shipments of counterfeit bulk drugs. It

is not possible at this time to determine the statistical probability of detecting counterfeit drugs using these samples and analytical techniques.

Mr. DINGELL. I want you to understand, Commissioner, these are

friendly questions. I have been a critic of the fact that the Congress

has not funded your agency for a long time. So I don’t want you

to engage in any defensive behavior here. I think we have to do

something to see to it you can protect the people. I am not satisfied

that the effort now ongoing in the Congress is going to enable us

to have assurances on that matter.

Commissioner, isn’t it the case that certain products are inherently difficult to repackage or relabel, such as sterile injection solutions, auto injectors, ointments, and prefilled syringes?

Ms. HENNEY. Yes, those are some of the most difficult.

Mr. DINGELL. So—and what—how do you know whether the repackagers abroad are repackaging safely in cleanly and adequate

circumstances or they are repackaging pharmaceuticals that in fact

322

meet all the Food and Drug standards, including being current on

their efficacy and not having passed their expiration date?

Ms. HENNEY. That is one of our greatest challenges in this whole

area.

Mr. DINGELL. How many of these repackagers do you investigate?

Ms. HENNEY. I would be glad to submit—— [The following was received for the record:]

Sixteen foreign facilities classified as drug repackagers have been inspected since

October 1, 1994.

Mr. DINGELL. How many of them are there and how often do you

get around to visit them? If you’ll submit that for the record, too.

[The following was received for the record:]

There are approximately 102 foreign facilities identified as repackagers in the current CDER drug registration and listing database. Drug repackagers have been included in the tier of facilities generally scheduled for routine surveillance once every

six years under the system currently applied to target and assign foreign inspections. Some of these facilities will be inspected more frequently if they are covered

by a pre-approval inspection of if they are classified as violative.

Mr. DINGELL. Commissioner, it is my understanding that drug

packaging, drug labels, holograms, and even shipping records are

often easily copied by counterfeiters and that the sophistication of

the efforts of counterfeiters make it extremely difficult to determine

faked items from the real items, is that true?

Ms. HENNEY. We have a better chance to catch them with those,

but they can get one step ahead of us, yes.

Mr. DINGELL. Mr. Kelly, do you agree with that statement?

Mr. KELLY. Yes, sir.

Mr. DINGELL. Commissioner Henney, what percentage of bulk

raw materials used to manufacture globally is considered counterfeit? I believe you gave us some figures earlier. Would you like to

do that again, please?

Ms. HENNEY. I think that to our best estimate and knowledge it

is probably in the 5 to 7 percent range.

Mr. DINGELL. Now you have a problem not only with the fact

that it is—that these are counterfeit but also that they might be

deteriorated, contaminated, adulterated, filthy, full of foreign or

deleterious or other hazardous additions to the mix, is that not so?

Ms. HENNEY. Yes.

Mr. DINGELL. Mr. Chairman, I think I’ve taken all the time I am

entitled to. I thank you for your curtesy.

Mr. BURR. The gentleman’s time has expired, but the Chair

would notify the gentleman to stick around with us.

Mr. DINGELL. I thank you. Commissioner Henney and Mr. Kelly,

I want to thank you. I did not mean to be discourteous. Our time,

as you know, is limited. We have a great deal that we have to do

to get a proper record here.

Mr. BURR. The Chair would take this opportunity to recognize

himself for the purposes of questions.

Again welcome to all our witnesses. Commissioner, let me ask

you what standard do we currently use to determine whether a

drug that is coming into this country, imported into this country,

has met our standards? Do we use section 505 of the Food Drug

Cosmetic Act?

323

Ms. HENNEY. Yes, that is primarily the standard we rely on.

Mr. BURR. So we currently use that standard for all drugs that

are imported into this country.

Now, Mr. Kelly, is that the understanding that the Customs

agency has?

Mr. KELLY. Yes, sir, that is our understanding.

Mr. BURR. I need you to pull that mike closer for her purposes

when we move to you. General Maher, let me ask you, is the Justice Department clear on the standard that we use for approving

drugs for import into this country?

Ms. MAHER. We wouldn’t be doing the testing.

Mr. BURR. What part would you play in the determination of

drugs coming into this country or reimported into this country?

Ms. MAHER. I am not sure I understand the question. We don’t

play a role in determining——

Mr. BURR. Do you play a role as it relates to patent protection?

Is the U.S. code something that comes under your jurisdiction?

Ms. MAHER. It does not come specifically under my jurisdiction.

Mr. BURR. But under the Justice Department?

Ms. MAHER. Yes.

Mr. BURR. Are you familiar with title 35, section 271 of the U.S.

Code?

Ms. MAHER. I am not.

Mr. BURR. Let me basically tell you what that says. And just

get—I’ve got the code here in case you want to read it for yourself.

But what that code says, ‘‘whoever without authority makes use of,

offers to sell or sells any patented invention within the United

States or imports into the United States any patented invention

during the term of the patent therefore infringes on the patent.’’ Is

that your understanding of the law?

Ms. MAHER. As I said, I am not familiar with that provision

but——

Mr. BURR. Given what that provision says, would it then be a

patent infringement for a manufacturer to produce in this country

for export, not for the purposes of reimporting into this country,

and a third party reimports into this country without the explicit

consent of the manufacturer; have they infringed on the manufacturer’s patent?

Ms. MAHER. I would assume so if there is not a license agreement.

Mr. BURR. If there is not a license agreement that specifically allows them to reimport into this country. That isn’t limited just to

drugs, isn’t it?

Ms. MAHER. No, I don’t believe so.

Mr. BURR. That is a general patent protection we have in this

country. It is not only stated in the U.S. Code, it to some degree

is codified in the North American Free Trade Agreement and in the

world Trade Agreement, World Trade Organization as it relates to

the TRIPS agreement, where we negotiate intellectual property. So

if in fact the FDA for any reason looked at the Justice Department

and said as it relates to a patent infringement we want you to sort

of wink, turn your head and not enforce this, would that be a

precedent in court for other industries as they took to a court a

324

patent infringement against them that you hadn’t enforced this

one?

Ms. MAHER. I don’t think a lack of prosecution can ever be offered as precedent, that somehow it undermines another prosecution. There is always—there are always decisions that have to be

made about which cases to bring. The fact that one case isn’t

brought doesn’t undermine a prosecution if the facts and circumstances warrant it in another case.

Mr. BURR. Mr. Kelly, has Customs ever stopped a product because of a patent infringement?

Mr. KELLY. Yes, we do, and it is usually a result of a what you

might call a patent lookout where the patent holder would put us

on alert as to the possibility of violation.

Mr. BURR. Were you aware before the last hearing we had that

it was a patent infringement for the reimportation of pharmaceuticals?

Mr. KELLY. No, sir, but I wasn’t at the last hearing either.

Mr. BURR. Hopefully somebody briefed you relative to the line of

questions that took place and that was one of them. I think Customs acknowledged that they were not aware that there was a patent violation that existed, whether it is in bulk, API or whether it

is in personal use. In fact, it is a patent infringement because it

is not specifically or explicitly said that it could be reimported.

Commissioner, let me ask you if I could, given that you use the

505 standard for the current importation of drugs, and let me reask

Chairman Bliley’s question, do you anticipate that if there’s legislation that moves through this institution this year that the FDA

would demand section 505 be met before any reimportation language was supported by the FDA?

Ms. HENNEY. Well, section 505 is really the basic safety standard.

Mr. BURR. I think we can get by with a yes or no, given the limited amount of time.

Ms. HENNEY. That all drug approvals must meet. As I tried to

indicate to Chairman Bliley, I believe that same standard would

apply.

Mr. BURR. So section 505 should apply to any reimportation, yes

or no?

Ms. HENNEY. I think we would have that expectation, yes.

Mr. BURR. As you know, a couple of months ago five drug companies joined in the United Nations initiative to provide AIDS drugs

to a number of Africa nations at significantly discounted prices.

First question, do you have an opinion regarding the impact legalizing reimportation will have on drug manufacturers who either donate or sell drugs in foreign countries below market prices?

Ms. HENNEY. I don’t.

Mr. BURR. Have you stopped to think about it at all?

Ms. HENNEY. That is not something I’ve given consideration to,

no.

Mr. BURR. Do you believe that if we lift the reimportation ban

that in fact we may actually discourage manufacturers from participating in these types of programs because we’ve opened up a

new market for a drug that meets the 505 standard, designated for

some type indigency program, whether it is in Africa, Asia, and poVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00328 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
325

tentially it is more profitable for those countries to reimport those

drugs to the United States? Should that be a concern to the FDA?

Ms. HENNEY. We have not been asked to consider that question.

So I would only be given——

Mr. BURR. Would you supply for this committee a statement from

the FDA, a written statement on that?

Ms. HENNEY. I will be happy to.

[The following was received for the record:]

The legislation, as enacted (section 745 of P.L. 106-387), provides in new section

804 (k) of the Federal Food, Drug, and Cosmetic Act (FD&C) Act that the authority

to reimport pharmaceutical products does not apply to drugs donated to charitable

organizations or a foreign country. This provision should ensure that donated drugs

would be used for their intended purpose rather than being resold in the United

States.

Mr. BURR. Thank you very much. Commissioner, let me just

point out a few things in your testimony if I could. Do we all acknowledge that the growth in international trade over the past few

decades has had a substantial impact on the ability of the FDA to

cope with the volume of regulated products coming into this country? That is out of your statement.

Ms. HENNEY. I think there are two issues there. Yes, we are seeing an overwhelming exponential increase in the number of regulated products coming into this country, approximately 14 percent

I believe just this past year.

Mr. BURR. You’ve asked for——

Ms. HENNEY. It did stretch our resources tremendously.

Mr. BURR. You’ve asked for $23 million to fund any effort that

might deal with reimportation. Can you break down for me how

those $23 million are spent, how much would be enforcement, how

many would be inspection?

Ms. HENNEY. Yes, I will be glad to supply that for the record.

[The following was received for the record:]

The President has not yet requested the $23 million, as required by the statute.

However, the enclosed chart reflects FDA’s estimated cost to fully implement the

Medicine Equity and Drug Safety Act of 2000. As you can see, the $23 million for

the first year included funding to begin to build the system called for in the bill.

Specifically, $2.52 million will go toward beginning to build the Forensic Chemistry

Center’s drug database; $9.55 million will be used to purchase laboratory equipment

and ramp up our laboratory capability; $5.50 million will be used to begin needed

information technology upgrades; $5 million will go towards establishing appropriate accreditation capabilities; and $.56 million will be needed for regulation development.

326

327

Mr. BURR. Thank you. I appreciate that very much.

Also in your testimony, this is in item 3, excuse me, item 4, put

all importers on notice they are required to provide the name of

foreign manufacturers. As I stated earlier, the FDA has a long history of sending notices out for their acknowledgment, sign-up, licensing, whatever we want to call it. What’s your assessment?

Have only the honest people registered? Is that the difficulty?

Ms. HENNEY. Well, I think there are many factors in this. And

some of it has to do with time and knowledge and a number of

other things. We have put the importers on notice again and we

are working with Customs right now to make this a condition of

entry. So I think that there will be a much more aggressive step

taken for not being compliant with this notice.

Mr. BURR. On page 10 of your testimony you state that the

FDA’s OCI has a close working relationship with Customs, including a memorandum of understanding providing for all OCI agents

to be cross-designated as Customs officers. How many total OCI

agents are there at FDA?

Ms. HENNEY. Approximately 150.

Mr. BURR. Can you tell me of the 150 agents which are now

cross-designated as Customs officers?

Ms. HENNEY. I will be glad to supply the exact number for the

record, but I believe nearly all of them are. There are a few I believe, perhaps in Miami, that aren’t but they actively work these

cases.

[The following was received for the record:]

As you know, the Office of Criminal Investigations (OCI) was established in

March 1992 with the selection of a Director. At that time there were no criminal

investigators employed by the FDA. In May 1993 FDA and Customs signed an MOU

concerning the cross designation of OCI special agents as Customs officers. As a new

criminal investigative agency that would be working a number of joint investigations with the Customs it was apparent that our field agents should quickly develop

a close working relationship with Customs agents. Therefore, the main purpose of

establishing the MOU for cross designation was to achieve a close working relationship and coordination between OCI and Customs. That close working relationship

was established and OCI and Customs have in the past and are presently working

together on a number of joint investigations.

Cross designation requires a block of training by Customs field offices and a renewal every six months of the cross designation status. OCI currently has a total

of 133 special agents and supervisors. Eleven of those agents/supervisors are assigned to OCI headquarters and 122 agents/supervisors are assigned to field offices.

Of the 122 agents/supervisors, 77 are crossdesignated as Customs officers. In some

cases the initial training or renewals requested by OCI have not taken place for a

variety of reasons. Since we have already established a close working relationship

with Customs field offices some field supervisors in Customs do not feel cross designation status is necessary for all OCI agents. They conclude that the status should

be accorded for a specific reason or investigation, if necessary, citing the time and

expense to cross designate agents. Also the language of the MOU states, ‘‘The U.S.

Customs Service agrees: to designate certain special agents of the Food and Drug

Administration, Office of Criminal Investigations as Customs Officers’’. After years

of working with and establishing an excellent cooperative working relationship with

Customs field offices, it is FDA’s belief that it is not necessary for all OCI agents

to be cross-designated as Customs Officers.

OCI investigates numerous import-related cases in virtually every district in the

U.S. and Puerto Rico. To our knowledge, the absence of cross-designation has never

been a factor or an impediment to any OCI import related case in any district. OCI’s

relationship with Customs is such that if it was determined that cross-designation

was necessary to assure any import investigation was enhanced, OCI would seek it

and we are confident that Customs would be responsive.

328

Mr. BURR. Let me say that according to the information from the

U.S. Customs Service that there are presently 15 FDA cross-designated agents in Baltimore, 14 in Los Angeles and 12 in Chicago.

That is a total of 41. None of these are in the high volume API districts that you stated. Why aren’t all OCI agents cross-designated

and why aren’t any OCI agents cross-designated in the high volume API areas?

Ms. HENNEY. Well, Mr. Chairman, your information differs a little bit with mine and so I will be glad to supply a fuller answer

for the record. Because it has been my understanding—— Mr. BURR. Is that your understanding, Mr. Kelly? I mean these

are Customs documents.

Mr. KELLY. My understanding it is the number is about 50. My

understanding also is that we do have a close working relationship,

close—— Mr. BURR. Are any of those 50 designated in the high volume

API districts?

Mr. KELLY. In the locations that you mentioned.

Mr. BURR. Chicago, Baltimore and Los Angeles, which were none

of the cities that were mentioned earlier that were high volume.

Mr. KELLY. My understanding is we have a closer working relationship than we had in 1993 when that memorandum of understanding was signed and that we are working in those higher volume ports, even though there is not an official cross-designation

working together.

Mr. BURR. The Chair’s time has expired. At this time the Chair

would recognize the gentleman from California, Mr. Waxman.

Mr. WAXMAN. Thank you very much, Mr. Chairman.

As you know, Commissioner Henney, the House and the Senate

both passed drug reimportation language by wide margins as part

of the agriculture appropriations bill. Draft compromise language

has been circulated and many of us are concerned that the compromise as drafted contains loopholes that the drug companies will

exploit to eviscerate the original intent of the proposal.

I and my colleagues Congressman Sanders, Berry, and Crowley

wrote to the agriculture appropriations conferees expressing our

concerns about the draft language. I would like to ask you about

some of the issues we raised in our letter. The letter indicates that

the current language appears to allow drug manufacturers to discriminate against U.S. pharmacists and wholesalers. For example,

the companies could require their foreign distributors not to sell to

U.S. pharmacists or wholesalers and could enforce these requirements by inserting restrictive provisions in their contracts.

Isn’t that correct?

Ms. HENNEY. Mr. Waxman, that issue, if it exists, I think could

be a real one, but I think that the implications in terms of trade

restriction or trade restraints are really better answered by other

agencies. We’ve got a lot of legal advisers.

Mr. WAXMAN. I wasn’t really asking before whether this would

stand up under NAFTA or GATT or anything else. I am just asking

you if the drug companies had a contract with their foreign purchaser not to turn around and sell it and that contract were

upheld, that would be a problem, wouldn’t it, for importation of

drugs into the United States?

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Ms. HENNEY. One would think it would.

Mr. WAXMAN. And it would allow, I believe, drug companies

themselves or their intermediaries to discriminate against U.S.

pharmacies or wholesalers because they could insert these clauses

into the contracts with the foreign distributors, which make it illegal then to sell to U.S. pharmacists or wholesalers. And under the

current draft of this language in the agricultural appropriations

bill, this type of restrictive contract, as I read it, would be perfectly

legal. Of course, if we try to challenge it on a trade basis, that

could take years before we see any result. We may not win it.

Is there any reason to believe the drug companies would take actions like trying to get these special provisions in contracts with

their purchasers abroad?

Ms. HENNEY. I don’t know that I have any evidence of that. But

if that would happen, I would think it would certainly be something that should be addressed now if Jeffords is expected to work.

Mr. WAXMAN. In fact I believe these restricted practices are commonplace. I agree with you if we are going to face this problem, we

ought to correct it now.

If we don’t address this loophole, this legislation won’t go very

far in addressing the high cost of prescription drugs for seniors in

the U.S.; and if the language is left as is, it will allow the drug

companies to evade the intent of the law.

Another loophole I am concerned with deals with labeling. Drugs

must bear the FDA-approved labels. In cases of brand name drugs,

the copyright of these labels belongs to the manufacturer. The

manufacturer could frustrate the intent of this legislation by using

foreign labels that are different than U.S. labels and then refuse

to allow reimporters to use the FDA-approved label. Do you think

the drug manufacturers could thwart the intent of the law simply

by changing labels, their foreign labels?

Ms. HENNEY. We at the FDA did raise this labeling issue to Senator Jeffords soon after it passed on our appropriations bill. We assumed that it was an oversight, but there is nothing in the bill, as

you note, that requires the manufacturer to give the approved label

to the importer. Without this requirement, then the importer

wouldn’t have access to that approved label and it couldn’t be imported because it would be essentially misbranded. It is likely an

issue dealing with copyrights, trademarks and the like, and again

it is another thing that needs to be fixed if Jeffords is expected to

work.

Mr. WAXMAN. I would think that it is quite simple for the drug

companies to use this tactic. Currently labels for the drugs used

overseas do not always use the FDA-approved label. If this problem

isn’t addressed, as you pointed out, drug companies will have an

enormous tool to block reimportation of drugs and undermine the

intent of the law. It seems to me that there are simple solutions.

Prescription drug manufacturers could be required to provide importers with authorization to use approved labeling and manufacturers could be prohibited from discriminating against U.S. pharmacies and wholesalers.

Would you support such an effort to eliminate these loopholes?

Ms. HENNEY. I think they must be worked out if the law is going

to work.

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Mr. WAXMAN. Thank you.

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

Mr. UPTON. Thank you. I appreciated your testimony this morning and particularly, Dr. Henney, I was delighted to see the statement in your testimony, I think it was point four, that indicated

that the FDA would require manufacturers to notify FDA when

they receive poor quality bulk drugs. This was an issue that we

took up in our hearing earlier this spring, and as we have proceeded to other things like Firestone, notification to a Federal

agency I think is very, very important. How quickly and under

what parameters do you see this happening? What timeframe?

Ms. HENNEY. I think we certainly need to engage in a very thorough discussion and dialog with the industry on this matter. It

clearly would require rulemaking and notice and comment. Rulemaking could take us several months.

Mr. UPTON. But you expect to see this happen by the early part

of next year?

Ms. HENNEY. I think we will begin engaging in these discussions.

I don’t believe that we could be to a final rule by the first of the

year.

Mr. UPTON. I have a question that I would like to sort of set out.

In a letter back in July to me, July 25, the FDA wrote, ‘‘OCI is

willing to work with Customs on a criminal investigative task force

if warranted. However, the establishment of a task force is predicated on identifying a large number of specific criminal violations

that are occurring and the need to respond to those violations with

the resources of a number of agencies.’’ It goes on to say, ‘‘In the

case of counterfeit bulk drugs, no large number of specific criminal

violations has been identified. Accordingly, FDA has concluded that

a joint standing task force with Customs for counterfeit bulk drug

investigations is not warranted at this time.’’ Now, a letter that I think the Department of Justice sent to

Chairman Bliley a week or 2 ago indicated that in fact an interagency cooperative such as a task force can be an important component of law enforcement, and facilitates the investigation by using

each agency’s area of expertise.

Where exactly are we in the field of things trying to get all three

agencies to work together and in fact develop an interagency task

force? Does your language back in July still stand based on what

the Department of Justice sent us and as a former OMBite, where

was the clearance process?

Ms. HENNEY. I think with respect to the working groups or task

forces that are meeting, whether or not it is a standing task force

or not may be the term of art we are all debating about.

We clearly are engaged in fairly frequent discussions with a

number of parts of Customs with respect to the counterfeit issue

both in terms, as I mentioned before, of our laboratory efforts, our

importation efforts, our civil actions as well as criminal actions. We

simply don’t have at this point a standing criminal task force, but

we do have a working group that is engaged in fairly frequent

meetings. In fact, I attended one in August.

Mr. UPTON. Ms. Maher?

Ms. MAHER. Well, looking at the letter you referred to, and we

said that in the Department’s view interagency working groups and

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task forces are effective and can be useful, is the language you

quoted, in law enforcement in identifying and in working on particular cases with Customs and FDA. But I don’t think that there

is any conflict with what the Commissioner has said that we are

not currently participating in such a task force.

Mr. UPTON. Do you know how many foreign firms appear to have

shipped misbranded products in 1999? Is there any idea? Do you

have some list?

Ms. HENNEY. I don’t think that we have a list, no.

Mr. UPTON. The FDA indicated that it was developing intelligence on international distribution channels of counterfeit and

unapproved drugs. Exactly how is that being done? Is it through

the Office of Criminal Investigations? Are they working closely

with Customs?

Ms. HENNEY. Mr. Chairman, with your indulgence I would like

the person that you gave such worthy praise to before to answer

that question. The head of our field operations, Mr. Dennis Baker.

If anybody can live in reflective glory, I was very glad that I hired

him when I first came on board.

Mr. UPTON. Welcome back.

Mr. BAKER. Thank you.

Mr. UPTON. I have to quickly swear you in.

[Witness sworn.]

Mr. UPTON. You are under oath as well. Thank you.

Mr. BAKER. Mr. Chairman, we have several ways and venues of

developing intelligence. We have international working groups

where we do have international partners that our Office of Criminal Investigations works with to identify potential counterfeiting

operations and distribution throughout the world.

We also evaluate foreign inspections. As an example, our staff

are now securing information on all manufacturing that occurs in

establishments overseas, not just information on what is being distributed.

Mr. UPTON. Let me stop you right there. In the hearing that we

had earlier this summer, we talked a little bit about the glycerin

I indicated in my statement, the glycerin which was contaminated

in Haiti, which caused a good number of deaths there.

As I recall from that testimony, in fact we traced that back and

we found some of that product, at least the raw material, had been

identified as coming in and was in the United States and had not

been used and it was caught in the nick of time.

Now, did that come from China? Where did that material come

from? It came from China. Was any attempt ever made? Whatever

happened to the investigation? Here is a substance that caused

deaths for sure. Whatever happened to the investigation of where

it came from? Did they identify the source where it came from?

Was there some tracking?

Mr. BAKER. They did identify the import source into the United

States and they did quite a bit of leg work. I would have to pull

the files to refresh my memory on it. That was some time ago. We

did find it in distribution channels in the United States.

Mr. UPTON. Was that case ever referred to the Department of

Justice?

Mr. BAKER. Insofar as the importer?

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Mr. UPTON. Correct.

Mr. BAKER. I would have to go back and look at the files to see

what the disposition was.

Mr. UPTON. Here is a clear case for what Dr. Henney was indicating in her testimony of requiring the manufacturer—if this had

been a U.S. firm, to in fact pass that along directly so that we could

take some type of action and make sure that it didn’t happen again

and in fact identify the source, whether it be FDA inspectors that

would go there or have the authority to look out for that company’s

particular products as they entered the States. Do you know more

based on that note that was handed to you there?

Mr. BAKER. We did meet with the Chinese embassy to disclose

information that we learned from the Haitian event. In essence, we

passed along our information to the Chinese authorities for use

against the manufacturer of the product in China.

Mr. UPTON. Do you know if any follow-up happened?

Mr. BAKER. I would have to check to see what the follow-up was.

Mr. UPTON. I would appreciate that for the record.

Mr. BAKER. I will be happy to supply that.

[The following was received for the record:]

On October 28, 1999, Agency representatives from the Division of Emergency and

Investigational Operations, Division of Field Science, and Office of International

Programs, met with representatives from the Chinese Embassy to disclose the results of the Agency’s investigation into the 1996 incident in Haiti that killed 88 children caused by contaminated glycerin used in a drug product. After the Haitian

tragedy, FDA issued an Import Alert for glycerin exported from all countries.

FDA began investigating this incident per the request of the World Health Organization. The Agency’s findings revealed that the glycerin used in Haiti was contaminated with approximately 24 to 26% diethylene glycol (DEG). The Agency also

concluded that the contaminated glycerin, labeled as ‘‘pharmaceutical grade’’, originated from a firm in China. The Agency was not able, however, to identify the firm

in China that caused the contamination.

In an effort to bring closure to this issue, to alert Chinese officials to the Agency’s

findings, and to allow Chinese officials to continue this investigation, the Agency requested the meeting to disclose the results of its investigation.

Embassy officials indicated that they would report back to the Chinese government and initiate a follow-up. FDA officials also offered to assist the Chinese government in their efforts. To date, the Agency has not received any requests for assistance.

Mr. UPTON. Okay, I think that completes my questions at this

point. Mr. Bryant.

Mr. BRYANT. Thank you, Mr. Chairman. Dr. Henney, let me ask

you a question about what the administration’s position would be

on reimportation or importation of drugs which are identified in

the Controlled Substances Act as drugs which have the potential

for addiction or abuse?

Ms. HENNEY. I’m sorry, I heard the first part of your question

but not the last part.

Mr. BRYANT. What is the position of the administration and FDA

on the reimportation of drugs that are listed on the controlled substances list, those that are addictive and can be used in an abusive

way?

Ms. HENNEY. Are you—let me just ask a point of clarification,

Mr. Bryant. Are you speaking of the reimportation bill currently

being considered or are you talking about personal reimportation

of scheduled products?

Mr. BRYANT. The former.

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Ms. HENNEY. The former. I don’t think that the position as outlined by the administration distinguishes between scheduled products versus prescription drugs. It is really drugs that are manufactured, are under prescription that could be reimported. So I assume

that the authors of the legislation mean all products that can be

obtained under a prescription and of course some of those are

drugs that can be abused.

Mr. BRYANT. I am concerned and I think a number of questions

have been asked between the Customs and FDA of the efforts of

the joint investigations, cross designations of FDA’s OCI, and folks

with Customs. Coming from a limited law enforcement background

as a former U.S. attorney, and I think I pointed this out in the last

hearing, back in June, of the turf battles that go on among investigators, Federal and State investigators. I want to be careful that

both of you, and I am sure that Justice would agree, that everyone

work together on this in a cooperative fashion so we can make sure

whatever we do in Congress works with whatever laws you enforce

now are enforced and there are not problems with jealousies among

agencies.

I think you testified that 150, most of whom are cross-designated, I am concerned about the location and we don’t want to

micromanage, but Director Kelly, Mr. Kelly, what is your view on

the placing of these—I know that you have folks out there, but the

placing of these OCI agents particularly among the high traffic

areas, the high volume areas?

Mr. KELLY. Congressman, I am led to believe by our people that

we are working more closely now with the FDA than ever before.

In 1993 there was a memorandum of understanding that allowed

for this cross-designation and there were some issues in 1993 that

I think all reports have been resolved. We don’t necessarily need

this cross-designation because we are working so closely at many

of these ports. There certainly is no resistance on our part to expand the cross-designation. The number is about 50, as Congressman Burr mentioned before. If more cross-designation is needed,

we will do two.

All of the feedback that I have received is that we are working

closely and cooperatively as far as investigations. We do have a

task force of sorts in the San Diego area doing Internet investigations right now.

Mr. BRYANT. Would you explain to me in your testimony, maybe

on your website, in our preparation materials the indications are

that there are something like 358 ports of entry and 20 customs

centers in addition to that which you operate, and the issue I

would ask you to explain to me, are some of these limited in terms

of commercial trade and if we pass this legislation that we are talking about where it would likely increase the importation of drugs

and all of the problems that need enforcement, how will that affect

those commercial sites and can we close down some of those given

the assets that you have, and will you be forced to try to shut down

some of these commercial entries to offset that?

Mr. KELLY. We have 301 ports of entry. The overarching supervision are 20 customs centers. Some ports, yes, are strictly trade.

For instance, Otai Mesa in California is 10 miles from San Ysidro,

it is passenger car, but Otai Mesa is all vehicle traffic. We would—

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we simply don’t know the volume that will be generated by this

piece of legislation. I could not make an intelligent statement

whether or not we would be forced to close. That certainly would

be a very drastic measure to close a port of entry. We would resist

that tremendously.

Mr. BRYANT. We are sort of on both sides of this. We don’t want

to impair our legitimate businesses but we don’t want these counterfeit drugs coming in either. You guys are where the rubber

meets the road.

Let me go back to a question, if I can find it very quickly here,

to Dr. Henney. Dr. Henney, in terms of the foreign drug plants, our

committee here has obtained evidence of some Chinese firms that

readily ignore patent laws and distribute these drug products. Are

we aware of the distribution of such drug products outside of China

that violate our patent laws?

Ms. HENNEY. Mr. Bryant, I am going to have to submit that response for the record. I don’t know that I can give you a full and

complete answer to what extent we are knowledgeable about that.

[The following was received for the record:]

FDA is not aware of evidence that Chinese firms are manufacturing and distributing pharmaceuticals in violation of U.S. patent laws.

Mr. BRYANT. Mr. Kelly, do you have any information on that?

Mr. KELLY. No, sir.

Mr. BRYANT. This committee has obtained reports of firms that

are counterfeiting drug products still under the U.S. patent laws.

These firms do manufacture other products that are exported to the

United States and it seems to me that the FDA would find these

reports relevant to assessing the integrity of these firms, and I assume that the FDA would like to have these reports that the committee has found.

Ms. HENNEY. We would appreciate that.

Mr. BRYANT. Dr. Henney, let me ask you a question here. The

FDA seems to be saying that it doesn’t want individual citizens to

bring drugs approved for the U.S. market from Mexico for their

personal use because the agency can’t assure the safety and effectiveness of these drugs, but as long as a wholesaler-importer provides documentation about testing products obtained in Mexico,

this somehow is dispositive. So while it is not safe and effective if

it is brought into the United States by an individual, it seems to

be safe and effective if brought in by a commercial operator whose

products will be available to not just one person but thousands of

other folks, and we are going to know that the drug is safe and effective by virtue of the paperwork being provided by the very person whose business interests are affected by this. This is at best

illogical, and at worst this is downright dangerous.

What is it specifically about the pending importation proposal

which has changed the FDA’s mind and reversed the agency’s clear

and heretofore unambiguous position about assuring the safety and

effectiveness of these imported drugs?

Did you follow all of that?

Ms. HENNEY. I tried to.

Mr. Bryant, I think there are a number of issues embedded in

your question. I think first and foremost, the pending legislation

which the administration has made comment on was initiated by

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the Congress. It clearly does apply to importers, and the importer

might be a pharmacist, and we feel that if that is to take place,

that our current method of assuring a safety system would have to

be nurtured with a new system that we would need to put in place

to make sure that the safety issues remain strong.

And that is why we are saying that we cannot accomplish this

piece of legislation without full funding to support a new safety

system on our part in terms of authenticating what is coming in

and making sure that it does meet safety standards. However, this

piece of pending legislation does not deal with personal importation

and the personal importation policy. So we have not made comment

in that regard.

I think it is important to keep in context that the personal importation policy when it was initiated by the agency many years

ago was a policy built out of compassion, that there was an overriding concern about people’s ability to get product that might be

available in another country that was not available here, and it

was particularly done at the time of the AIDS crisis when there

were no treatments available here and possibly available in some

other countries. And we opened it up by policy to allow an individual to bring a personal amount of product into this country, or

if they were coming in from a country and had already been prescribed a medication in another country that may not have been

available here.

I think that policy has extended over time, and it is now one that

people are relying on because of the price issue. We have tried to

be understanding of that matter. We do have concerns about it and

that is why we try to tell citizens that go into other countries to

purchase products perhaps at lower cost, that they do that at some

risk in terms of their safety, but we have chosen by enforcement

discretion not to enforce the law in terms of their personal desire

to purchase that product. But they need to be aware of the safety

risk they put themselves at.

Mr. BRYANT. To be clear in my own mind, let me ask that each

one of you and probably a close simple yes or no answer might

apply. You might have to explain a little bit. Do the three agencies,

for lack of a better word, that you represent, each one of you, what

is your position on this bill that would—these riders, the Crowley

and the Coburn and I guess Jeffords over in the Senate, what is

the position? Do you favor the passage of this that I understand

would allow the importation of bulk drugs from other countries,

large numbers, rather than simply the personal use situation? Do

you support this type of legislation? And each of you answer yes

or no.

Ms. HENNEY. Mr. Bryant, I believe the administration has made

itself very clear in terms of strong opposition to both the Crowley

and Coburn amendment on the issue of strong safety concerns that

those amendments would represent.

On the matter of Jeffords, I think from the FDA’s part, the original Jeffords, and I am given to understand that this has been

opened up for a lot of discussion, and I don’t know its current state

of play, but if we looked at the language as originally embodied in

Jeffords, we believed that it was a new system, it could be a workable system, and from our part we could only do it if fully funded.

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I think a number of other issues have arisen during the course

of discussion, but I don’t know the current language of Jeffords as

it now stands, so I couldn’t comment on that.

Mr. KELLY. Trade has essentially doubled in the last 6 years, and

obviously the volume comes right through the Customs Service. We

don’t have a position on the bill. Obviously we do what we have

to do. Clearly we are strapped for resources now. So this legislation

certainly has the potential of adding to the volume that Customs

has to deal with. All I ask is consideration for the Customs Service

as far as resources are concerned.

We have a resource allocation model that we had a consultant do

for us, and it is an excellent piece of work. It is workload driven.

What we would want to do is take information from the FDA and

put it into our resource allocation model and come out with a figure, what do we need to effectively enforce this piece of legislation.

So our concern is resource driven, what do we need to do our job

as far as this piece of legislation is concerned.

Ms. MAHER. Mr. Bryant, the Department of Justice has not commented on the bill and the Office of Consumer Litigation, which I

oversee, is certainly not the only component which would have

views on that. If the Department were to provide views, we would

have to solicit views from divisions such as the Criminal Division

and the Office of International Affairs, and so forth. We can do

that, but that has not been done to date.

Mr. BRYANT. Thank you. I yield back the balance of my time.

Mr. UPTON. Mr. Cox.

Mr. COX. Thank you, Mr. Chairman.

Thank you for joining us. I would like to ask about the letter that

the FDA sent to the committee addressed to Chairman Bliley and

copied to the ranking member, Mr. Dingell. I wonder if you can distribute a copy of that letter to the members and the witnesses. This

letter concerns the production of documents to the committee concerning the criminal case that is described in Ms. Maher’s testimony involving the prosecution of counterfeit antibiotics from the

People’s Republic of China.

According to the letter of August 29, the FDA may have violated

grand jury secrecy rules by disclosing information which is subject

to the grand jury rule 6(e) of the Federal Rules of Criminal Procedure. The letter is unusual in that it is not signed by a lawyer, nor

does it reference any petition to the court concerning the use of the

material within FDA by anyone other than an attorney for the government. I am assuming, and I will have to ask you this question,

that the signatory on the letter, Melinda K. Plaisier, is not an attorney for the government; is that correct?

Ms. HENNEY. That’s correct. She is head of our legislative office.

Mr. COX. I take it that you are a medical doctor and not an attorney for the government?

Ms. HENNEY. Yes, I am a physician.

Mr. COX. Rule 6(e) of the Federal Rules of Criminal Procedure

requires that this information be handled by attorneys for the government, and it would have to be segregated within FDA, presumably stamped secret, and other precautions would have to be taken

so that this information could be kept secret within the confines of

the law. It appears that that did not occur. Do you know why?

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Ms. HENNEY. Mr. Cox, this matter came to our attention a few

months ago, I believe a few days before the committee received this

letter, we saw during the course of looking at materials that had

been provided to the committee that some 6(e) documents inadvertently may have been transmitted in response to a request before

the agency from the committee.

Mr. COX. I need to stop you because I don’t understand how that

can happen. I don’t understand how that information could have

been in the possession of anyone not an attorney for the government.

Ms. HENNEY. That is what we are investigating ourselves right

now, how it happened.

Mr. COX. How can you conclude that it is inadvertent then?

Ms. HENNEY. Well, it was inadvertent in that it got transmitted

to the committee and we are exploring how it happened, not only

the transmittal to the committee but how it happened that the 6(e)

documents were outside the confines of a secure situation within

the agency.

Mr. COX. The people who transmitted this information and who

reviewed it for transmittal in the first instance apparently were not

attorneys for the government and were not on the grand jury list?

Ms. HENNEY. That’s correct.

Mr. COX. So at least facially we have a potential criminal violation. Was there a notification to the Inspector General?

Ms. HENNEY. We have notified the Inspector General, but it is

under investigation by our internal investigations group.

Mr. COX. Is that normal for a potential criminal violation?

Ms. HENNEY. Yes.

Mr. COX. That the IG would not handle it?

Ms. HENNEY. Within the agency we have an internal affairs operation. They work closely with the IG of the Department, but they

are able to undertake investigations within the agency.

Mr. COX. My understanding of your MOU is that in fact it would

be normal for the IG to handle that; is that correct?

Ms. HENNEY. Under the memorandum of understanding as I

know it, we notify the IG of any matter like this and they take it

under consideration as to whether they want to handle solely the

investigation or they work with us in the investigation. We have

notified them of that and we have not heard whether they will be

entering this particular investigation or not.

Mr. COX. I am attempting to find a copy of it, and I just reviewed

it recently and it strikes me that it is abnormal for the IG not to

do this.

Ms. HENNEY. As I recall, when this particular memorandum of

understanding was entered into with the IG, it was at a time when

the agency felt a need to have its own internal affairs unit. We

were long delayed in terms of waiting for the IG because of the

number of cases that they had under investigation through the

whole department, and thus this arrangement was developed

through this memorandum of understanding. It is that which we

have relied on.

Mr. COX. Does the Office of Internal Affairs comprise non-FDA

employees?

Ms. HENNEY. No.

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Mr. COX. They are people that work for the FDA. Have any of

them worked for the Office of Criminal Investigations?

Ms. HENNEY. They are credentialed as essentially criminal investigators, but they do not report to that office.

Mr. COX. Have any of the people who presently work there formally been in the Office of Criminal Investigations?

Ms. HENNEY. I don’t know that.

Mr. COX. The concern is that what we have if we handle it as

it is being handled is the people conducting the investigation essentially investigating their colleagues. There isn’t the same arm’s

length arrangement that you would have if you had the IG conducting the investigation. I wonder if the MOU seems on its face,

as it does to me having read it, to put this in the lap normally of

the IG and the decision was made not to do that.

Ms. HENNEY. The decision was to give this to the Office of Internal Affairs. They would make their normal contacts with the IG

and develop the plan for the investigation of the matter.

Mr. COX. This has been going on for months. Where does it stand

now?

Ms. HENNEY. I have not received a report on the status.

Mr. COX. The Office of Internal Investigations doesn’t have the

power itself to convene a grand jury?

Ms. HENNEY. No.

Mr. COX. Or to even get testimony under oath as the IG could.

Isn’t that right?

Ms. HENNEY. I do not know the extent of their authorities in that

regard.

Mr. COX. Can they subpoena documents?

Ms. HENNEY. I don’t know, Mr. Cox.

Mr. COX. Are you at all involved in the decision whether to conduct the investigation through the IG or through the Office of Internal Investigation?

Ms. HENNEY. I was involved in the decision that said we needed

to investigate this matter thoroughly.

Mr. COX. You did not opine on it going to the IG or Internal Affairs?

Ms. HENNEY. I did not make a designation as to which should,

and I think what we have normally done when we have matters

within the agency that need exploration is to turn first to our Internal Affairs, and then they consult with their colleagues in the

IG as to how it will be conducted.

Mr. COX. Why have you not been briefed on the status of the investigation?

Ms. HENNEY. I am normally briefed on the status of the investigation when the investigators feel that they are at a point where

they need to be having me make a decision or need to transmit

critical information.

Mr. COX. Is your inference from the passage of a month and

some since at least we were provided and presumably the FDA was

on notice that it is a complex investigation and that is why it is

taking a long time or that there is nothing worth paying attention

to?

Ms. HENNEY. I don’t know what all might be involved in the investigation at this point.

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Mr. COX. I raise this because it is rather clear that in the one

criminal matter that we have seen—and this is the only one to my

knowledge, the only criminal case that FDA has brought for the

importation of bulk pharmaceuticals?

Ms. HENNEY. I believe that is correct. I don’t know that for a

fact.

Mr. COX. It seems that we have a rather serious internal problem within FDA concerning the handling of the documents. They

appear not to have been marked properly. They are being handled

by people who are not on the grand jury list. They are not apparently in the office where they belong. Do you know the answer to

the question of which office these things came from?

Ms. HENNEY. We do not know at this point the different transmission points within the agency. That is what they are exploring

right now.

Mr. COX. Do you believe that in any way the misconduct or mishandling of documents here is related to a lack of funding to the

FDA?

Ms. HENNEY. I think we will have to make those judgments once

we see the completion of the investigation.

Mr. COX. I will say that it strikes me as extremely improbable

that that could be the case. Rather this seems to be a clear case

of people not following the rules, and I would hope that it would

get some serious attention because I have never seen a letter like

the one that came to the committee just—let me ask this: Has the

FDA or the Department of Justice made application to the District

court that had jurisdiction over this matter where the guilty plea

was entered, and so on, that would permit the people who have

handled this information within FDA to do so?

Ms. HENNEY. I need the thrust of your question again, please.

Mr. COX. Even though I realize, Ms. Maher, you are with the

Civil Division, do you know the answer to that question?

Ms. MAHER. I don’t know the answer to that question. I just notice that the letter was copied to the Assistant U.S. Attorney in

New Jersey. Frankly, this is the first time I have seen the letter,

and I wasn’t aware of the issue and I don’t have any information

on it. But that doesn’t mean that the U.S. Attorney’s office isn’t—

hasn’t made some kind of application. I just don’t know the answer

to the question.

Mr. COX. Okay. These are very serious matters. It is a crime, and

it seems to me, or at least according to 6(e), handling documents

in this way is subject to serious criminal penalties. It doesn’t seem

to be being handled internally with that gravity, and I would hope

that would change. The way that it came to the attention of the

committee is highly unusual. I don’t think that the committee has

ever received a letter like this, not only during my 12 years in Congress, but at all because it is so facially irregular.

To the extent that you haven’t been briefed on it, I would assume

that this would be a good time and perhaps you can get back to

us. Is that acceptable?

Ms. HENNEY. Yes.

[The following was received for the record:]

As you know, FDA’s Office of Internal Affairs began the preliminary investigation

of this matter in September and in accord with our MOU with the Department of

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Health and Human Services Office of the Inspector General (OIG) notified them.

Subsequently, on October 4, the OIG notified the Agency that they would assume

the lead on this investigation. Dr. Henney, Commissioner of Food and Drugs, was

briefed on this status subsequent to the hearing. Since the OIG now has the lead,

FDA expects no further briefing until the investigation is completed.

Mr. COX. Thank you. Thank you, Mr. Chairman.

Mr. UPTON. Before I yield to Dr. Coburn, I have been asked by

the minority to put two letters into the record by unanimous consent that they, I guess, referred to in their questions. So without

objection that is now done.

[The following was received for the record:]

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Mr. COX. Mr. Chairman, I would ask also by unanimous consent

that we include the letter that we just had discussion on for clarity

purpose.

Mr. UPTON. Without objection, so ordered.

[The following was received for the record:]

DEPARTMENT OF HEALTH & HUMAN SERVICES

FOOD AND DRUG ADMINISTRATION

August 29, 2000

The HONORABLE THOMAS BLILEY

Chairman, Committee on Commerce

House of Representatives

Washington, D.C. 20515-6115

DEAR MR. CHAIRMAN: This letter is in follow-up to a telephone conversation I had

with Mr. Alan Slobodin, Senior Counsel, of your staff on August 25, 2000. I called

Mr. Slobodin to advise him that it recently came to our attention that the Food and

Drug Administration (the Agency) may have inadvertently disclosed documents related to a closed grand jury investigation in a document production responsive to

your letter of August 4, 1998, requesting information about counterfeit bulk drugs.

Specifically, documents provided to the Committee on the following dates, included documents that may be subject to Rule 6(e) of the Federal Rules of Criminal

Procedure: October 14, 1998 Boxes 1 and 2; October 29, 1998 Box 3 of 4; December

29, 1999; January 20, 1999.

We respectfully request that if the Committee is finished with these documents,

please return them to the Agency. We will be happy to arrange for a courier to pick

them up. If the Committee has further need of the documents, we respectfully request that you take precautions to not further disclose, make no copies, and advise

us when you are finished so we may arrange to have them returned to the Agency.

We apologize for any inconvenience this may have created. Please let us know

when the Agency may retrieve these documents.

Sincerely

MELINDA K. PLAISIER

Associate Commissioner for Legislation

cc: The Honorable John D. Dingell

Ranking Minority Member

Committee on Commerce

House of Representatives

Mr. Richard Schechter

Assistant U.S. Attorney

Department of Justice

Mr. UPTON. Dr. Coburn.

Mr. COBURN. Thank you, Mr. Chairman.

Dr. Henney, you have been through a controversial period of time

where you approved a drug that Mr. Waxman is happy with and

I am unhappy with, and my purpose is not to berate you in that

decision, but I have some questions about that process that I think

are important for the FDA, and implicit in past drug approvals and

future drug approvals, and I just wanted to ask you some questions

about that if I might. If you don’t know the answer, that is fine.

I would like you to get back to me with the answer.

Also, I sent you a letter on September 6 asking some specific

questions that I have not heard any answer from, and this was

prior to the release of that approval.

The basis of my question is this: With the approval of RU-486,

it by itself will not accomplish the purpose under which it was approved by the FDA. It is a recognized medical fact that it has to

be used in combination with some other drug with which to do

that. The other drug that is used in that is a drug that is produced

by G.D. Searle Company, which they have disallowed and disavowed that they want that drug used for that.

347

My question to you is: Coming with implicit approval of RU-486,

will the FDA hold harmless every practitioner in the off-label use

for Cytotech for every purpose outside of the approved use and

every other drug that might be utilized in combination with other

approved drugs, and have you set a precedent which will diminish

the power of the FDA?

Ms. HENNEY. With respect to the treatment plan that you reference, Mr. Coburn, Dr. Coburn, I think that the treatment plan

in order to accomplish the early termination of pregnancy really

does require the two products; and in that regard we have been engaged in discussions with Searle about changing the label to reflect

that treatment plan on the label.

In terms of—— Mr. COBURN. Could I interrupt you there? Have you ever in the

history of the FDA gone to a manufacturer when they have expressed a desire that they don’t want a label change and recommended to them that a label and nonapplication by them be

changed because the FDA wants a change? Has that ever happened

before in the history of the Food and Drug Administration?

Ms. HENNEY. I don’t know the full history of the Food and Drug

Administration, so I don’t know the answer to your question. I do

know that it is quite common in my own field where a drug in and

of itself is not the whole treatment, but requires the use of many

other drugs to really complete an effective treatment plan, that

that has been done in those kinds of situations. And that has been

done in those kinds of situations.

Mr. COBURN. But the FDA has, in fact, asked other manufacturers to change their labeling request to make a treatment plan, and

that would be your testimony, that the FDA has done that in the

past?

Ms. HENNEY. I don’t know that there has been a formal request

of that to be reflected on the label. There is certainly an acknowledgment, as we have approved different products, that they are a

part of a treatment plan, not effective in and of themselves to the

degree the treatment plan provides.

Mr. COBURN. In regards to Cytotec, Searle sent a letter out to all

practitioners throughout the United States, all providers, stating,

No. 1, they don’t want this drug used for this, that it’s dangerous

for this; and in statements made to the press they stated, in fact,

that this letter was written jointly with the help of the Food and

Drug Administration. Is that a true statement?

Ms. HENNEY. I think there are two issues there. There were essentially two letters in question. One—and we certainly were very

much engaged with their writing of the language in the letter that

tells practitioners and women really that if they are taking

Cytotech and wish to remain pregnant, that there are side effects

potentially of birth defects.

However, for the termination of pregnancy, that is a different

issue and a different letter under question. And we have asked for

revision of that, because it is different than what the company implies and states on its label in other parts of the world.

Mr. COBURN. In fact, under the label requirements, even the IND

and the NDA that was done with Cytotec in this country we have

no label request and no indication for the procedure under which

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this drug indirectly has been approved by the FDA in conjunction

with RU-486; is that correct?

Ms. HENNEY. What are you talking about here?

Mr. COBURN. I’m talking under the jurisdiction—you don’t have

jurisdiction outside of this country in terms of labeling. You have

jurisdiction in this country.

I’m talking about the letter that they sent—I’d like to introduce

this into the record—August 23, which they claim was written in

part with the help of the Food and Drug Administration.

So my question is, it really doesn’t have anything to do with RU486 and Cytotec. The fact is, I see a prostitution of the process of

the Food and Drug Administration that undermines your ability in

the future to ever counter a claim for any drug company that wants

a liability claim on off-label using, because in fact the Food and

Drug Administration, with its approval of RU-486, has implicitly

approved a drug for which the drug manufacturer doesn’t want it

approved, has stated they don’t want it approved, and you helped

write a letter that helped them say that.

So my question is, is this all about posturing for liability so that

Searle is not sued, and all the liability for using this drug now stated, that should never be used for pregnant women or for abortion,

is that to shift all the liability to the practitioner?

In other words, I don’t understand why we would not have approved this drug as a true drug regimen and done it in a way that

does not dilute the future potential of activity for the FDA to control drugs. And it seems to me that we’ve diluted your capability

precedent for future actions on other off-label drugs because you’ve

implied, I believe, that it’s okay to use this drug for this procedure.

Is that a fair statement or an unfair statement?

Ms. HENNEY. We have said that the treatment plan—we have

approved the drug as a part of a treatment plan. I think with respect to the matter of helping in terms of drafting of that particular letter, I think we might question that. Our real assistance

came in an earlier letter.

Mr. COBURN. So let me make sure I understand this.

The FDA did not assist Searle in this letter to practitioners stating that they do not want Cytotec used for both the induction of

labor or as a use of a second drug combination as an abortive fashion.

Ms. HENNEY. It was really for the use of this, if a woman desired

to remain pregnant. It was not for its use as an abortive agent.

Mr. COBURN. But I’m talking about this letter. There is no assistance by the FDA with G.D. Searle Company in developing this letter that went to every practitioner in the United States disavowing

the utilization of Cytotec, the second component in a medical abortion, that they did not want, should not be used, it is dangerous

to be used in that manner. That is the manufacturer of this product saying that, and the FDA had no part in the formulating or

drafting of this letter.

Ms. HENNEY. We had a part in the formulating and drafting of

the letter that essentially warned health practitioners and patients

if Cytotec was used and a woman desired to remain pregnant that

she would be at risk of severe birth defects. That is the part of the

letter that we assisted in.

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Mr. COBURN. Fine. Thank you.

I’d like to submit with unanimous consent this letter from Searle,

as well as statements from the press relating to FDA’s concerted

help in writing this letter. I’m not sure we have a full explanation

of why the FDA would have been involved in this.

The other thing that concerns me—and I would make this note

in the record for the future, and I think it’s very important—FDA

has to be the final approver on medical uses and labeling for drugs,

and I believe that that process has been bastardized with this letter and with the use of Cytotec in conjunction with this.

We need to make sure that we preserve FDA’s power, and I believe a precedent has been set with this because we now have the

Food and Drug Administration asking a manufacturer to allow a

drug to be used off-label by their implicit approval of another two

drug combinations when, in fact, the manufacturer doesn’t want

any part of it and doesn’t want the liability associated with it.

The second point I would make is because this has happened,

any practitioner who uses Cytotec to perform a medical abortion,

if there is any complication, Searle is off the hook, and the maker

of RU-486 is off the hook, but the practitioner isn’t. So what we

have done is shifted responsibility from those that should be to

those that are carrying out what is recommended by the Food and

Drug Administration as a proved policy of terminating lives in this

country and doing so in a manner that shifts the liability away

from those that should have it.

With that, I thank the chairman for allowing me to participate.

Mr. UPTON. The documents, without objection, are included as

part of the record.

[The following was received for the record:]

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Mr. UPTON. Mr. Burr.

Mr. BURR. Thank you, Mr. Chairman.

Commissioner, share with me, if you will, why it has taken 3

years since FDAMA was passed for us to write the final regs as it

relates to foreign establishments whose products are imported or

offered for import in the United States.

Ms. HENNEY. Mr. Burr, I think that there were probably two factors in its taking 3 years to get this particular regulation out.

The first was that we worked on those matters within the FDA

Modernization Act that actually has statutory deadlines or requirements first, and they were given first priority. I would note that

we have met nearly 100 percent all of those requirements and requests that are embodied in that law.

Second, we were given no additional appropriations as we were

expected to undertake all that is involved in rulemaking. So there

were no additional appropriations provided when the FDA Modernization Act passed, so we worked on our—the priority issues

first under constrained resources, and it has taken some time for

us to get this out.

Mr. BURR. Could this committee expect that any change in our

importation or reimportation guidelines in this country would take

a similar amount of time, 3 years or longer, to fully implement the

regs and the guidelines for that?

Ms. HENNEY. I would hope not. Because we do place a strong priority on this effort. But I have mentioned earlier, throughout the

course of this hearing, that we have to prioritize by risk and we

have to prioritize by resources.

Mr. BURR. I think you clarified a lot today, and my understanding, and I think the record will show, that the FDA is supportive of a standard that is consistent with section 505, that these

drugs must meet.

Mr. Waxman raised a question about labeling, and I would in

fact point you toward section 505. And I will just be general in my

statement, but section 505 requires that any manufacturer file an

NDA. And in that NDA they list those facilities that that specific

drug would be made in. And the labeling is determined off of that

NDA and in compliance with section 505. For anybody to suggest

that there might be an additional labeling issue would be for them

to not have an intention to use section 505 as a guideline. Would

you agree?

Ms. HENNEY. I don’t know that they would have an intention,

but yes, they would have to be given some sort of permission or access.

Mr. BURR. Section 505 is very specific as it relates to labeling

and the requirement for an NDA and the requirement to list the

facilities where one would manufacture a drug, correct?

Ms. HENNEY. You are absolutely correct.

Mr. BURR. You would expect that to also be a guideline that you

would follow as it related to reimportation or importation changes

that might be considered by this Congress?

Ms. HENNEY. Yes, there would have to be congruency between

those two things.

Mr. BURR. Let me go to Mr. Kelly because he is Customs.

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Your folks are on the border. I mean, even General Maher said

in her testimony there are also drugs that are manufactured in

whole or in part in unauthorized factories or facilities and then

shipped with the complicity of the authorized manufacturers under

its name and trademark—in other words, manufacturers in cahoots

with manufacturing outside of the stream of an NDA-named facility.

How do you catch that?

Mr. KELLY. With great difficulty.

Mr. BURR. It is not an expiration date now. It is the correct paperwork; it is the manufacturer’s logo; it is everything imprinted—

the color of the pill is right. How do you catch it?

Mr. KELLY. As I said, with great difficulty. We need direction, we

need to work closely with the FDA to get—we are looking for some

national standards now from them to address a lot of these issues.

Mr. BURR. It is tough, isn’t it? You can say that. We understand

the job that we have got, you are doing. And we understand that

as pharmaceuticals become more global, which they are in fact, the

challenges that we place on Customs are that much greater.

Now, the natural question that I have to ask is, what is your job

going to be like if we allow this new importation and reimportation

to exist? How much have we strained your ability for your Customs

agents to determine the difference between real and fake, adulterated and nonadulterated?

Mr. KELLY. Well, it clearly will be strained, to what extent we

simply don’t know. We don’t know what the volume is. We don’t

know what the complexity of these shipments will be.

Mr. BURR. Let me ask General Maher.

Currently, if a U.S. manufacturer manufactures a product and it

goes into the consumer stream, they are liable, even if the FDA has

approved the safety of, the efficacy of the good manufacturing process, everything is followed; if in fact they have a contaminated

product, they are liable. I mean, they will be sued and somebody

will win.

Let me ask you, based upon the reimportation language that is

out there, if a U.S. manufacturer manufactures in this country for

export, it gets out of their chain of control—which everybody’s testimony said happens today—it is stored improperly, it is not temperature controlled, it is not humidity controlled, the active ingredient doesn’t work because of the storage.

It is reimported back into the country to a wholesaler or pharmacist, it is administered to a patient and their heart medication

does not work and they die. Who is liable? Is the original manufacturer liable?

Ms. MAHER. I don’t know that I could give you a legal opinion

on that, based on the statute.

Mr. BURR. Is that not an important question we get an answer

to before we head into this world of saying we will take all drugs

from around the world whether they are manufactured in the facility, whether they are stored in the warehouse, whether the manufacturer has been able to maintain that chain of control; as long as

we think that it’s not contaminated or that it has been made in a

facility under section 505, approved, we will take it back in. Are

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we taking a great risk and aren’t we holding private sector companies in this country liable for tremendous exposure?

Ms. MAHER. As I understand it, that is one of the reasons the

Jeffords bill, in the version that I reviewed, requires, or will require, the Secretary to issue regulations that would establish a

pedigree.

Mr. BURR. We do require the Secretary to authorize the process.

We authorize the Food and Drug Administration today to approve

the safety and the efficacy of every pharmaceutical in our marketplace. But that authorization, that approval, that good stamp of approval from the FDA does not lift liability from the manufacturers,

does it?

Ms. MAHER. I am not suggesting that it would lift the liability.

I am suggesting that it would help to identify who is in the chain

of custody of the product.

Mr. BURR. And what Mr. Kelly and what you and what the Commissioner have told us today is, we have a serious problem today

with counterfeit, adulterated drugs.

Now we are going to open it up to a whole new world, the population is going to get that much bigger, and I only ask you to look

at that one piece and tell me whether I am wrong that for a manufacturer of pharmaceutical products in the United States of America who manufactures with the intention of export, and somewhere

in the chain of where that drug goes, it is stored improperly, it becomes contaminated for whatever reason, we have not done anything in the language currently debated that would lift the liability

from that original manufacturer, have we?

Ms. MAHER. I haven’t seen anything expressly in the bill that

would do that.

Mr. BURR. I have not either. I would hope that is one of the areas

we begin to look at and ask ourselves, in fact, is this fair?

Commissioner, would you agree from my earlier set of questions,

that any reimportation or importation of a patented drug without

the consent of the manufacturer is in fact against U.S. law?

Ms. HENNEY. Today, yes.

Mr. BURR. And is there anything in the proposed legislation that

changes U.S. Code for patent protection of any manufacturer

whether they are drug manufacturers or whether they are software

manufacturers?

Ms. HENNEY. Not that I am aware of.

Mr. BURR. So even under the current reimportation language, it

would have to be the interpretation of whatever department of the

Federal Government—hopefully, it is Justice, some area of Justice—that they would look at it and say, it is still against the law

to reimport against the consent of a manufacturer under patent

protection.

So in fact we have done nothing unless we address in legislation

the ability to get around patent law in this country.

Would that be a direct statement to General Maher or to the

Commissioner?

Ms. HENNEY. I would think that would be one issue that would

clearly have to be worked through.

Mr. BURR. Would you also agree that—would you also agree, it

puts us in great jeopardy as it relates to our negotiations for harVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00357 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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monization with the EU on a drug standard, if in fact we get away

from the gold standard we have always had, which is section 505?

Ms. HENNEY. I don’t know that the legislation under consideration would truly get us away from that standard.

Mr. BURR. As long as we stick to 505, we are okay, we are on

sound ground. But any movement away from section 505 is the

standard that we use for a sign-off that something is safe and effective to come back into this country would, in fact, put us in great

jeopardy with our trade negotiators on harmonization of drug approvals between the EU and the United States of America where

we, for 3 or 4 years now, cannot find agreement.

Ms. HENNEY. Mr. Burr, I am going to ask your indulgence in providing a fuller answer to your question for the record. We clearly

have been involved in nearly a 10-year discussion in terms of our

international harmonization efforts with not only the EU, but

Japan and others, about harmonizing what we see in terms of our

review documents. And the standard that we expect at the end for

us, a standard of approval, may still be different than other countries; but we have never abandoned that standard in all of those

discussions.

But I really would appreciate the privilege of providing a full answer for the record.

[The following was received for the record:]

We do not believe the Medicine Equity and Drug Safety Act of 2000 (section 745

of P.L. 106387) would compromise the approval standard in Section 505 of the

FD&C Act. Drugs allowed into the U.S. under this legislation are expected to already have been approved by FDA. Therefore, we do not expect any impact on MRA

negotiations.

Mr. BURR. I would appreciate that, because I hope that given the

interaction that members of this committee have had with the FDA

relative to this issue, that our understanding is still the same and

that we would hold fast to the gold standard in any harmonization

negotiations that we might go through, either with the EU or with

other countries.

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

I want once again to thank our witnesses. I hope they understand

that not only are we here to look at the counterfeit problem and

to be as helpful as we possibly can be as a committee and as a Congress; we are also here to make sure that any steps that we might

make don’t contribute to the problem that we have.

And I think clearly there are questions that exist, some of which

we have gotten answers to today; and I thank our witnesses for

that. But clearly there are many more areas than the authors of

this legislation on reimportation have thought of that are affected

by what we do; and I hope for once we will slow down, we will work

with an agency that up till this point in its history has never broken from the gold standard that it set.

Certainly there is a list of former commissioners of the FDA who

have raised questions about what we might be getting ready to do,

and I would like to quote one in concluding. It is a letter dated July

17, 2000, to the Senate Majority Leader, Trent Lott, Tom Daschle

from former FDA Commissioner Goyan, and I quote, ‘‘Even with

my background and training, based upon physical inspection alone,

I can’t tell the difference between an authentic drug that has been

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properly stored and handled, an authentic drug that has not been

properly stored and handled, and a counterfeit medicine that looks

exactly like the real medicine that it copies. ‘‘How are the Customs Service agents at entry points along our

borders with Mexico or at one of our Great Lakes ports going to

tell the difference?’’ I think that best sums up the challenge that you have got, Mr.

Kelly, but it best sums up the reason that we should slow down

and do it right and work in a partnership and not a political vacuum.

I yield back.

Mr. UPTON. I appreciate the gentleman yielding back the balance

of his time. I just note for the record, I wasn’t intending to go to

a third round.

Mr. BURR. I had confidence you weren’t.

Mr. UPTON. Mr. Strickland.

Mr. STRICKLAND. Thank you, Mr. Chairman.

Dr. Henney, I find myself generally sympathetic with whatever

we can do to lower the price of drugs for American consumers who,

I think, are getting gouged with these high prices. Having said

that, I think it is terribly important that we make sure that whatever we do protects the American consumer and the American public.

In that regard, I understand this letter from Representative Dingell has been placed into the record; and having read this letter,

I am concerned that it appears that there is a major problem, at

least along the Mexican border, where substances that probably

should not be available to certain individuals are being permitted

into the country in significant quantities. By that I mean, I think

that ought to be a major concern for us.

What I would like to ask you is, can we expect an answer to the

issues raised in this letter made available to this committee within,

say, 2 weeks? Is that a reasonable thing to request of you?

Ms. HENNEY. We will make every effort, Mr. Strickland, to respond within 2 weeks. I would say that the investigators or the faculty members that Mr. Dingell cites within the letter, that have

done at least a preliminary study on this issue, we actually had invited to come in to talk to the whole leadership group of the Agency

about their findings so that we might explore not only what they

found, but if there are any other projects, that we might work on

them—work with them on.

So I think that we are very sympathetic to this issue, particularly as it relates to the personal importation policy, and we want

to find out everything that they have found out in terms of their

study and evaluation of the Mexican border.

Mr. STRICKLAND. For example, they indicate that on a particular

day, 11,000 Valium tablets were brought into the country. Having

worked in health care settings, I know how devastating access to

that kind of drug can be if it isn’t appropriately monitored by a

physician.

And I also understand that every study has particular methodologies and perhaps certain assumptions that need to be looked

at and evaluated to make sure that it is a credible study. But I

think these are very, very serious findings that are outlined in this

356

letter, and it seems that it would be really helpful if we could have

a response from you, and this committee could know what your

findings and what your conclusions are regarding these particular

allegations.

Ms. HENNEY. Well, I think that they are very interesting findings, not only of the controlled substances that may be being

brought in under personal importation that have unique issues, but

also that it is not just seniors that are going into Canada—and not

just Canada from their study, but Mexico from this study—but it

is really much younger people who are seeking these medications

as well. So that is why we really want to look in depth as at what

is being found.

Mr. STRICKLAND. Just one more question. Is it reasonable for us

to expect you will sit down, or your office will sit down, with Customs and try to work together to try to make sure that these issues

are resolved?

Ms. HENNEY. We intend to sit down not only with Customs, but

with DEA. We do have a policy that harmonizes; sometimes, in operation, it is not interpreted as consistently as it might be. So we

want to undergird our understanding about how personal importation, as it relates to scheduled products, really is to work. And certainly we want to share with them the findings of the study.

Mr. STRICKLAND. Thank you.

Thank you, Mr. Chairman. No further questions.

Mr. UPTON. Mr. Bryant.

Mr. BRYANT. Thank you, Mr. Chairman for this second round.

Ms. Maher, let me ask you, you know, so often we hear stories— probably countless stories—about how people in developed countries and underdeveloped countries, taking medication, experience

problems with drugs that don’t work or drugs that do them harm.

And realistically we just don’t have that over here in the United

States very often.

I am wondering, as we look at changing the policy rather dramatically that would allow potential reimportation of potentially

dangerous counterfeit drugs—whatever, the whole gamut of bad

things that can happen in this country—it is not unrealistic that

we could see some people that are injured, some people that die as

a result of this. And I know that is not the intent of Congress. We

want to have drugs that are, I guess, more affordable, whatever.

I assume that is the logic behind this. I know I certainly do, but

again not at the risk of having people die.

Is the Department of Justice—in terms of the current resources

you have available, is the Department of Justice that would handle

the actual prosecution of these cases that are made by Customs

and made by the FDA-OCI folks, are you, with the resources you

have now, ready to handle this potential from a legal standpoint?

Ms. MAHER. Well, we are certainly ready, willing and able to

prosecute cases involving counterfeit pharmaceuticals. And if, as a

result of a new reimportation law, there were to be an increase in

those right now, we don’t anticipate an inability to prosecute cases.

So we are prepared to bring cases that are referred to us involving

counterfeit drugs.

I think it is the counterfeit drugs that you are referring to that

cause harm to those who consume them. Whether they are in the

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United States or in some developing country, they are drugs that

are other than what they purport to be.

Mr. BRYANT. I think it almost goes without saying if this law is

changed, there will be an increase in the importation of drugs now;

and how many of those are counterfeit and defective or whatever

are yet to be determined. And there was fear of that at one point;

that is why the law was passed as it is. And certainly I think we

all understand that the real deterrent to this type of conduct ultimately is the fear of prosecution of getting caught and then being

prosecuted to the full force of the law.

Ms. MAHER. These are very resource-intensive prosecutions to

bring, and that is why some of the suggestions that were contained

in our written testimony are things that we believe would make

these prosecutions easier and less time-consuming and resource intensive.

Mr. BRYANT. Dr. Henney, I also practiced law, and I was a civil

defense lawyer and defended medical health care providers’ malpractice cases, and realistic enough to know—Dr. Coburn kind of

woke me up on this. I had expressed some concerns about the approval of RU-486, but I would like to follow up on some of the questions he had—not as a doctor. I am not a physician like you or he

are; I am a lawyer. And know just enough about medicine to be

fairly dangerous to myself.

But help me out on the FDA approach here. Is—as I understand,

this is kind of a two-phase—the first phase is one drug followed up

by second-phase drug that Dr. Coburn was alluding to quite a bit.

Now, is this first drug—and I know it has a specific name, is it—

where is it going to be manufactured, inside the country of the

United States or is it going to be outside?

Ms. HENNEY. Mr. Bryant, there are two drugs involved in this.

The first is misoprostol. That is the drug that we announced the

approval of last Thursday; and then following that, on the third

day misoprostol is taken. That combination in a treatment plan essentially is the combination that results in early termination of

pregnancy. We have at the FDA made the determination that we

will keep the manufacturing site of this particular product confidential for two reasons.

Mr. BRYANT. Let me stop there. I think I understand some of the

politics involved and some of the economic issues involved. Are the

two drugs you refer to, is that first and second phase? Because I

am looking—where does Dr. Coburn’s Searle product come in?

Ms. HENNEY. Day three, that is the second drug.

Mr. BRYANT. So we know who manufactures or who handles the

second product, potentially. But the first one, you are saying you

cannot tell this committee whether that product—I am not asking,

where specifically is it made, other than is it in this country or out

of the country; because I am concerned that—I believe if drugs are

manufactured in this country generally what the FDA does have,

I guess, is some authority over that and some inspection occasionally of the processes to ensure that there is quality control. I don’t

have that same confidence that the FDA has that for any kind of

drug that is manufactured out of this country.

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So is it fair to say—let me ask it this way: Is it fair to say that

the FDA will have some process or some inspection or some ability

to judge the quality of this product and its manufacturing process?

Ms. HENNEY. Mr. Bryant, let me assure you that this product

had to go through every step of approval that any drug does approved by the FDA. And that includes the preapproval inspection

of all of the processes of manufacture and making that drug. And

this drug met that at its manufacturing sites.

Mr. BRYANT. You are not prepared to tell this committee if the

manufacturing is outside the country or inside the country?

Ms. HENNEY. No, I am not.

Mr. BRYANT. The second phase that Dr. Coburn questioned,

again from a liability standpoint, does the FDA by asking—let’s

again use Searle as an example. There may be other conditions

that would be involved that could have their particular drug used

off-label, I think is the terminology. Does the FDA, by approving

this entire process, believe it is affording protection from liability

to companies like Searle who are involved in that second process

either willingly or unwillingly?

Ms. HENNEY. Mr. Bryant, as you alluded to, I am a doctor and

not a lawyer. So I don’t know the full answer to that question. But

we will try to provide a response to you for the record.

Mr. BRYANT. In simple terms, is this the first time to your knowledge that the FDA has ever asked a company such as Searle to,

in effect, relabel a product, say, You can use it really for other

issues beyond what we say?

Ms. HENNEY. As you know, the FDA has been around for 100

years, and we have been approving products for probably some 50

years. And I just simply don’t know the answer to that question.

Mr. BRYANT. So from your knowledge, you just don’t know?

Ms. HENNEY. I don’t know.

Mr. BRYANT. When you are questioning your attorneys, what

would be the liability effect of that? Would you anticipate that

Searle, for example, again would have to go back and begin a retesting process for themselves, verify that this is a safe, effective

use of their product?

I assume they have done that for the reason the product is used

for now, but with you asking them to label it to another use,

wouldn’t you think they would be wise to at least go back and test

it themselves? Or are you providing—is FDA providing them liability from that?

Ms. HENNEY. Mr. Bryant, certainly not liability, but the basis of

the test, the clinical trials and specifics under question involve this

product both at clinical trials that were part of this submission

from the U.S. and France. So we would rely on that information.

Mr. BRYANT. Would you also—and I assume you will have access

to this record; if some of my questions maybe are discombobulated,

you can determine where I am going about the liability issues.

Would you also give us the opinion of your attorneys, I guess, at

FDA in terms of the liability for doctors?

I guess the point he concluded with, even—I am not sure I disagree with Dr. Coburn—is that what appears to be an effort—there

appears to be an effort by FDA to protect the manufacturer of

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phase one drugs, as well as what I call the phase two drugs. That

is my wording. And in the end, things do go wrong.

You know, the history that I have read about overseas is—you

know, has been pretty good; all that counts. But things do happen

and things will happen; and in those instances, you know, people

look around for deep pockets. And I am wondering if all that is

going to be left out there that could provide some compensation for

an injured plaintiff would be the doctors. Dr. Coburn seems to

think that. I am not sure that is right, to burden their backs, and—

when they are trying to do the right thing, and have you, FDA, out

there working with the drug companies to maybe to give them immunity.

I don’t know how it will all play out, but could you maybe check

and give us a response, your attorney’s best guess on that?

Ms. HENNEY. We will try to the best of our ability to give you

a response to that.

[The following was received for the record:]

Under the approved treatment regimen, misoprostol is administered on day three

to help stimulate uterine contractions. This use of misoprostol is contained in the

approved labeling of mifepristone. It is based on the clinical trials for the regimen

of the two drugs, which FDA found to be safe and effective for the termination of

early pregnancy. FDA does not address liability issues, either for manufacturers or

for physicians, in its approval decisions.

Mr. BRYANT. Thank you.

Mr. UPTON. Thank you. I might announce the intent—a vote has

been called. I have got a couple of questions that I know I am not

going to get through, so I am going to submit those in writing. I

am going to ask one or two questions before the next bell rings.

And then we will release you all, this panel, we will go vote and

probably start the second panel at about 1:15 when we get back.

Dr. Henney, I was very concerned about how FDA handles criminal investigative information; and my question, which I understand

your staff, was briefed about last week regards how the FDA in

fact handles these investigative leads.

I am going to ask unanimous consent that this internal e-mail

from the FDA’s Office of Criminal Investigations be entered into

the record. This is an e-mail that was dated January 7, 1997, concerning bulk counterfeit issues, and according to the e-mail, FDA

received information from its counterpart in Australia, called the

Therapeutic Goods Administration, TGA. The information was that

the TGA had obtained evidence of a delivery of bulk drug material

manufactured in India, supplied to a pharmaceutical manufacturer

in Australia, which had been partially substituted with sugar

milled to the same size as the bulk drug; and the substitution involved three of ten containers in the delivery.

TGA further determined that the inferior grade active pharmaceutical ingredients were being placed in the bottom of the containers or in every third or fourth drum. Apparently, the firms involved have access to sophisticated packaging activity that may

even co-opt employees in the process.

According to the e-mail, the FDA agent was going to contact the

TGA, obtain all the pertinent information. The only other information besides the e-mail was a handwritten note on the e-mail indiVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00363 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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cating the name of the Indian firm and that the FDA had a record

of two import entries, one in 1994, but none in 1995 through 1997.

However, the committee’s investigation shows that this Indian

firm had been inspected twice by the FDA up to that time and that

the U.S. in fact was its primary export market. And, in addition,

the committee has not received any other documents or information, whether the FDA ever pursued this matter. And I don’t believe that the matter had been—even amounted to a preliminary

inquiry by the Office of Criminal Investigations, based on the

FDA’s June 2 letter to Chairman Bliley.

Do you have any information for the committee on whether or

not the investigative lead was ever pursued further with the Australians? If so, what happened; and if not, why not? And does the

Office of Criminal Investigations close the matter because they relied totally on FDA’s information on the import data system?

Ms. HENNEY. Mr. Chairman, I would want to give a full response

to your question for the record. I do know that we have a very

strong and good working relationship through our counterparts in

Australia. And I do know that we did some tracking on this particular issue, but I would like to outline that in full detail, if I

could, for the record.

Mr. UPTON. Okay. We will allow you to do that.

[The following was received for the record:]

The OCI e-mail dated January 7, 1997, concerned information provided to OCI by

FDA’s Forensic Chemistry Center (FCC). FCC was passing information to OCI that

they received from the Medicines Control Agency (MCA) of Britain. MCA was made

aware of the information in December 1996 during a Pharmaceutical Inspection

Convention where the Therapeutic Goods Administration of Australia made a presentation. Other FDA personnel attended this convention. The information concerned

a delivery of sulfamethoxazole raw material manufactured in India and supplied to

Australia, which had been partially substituted with sugar milled to the same size

as sulfamethoxazole.

At the time, a query was made by OCI to determine if the company had imported

product to the U.S. That inquiry determined that there was no record of entries by

the company for the years 1995, 1996 or 1997. OCI did not open an investigation

because there was no criminal violation to pursue. The information regarding the

incident was maintained and regulatory offices in FDA were aware of the situation.

Mr. UPTON. We appreciate your testimony, all three of you, as

you are now, as they say, ‘‘saved by the bell.’’

We will come back at about 1:15.

[Brief recess.]

Mr. UPTON. Our next panel really includes only Nikki Mehringer,

who is the Area Quality Control Leader at Eli Lilly.

Thanks so much for being patient and waiting. I hope you had

something to eat, or else a late breakfast. As you know, the rules

in the subcommittee—we always have the tradition of taking testimony under oath. Do you have any problem with that?

Ms. MEHRINGER. No problem.

Mr. UPTON. Do you wish to be represented by counsel?

Ms. MEHRINGER. No.

[Witness sworn.]

Mr. UPTON. You are now under oath. Your testimony is made

part of the record in its entirety, and if you can limit your remarks

to about 5 minutes, that would be terrific.

And the time is now yours. Thank you.

361

TESTIMONY OF NIKKI MEHRINGER, AREA QUALITY CONTROL

LEADER, ELI LILLY

Ms. MEHRINGER. Thank you, Mr. Chairman, members of the

committee. Thank you very much for this opportunity to talk with

the committee about matters of importance concerning safety and

quality.

I am a registered pharmacist, I am a quality control professional,

and I am a consumer, I am a voter, I am a wife, and I am a mother; and the testimony I will give today will reflect my experiences

in each of these roles.

We have talked a lot this morning about counterfeit, and about

people who might want to use changes in the laws and regulations

of this country to their advantage. I want to talk about other possibilities that may happen when people who want to follow laws, as

they may be changed under the provisions, and still lead to increased risk for American patients.

Let me explain for a few moments the duties of a quality control

professional at a pharmaceutical manufacturer. The current good

manufacturing practices for finished pharmaceuticals, we have

heard about them this morning. They are part of the code of Federal regulations; they are the book by which I do my job, by which

I live, by which I am inspected by the FDA.

I want to read just a few fascinating points from this to you. The

second paragraph of the GNP states, ‘‘The failure to comply with

any regulation set forth in this part and in parts 211 through 226

of this chapter in the manufacture, processing, packing or holding

of a drug shall render such drug to be adulterated under section

501(a)(2)(B) of the act, and such drug, as well as the person who

is responsible for the failure to comply, should be subject to regulatory action.’’

This is very important. This is one of the first things we teach

people when they come to work in our industry. What this says is,

if you don’t follow any of these rules, the drug product you have

manufactured is adulterated, under law. If it is under your control,

you shall reject it. If it is on the market, you shall recall it. It

doesn’t matter what the test results were; we do not test quality,

we build it in through this system.

One more paragraph, ‘‘Responsibilities of the Quality Control

Unit: There shall be a quality control unit that shall have the responsibility and authority to approve or reject all components, drug

product containers, closures, in-process materials, packaging, term

labeling and drug products and the authority to review production

records to assure that no errors have occurred; or if errors have occurred, that they have been fully investigated. The quality control

unit shall be responsible for approving or rejecting drug products

manufactured, processed, packaged or held under contract by another company.’’ That is my job. That is the job of everybody who works for me.

It is the job of a person and people at every pharmaceutical manufacturing company. Accountability here is pretty clear: The regulatory action can be taken and, again, these are rules.

This law is a minimum. Every quality control unit at a pharmaceutical manufacturer determines their own internal standards,

writes their own policy and procedures, determines what specificaVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00365 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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tions they want to use, which may be higher and tighter than those

required by the law. It is a business decision we make, because we

believe it gives us an advantage. We believe it is best for the consumer.

Today, nothing enters a U.S. wholesaler or the U.S. Distribution

system without the approval of the quality control unit of a manufacturer. This is appropriate. These are the experts with the attributes of that particular drug.

Under the provisions of the bill under consideration for importation and reimportation, the decision on whether or not a drug product can enter or reenter the U.S. distribution system would be

taken away from the manufacturer and decentralized to hundreds

of wholesalers and pharmacists. The basis for their decision on

whether that product could enter or reenter would be a paper trail

and some degree of testing that would provide reasonable assurance of the quality of the drug product.

This violates the very basis of quality control principles, that

quality is designed in, built in, controlled in and not tested in. And

the role of these laws and regulations in this system is very unclear to me.

Let’s imagine a few scenarios of how this might work, Mr. Chairman. Let’s say you receive a call today from a person in your district who says, I have a complaint on a drug product. A person just

called my office, and they do sometimes then say, My daughter

took a drug product. She’s in the hospital; she had an adverse reaction. It could be from a tablet, a capsule, an injectable product,

maybe an aerosol, an inhaler—maybe she had asthma and expected to get some good result in the middle of an attack, and she

didn’t.

She calls you. She is upset. You know where to go; you can call

the FDA. But you can call that pharmaceutical manufacturer, talk

to that quality control group. And if it were me, if you called me,

I would say, give me 2 hours.

I have all the traceability of that lot. I know where it went, I

know where it has been stored, I know everything about that until

it got to the U.S. wholesaler. Then I handed it to a wholesaler who

is registered, who is covered by the Prescription Drug Marketing

Act, who is inspected by their State board of pharmacy; and he has

complete records.

By that afternoon, I will tell you the history of that drug, and

I will tell you if there is anything wrong with it. You have got clear

accountability.

Let’s imagine that happens again in 2 years if this is passed. You

call me. I say, let me check. And then I call you back and say, You

know that lot of drug I shipped out of the country 18 months ago,

and I shipped it to a wholesaler out of the country? I never intended it to be reimported back into the U.S. In fact, the labeling

I put on it was for the country I shipped it to. I can tell you, the

labeling was not suitable for the U.S. market, not approved.

I don’t know when it came back. I don’t know how it came back.

I don’t know where it came back. I don’t know where it is stored.

And I am not sure who to call to find out.

You see the difference. The single point of accountability is very,

very clear. And it is what the law charges me with. If we change

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this, I do not understand how I can have accountability for activities that I have no control over.

The duties with which I am charged trouble me profoundly, that

the activities of looking at data regarding storage, devising testing

protocols, setting limits, reviewing test results and deciding disposition of batches will be done by hundreds of entities who have

no technical knowledge of this drug product.

Every change that is made has intended and unintended consequences. Certainly we know the intended consequences of this

provision, but the unintended consequences could be very serious.

We all know it would be sad if people receive very dramatic bodily harm from some counterfeit drug or receive some very dramatic

adverse drug event. But I will tell you what is just as sad. What

is just as sad is if somebody goes and pays their money and receives a drug that doesn’t work and they don’t know it is not working and they pay their money and they take it and they never get

better. And the doctor doesn’t know if it is a treatment failure or

a diagnosis failure or a drug failure.

Today, when you go to the pharmacy and you have a prescription

filled, you don’t worry that it is safe and effective, do you? I don’t.

I have great faith in the FDA and the whole enforcement system

within the U.S. But how sad it would be if we would lose that.

The United States has a good system of control around the manufacture and distribution of pharmaceutical products. It is tedious.

It is detailed. It is not always convenient. It is monotonous. People

who are in charge of control functions can drive the people around

them crazy. But we do it every day in this same controlled manner

so that when we need to call on it, when we need to trace a product, if we need to recall a product, we know everywhere that was

sent.

We can get our hands on it quickly. It is there. I will tell you

that just like good health itself, you don’t appreciate this control

system until it is gone.

That concludes my testimony, and I have also submitted written

testimony for the record.

[The prepared statement of Nikki V. Mehringer follows:]

PREPARED STATEMENT OF NIKKI V. MEHRINGER, AREA QUALITY CONTROL LEADER,

EUROPE AND NORTH AMERICA, ELI LILLY AND COMPANY

Thank you for the opportunity to speak with you today regarding Quality Control

and Safety matters of interest to the Committee.

Quality control is essential from the initial point of manufacturing through the

entire distribution chain to the hands of the patient. Even the healthcare professional cannot look at a white tablet and determine if it will still be effective—we

are all dependant on the controls throughout the system that assure the Safety,

Identity, Strength, Quality, and Purity of the medicine. A failure in this system may

cause failure in treatment, medical harm, and result in significantly increased expense.

I am a Registered Pharmacist and have practiced pharmacy in 4 states (Indiana,

Ohio, Iowa, and Illinois). I have 15 years experience in the pharmaceutical manufacturing industry as a Quality Control professional. I am also a consumer, a wife, and

a mother. My comments reflect my experiences in all of these roles.

Food and Drug regulation in the United States is based on a three-fold approach:

1. The Law—The history of Food and Drug law in the United States has been

based on reactions to public health crises rather than visionary approaches to potential risks. The principal law is the Food Drug and Cosmetic Act, which was passed

in 1938 in reaction to a disaster in which a poisonous ingredient was mistakenly

used in the preparation of an antibiotic causing the deaths of dozens of children.

364

Changes in the act have been made over the years, often in response to major public

health issues. Examples of these changes include the establishment of Good Manufacturing Practices and the Prescription Drug Marketing Act. As a result, we have

a well-constructed system of laws and regulations, which provides the U.S. public

with safe and effective medicines. This system is recognized around the world for

the extremely high standards it maintains in the areas of drug manufacturing and

distribution.

2. Enforcement—the Food and Drug Administration is charged with the enforcement of the Food Drug and Cosmetic Act. The FDA accomplishes this with a system

consisting of the following:

a) Drug Registration and Approval—This system of review determines what products may be sold in the U.S., including approval of the product itself, the labeling of the product (including approved uses and safety warnings), the location

and methods for the manufacture and testing of the product, storage requirements, and allowed expiration dating.

b) Facility inspections for Good Manufacturing Practices—All FDA-regulated locations, whether within the U.S. or in other countries, are subject to both routine

and for-cause FDA inspections. Such inspections may relate to the practices of

the manufacturer, including the state of facilities, procedures, organization and

education of staff, quality systems, and process controls in place at the facility.

3. Good Science—The Pharmaceutical Industry and the FDA collaborate to improve current Good Manufacturing Practices through scientific approaches such as

advancements in validation practices, stability studies of molecules, and new methods of manufacturing and testing.

This three-fold system maintains the assurance of quality that the American consumer demands. The underlying concepts that support this system are complex and

dynamic. At the risk of over-simplification, the goal of the entire system is to

achieve ‘‘Control.’’ It is no accident that the term we use for the organizational entities entrusted with the duty to run these systems within a factory is ‘‘Quality Control.’’ The systems in place demand control from drug development through manufacturing and distribution to assure that the product is safe and effective for its intended use. Final product testing is only the confirmation that the process worked.

Chart A illustrates a typical supply chain that supplies product to the U.S. Consumer. At each step, there are applicable registration requirements, regulations,

and enforcement agencies. At each step, accountability is clear. Requirements for security, identity control, accountability, traceability, and storage are clear. If a consumer registers a complaint, the entire history of that single capsule or vial can be

traced and investigated through the system that is in place. The supply chain is

controlled.

Why is this control of the supply chain critical? It has been suggested that a drug

product could leave this controlled supply chain for a period of time and then be

allowed to re-enter it if testing were performed upon re-entry. The inherent limitations of final product testing do not support this assertion. These limitations include

the following:

a) Drug products are assigned expiration dates because the drug product itself

changes over time. The changes in drug products are dependent on storage conditions, particularly heat, humidity, and sunlight. Testing gives a single-point piece

of data regarding the chemical status of that product on that day. To predict the

‘‘goodness’’ or the efficacy of a drug product on its assigned expiry date, one must

know the storage conditions, packaging components, and inherent nature of the molecule. The methods and calculations to predict this are so sensitive and complex

that the FDA has just published a Stability Guidance Document that is over 100

pages long. Thus, a single point of testing today cannot predict the performance of

that product over time unless it is put in the context of the inherent nature of that

molecule and the storage conditions that the product has experienced.

b) Final product testing is not recognized by the law or by the industry as sufficient to guarantee safety or quality. In fact, manufacturers reject many lots that

meet all testing requirements because they did not meet the requirements of Good

Manufacturing Practices for in-process controls, validation, adherence to the approved NDA, or other reasons. A drug product may meet all testing requirements

and still be determined to be adulterated or misbranded under U.S. law. Most of

the warning letters received by FDA-regulated manufacturers do not involve product that fails to meet testing requirements; instead these warnings are based on

suspect practices at the manufacturer. The FDA teaches their investigators to catch

potential problems before they get to the point that a product would actually fail

to meet testing requirements—the FDA wants that buffer in their control system

to prevent potential public health issues. In fact, many lots that meet all testing

requirements are later recalled from the U.S. marketplace each year because they

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are discovered to have not met these GMP requirements or because they failed to

meet labeling requirements.

c) Reliability of testing results varies greatly depending on the laboratory that

performs the testing, the equipment used, the analytical testing method used, and

the education and experience of the people who run the test. To transfer a testing

method from one laboratory to another within the same company using similar

equipment consumes hundreds of man-hours to assure that the different laboratories will generate similar results on a given sample.

Dismantling the control of the supply chain leads to other concerns around safety

and quality. A few of these are listed below:

a) When a customer complaint is received today by the FDA or the pharmaceutical manufacturer, all the records necessary to investigate the lot of product are

available immediately. The manufacturer can trace the history of that product from

the dispensing of the raw materials, the manufacture of the active ingredient, the

manufacture and packaging, storage, and distribution of that single tablet, capsule,

or vial. If a recall is deemed to be necessary, the manufacturer can contact all

wholesalers to whom that lot of product was shipped within a few hours. If a decentralized system of importation or re-importation were instituted, the manufacturer

would not have this capability to trace product. In fact, the manufacturer may be

recalling a lot of product in Europe with no idea that any of the product has been

shipped into the United States. Additionally, the incident that caused the lot of

product to be unacceptable to the consumer may have occurred somewhere out of

the control of the manufacturer or the U.S. government, making investigation slow

and cumbersome and enforcement impossible.

b) Each country has unique requirements for products sold in that country. Each

market has different expectations for products sold in that market. A manufacturer

may be approved by FDA and therefore will target certain lots of product for the

U.S. market and will manufacture those lots in accordance with FDA and U.S. requirements. However, other lots of product produced at that same facility will be

targeted for other countries and will be manufactured in accordance with their requirements. If the pharmaceutical company no longer controls the movement of

these materials between countries, then there is risk that the importer will not be

equipped or able to discern critical differences in products that may lead to confusion among patients or health care professionals and safety issues. Examples of

these concerns include:

1) Labeling requirements—Approval of labeling is a part of the drug approval

process in each country. Therefore, labeling is different for each country. Differences

may include critical content issues including indications for use and wording of safety warnings and also include convenience issues such as the bar codes used for inventory control in each country. Only the manufacturer can determine if a given

label is appropriate for a given market based on the knowledge of the complex registration and customer requirement for each market.

2) Packaging—Once again, packaging is approved as part of each country’s drug

approval process. Packaging components may look the same, but may be made of

different materials. Requirements vary and may have safety implications—for example, the U.S. has strict standards for Child-Resistant containers that may not be approved in other markets. Once again, the manufacturer is charged with assuring

that all requirements are met for the intended market. A product may meet all testing requirements but the container may not meet the U.S. government requirements.

3) Single dose identity or trade dress—Tablets and capsules intended for market

in the United States are uniquely identified by color, shape, size, or imprinting upon

the tablet or capsule. These unique identifiers are registered at U.S. poison control

centers to assure quick identification in case of an emergency. Tablets and capsules

intended for market elsewhere may not have these same identifiers. The resulting

confusion for health care professionals who depend on this system could be disastrous if an importer was not aware of this difference.

All of the issues raised above demonstrate increased risk to the public health assuming that all involved are making a true effort to transform this system of a centralized, controlled supply chain to a decentralized system where hundreds of different entities may be importing the same drug product into the United States from

multiple sources. None of the statements above address the potential risks from

those who are looking for an open door to bring product into the country that they

know do not meet the requirements of the NDA or Good Manufacturing Practices.

Drug counterfeiting is a real issue. The U.S. has been able to minimize the availability of counterfeit drugs through the strict controls in place today. Areas around

the world with less strict enforcement capabilities find containers of material that

contain placebo, substandard or sub-potent or super-potent drug, or sometimes

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drugs that are a completely different entity than the label states. The people who

participate in this counterfeit business are a sophisticated group who knows how

to weigh the potential risk of being caught against the potential benefit. It is in all

of our best interests to make sure they know that the enforcement systems in the

U.S. will not be weakened and they enter here at great risk.

If any of the potential changes to the supply chain for the U.S. pharmaceutical

market lead to product that is dramatically harmful to patients, we will discover

it quickly, and very sadly. There is a risk here that is potentially more pervasive,

difficult to distinguish, less dramatic, and just as sad. That is the risk that health

care professionals will prescribe medications, patients will pay for them and take

them as prescribed, the patients will not get better because the medicine is not

harmful, it is just ineffective. It may be ineffective because it was stored improperly

somewhere along its journeys, or because it is packaged or labeled inappropriately,

or because it is a counterfeit drug that is actually a placebo. In any of these cases,

it is our job as the lawmakers, the agencies who enforce the laws, and the manufacturers who understand the molecules and the science around the molecules to assure we have the controls in place to prevent this from occurring.

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Mr. UPTON. I appreciate that very much. And just as I sort of get

prepared to ask—I do have a number of questions, but I am going

to yield, I think, first to my colleague from Ohio, Mr. Strickland.

Mr. STRICKLAND. Sure. Thank you, Mr. Chairman.

Let me begin by saying that you are a very effective witness. I

think you advocate for your thoughts and opinions effectively and

some of the things that you have said have given me pause. And

so I want to thank you for that.

Having said that, I would like also to share some thoughts with

you.

Ms. MEHRINGER. Certainly.

Mr. STRICKLAND. You are a scientist, and that is your responsibility with your industry. I respect that, and I respect the science,

and I respect the fact that you spoke to us as you did.

The problem, I think, that has brought this issue forward is the

perception, I think, it is based on the fact that the industry that

you work for—through no fault of your own certainly—is engaging

in practices which cause many of us to think that the American

consumer is being treated unfairly; that drugs that are developed,

in part, through public resources are available to other citizens and

other countries at a cheaper price. And I think there is a perception based on fact that the whole pricing of the pharmaceutical industry is troublesome.

Now, you mentioned a business decision in terms of even going

above and beyond what you may be required to do. And that is admirable. Like you, when I buy a medication in this country, I don’t

worry about its safety. I am glad it is that way.

But I am also troubled by the fact that there is this other issue

out there that is driving this concern and this effort, I think. And

I think there is an equal responsibility on the part of the industry,

just as there is a responsibility on the part of us who sit up here,

to try to make sure that both concerns are adequately addressed;

that we remain concerned about safety, but we also be concerned

for the American consumer, for the senior citizen, for those who

maybe can’t afford the drugs. And that is a tragedy as well.

And I am so puzzled, in a sense, that the industry would be opposed to a medication benefit under Medicare that would be available to Medicare recipients. I can only assume that the major concern has to do with cost and price and profit. And so I am sitting

up here feeling some conflict, because what you say makes a lot of

sense to me; but I am also sitting up here thinking, something has

got to be done to protect the American consumer.

And so I really don’t have a question for you. I just—I will once

again state the fact that you said things that make sense to me,

and I am going to listen to what you have said and I will try to

respond in a way that I think is responsible. But—and you are not

responsible for the pricing policies of your industry. But that is the

problem, as I see it, that makes many of us look for ways that we

can change things for the sake of the American consumer.

So thank you for your testimony.

Ms. MEHRINGER. Thank you.

Mr. UPTON. I thank you for your testimony as well. And the

thing that we all struggle with—it certainly came out when we

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have been totally immersed in the Firestone issue the last couple

of weeks.

But one of the points—and I am from Michigan, as you may

know—one of the points that I had made was that whenever any

of us buy a product—any of our constituents, any American buys

a product that is made in America, we have a belief, in fact, that

that product is going to be safe; whether it is an automobile,

whether it is a tire, whether it is a bottle of Tylenol, it is going to

work, it is going to work for the purpose, and that there are regulators at the State and Federal level to, in fact, assure that safety.

As we examined the Firestone issue, one of the items that bothered us the most and became one of the planks in the legislation

that is moving here in the House, as well as in the Senate, was

that when in fact there was a recall—and there was in Venezuela

or Saudi Arabia, and it happened at an earlier time—that that information needed to be passed along to, in this case, NHTSA under

the Department of Transportation.

And in fact, in good testimony, the President of Ford, Mr. Nasser, indicated that in the future they would do that; they didn’t

need a law, they would do that. He called on other members to do

that as well. And we will make sure that that is done by getting

this legislation passed.

One of the points—and I use that as the example because in the

hearing that we had earlier this summer, the FDA indicated, and

Dr. Henney reiterated today, that they would require manufacturers to notify the FDA when they receive poor quality material,

whether it be directly counterfeit or maybe it was a mistake in the

process. And it just—I guess those of us nonchemists—and I presume that my colleague and friend, Mr. Strickland is a non; but it

seems to me common sense that when you identify a faulty product

coming up the line that somewhere along the line that information

is going to be passed along. And based on that, they can begin to

trace it.

Maybe, you know, this is a bad character, maybe we have to

watch them a little bit closer, maybe we will send those FDA inspectors there every year instead of who knows when. But at least

they are going to get in the process, and we are going to weed them

out and we are going to build cooperation between industry folks

like your company, Eli Lilly, and other good players, whether it be

Pharmacia, Upjohn or any other—obviously, the client base. Because it is your folks working on the line, it is your reputation, as

you point out, to make sure and ensure that that product is safe

from the very beginning of your testimony to the very end. And

that even after it leaves your operation, you are going to have the

ability to know the quality control as it ends up finally in someone’s medicine cabinet when that son, daughter, parents, whoever

takes that medication.

But I have to say, as we have begun to look at this process, again

the issue of requiring companies to let us know about foreign recalls, the process that you, we would have hoped, I would think

had already been part of the process; that in fact when you found

that company overseas that put milled sugar in—tainted, you

know, 30 percent of the barrels of bulk material that came in;

when you found that, there is a red flag—not only would you tell

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your other industry peers, of which—obviously, you have them, but

in fact there would be some type of inspection or some alert to

make sure that what the real-life example, what happened in Haiti

with the tainted glycerine, would not and could not happen again.

But there was no checklist, though; is that right?

Ms. MEHRINGER. To my knowledge—and I am not an expert in

counterfeit, but to my knowledge, there is no formal requirement

for that. However, also, to my knowledge, there is a great deal of

cooperation between the pharmaceutical industry and the FDA on

counterfeiting.

Mr. UPTON. That is in this country. But what about in products

that actually come from overseas, where in fact you may not have

the inspectors that come in and in fact things are found, whether

it is the little example that I used at the end, before I broke for

the vote, with the company in India?

Ms. MEHRINGER. I do believe, although not required, there have

been meetings between corporate security people and the FDA to

discuss these very issues. And I would ask you to consult with the

FDA and the OCI on those conversations to my knowledge would

have been voluntary. But we clearly have seen that counterfeiting

is a real threat and have seen the FDA as our ally there, working

against that, even if it didn’t originate here.

Mr. UPTON. So you would certainly support the FDA’s new initiative to begin to catch that?

Ms. MEHRINGER. Yes.

Mr. UPTON. Now, as I understand also—one of the questions that

has bothered me for some time, when I learned it, was that Eli

Lilly and other pharmaceutical companies manufactured the same

product for different countries, obviously; but why is it that they

do them in different colors and different shapes and sizes? I mean,

it would seem to me, if you want to trace something, particularly

if something is going to go overseas and perhaps come back, which

we don’t know exactly what is going to happen, that that would be

a very easy way to figure out and would help the Customs folks,

who have an enormous task in front of them. Why wouldn’t there

be some—I don’t want to call it ‘‘policing,’’ but some just standards,

or normalcy, repetitive to the products, no matter what it is?

Ms. MEHRINGER. Actually, for the most part, we would welcome

that. The underlying issue is that the drug approval process in

countries around the world is very fragmented. So certain drugs

have been launched in various countries at different times and approvals have been given; and those approvals—in the course of

those approvals, each agency seems to want its own labeling or its

own small nuance.

Each agency dictates to us what is now approved. We now submit identical submissions in the U.S. and Europe, and we would

love for the FDA and Europe both to say, that is fine, just like you

submitted them; but then the changes start. And in order to market in that area of the world, we must abide by those changes.

Mr. UPTON. But someone actually says we would rather have

them green than blue or yellow?

Ms. MEHRINGER. That is more market driven than regulatorily

driven. There are countries that want plain white tablets. That is

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the standard; that is what they want. They think that is what the

customer expects, and so we are—— Mr. UPTON. It must be aspirin, because it is white.

Ms. MEHRINGER. That is right. That is right.

There are other countries, like the U.S., that want unique identifiers, distinct color, shape, size and form.

So speaking for the whole pharmaceutical industry, not everyone

has the same appreciation, as the American public does, or the

same wants or the same needs.

So, again, these products which have been launched over a period of the last 20 years and have gone through the drug development process, we have at times been focused on pleasing the regulatory agencies and on pleasing the customers. But frankly, it

would be much easier for us as manufacturers to make one package, one label, and one presentation. I would welcome that.

You understand, though, that I am not free to change that?

Mr. UPTON. I understand that.

You talked about keeping track of the records, and obviously the

company, the manufacturers, keep a record from start to finish, the

lots. And do the pharmacies really do that or not? I don’t know the

answer to the question.

Ms. MEHRINGER. Pharmacies do not track by lot number, no.

Mr. UPTON. So once you ship it out—the wholesalers do, right?

Ms. MEHRINGER. The wholesalers, our own distribution centers

do. I do not know that all the wholesalers do. We can track it to

the wholesaler level.

Mr. UPTON. But you indicated that—the example that you used,

the mother that called you to say, ‘‘My daughter has got a problem;’’ give me 2 hours—you can track it through your system.

Let’s say you gave it to ABC wholesaler, who ships it out to

Kmart, to use them as an example. Do they all have the records

then of that—are you able to—are they able to track it from that?

To use a real-life example, when that happens, have they been cooperative and have they been able to have the information that you

have really needed to reassure that parent?

Ms. MEHRINGER. When we go to the wholesalers, we have lot

number accountability to the wholesalers. The shipment from the

wholesalers on to the pharmacies is generally not tracked by lot

numbers. But they have been cooperative, absolutely.

It is important to recognize that the law provides for various levels of recalls. And that is dependent upon the risk to safety and

the risk to health. If we are in a recall situation, we work with the

FDA; we determine, do we need to go to the wholesalers, do we

need to go the pharmacies or to the American public? I think the

whole system works together and is very cooperative at that point.

Mr. UPTON. That page was for me.

I guess the last question is, we try to assure the absolute quality

assurance to the individual. There really isn’t any single test that

can be used on that product, whether it be coming from Mexico or

Canada or China. I mean, there are so many different ways in

terms of what a chemist would look for to ascertain the purity of

that substance. It is really a very tough test. We were commenting

up here, the staff was able to take, I guess you could say, a field

trip that was rather lengthy; and they shared some of the informaVerDate 11-MAY-2000 13:08 Apr 11, 2001 Jkt 010199 PO 00000 Frm 00375 Fmt 6601 Sfmt 6602 E:\HEARINGS\65846.TXT pfrm03 PsN: 65846
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tion with us in terms of the thousands of pills that come across at

particular border crossings virtually every day. And you really can’t

say it is this; you know, you hope that it is, but there is no real—

without a lab, you can’t really tell.

Ms. MEHRINGER. You need a very specialized lab; simple chemical testing will not tell you that. In fact, the FDA has established

their own forensic testing lab, which is quite a speciality lab, that

they can—I believe they call it ‘‘fingerprint’’ products and try to

discern if a material is counterfeit or not. That is the only lab in

the FDA, I believe, that deals with that because they have those

specialized capabilities.

So this is not a matter of routine, let’s find a chemist and a

third-party lab and take a look at this. It is very specialized to be

able to actually fingerprint that drug.

To your point, also the limitations of testing are—testing gives

very limited information. It is a single point of what happens. Unfortunately, these molecules are dynamic. They change, they degrade; when they see heat, they see moisture, they degrade a little

more. They don’t just sit there in the solution, in the injectable

vial, waiting for someone to take them.

That, again, is why you must have a knowledge of the molecule.

You must have a knowledge of the formulation. You must have a

knowledge of those requirements. So if you get a single point of

testing someone—it might be 92 percent—someone might think

that is good. That may be bad because you know that at the rate

of degradation, it is going to be ineffective in a matter of few

months.

You have to put the testing in the whole context of the knowledge of the drug.

Mr. UPTON. I know that I can speak for all the members of the

subcommittee. We appreciate your time and testimony. We look

forward to working with you and hearing from you on this issue

in the future.

I don’t know—Ted, do you have anything?

Mr. STRICKLAND. Just, I want to thank the witness.

Mr. UPTON. Thank you very much.

[Whereupon, at 1:50 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

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