SAFETY OF IMPORTED 

PHARMACEUTICALS: STRENGTHENING 

EFFORTS TO COMBAT THE SALES OF 

CONTROLLED SUBSTANCES OVER THE 

INTERNET 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

TUESDAY, DECEMBER 13, 2005 

Serial No. 109-46 

Printed for the use of the Committee on Energy and Commerce 

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

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 2005 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 

Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001

25-958PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

GRESHAM BARRETT, South Carolina 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

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

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

ED WHITFIELD, Kentucky, Chairman 

CLIFF STEARNS, Florida 

CHARLES W. “CHIP” PICKERING, Mississippi 

CHARLES F. BASS, New Hampshire 

GREG WALDEN, Oregon 

MIKE FERGUSON, New Jersey 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas 

 (EX OFFICIO)

BART STUPAK, Michigan 

 Ranking Member 

DIANA DEGETTE, Colorado 

JAN SCHAKOWSKY, Illinois 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

HENRY A. WAXMAN, California 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)

(II)
CONTENTS 

Page 

Testimony of: 

Stana, Richard, Director, Homeland Security and Justice issues, U.S. Government 

Accountability Office ................................................................................................... 51 

Rannazzisi, Joseph, Deputy Assistant Administrator, Office of Diversion Control, and 

Deputy Chief, Office of Enforcement Operations, Drug Enforcement Operations ..... 101 

Ahern, Jayson, Assistant Commissioner, Office of Field Operations, Bureau of 

Customs and Border Protection .................................................................................... 109 

Meyer, Robert, M.D., Director, Office of Drug Evaluation II, Office of New Drugs, 

Center for Drug Evaluation and Research, Food and Drug Administration ................ 114 

Halpern, Joshua, Vice President, IntegriChain, Inc. .......................................................... 143 

Dahl, James, Formerly with Office of Criminal Investigations, Food and Drug 

Administration ............................................................................................................... 169 

MacCarthy, Mark, Senior Vice President, Public Policy, VISA, U.S.A., Inc. .................. 174 

McEneney, Michael, Partner, Sidley, Austin, Brown, & Wood, LLP, on behalf of 

MasterCard International Incorporated ......................................................................... 178 

Townsend, Bruce, Vice President, Corporate Security, FedEx Corporation .................... 183 

Silva, Dan, Corporate Security Manager, UPS .................................................................. 187 

McLaughlin, Andrew, Senior Policy Counsel, Google, Inc. ............................................. 191 

Scheibel, John, Vice President, Public Policy, Yahoo! Inc. .............................................. 202 

(III) 

(1) 

SAFETY OF IMPORTED 

PHARMACEUTICALS: STRENGTHENING 

EFFORTS TO COMBAT THE SALES OF 

CONTROLLED SUBSTANCES OVER THE 

INTERNET 

TUESDAY, DECEMBER 13, 2005 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

Washington, DC. 

 The subcommittee met, pursuant to notice, at 1:05 p.m., in Room 

2123, Rayburn House Office Building, Hon. Ed Whitfield [chairman of 

the subcommittee] presiding. 

 Members present: Representatives Whitfield, Stearns, Ferguson, and 

Stupak. Also present, Representative Norwood. 

 Staff Present: Mark Paoletta, Chief Counsel for Oversight and 

Investigations; Alan Slobodin, Deputy Chief Counsel for Oversight and 

Investigations; Clayton Matheson, Analyst; Michael Abraham, 

Legislative Clerk; and Chris Knauer, Minority Investigator. 

 MR. WHITFIELD. The committee will come to order. 

 I want to thank all of you for being here today, and particularly our 

witnesses for today's hearing, and apologize. We're just a few minutes 

behind schedule, but with travel arrangements and everything else, I'm 

sure you all understand how that goes. 

 The hearing today is on the safety of imported pharmaceuticals and 

strengthening the effort to combat sales of controlled substances over the 

Internet. Today's hearing will focus on the effort to combat the sale of 

controlled substances over the Internet. Prescription drugs with wide 

appeal and popularity such as Percoset, Vicodin, Darvon, anabolic 

steroids, and Valium are just a few examples of drugs that are being sold 

over the Internet. 

 As you know, this committee is committed to protecting the safety of 

Americas' pharmaceutical supply, but, unfortunately, with the advent of 

the Internet, obtaining controlled substances illicitly online has become 

too convenient and can be obtained without a valid prescription. 

 Now the Government Accountability Office will be testifying at 

today's hearing, and they will talk about some of their findings. But they 

recently found that, although there is no systematic collection of data on 
2

the volume of controlled substances encountered at mail and carrier 

facilities, we know without question that the volume is substantial. For 

example, according to the FDA/Customs blitz which was conducted in 

the summer of 2003 at the Miami, New York, San Francisco, and 

Carson, California international mail facilities, of the imported 

pharmaceutical products found, 28 percent of the drugs tested were 

controlled substances, representing over 25 different controlled 

substances. Based on the JFK estimate by senior Customs officials that 

40,000 parcels contained drugs imported through that airport on a daily 

basis and extrapolating those figures, as many as 11,200 drug parcels 

containing controlled drug substances are imported daily through JFK 

alone. 

 A February 2004 study by the National Center on Addiction and 

Substance Abuse, in partnership with a private investigative firm, 

documented the availability of controlled prescription drugs on the 

Internet; and they found that of the 495 websites offering Schedule II 

through IV controlled prescription drugs identified in the study, only a 

third of those, of the 495, or 157, were “anchor” sites where consumers 

actually purchased the drug, but 90 percent of those sites did not require 

a prescription. Now the remaining 68 percent of the 495 were portal 

sites simply acting as a conduit to other websites, including anchor sites 

which sell the drugs. 

 I have already mentioned GAO will be testifying today; and they 

also, as I said, will be discussing their recent report that documents these 

highly addictive controlled substances being readily available. 

 All of us are concerned about our young people. The February 21, 

2005, issue of U.S. News & World Report pointed out the concern of 

prescription drug abuse among our teenagers. One in 10 high school 

seniors have tried the painkiller Vicodin without a prescription and 1 in 

20 have taken the potent pill OxyContin. 

 For young people in particular, online pharmacies are especially 

seductive. We know, for example, that on February 21, 2001, a young 

teenager named Ryan Hate died at the age of 18 of an overdose after 

mixing morphine and two prescription antidepressants with 

Hydrocodone, a potent and highly addictive painkiller that he bought 

from an Internet pharmacy in Oklahoma. And on June 7, 2001, the 

parents of Todd Rhodie told our subcommittee about finding their son 

dead in his apartment; and, according to the medical examiner, Todd's 

death was caused by a massive overdose of controlled substances that he 

had ordered from a foreign Internet pharmacy. 

 DEA has testified that its investigations have discovered over 14 

deaths of overdoses and 15 people who have entered treatment or 

sustained injuries from drugs obtained over the Internet. 
3

 IntegriChain will be testifying today. They are out of Princeton, New 

Jersey. It's a firm doing investigative work on Internet pharmacies. 

They provided a briefing to our subcommittee last July, and as a result of 

that briefing I requested as a test of their investigative capabilities that 

IntegriChain gather intelligence on a series of websites selling these 

controlled substances identified by the majority and the minority staff, 

and the results of that work will be presented publicly for the first time at 

this hearing. This white paper will provide more details for 

consideration on how to strengthen efforts to combat sales of controlled 

substances over the Internet. 

 I might also say that most of us are critical of what we view as the 

inability of the Federal agencies to really get a control of this issue. We 

have a right to be critical I think in many instances, but I also think it's 

important to look at some of the accomplishments of the agencies. 

 Last September, for example, the DEA announced a new virtual 

enforcement initiative, part of which included Operation CYBERx. That 

investigation led to the arrest of 17 people who operated rogue Internet 

pharmacies that took orders for controlled substances over the Internet 

and then shipped those products to U.S. citizens without a valid 

prescription. Those arrested included the ringleader of more than 4,600 

rogue Internet pharmacy websites. 

 Then on July 15, 2005, the Attorney General of the State of Florida 

announced the State's largest prosecution of an organized filling Internet 

orders for controlled substances. These arrests in this operation resulted 

from an investigation involving a task force involving the DEA. 

 Then last April the DEA led Operation Cyber Chase which resulted in 

more than 20 arrests in eight U.S. cities and four foreign countries, 

shutting down an organization that ran over 200 websites illegally selling 

what were identified as controlled substances. 

 In September 2004, the Bureau of Customs and Border Protection 

implemented a national policy for processing controlled substances, 

Schedules III through V, imported through the mail and carrier facilities. 

Under this new policy, packages containing controlled substances in 

Schedules III through V are no longer transferred to FDA for disposition, 

released to the addressee, or returned to the sender. Instead, Customs 

can now hold these packages as unclaimed or abandoned property as an 

alternative to seizure. And, according to the GAO, Customs recently 

reported to this committee that a full year of this new policy resulted in 

over 72,000 interdictions, with almost all of the parcels abandoned and 

disposed. 

 Now we're also going to be looking at some ways to hopefully deal 

with this problem from a legislative standpoint or to make some 

suggestions; and we have identified several ideas worthy, though, of 
4

consideration. First, the July 2005 National Center on Addiction and 

Substance Abuse report specifically recommended that Congress should 

clarify Federal law to prohibit sale or purchase of controlled prescription 

drugs on the Internet without an original copy of a prescription issued by 

a licensed DEA certified physician licensed in the state of purchase 

based on a physical examination and evaluation and to impose higher 

penalties for illegal sale to minors. That's one recommendation. 

 Congress should also, it has been suggested, consider increasing 

penalties for Schedule III drugs. We know that penalties are much more 

severe for I and II, and they seem to be having some impact there, so 

that's one thing that we could look at. But, more important, we want to 

explore everything to come up with the best solutions we can that are 

reasonable. 

 So I want to thank all the witnesses for being with us today and those 

members of the subcommittee as well; and now, at this time, I'd like to 

recognize our ranking member, my friend, Congressman Bart Stupak of 

Michigan. 

 [The prepared statement of Hon. Ed Whitfield follows:] 

PREPARED STATEMENT OF THE HON. ED WHITFIELD, CHAIRMAN, SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS

Today’s hearing focuses on strengthening the efforts to combat the sales of 

controlled substances over the Internet. What are these controlled substances of concern? 

Prescription drugs with wide appeal among drug abusers such as Percoset, Vicodin, and 

Darvon, anabolic steroids, and Valium. 

 We at this Committee have long been interested in and committed to protecting the 

safety of America’s pharmaceutical supply. The Committee has played a key role in the 

enactment of the Prescription Drug Marketing Act in 1987, and the Bioterrorism 

Preparedness Act in 2002. To that end, this Subcommittee has held a number of hearings 

related to the safety of imported drugs over the last seven years. However, today’s 

hearing focuses on a subset of imported drug concerns: the particular problem of 

controlled substances sold over the Internet by rogue pharmacies. Unfortunately, with 

the advent of the Internet in the last few years, obtaining controlled substances illicitly 

online has become too convenient. Most illicit Internet pharmacies offer controlled 

substances without valid prescriptions. Many of these sites substitute a simple online 

questionnaire for a face-to-face examination of the patient by a physician. 

 While the Government Accountability Office (GAO) recently found that there is no 

systematic collection of data on the volume of controlled substances encountered at mail 

and carrier facilities to establish an exact measurement, the federal authorities do not 

dispute that this volume is substantial and have undertaken actions to curb this problem. 

Available information documents a growing and serious public health priority justifying 

the actions already undertaken as well as other possible future actions. For example, 

according to the FDA/Customs blitz conducted in the summer of 2003 at the Miami, New 

York (JFK Airport), San Francisco, and Carson, CA international mail facilities, of the 

imported pharmaceutical product found, 28 percent of the drugs tested were controlled 

substances, representing over 25 different control substances. Based on the JFK estimate 

by senior Customs officials that 40,000 parcels containing drugs are imported through 

that airport on a daily basis, as many as 11,200 drug parcels containing controlled 
5

substances are imported daily through JFK. 

 A February 2004 study by the National Center on Addiction and Substance Abuse in 

partnership with a private investigative firm documented the availability of controlled 

prescription drugs on the Internet. It is important to note that it is difficult to ascertain the 

exact number of these Internet pharmacies. Of the 495 websites offering Schedule II-V 

controlled prescription drugs identified in the study, only about a third (157) were 

“anchor” sites, where consumers actually purchase the drugs. 90% of these sites did not 

require a prescription. 47% of these sites disclosed that the drugs would be coming from 

outside the United States and 25% gave no indication where the drugs would be coming 

from. The remaining sixty-eight percent of the 495 total websites were portal sites. 

Portal sites do not sell drugs but act as a conduit to other websites, including anchor sites, 

which sell the drugs. The report also found that 73% of drugs offered on these websites 

were Schedule II and III controlled substances. Only 6% of the websites in the study 

required a prescription in order to purchase drugs. About half of the sites offered only an 

online “consultation,” a practice that the American Medical Association has found not to 

meet appropriate standards of medical care. 

 Likewise, we will hear testimony from the GAO about its recent report that also 

documented the wide availability of highly addictive controlled substances over the 

Internet. And as the GAO notes in its report, both the Drug Enforcement Administration 

(DEA) and the Office of National Drug Control Policy (ONDCP) have found that the 

easy availability of controlled substances directly to consumers over the Internet has 

significant implications for public health, given the opportunities for misuse and abuse of 

these addictive drugs. 

 According to an article in the February 21, 2005 U.S. News and World Report, 

although prescription-drug abuse is rising among all age groups, law enforcement 

officials are especially concerned about abuse among teenagers: One in 10 high school 

seniors has tried the painkiller Vicodin without a prescription, and 1 in 20 has taken the 

potent pill OxyContin. For young people in particular, online pharmacies seem 

especially seductive. For this generation, the Internet is a familiar medium and it feels 

safe. Controlled substances are easily sold over the Internet by not attracting attention 

and looking legitimate. Postings skillfully blend these drugs with other apparently legal 

or “lifestyle” drugs. The seduction and convenience of the Internet coupled with the 

wide availability of controlled substances raises a disturbing prospect of many young 

people hooked on drugs with the ease of logging on to a computer. 

 The convenience and seductiveness of the Internet and the wide availability of 

controlled substances over the Internet has already had tragic consequences. On 

February 21, 2001, Ryan Haight died at the age of 18 of an overdose after mixing 

morphine and two prescription antidepressants with Hydrocodone, a potent and highly 

addictive painkiller that he bought from an Internet pharmacy in Oklahoma. Ryan was 

17 and complaining of back and joint pain when he started ordering prescription 

painkillers from Internet pharmacies. On June 7, 2001, the parents of Todd Rode 

(pronounced RO-DEE) told this Subcommittee their heart-wrenching story of finding 

their son dead in his apartment. According to the medical examiner, Todd’s death was 

caused by a massive overdose of controlled substances that Todd ordered from a foreign 

Internet pharmacy. Last year, DEA testified that its investigations have discovered 14 

deaths or overdoses and 15 people who have entered treatment or sustained injuries from 

drugs obtained over the Internet. 

 Moreover, in the course of its oversight work, the Committee has become acquainted 

with ICG, Inc. of Princeton, New Jersey and its investigative work on Internet 

pharmacies. Last July, ICG provided a briefing I convened for the Subcommittee 

members. As a result of that briefing, I requested as a test of its investigative capabilities 

that ICG gather intelligence on a series of websites selling controlled substances 

identified by the Majority and Minority Committee staff. The results of that work as well 
6

as other investigations of websites marketing controlled substances will be presented 

publicly for the first time at this hearing. This White Paper will provide more details for 

consideration in how to strengthen efforts to combat sales of controlled substances over 

the Internet. In addition, at the invitation of the Majority and Minority Committee staff, 

ICG last week briefed representatives from credit card companies, consignment carriers, 

and the Internet community. That meeting has already led to beneficial exchanges of 

information and may lead to constructive and proactive working relationships in the 

private sector. 

 While we note the growing problem of controlled substances over the Internet and 

consider additional new approaches to curb the sales of these products, we will also 

examine what the federal agencies have accomplished, especially during the last year. 

 For example, last September, the DEA announced a new “Virtual Enforcement 

Initiative,” part of which included Operation CYBERx. That investigation led to the 

arrests of 17 people who operated rogue Internet pharmacies that took orders for 

controlled substances over the Internet and then shipped these products to U.S. citizens 

without a valid prescription. Those arrested included the ringleaders of more than 4,600 

rogue Internet pharmacy websites. On July 15, 2005, the Attorney General of the State of 

Florida announced the state’s largest prosecution of an organization filling Internet order 

for controlled substances. These arrests in this operation resulted from an investigation 

involving a collaborative task force involving the DEA. Last April, the DEA led 

Operation Cyber Chase, which resulted in more than 20 arrests in eight U.S. cities and 

four foreign countries, shutting down an organization that ran over 200 web sites illegally 

selling what were identified as controlled substances such as Ritalin, Xanax, and Valium. 

 In September 2004, the Bureau of Customs and Border Protection (‘Customs”) 

implemented a national policy for processing controlled substances, schedule III through 

V, imported through the mail and carrier facilities. Under this new policy, packages 

containing controlled substances in schedules III through V are no longer transferred to 

FDA for disposition , released to the addressee, or returned to the sender. Instead, 

Customs can now hold these packages as unclaimed or abandoned property as an 

alternative to seizure. According to the GAO, Customs reported that the recent policy 

improved their ability to quickly process the volume of this category of packages. 

Customs recently reported to this Committee that a full year of this new policy resulted in 

over 72,000 interdictions, with almost all of these parcels abandoned and disposed, and 

only 120 individuals electing to pursue a formal seizure proceeding. As the GAO noted, 

with Customs implementing this new policy, a more reliable and systematic approach to 

data gathering could result by using information collected by Customs and FDA at 

various field locations, including the number of packages deemed abandoned by CBP. 

Finally, the GAO notes that working groups of a federal interagency task force are 

working cooperatively with the carriers, credit card companies, and Internet businesses to 

develop more policy solutions relevant to the imported controlled substances problem. 

 I personally have been very interested in the safety of imported drugs, and in 

particular, the problem of controlled substances. The people in my homestate of 

Kentucky have been significantly harmed by prescription drug abuse, including the 

misuse of controlled drugs containing hydrocodone. In light of this concern, I am pleased 

to say that the State of Kentucky recently enacted a new law this year, and effective this 

past June, that law makes it illegal to ship a prescription drug to a pharmacy or a 

pharmacist not registered with the Kentucky State Board of Pharmacy. As a result of this 

law, under the auspices of the Kentucky Bureau of Investigation, UPS and FedEx have 

worked successfully to intercept illegal shipments. I realize the issue under examination 

today is a national problem concerning a global threat of controlled substances sold over 

the Internet. I am not suggesting that the Kentucky law is instructive as a particular 

policy solution to controlled substances over the Internet. But the positive developments 

in Kentucky remind me of what America can accomplish in solving a problem when we 
7

are all united, focused, and supportive of efforts to combat a prescription drug abuse 

problem. 

 I believe this is a crucial time for the U.S. Congress to send a unified, bipartisan, 

unmistakable message about stopping the illicit sales of controlled substances over the 

Internet. That clear, unified message will have a tremendous impact in providing further 

support to the Executive Branch and the private sector to intensify the focus of the laser 

beam against illicit sales of controlled substances over the Internet. 

 Already, in preparing for this hearing, I can identify several ideas worthy of 

legislative consideration in addressing this issue. First, the July 2005 National Center on 

Addiction and Substance Abuse report specifically recommended that Congress should 

clarify federal law to prohibit sale or purchase of controlled prescription drugs on the 

Internet without an original copy of a prescription issued by a licensed, DEA-certified 

physician, licensed in the state of purchase, based on a physical examination and 

evaluation, and to impose higher penalties for illegal sale to minors. That is a 

recommendation that I will explore at this hearing. Second, Congress should consider 

increasing penalties for Schedule III drugs. Why is it that there do not appear to be 

websites explicitly marketing heroin or cocaine? There may be several reasons, but one 

factor may be the harsher penalties. The penalties for crimes involving Schedule III 

drugs are substantially less than for those in Schedules I and II. We should consider 

increasing penalties for Schedule III drugs illicitly marketed over the Internet. Third, we 

should consider extending the coverage of forfeiture authority for Customs from not just 

Schedule I and II drugs but also to Schedule III drugs. Information and testimony gained 

today may help determine whether Congress pursues these proposals, and other 

measures. I invite Congressman Stupak, the Ranking Member, to join with me as a 

bipartisan team to spearhead Congressional action on this front. 

 I am hopeful that today we will learn much more about the nature of the problem, the 

actions taken to combat it, and what actions could be taken to help aid the effort, 

including legislation. I thank all of the witnesses for testifying today and look forward to 

their testimony. I now recognize my friend, Congressman Bart Stupak, the Ranking 

Member, for his opening statement. 

 MR. STUPAK. Mr. Chairman, before I start, I'd like to make special 

mention this will be the last hearing a good friend to this committee, Ms. 

Dot Riley, will be participating in. Dot retires on the 30th of this month 

and has served the Federal government at Customs for more than 

two decades. She's been a friend to this committee and helped us on a 

broad range of very important Homeland Security matters. 

 Dot, I realize that working with this subcommittee has often been on 

the enjoyment scale of a root canal, but we'll sorely miss you and thank 

you for all the work you have done for us. 

 Mr. Chairman, if I may, I would like to revise and extend my opening 

statement and submit supporting documents. I also ask that members 

who are not present at this time be allowed to submit their opening 

statements with exhibits. 

 MR. WHITFIELD. So ordered. 

 MR. STUPAK. Thank you, Mr. Chairman. 

 Mr. Chairman, by my count this will be the fifth hearing this 

subcommittee has had on the issue of dangerous drugs entering the 

United States via the mail facilities and express consignment carriers and 
8

how the Internet drives much of that traffic. While today's hearing is on 

the aspect of dangerous controlled substance being sold on the Internet, 

as opposed to prescription drugs generally, if you examine those earlier 

hearing transcripts you will fine nothing but promises and assurances 

from many of the witnesses today about how they're working to eradicate 

this problem. Unfortunately, what we will hear again today is virtually 

the same thing we hear every year on this matter, which is that nobody is 

really in charge, that the problem is only getting worse, and that the steps 

everybody is taking appear not to be working. 

 Sad to say, Mr. Chairman, I do not believe we're any closer to solving 

this problem now than we were a half decade ago when myself, Mr. 

Dingell, and Mr. Klink wrote the very first Internet pharmacy bill. Then 

there were only 25 active sites selling drugs on the Internet. Those 

seemed to be offering Propecia, Xanacal, and Viagra. Almost no sites 

could be found offering the dangerous controlled substances that we are 

seeing entering the U.S. such as those depicted in the posters taken last 

year by Senate staff at the JFK mail facility or our staff at the Miami 

facility. 

 Since our first hearing on this matter, we have only watched the 

volume of dangerous drugs explode. Indeed, the record of these earlier 

hearings regarding Internet drugs, including controlled substances, are 

replete with promises from DEA, Customs, and FDA about how they're 

putting together a special interagency task force or how they're working 

closely with shippers and credit card companies to eradicate this 

problem, yet today there appears to be little new data to guide us on what 

policies are most effective, nor are there any new approaches to tackling 

this problem. 

 DEA, like they were years ago, is working off an ineffective model of 

attempting to put people in jail, as opposed to rapidly frustrating the 

ability for rogue sites to do business. While it's admirable to bring 

prosecutions, the fact is that those behind these sites proliferate much 

quicker than DEA can bring such actions. Indeed, DEA's formal 

approach takes months if not years of efforts to shut down a rogue 

Internet site. By the time one is removed, many others are allowed to 

open for business. The trend of new rogue sites selling controlled 

substances is heading upwards. Today, hundreds of sites are selling or 

offering to sell controlled substances to almost anybody without a 

prescription, and there appears nothing on the horizon to reverse that 

trend. 

 The credit card companies and shippers will testify again today that 

they, too, are aggressively working on shutting down or decoupling their 

services from these dangerous sites. Nevertheless, what is known is 

exactly what impact -- what is not known, I should say, is exactly what 
9

impact, if any, this is having on the problem, whether this activity is 

being coordinated with other formal activities or how many stand-alone 

sites have been permanently blocked from doing business. 

 In correspondence to Mr. Dingell, DEA has told us that they are 

working aggressively with shippers and credit card companies, but we 

have no idea what such an effort really entails nor what is being 

accomplished. In fact, we will hear from GAO controlled substances 

continue to enter the United States through mail facilities and express 

consignment carriers and the problem appears to be getting worse. 

Moreover, as GAO will tell us, the approach to this problem by key 

agencies is still uncoordinated and ineffective. 

 Why, Mr. Chairman? Countless letters have been sent by members of 

this committee to key agencies responsible for prosecuting this mess for 

years. Here is a group I have over the last two years. What we appear to 

be doing is spinning our wheels on the same patch of mud year after 

year. 

 I'm particularly disappointed the administration has not taken a more 

proactive and aggressive approach to address this public health crisis by 

asking for new tools from Congress, particularly given now that 

prescription drugs are abused at even a greater rate than Schedule I 

drugs. In fact, earlier this year Mr. Dingell and I sent a letter to Secretary 

Levitt that once again lists the many concerns we have with imported 

pharmaceuticals. 

 This is what the letter said in part. It was a July 20, 2005 -- we've 

pointed out repeatedly that significant amounts of controlled substances 

are now entering the United States from foreign sources. Recently, a 

report by the National Center on Addiction and Substance Abuse at 

Columbia University noted that Americans are now abusing prescription 

drugs more than cocaine, hallucinogens, inhalants, and heroin combined. 

That report also found that the abuse rate of prescription drugs by 

teenagers has increased substantially in just the past decade. One reason 

cited for the recent increase in abuse rates is the easy access of 

prescription drugs purchased through the Internet. Our investigation has 

repeatedly demonstrated the ease at which foreign purchased prescription 

drugs can enter the United States with the click of a mouse, and anybody 

who has visited an international U.S. mail facility would understand that 

the Internet is a source of many of these drugs. 

 Mr. Chairman, even though HHS has neither responded to this letter 

of July nor asked for any new authorities from Congress to allow them to 

more effectively target this problem, I would nonetheless like to place 

this correspondence in the record. It's just one more example that we're 

serious about solving this dangerous and growing threat to public health 

and we continue to remind key agencies of our concerns. 
10

 So I move for admission of these documents, Mr. Chairman. 

 MR. WHITFIELD. Without objection. 

 MR. STUPAK. Thank you. 

 [The information follows:] 
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 MR. STUPAK. Mr. Chairman, let me say something about the border 

issue, the broader issue of importation. Some will try to argue the 

administration hasn't been more aggressive in stopping controlled 

substances from being sold online because Congress and others have sent 

mixed messages regarding the whole online pharmacy problem. Quite 

frankly, I believe the importation debate is a ruse and that those agencies 

should not be allowed to hide behind it. 

 While indeed many advocate finding ways to allow U.S. consumers 

to safely purchase drugs on the Internet, I can't think of anyone in this 

Congress who openly advocates the purchasing of illegal controlled 

substances from Internet sites without a prescription. Quite frankly, I 

believe that for too long key agencies have been allowed to duck behind 

the smokescreen while not getting the job done. 

 Mr. Chairman, I started my opening by thanking you for having this 

hearing; and I say this with some hesitation because each time we have 

this hearing my level of frustration grows a bit greater. This subject has 

become the public health version of the movie Ground Hog Day. The 

same promises keep being made, the same task forces, the same strategic 

plans, and the same Web crawlers. Much of what we will hear today we 

have heard many times in the past. But, like in the movie, nothing seems 

to ever change and nothing new seems to be added in terms of what the 

agencies will do differently to effectively address the serious problem. 

 So as we proceed forward let me make the following suggestions. If 

as a committee we really do expect to see some meaningful progress, 

then we must make certain agencies are accountable for solid and 

specific action plans. The fact of the matter is that neither DEA nor FDA 

appear to have at all affected the flow of controlled substances entering 

the United States with the approaches they've taken over the last six 

years. Why? 

 We must answer the following questions: 
42

 Number one, what are the various agencies doing that is effective and 

what are they doing that is ineffective? Do we know the difference 

between the two? I believe much more data needs to be forthcoming 

from DEA in particular on how they are approaching this issue. 

 Secondly, we also need to know from the administration, if the 

current model is not working, what new tools are needed. Do we need a 

change in regulations or statutory changes to give DEA, Customs, or 

FDA something new they currently do not have? So far, we have almost 

no useful guidance in this regard from the administration. 

 The administration must also be held accountable in this regard. We 

must understand what roles are the credit card companies, the shippers, 

the Web hosts, and the search engines. They're among the key actors. 

Should they be playing a role to eradicate this problem? To date, we 

have no idea if success lies more in attacking the credit card part of the 

problem or going after the domain names of the rogue sites. 

 Fourth, we can't evaluate if FedEx or UPS are doing enough to police 

their systems because we don't know if their systems hold the keys to 

solving this problem. We can't evaluate who we should be working with 

more closely and with whom because no one seems to have any decent 

data on where best to place limited resources to be effective. This is a 

failure by the Federal government, and this should change immediately. 

 Mr. Chairman, in short, we need to formally measure who is doing 

what and then measure what impact it is having on the problem. If we do 

not start holding agencies seriously accountable for either solving this 

problem or at least coming up with new ideas on how to approach this 

problem, then I fear that sometime next year we will be having our 

seventh or eighth hearing on the subject, and the problem will be greater. 

I'll look forward to hearing what this witnesses say today. I'll try to 

remain open minded, but if suddenly I hold up a ground hog to see its 

shadow, you'll know why. 

 One more quick note, if I may. The posters we have here -- I know 

you have been involved in this and I have for the last six years -- this is 

just from JFK International. That's the mail branch room. If you look, a 

lot of this came from the Netherlands; and if you go down to the third 

one just in the picture the day we were there we had about 20,000 boxes 

of suspended mail from JFK. And in Miami Airport where I mentioned 

in my opening, it's the same. 

 You can go out here to Dulles. You'll see just shipments and 

shipments illegally coming into the United States containing who knows 

what. As I said, this problem is only getting greater and greater each and 

every day. As these pictures show us, if you have been out there, 

whether Dulles, JFK, or Miami, it's a whole roomful of drugs coming 
43

into these country by the click of a mouse; and we have done nothing to 

stop its trend. 

 So with that, Mr. Chairman, I'll yield back to you and 

thank you for your extended time. 

 MR. WHITFIELD. Mr. Stupak, thank you very much and I appreciate 

those pictures as well because all of us have been at those sites and 

hopefully we can get some good information from our witnesses today. 

 At this time, I recognize the gentleman from Florida for his opening 

statement. 

 MR. STEARNS. Thank you, Mr. Chairman; and let me echo my 

colleague's comment. It's an important issue. It's an important issue, and 

I heard Mr. Stupak, and I have heard him speak on this eloquently 

before. I'm hoping that our panel will help educate us some more on 

what laws are currently being broken and perhaps what we in Congress 

should do to draft legislation. 

 It's my understanding that the drugs being discussed today are mostly 

those controlled substances classified as Schedule II or III by the DEA 

under the guidelines of the Controlled Substances Act. Obviously, these 

drugs are highly addictive in nature and require monitoring by a licensed 

physician to prevent complications. 

 When it comes to the latter, I harbor particular concerns. As 

chairman of the Subcommittee on Commerce, Trade, and Consumer 

Protection, I have been active in legislative efforts to clean up illicit 

steroid use in sports leagues. It has culminated in a bill in the 

subcommittee and the full committee, the Drug-free Sports Act, 

H.R. 3084. Not only do young, impressionable schoolchildren see these 

idolized athletes take steroids to enhance their performance, and 

sometimes these athletes lie about it, and then are able to easily purchase 

steroids themselves over the Internet. That's a doubleheader of a 

problem here. 

 We have here a good example here in this Google presentation that 

the staff has shown that you can go to Google, put in steroids, go next to 

buying steroids online, and then, step three, we have that the FDA and 

others have some advertising saying that these drugs could be dangerous 

and they need a prescription and should be very careful. 

 Further study by the National Center on Addiction and Substance 

Abuse found that of the 165 websites they found that sold Schedule II 

and III drugs, almost 90 percent of them did not require a prescription. 

That's hard to believe. Many of these sites also substituted an online 

questionnaire for the face-to-face consultation by a physician, which the 

American Medical Association has deemed below acceptable standards 

of care. So what kind of doctor can think that a cursory online checklist 

substitutes for a thorough examination? I wonder. 
44

 These illegal pharmaceutical websites sell these dangerous drugs to 

people of all ages. According to a report by the U.S. News & World 

Report, 1 in 10 high school seniors have tried Vicodin without a 

prescription and one in 20 has taken OxyContin. Additionally, the 

National Institute on Drug Abuse monitoring the future report for trends 

in the years 1975 to 2004, the majority of students reported that it was 

fairly easy or very easy to obtain these controlled substances, and 

children as young as in fourth grade have sampled them. 

 Controlled substances have their place in America's medicine 

cabinets, we all agree, for controlling pain, sedating nerves, preventing 

seizures. Of course, there is no substitute. However, the ideal practice is 

to obtain a prescription by your personal physician and go to your local 

pharmacist to get it filled and not through a cursory filling out of a 

questionnaire and getting it through the Internet. 

 So I appreciate your having this hearing, Mr. Chairman; and I look 

forward to some of the remedies. I yield back. 

 MR. WHITFIELD. Thank you, Mr. Stearns. 

 At this time, I recognize the gentleman from New Jersey, Mr. 

Ferguson. 

 MR. FERGUSON. Thank you, Mr. Chairman. 

 I appreciate you holding this hearing, and I share some of the 

frustrations of my friend from Michigan. I would simply remind him 

he's been here a long time and he knows sometimes government doesn't 

work as quickly as we would like. I would just remind him that Ground 

Hog Day did have a happy ending, and I would hope certainly that as we 

continue to investigate and try to take action on this very serious subject 

that this situation would also have a happy ending. 

 Mr. Chairman, I think today we're taking another important step 

toward uncovering a growing problem in our country and one that many 

people are simply not aware of, certainly not aware of in terms of its 

scope or in terms of the growing threat that it poses to American's health. 

Today we have mayors and county officials and even governors of some 

states who are explicitly supporting Internet purchasing of drugs from 

Canada. They're essentially lulling Americans to sleep, making them 

think that pharmaceuticals and drugs purchased from other countries 

over the Internet are perfectly safe. The facts say very clearly that this is 

not the case. 

 According to a July 2004 FDA analysis of three commonly 

prescribed drugs purchased from a website advertised as Canadian, all 

three so-called Canadian generic drugs were fake, substandard, and 

potentially dangerous. The products purchased were so-called generic 

versions of Viagra, Lipitor, and Ambien. None of these products have a 

generic version that are approved for use in the United States. 
45

 The FDA stated, and I quote, the test results of our analyses offer 

proof positive that buying prescription drugs online from unknown 

foreign sources can be a risky business. As was the case here, even 

where a website looks legitimate, FDA has clear evidence that the 

website is dispensing misbranded drugs that are not the same quality as 

those approved by the FDA for sale in the United States. Close quote. 

 The FDA findings have also cited pharmacies posing as being located 

in states like Arizona but in reality were fronts for selling drugs 

originating in countries like India. 

 For today's hearing, we're looking into the dangerous unregulated 

availability of controlled substances over the Internet. The GAO 

recently documented the wide availability of highly addictive controlled 

substances over the Internet; and, as the GAO notes in its report, both the 

DEA and the Office of National Drug Control Policy have found that the 

easy availability of controlled substances directly to consumers over the 

Internet has significant implications for public health, given the 

opportunities for misuse and abuse of these addictive drugs. 

 Last July, IntegriChain Inc., who is represented here in a second 

panel, a firm which is just outside of my district in Princeton, New 

Jersey, provided a briefing for the subcommittee members. IntegriChain 

investigates Internet pharmacies, and after the briefing the majority and 

minority staffs of the subcommittee asked the company to provide a 

review of a few websites selling controlled substances. I'm looking 

forward to the IntegriChain report and hearing about its findings. 

 But what does this report and the questionable integrity of foreign 

Internet pharmacies say about this dangerous cottage industry? How can 

we trust nameless, faceless doctors and pharmacists to distribute 

controlled substances over the Internet? How can we trust them to get us 

other drugs and medication? The answer very simply is that we can't, 

and at this hearing we hope to shine light on this very important and 

growing problem. 

 Thank you, Mr. Chairman. I yield back. 

 MR. WHITFIELD. Thank you, Mr. Ferguson. 

 We have with us today Dr. Charlie Norwood, who is a member of the 

full Energy and Commerce Committee and serves on the Health 

Subcommittee, among others. Although he's not a member of Oversight 

and Investigations, this is a subject matter that we are discussing today 

that he has a particular interest in; and I would like to ask unanimous 

consent that Mr. Norwood be able to make an opening statement and ask 

questions if he so desires. 

 So the gentleman is recognized. 
46

 MR. NORWOOD. Thank you, very much, Mr. Chairman, for allowing 

me the privilege of sitting in on this what I consider extremely important 

hearing. 

 I know my colleagues on the Commerce Committee have heard me 

say this before, but I just really need to say it again: We in this country 

do not do a good enough job addressing the needs of patients with 

chronic pain, yet over 45 percent of us will experience chronic pain at 

some point in our lives. Prescription medications are an important part 

of pain therapy. Unfortunately and sadly, we have allowed a few bad 

actors to jeopardize a doctor's ability to offer pain care to their patients 

out of fear of patient abuse or diversion. 

 I am encouraged by some of Congress's recent efforts to address pain 

care. However, if we don't tackle prescription drug abuse, no bill 

expanding access is going to make any difference at all. We need a 

comprehensive strategy that removes bad actors. NASPER legislation 

that the Chairman and I offered encouraging state prescription drug 

monitoring programs, that's a good first step. However, we must address 

what is perhaps one of the biggest barriers to improving legitimate pain 

care therapy, and that is Internet pharmacies. 

 The addiction community tells me that these sites represent one of the 

easiest ways to access controlled substances. Even children and 

teenagers can easily order an addictive controlled substance without a 

prescription. Worse yet, Internet pharmacies often fill the e-mail boxes 

of those trying to beat the addiction with advertisements for their goods. 

 The number of Internet pharmacies grew from zero in the mid-1990s 

to roughly a thousand in 2003, to who knows how many today. It would 

be one thing if these pharmacies were operating under the same 

standards as traditional pharmacies, but most don't. Of 157 Internet 

pharmacies identified by the Center for Addiction and Substance Abuse, 

90 percent, 90 percent did not require prescription. It boils down to this: 

Right now, I could go on the Internet and buy a controlled substance by 

pointing and clicking two things: I need the drug, and I'm not lying. 

 This problem isn't restricted to certain low-grade painkillers. An 

Internet search for OxyContin yields several hundred thousand websites, 

many of which can be used to get it and other powerful painkillers 

without a prescription. If you take a careful look at these sites, you will 

find many based abroad, but some are right here in the United States. 

These sites have become a problem as they grow in number, market 

aggressively, and lack proper regulation. 

 Don't get me wrong. There are good, legitimate Internet pharmacies, 

but rogue pharmacies that sell prescription drugs without a prescription 

have to change the way they do business. I will soon introduce a bill to 

target these rogue Internet pharmacies by requiring a prescription for 
47

controlled substance. We can provide effective protections against 

Internet pharmacy abuse while ensuring that chronic pain patients 

receive the care that they desperately need. 

 Mr. Chairman, I look forward to hearing from your witnesses today. 

 MR. WHITFIELD. Mr. Norwood, thank you very much; and I would 

also ask unanimous consent that any member that desires to do so may 

submit his opening statement for the record. 

 [Additional statements submitted for the record follow:] 

PREPARED STATEMENT OF HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY AND 

COMMERCE

 Mr. Chairman, I strongly support this hearing. The fact that these rogue Internet 

pharmacies are easily selling highly addictive, dangerous controlled substances without a 

valid prescription to American citizens, especially teenagers, is an outrage. Republicans 

and Democrats disagree on many issues. But this is an issue on which we can all work 

together. 

 The sale of controlled substances such as Vicodin, Percoset, and steroids to our kids 

must be stopped. Immediate action needs to be taken to drive these operations off the 

Internet and put the bad actors in jail. There has been understandable frustration that the 

Federal government has not found a silver bullet strategy to solve the problem. The 

challenge of these rogue Internet pharmacies is that their operations may involve several 

countries and the bad actors behind these operations can easily conceal their identities 

and activities. For those reasons, it has been difficult to obtain the kind of data about the 

bad actors to enable the federal government to design an effective, comprehensive 

strategy to stop these rogue Internet pharmacies. 

 With today’s hearing, this Subcommittee can help the public and private players 

achieve significant results in solving this problem. As we have learned from fighting 

terrorism, a part of the solution is about gaining more detailed intelligence about these 

rogue pharmacies and the bad actors behind them. We will hear testimony from a private 

investigative firm about the results of their work in probing about 180 websites that have 

controlled substances available for purchase. In particular, by focusing on controlled 

substances, particularly the Schedule 2 and 3 drugs offered on the Internet, the public and 

private sectors can concentrate on getting comprehensive information about the limited 

number of Internet operations selling controlled substances. With this better intelligence, 

they have an opportunity to take more effective actions to stop these transactions that 

pose a serious public health threat. 

 The people on the frontlines of federal and state law enforcement combating this 

problem should be commended for their efforts in dealing with this highly challenging 

and complicated threat. What I am very interested in learning about today is what we in 

the Congress can do to help law enforcement by giving them more authority and perhaps 

more resources. 

 I also want to express appreciation to the private industries represented at today’s 

hearing. While they should not be confused with law enforcement agencies, these private 

companies have been working cooperatively with the government, are taking steps to 

address this issue, and are an essential part of the solution. 

 Easy Internet access to controlled substances is a dangerous reality, one that today’s 

hearing will show must be addressed immediately, legislatively if necessary. With 

unified, bipartisan leadership from this Committee, we can help the public and private 

sector act against an illegal industry that makes it possible to do drugs and get them 

without a prescription. 
48

 I thank the witnesses and look forward to the testimony. 

 MR. WHITFIELD. Before I introduce the witnesses, one other sort of 

milestone I would like to recognize today is John Dingell, who served as 

chairman of the full Energy and Commerce Committee for many years 

and certainly was also chairman of the Oversight and Investigations 

Subcommittee, is celebrating his 50th year in the Congress today. He 

was sworn in on December 13, 1955, and I guess is the third-longest 

serving member, Mr. Stupak. So we all congratulate him for his 

distinguished service in the Congress. 

 Once again, I want to welcome those of you on the first panel. We 

genuinely appreciate your time in being here to help address this serious 

issue. 

 On the first panel today, we have Mr. Richard Stana with the GAO; 

we have Mr. Joseph Rannazzisi, who is the Deputy Assistant 

Administrator, Office of Diversion Control, at the DEA; we have with us 

Mr. Jayson Ahern, who's the Assistant Commissioner, Office of Field 

Operations, for the Bureau of Customs and Border Protection; and then 

we have Dr. Robert Meyer, who is the Director, Office of Drug 

Evaluation, at the Food and Drug Administration. 

 So thank you very much for being here. 

 As you're aware, the Committee on Oversight and Investigations is 

holding an investigative hearing; and when doing so it has been our 

practice of asking that people testify under oath. Do any of you have any 

objection to testifying under oath? Do any of you have any attorneys 

with you today that will be representing you, giving you advice? 

 Okay. In that case, if you would stand and raise your right hand, I'd 

like to swear you in. 

 [Witnesses sworn]. 

 MR. WHITFIELD. Thank you. You're now sworn in. 

TESTIMONY OF RICHARD STANA, DIRECTOR, HOMELAND 

SECURITY AND JUSTICE ISSUES, GOVERNMENT 

ACCOUNTABILITY OFFICE; JOSEPH RANNAZZISI, 

DEPUTY ASSISTANT ADMINISTRATOR, OFFICE OF 

DIVERSION CONTROL, AND DEPUTY CHIEF, OFFICE OF 

ENFORCEMENT OPERATIONS, DRUG ENFORCEMENT 

ADMINISTRATION; JAYSON AHERN, ASSISTANT 

COMMISSIONER, OFFICE OF FIELD OPERATIONS, 

BUREAU OF CUSTOMS AND BORDER PROTECTION; AND, 

ROBERT MEYER, M.D., DIRECTOR, OFFICE OF DRUG 

EVALUATION II, OFFICE OF NEW DRUGS, CENTER FOR 
49

DRUG EVALUATION AND RESEARCH, FOOD AND DRUG 

ADMINISTRATION 

 MR. WHITFIELD. Mr. Stana, we'll call on you for your five-minute 

opening statement. 

 MR. STANA. Thank you Mr. Chairman, Mr. Stupak and members of 

the subcommittee. 

 I appreciate the opportunity to discuss Federal agencies' efforts to 

interdict and inspect millions of packages of prohibited prescription 

drugs imported for personal use through the 14 international mail and 29 

private carrier facilities. Since early 1999, online Internet pharmacies 

have enabled American consumers to order a range of prescription drugs 

over the Internet. These drugs include noncontrolled prescription drugs 

like those to combat baldness, impotence and obesity, but also include 

controlled substances like Valium and anabolic steroids. 

 There's growing concern that purchasing prescription drugs from 

Internet pharmacies is risky because these drugs may be compromised or 

not the authentic product customers intended to purchase. Another 

concern is that consumers might also be violating the law, unknowingly 

or intentionally, by having these drugs shipped into the country. 

 U.S. Customs and Border Protection and the FDA are responsible for 

interdicting and inspecting incoming packages at U.S. mail and private 

carrier facilities. DEA, the Postal Service, ONDCP, and U.S. 

Immigration and Customs Enforcement are involved in efforts to inhibit 

the importing of prescription drugs. 

 My prepared statement summarizes our recent report on Federal 

efforts to address the illegal importation of prescription drugs through the 

international mail and carrier facilities. In my oral statement I'd like to 

focus on efforts to address the illegal importation of illegal controlled 

substances and make three main points. 

 First, drugs purchased over the Internet from foreign sources are 

largely outside the U.S. regulatory system, which can present safety and 

quality and law enforcement problems. Of particular concern is easy 

access to highly addictive controlled substances which can be imported 

by consumers of any age, sometimes without a prescription or 

consultation with a physician. Recently, GAO investigators easily 

obtained anabolic steroids without a prescription through the Internet. 

After conducting Internet searches we found hundreds of websites 

offering anabolic steroids commonly used by athletes and bodybuilders 

for sale. Our investigators then used an e-mail account in a fictitious 

name to place 22 orders. From these orders, we received 10 shipments 

of anabolic steroids, all from foreign sources. Obviously, obtaining such 

drugs and taking them without medical supervision is not only illegal but 
50

risky. The officials we spoke with told us the Internet is the most widely 

used means of buying and selling anabolic steroids illegally. Law 

enforcement actions require extensive time and resources, and sentences 

for illegal steroid traffic are relatively low. 

 Second, the large volume of packages containing prescription drugs 

that arrive at international mail and private carrier facilities is straining 

CBP's and FDA's limited resources. Despite changes in both FDA and 

CBP handling procedures, large numbers of packages continue to be 

released to addressees, with or without inspection. 

 In August, 2004, FDA issued procedures to standardize CBP's 

selection of packages forwarded to FDA, FDA's inspection of these 

packages, and FDA's admissibility determinations. However, even with 

these new procedures, many packages containing prescription drugs 

prohibited for import continue to be released to addressees. For 

example, packages forwarded by CBP to FDA but not processed by FDA 

inspectors by the end of each workday are returned to the Postal Service 

for delivery to the addressee. If the results of recent enforcement sweeps 

are typical, some of these release packages likely contained controlled 

substances. 

 With respect to controlled substances, last year CBP implemented a 

new policy to expedite its handling of drugs in Schedules III through V 

that are detected in its inspection process. The new policy reduces the 

information to be recorded about the drugs and enables CBP to destroy 

the drugs 30 days after notifying the addressee that the drugs would be 

treated as abandoned property if not claimed. CBP officials told us that 

an inspector at a mail facility could now process a package in about 

one minute, versus one hour under the old seizure and forfeiture system. 

CBP reported it destroyed about 72,000 packages in the first year of 

implementation, but no one knows whether the new policy has deterred 

individuals from importing controlled substances, and packages 

containing these drugs continue to flow into the country. 

 My last point is that concerns about illegal importation are not new 

and past actions to mitigate the problem have had only limited success. 

Most recently, CBP is leading an interagency task force that includes 

CBP, FDA, DEA, ONDCP, ICE, and DOJ attorneys. To date, this task 

force has undertaken multiagency enforcement operations and promoted 

increased public awareness of potential dangers of imported drugs, 

among other things. While this was a step in the right direction, we 

recommended that a broader strategic framework be adopted that 

commits governmental and private organizations to better define the 

nature and scope of the illegal importation problem, establish objectives, 

milestones and performance measures to gauge results, determine the 

number and types of resources needed to address the problem, and 
51

evaluate progress and barriers to successful resolution. We believe that a 

strong strategic framework would provide direction, coordination and 

accountability needed to address the law enforcement and safety 

challenges we identified. 

 This concludes my oral statement, and I'd be happy to address any 

questions the subcommittee may have. 

 MR. WHITFIELD. Thank you, Mr. Stana. 

 [The prepared statement of Richard Stana follows:] 

PREPARED STATEMENT OF RICHARD STANA, DIRECTOR, HOMELAND SECURITY 

AND JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
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 MR. WHITFIELD. At this time, I'll recognize Mr. Rannazzisi for his 

opening statement. 

 MR. RANNAZZISI. Thank you and good afternoon. 

 Chairman Whitfield, Ranking Member Stupak and distinguished 

members of the subcommittee, on behalf of Administrator Karen P. 

Tandy and the men and women of the Drug Enforcement Administration, 

thank you for the opportunity to discuss our efforts to combat the illegal 

distribution of controlled substance pharmaceuticals via the Internet. 

 The illegal use of pharmaceuticals, particularly those containing 

controlled substances, remains a significant problem. Users obtain these 

illegal prescriptions from a variety of sources, including doctor shopping, 

falsified prescriptions and theft. 

 In recent years, the DEA has seen a significant increase in the 

availability of controlled substance prescriptions via the Internet. DEA's 
100

efforts are focused on the drug traffickers behind these Internet sites. 

Often these Internet-based drug traffickers most commonly selling 

pharmaceutical substitutes or those marketed as pharmaceutical 

substances often mask their activity as those of legitimate online 

pharmacies. Their illicit products have no guarantee of safety or 

effectiveness and offer no assurance of meeting appropriate handling, 

storage, or shipping standards. These sites provide pharmaceutical 

products with no face-to-face medical evaluation, no tests, no drug 

interaction screening, and no follow-up care, all elements present when 

substances are legitimately prescribed. 

 Pursuing the organizations that facilitate the illegal sale of controlled 

substances via the Internet is a priority for DEA. A concerted 

organizational attack is the most effective way to stop and not just 

relocate Internet drug traffickers. 

 Two recent OCDETF operations, Operation Cyber Chase and 

Operation CYBERx, illustrate such a concerted organizational attack on 

Internet traffickers on both an international and national scale. As 

successful as these operations were, no significant investigation could 

take place without a well-coordinated effort at all levels of law 

enforcement. 

 Traditional geographic lines of jurisdiction do not exist on the 

Internet. Yet law enforcement must abide by such limits. This means 

that collaboration between the public, interagency, and private sector 

levels is a key component to successful investigations. 

 Among other activities, an Internet agency task force with 

participation from CBP, ONDCP, DOJ, FDA, ICE, and DEA meets 

regularly to address Internet diversion threats. 

 Collaboration with the private sector is equally important. Internet 

drug traffickers must rely extensively on the commercial Internet 

services, express package and delivery carriers, and financial service 

companies. The DEA has reached out to each of these sectors and is 

working to educate and facilitate their assistance in shutting down 

Internet drug trafficking operations. 

 In addition, we are working with state authorities and the medical 

community to disseminate information regarding illegal controlled 

substance activities via the Internet. 

 Despite the collaborative efforts, there remains significant challenges 

in tackling this Internet threat; and a legitimate transaction involving 

controlled substances over the Internet must be in compliance with the 

Controlled Substances Act. 

 Additional clarification of the roles and responsibilities of 

professionals that use the Internet to meet the needs of clients would not 

only allow us to more readily identify legitimate online pharmacies and 
101

persons operating or promoting them but assist in gathering information 

pointing to patterns of abuse. Such clarification would also help us 

investigate the illegal traffickers hiding behind the facade of an otherwise 

legitimate practice. 

 In addition, a statutory definition outlining what constitutes a valid 

doctor-patient relationship should be established. Also, the penalties 

associated with the illegal sale of Schedule III to V substances, which are 

the most common illegally sold controlled substances on the Internet, are 

not as significant as may be warranted. 

 The DEA will continue to promote collaborative actions in order to 

investigate and arrest the individuals illegally selling controlled 

substances. We're appreciative of the support from key sectors of the 

Internet-related business community. The DEA is committed to 

developing this relationship even farther. 

 The Internet presents a new and significant challenge for law 

enforcement. Each investigation helps DEA and sister agencies learn 

how to conduct better investigations. From the experiences that we have 

had, DEA has refined the methods by which we identify, pursue and 

ultimately dismantle these trafficking groups; and we will continue to 

make this a priority. 

 Chairman Whitfield, Ranking Member Stupak, members of the 

subcommittee, I thank you again for this opportunity to testify and look 

forward to addressing any questions you may have. Thank you. 

 MR. WHITFIELD. Thank you very much. 

 [The prepared statement of Joseph Rannazzisi follows:] 

PREPARED STATEMENT OF JOSEPH RANNAZZISI, DEPUTY ASSISTANT ADMINISTRATOR,

OFFICE OF DIVERSION CONTROL, DEPUTY CHIEF, OFFICE OF ENFORCEMENT OPERATIONS,

DRUG ENFORCEMENT OPERATIONS

Introduction

 Chairman Whitfield, Ranking Member Stupak, and distinguished Members of the 

Subcommittee, on behalf of Administrator Karen P. Tandy, and the men and women of 

the Drug Enforcement Administration, thank you for the opportunity to discuss our 

efforts to combat the illegal distribution of controlled substance pharmaceuticals via the 

Internet. 

 The illegal sale of pharmaceuticals over the Internet, the most dangerous of which 

are also controlled substances, continues to be a significant challenge facing the DEA. 

Internet-based drug traffickers, most commonly selling pharmaceutical substances or 

those marketed as pharmaceutical substances, often mask their activities as those of 

legitimate online pharmacies. Their illicit products have no guarantee of safety or 

effectiveness and offer no assurance of meeting appropriate handling, storage, or 

shipping standards. Perhaps most disturbing is that many of these Internet 

pharmaceutical sites—calling them “pharmacies” gives them more credit than they 

deserve-- are hiding behind a façade of legitimacy by pretending to ask customers 

health questions. After customers fill out a superficial questionnaire, which is given an 
102

even more cursory review (if any) by a doctor employed by the internet pharmacy, 

these sites provide pharmaceutical products with no face-to-face medical examination, 

no tests, no drug interaction screening, and no follow-up care. 

Trends in Abuse

 

 A quick search on the Internet reveals thousands of sites offering pharmaceutical 

controlled substances for sale. The sale of these substances over the Internet is only 

one way that users illegally acquire pharmaceuticals. The DEA has also investigated 

cases where prescriptions have been forged; pharmacies have been robbed: 

unscrupulous doctors have operated “pill mills” that essentially sell prescriptions or 

drugs after perfunctory or non-existent medical examinations; or pharmaceuticals have 

been smuggled into the United States. However they are acquired, the illegal use of 

pharmaceuticals is one of the fastest growing forms of drug abuse. 

• According to SAMSHA’s (Substance Abuse and Mental Health Services 

Administration) 2004 National Survey on Drug Use and Health, 6.0 million 

Americans that year reported non-medical use of psychotherapeutic drugs1

. 

• The 2003 Monitoring the Future study found that the annual prevalence of 

Vicodin (Hydrocodone) abuse, a narcotic pain-reliever, by 12th graders was 

second only to marijuana. 

• A 2005 study by the National Center on Addiction and Substance Abuse 

(CASA) at Columbia University indicated the abuse of pharmaceutical 

controlled substances grew at a rate of twice that of marijuana, five times that 

of cocaine, and 60 times that of heroin between 1992 and 2003. 

• The Partnership for a Drug-Free America’s 2004 Partnership Attitude 

Tracking Study found teen abuse of prescription and over-the-counter 

medications is higher or on par with teen abuse of a variety of illicit drugs—

i.e., cocaine/crack (9 percent), Ecstasy (9 percent), methamphetamine (8 

percent), LSD (6 percent), ketamine (5 percent), heroin (4 percent), and GHB 

(4 percent). 

Problem of Internet Drug Trafficking

 Internet drug traffickers offer drugs for sale without a prescription, without benefit 

of a legitimate doctor-patient relationship, and at highly inflated prices. Recent DEA 

investigations involving pharmaceutical drug traffickers using the façade of legitimate 

online pharmacies reveal pharmaceutical controlled substances being sold at four to ten 

times the price offered by legitimate “brick and mortar” pharmacies. In all cases, the 

online scheme is perpetrated by collaborators seeking to profit by trafficking either 

diverted or counterfeit drugs. 

 Purchasing pharmaceuticals over the Internet exposes consumers to risks such as 

purchasing a product that is counterfeit, is improperly handled or stored, is 

contaminated, or is lacking any warnings or instructions for use. With few exceptions, 

the consumer has no idea of the content of the substances they are receiving. 

 Internet traffickers who illegally offer pharmaceutical controlled substances 

through their websites frequently share characteristics, such as: 

 

1

 Non-medicinal use of prescription-type pain relievers, tranquilizers, stimulants, or sedatives; does 

not include over-the-counter drugs. 
103

• Advertise that no prescription is necessary 

• Fail to participate in any insurance plan and require payment by credit card or 

cash C.O.D. 

• Offer a limited selection of medications for sale, mostly controlled substances 

and “lifestyle drugs” 

• Fail to request the name, address, and phone number of a current physician 

• Are willing to deliver drugs to a post office box or other location to avoid 

detection by authorities 

• Deceptively and inaccurately advise about the law and why it is permissible to 

obtain pharmaceutical controlled substances from foreign countries via the 

Internet 

 As part of the scheme, online “consultations” consisting of medical questionnaires 

filled out by an individual purport, yet fail, to create a legitimate doctor-patient 

relationship. A legitimate doctor-patient relationship includes a face-to face 

consultation, where a licensed physician can examine the physical symptoms reported 

by a patient before making a diagnosis and authorizing the purchase of a prescription 

medicine. Filling out a questionnaire, no matter how detailed, is no substitute for this 

relationship. 

 DEA’s contention that no legitimate doctor-patient relationship exists during these 

transactions is shared by the medical profession. The Federation of State Medical 

Boards’ (FSMB) policy on Internet prescribing affirms that the prescribing of 

medications by physicians based on an online medical questionnaire clearly fails to 

establish an acceptable standard of medical care.2

 The American Medical Association 

(AMA) has stated that a face-to-face evaluation is necessary to diagnose and confirm a 

medical need for prescribing.3 Further, the AMA declares it unethical for a physician 

to authorize a prescription for someone identified only through electronic means. 

 Pharmaceuticals can be purchased legitimately over the Internet, but only if the 

proper protocols are followed. Currently, there are only 12 DEA-registered pharmacies 

that have been included on a list of Verified Internet Pharmacy Practice Sites (VIPPS) 

compiled by the National Association of Boards of Pharmacy (NABP), an independent, 

non-profit organization of licensing boards. The NABP list identifies to the public 

those online pharmacy practice sites that are appropriately licensed, are legitimately 

operating via the Internet, and that have successfully completed a rigorous criteria 

review and inspection. Most other Internet pharmaceutical sales in the United States 

are legally suspect and potentially very dangerous. 

DEA Enforcement Activity

 The DEA focuses a significant amount of its resources on attacking Priority Target 

Organizations (PTOs), which are major drug supply and money laundering 

organizations operating at the international, national, regional, and local levels that 

have a significant impact on drug availability. DEA’s core competency, the disruption 

and dismantlement of drug trafficking organizations impacting the United States, is an 

integral component to both the Department of Justice’s Strategic Plan for Fiscal Years 

2003 – 2008 and The President’s National Drug Control Strategy, February 2005. A 

concerted organizational attack is the focus of our effort to counter drug traffickers 

utilizing the Internet to facilitate their illicit trade. 

 As of October 2005, DEA has initiated 236 investigations of online sales of 

controlled substances without a prescription. In FY 2004, as a result of online 

 

2

 2002 – Model Guidelines for the Appropriate Use of the Internet in Medical Practice 3

 H120.949 Guidance for Physicians on Internet Prescribing 
104

pharmacy investigations, DEA seized over $14.5 million in cash, bank accounts, 

property and computers—a 480 percent increase over 2003 ($2.5 million). Two 

operations in particular warrant specific mention: 

Operation Cyber Chase 

• On April 19th and 20th, 2005, the DEA dismantled an international 

pharmaceutical controlled substance trafficking organization that supplied an 

estimated 100,000 “customers.” As a result of this Organized Crime Drug 

Enforcement Task Forces (OCDETF) investigation, the leader of the organization 

(Akhil Bansal) and 25 co-conspirators were arrested in 4 countries. Their web of 

operations, however, touched many, many more. 

 We know that, since at least July 2003, the Bansal organization was responsible 

for the illegal distribution of 2.5 million dosage units of controlled substances per 

month to more than 100,000 “customers” without a medical evaluation by a 

physician. Bansal, an Indian national, supplied eight separate drug organizations 

that together operated over 200 websites with pharmaceutical controlled 

substances he arranged to be smuggled from India. 

 The success of this operation required the cooperation of numerous international, 

federal, state, and local law enforcement agencies. Participants included the 

Federal Bureau of Investigation; Immigration and Customs Enforcement; Food 

and Drug Administration; Postal Inspection Service; and the Internal Revenue 

Service, as well as several overseas police agencies including the Australian 

Federal Police; the Narcotics Control Bureau of India; the Costa Rican Judicial 

Police and two additional Costa Rican federal agencies, The Drug Control Police, 

and Drug Institute. 

 State and local law enforcement agencies were integral as well. Officers from 

Pennsylvania, New York, and Florida, contributed to the success of this operation 

that resulted in the seizure of over 10 million dosage units of pharmaceutical 

controlled substances, as well as 231 pounds of Ketamine, and $8.5 million. 

Operation CYBERx 

• On September 21, 2005, a 15-month OCDETF multi-agency Internet investigation 

concluded with the dismantlement of the Johar Saran drug trafficking organization 

based in Ft. Worth, Texas. The investigation resulted in 19 arrests including the 

leader of the organization, Johar Saran. This operation is the domestic bookend to 

Operation Cyber Chase. 

 Saran and his co-conspirators were arrested for supplying pharmaceutical 

controlled substances directly to U.S. Internet customers without a medical 

examination by a physician. We believe that since August 2004, the Saran 

organization was responsible for the illegal distribution of 3.5 million dosage units 

of Schedule III-V controlled substances per month. 

 To date, this investigation has resulted in the seizure of $16.8 million in assets—

$1 million in U.S. currency, $5.5 million in bank accounts, $8.6 million in real 

property, and $1.7 million in jewelry. Immediate suspension orders against the 

DEA registrations of 21 pharmacies and 20 physicians were served in Texas, New 

York, Florida, Utah, Washington State, and Puerto Rico. 
105

 Again, the success of this operation depended upon the cooperation of several 

other law enforcement agencies. The Federal Bureau of Investigation, the Internal 

Revenue Service, the Food and Drug Administration, the Texas Department of 

Health Services, the Texas Board of Pharmacy, and the Florida Department of 

Law Enforcement were all key to shutting this organization down. 

Interagency Collaboration

 I highlighted the cooperation between the DEA and our international, federal, state, 

and local law enforcement partners because, particularly when we are discussing 

Internet investigations, no significant investigation could take place without a well 

coordinated effort. Traditional geographic lines of jurisdiction do not exist on the 

Internet, yet law enforcement must abide by such limits. This means that collaboration 

is a key component to successfully investigating and arresting those who are nothing 

more than drug dealers utilizing the anonymity of the Internet to ply their trade. 

 To better facilitate this interagency cooperation, a federal interagency task force 

was established in early 2004 with the purpose addressing Internet diversion of drugs 

and conducting public outreach on pharmaceutical issues in general. Among other 

groups, DEA, ONDCP, ICE, CBP, and FDA have been represented at task force 

meetings past and present. A major focus of this evolving task force has been to reach 

out to business leaders in key industry sectors that provide services used by Internet 

pharmaceutical trafficking groups. The purpose of this outreach has been twofold: to 

raise awareness of the problem; and to elicit voluntary efforts to restrict their services 

from being used by illicit Internet pharmaceutical traffickers. The task force has also 

provided support to DEA through ICE and CBP special authorities. ICE and CBP 

have primary jurisdiction in the enforcement of trans-border smuggling laws and 

periodically conduct interdiction operations at international mail facilities to identify 

packages containing illicit pharmaceuticals. The task force meets quarterly and is 

currently evaluating options for establishing a single reporting point for businesses to 

report suspicious Internet pharmaceutical sites. 

 In January and July 2005, DEA in conjunction with the Department of Justice 

Narcotics and Dangerous Drugs Section hosted a training seminar for Assistant United 

States Attorneys and DEA personnel to share information on prosecution and 

investigative strategies for targeting pharmaceutical diversion of controlled substances. 

DEA/Private Industry Initiatives

 To successfully ply their trade, Internet drug traffickers must rely extensively on 

the commercial services of three principal business sectors: (1) providers of various 

internet services – including web hosting, domain name registration, and search; (2) 

express package delivery companies; and (3) financial services companies, including 

major credit card companies and third party payment service providers. The DEA has 

reached out to each of these sectors and is working to educate and facilitate their 

assistance in shutting down Internet drug trafficking operations. 

 Several interagency meetings have been held with senior managers and legal 

counsel from leading Internet, express parcel carriers, and financial services companies. 

These meetings provided an opportunity for government and the private sector to reach 

a better understanding of relevant federal laws and explore areas of potential 

cooperation and voluntary industry actions to curb the expanding illicit sale of 

pharmaceuticals over the Internet. 

 In addition to our investigative efforts aimed to shut down Illegal drug sales over 

the Internet, we are working with the state authorities and representatives of the 
106

pharmacy and medical communities to disseminate information regarding activities that 

can legally be conducted via the Internet 

 DEA Field Offices have also taken action to help with this threat. Diversion 

Investigators conduct on-site licensing inspections to ensure that the pharmacy is aware 

of its responsibilities under the law. New pharmacy applicants or those seeking a 

renewal through on-line procedures are now linked to the April 2001 Federal Registrant 

Guidance Document regarding “Dispensing and Purchasing Controlled Substances over 

the Internet.” Titled “Retail Pharmacy Advisory,” this pop up link takes the applicant 

to the aforementioned Federal Register notice outlining important information for 

prescribers, pharmacists, and law enforcement alike. 

 During the CYBERx investigation, the DEA discovered that the main suppliers 

were legitimate DEA registrants. While we didn’t find any criminal negligence in this 

case, we did implement the Internet Distributor Initiative to increase the awareness of 

DEA registrants regarding their obligations and possible role in the illegal distribution 

of pharmaceuticals via the Internet. Based on these meetings, the distributors 

voluntarily reviewed their customer base and apprised DEA of the termination of 

business with over 100 known or suspected illegitimate Internet drug trafficking 

organizations. An analysis of these pharmacies’ buying patterns from January – 

September 2005 revealed over 60,000,000 dosage units of controlled substances had 

been purchased. 

 We believe that because of this initiative, many illegal Internet pharmaceutical sites 

are now unable to purchase large quantities of controlled substances for illegal sale 

domestically. While this is an effective approach to go after some of the domestic 

sources of illegal pharmaceuticals supplying the Internet, this will not affect foreign 

sources of pharmaceuticals. The global nature of the Internet adds to this challenge, as 

many substances which are controlled in the United States are not controlled elsewhere, 

and therefore offering to sell these substances on line is not illegal per se. 

 As a consequence of these and other initiatives, DEA is able to effectively monitor 

both the supply and dispensing sides of the domestic Internet trafficking problem. The 

communication between the DEA and the distributors continues to increase. An 

example of increased cooperation is the fact that distributors are notifying DEA of 

potential targets, unusual purchasing patterns, and queries from the potential 

illegitimate Internet pharmacies who have been effectively cut off from supplies by this 

initiative. 

Continuing Challenges

 Although no special DEA registration is currently required to market controlled 

substances online, the tangible aspects of manufacturing, distributing, prescribing, and 

dispensing pharmaceutical controlled substances remain squarely under the jurisdiction 

of the Controlled Substances Act. Any legitimate transaction over the Internet must be 

in compliance with these existing laws. Additional clarification of the roles and 

responsibilities for professionals seeking to use the Internet to meet the needs of clients 

would not only allow us to more readily identify legitimate online pharmacies and 

persons operating and promoting them, but it would also assist in gathering information 

pointing to patterns of abuse. Such clarification would also help us investigate the 

illegal traffickers hiding behind the façade of an otherwise legitimate practice. 

 In addition, there exists no statutory definition specifically outlining what 

constitutes a valid “doctor/patient” relationship. Further, the penalties associated with 

the illegal sale of Schedule III-V substances are not as significant as may be warranted. 

 This does not mean however that Internet drug traffickers can operate freely, as 

demonstrated by Operations CYBERx and Cyber Chase. The DEA will continue to 

promote public/private sector and international collaborative actions and use our 
107

existing authority to investigate and arrest the individuals illegally selling controlled 

substances. The increasing support that we receive from key sectors of the Internetrelated business community is essential to turning the tide in this critical area of drug 

trafficking and abuse. The DEA is committed to developing this relationship even 

further. 

Conclusion

 The Internet is a universe that by its very nature is impossible to fully monitor, 

regulate, and control. While drug traffickers who exploit the Internet to target 

America’s most vulnerable continue to pose a significant threat to citizens’ lives and 

health across the country, the DEA has learned from experience and refined its methods 

by which we identify, pursue, and ultimately dismantle these groups. 

 I appreciate the opportunity to testify here today and look forward to answering any 

questions the subcommittee may have. 

 MR. WHITFIELD. Mr. Ahern, you are recognized for five minutes. 

 MR. AHERN. Mr. Chairman, Ranking Member Stupak, let me begin. 

 Chairman Whitfield, Congressman Norwood, Ranking Member 

Stupak, I appreciate the opportunity to testify today at today's hearing; 

and my testimony today will focus on Customs and Border Protection's 

efforts to prohibit the illegal importation of controlled substances into the 

United States. 

 CBP, as the guardians of the Nation's borders, is America's frontline 

of defense. CBP safeguards the homeland foremost by preventing the 

entry of terrorists and instruments of terror, while insuring the speedy, 

orderly, and efficient flow of travel and commerce. At the same time, we 

must continue to perform our time-honored duties, including the duty to 

enforce laws related to the admissibility of controlled substances. 

 Mr. Chairman, I would like to thank this committee for bringing this 

issue to the forefront of the public's attention. An enormous volume of 

controlled substances are either purchased over the Internet and shipped 

through international mail and express courier facilities. 

 The volume of illegal importation is so great that Customs and Border 

Protection was forced to streamline its operational processes of 

controlled substances interdictions at the mail facilities and courier 

facilities throughout the country. On September 1st of 2004, we 

implemented a policy in which these locations interdicted Schedules III, 

IV and V controlled substances but no longer formally seized these items 

due to the fact it takes approximately one hour to process each one of 

these seizures. As an alternative, since the majority of these substances 

are imported in noncommercial quantities, the controlled substances are 

held as unclaimed personal property. The intended recipients are 

subsequently then notified of the interdictions and provided with the 

option of requesting CBP formally seize the controlled substance or 

abandoning the controlled substances to the government. If the 
108

controlled substances are abandoned or if the intended recipient does not 

respond to our notification within 30 days, destruction immediately 

occurs. 

 Customs and Border Protection is undertaking significant measures to 

protect U.S. residents from controlled substances manufactured abroad. 

Specifically, we are instituting a strategy that includes identifying 

national importation trends by centralizing the functions out of one of 

our field analytical units, utilizing these trends along with shipper 

information identified from interdictions at our mail facilities so we can 

electronically target illegal shipments and conduct both national and 

localized enforcement operations. 

 CBP is also an active participant on the interagency task force that 

works cooperatively with the DEA, the FDA, U.S. Immigration and 

Customs Enforcement, the Office of National Drug Control Policy, and 

the Department of Justice. The task force law enforcement principals 

conducted three-day special operations named Operation Safeguard in 19 

instances at international mail branches and two express consignment 

facilities over the last two years. These enforcement efforts are designed 

to identify the type, volume, and quality of such shipments. Results from 

Operation Safeguard indicate in some instances importations are of 

questionable origin. 

 The task force has accomplished other significant efforts as well. 

During my testimony last year before the Senate Permanent 

Subcommittee on Investigations, I stated that a public service 

announcement communicating the potential dangers of foreign-made 

controlled substances was being made jointly by the Food and Drug 

Administration and with the Customs and Border Protection. I'm pleased 

to report that the public service announcement has been completed and 

can be found on CBP and FDA websites. 

 The task force has also worked with Google Incorporated to provide 

consumers searching for online pharmacies the ability to obtain 

information on importation restrictions concerning controlled substances. 

Specifically, individuals who query Google for items such as steroids are 

provided a linked page on CBP's website which informs them of 

importation restrictions. I believe this is an excellent example of private 

and public sectors partnering together to protect the American public 

from the illegal acquisition of controlled substances. 

 In addition, the task force is currently discussing with leading Internet 

companies, parcel carriers, and payment providers efforts that these 

industries can undertake to assist Federal authorities in curtailing the 

supply of illicit Internet sales. 

 I would also like to recognize efforts by U.S. Immigration and 

Customs Enforcement. ICE has conducted Operation Apothecary to 
109

address, measure and attack potential vulnerabilities in the entry process 

that might allow for smuggling of commercial quantities of these illegal 

products. These special operations include investigative work by the 

Cyber Crimes Center and enforcement blitzes jointly with Customs and 

Border Protection at our mail facilities and express consignment 

facilities. 

 In conclusion, Customs and Border Protection officers are vigilant in 

detecting products that violate the Controlled Substances Act. We utilize 

our agency's valuable resources on a priority basis in protecting U.S. 

residents against the threat of terrorism, and our experience shows us our 

officers are unable to identify all the parcels that are coming into our 

mail and courier facilities. 

 Even though we have made strides in addressing this problem, the 

growing problem presents a formidable challenge. We are aggressively 

utilizing tools to combat the proliferation of controlled substance 

importations purchased on the Internet, and we'll continue to evaluate 

approaches that might enhance these efforts. 

 I thank you for the opportunity to testify today, and I'll look forward 

to your questions. 

 MR. WHITFIELD. Thank you, Mr. Ahern. 

 [The prepared statement of Jayson Ahern follows:] 

PREPARED STATEMENT OF JAYSON AHERN, ASSISTANT COMMISSIONER, OFFICE OF FIELD 

OPERATIONS, BUREAU OF CUSTOMS AND BORDER PROTECTION

INTRODUCTION:

 Mr. Chairman, Ranking Member Stupak and other Members of the Committee, I am 

Jayson P. Ahern, Assistant Commissioner, Office of Field Operations at the Bureau of 

Customs and Border Protection (CBP). I appreciate the opportunity to testify at today's 

hearing. My testimony will focus on CBP’s efforts to prohibit the illegal importation of 

controlled substances into the United States. 

 CBP, as the guardian of the Nation’s borders, is America’s frontline of defense. CBP 

safeguards the homeland—foremost, by preventing the entry of terrorists and instruments 

of terror into the United States, while ensuring the speedy, orderly, and efficient flow of 

lawful trade and commerce. At the same time, we must continue to perform our timehonored duties, including the duty to enforce laws related to the admissibility of 

controlled substances falling under the jurisdiction of the Drug Enforcement 

Administration (DEA). 

 Mr. Chairman, I would like to thank this Committee for bringing this issue to the 

forefront of the public’s attention. An enormous volume of controlled substances are 

either purchased over the Internet and shipped through our international mail and express 

courier facilities, or they may transit our borders through other ports of entry. 

 The volume of illegal importations is so great that CBP was forced to streamline its 

operational processing of controlled substance interdictions at the 13 international mail 

and 29 express courier facilities. On September 1, 2004, we implemented a policy in 

which these locations interdict Schedules III, IV and V controlled substances but no 

longer formally seize these substances due to the fact that it takes approximately one hour 
110

to process each seizure. Rather, since the majority of these shipments are imported in 

non-commercial quantities, the controlled substances are held as unclaimed personal 

property. The intended recipients are subsequently notified of the interdictions and 

provided with the option of either requesting that CBP formally seize the controlled 

substances or of abandoning the controlled substances to the Government. If the 

controlled substances are abandoned or if the intended recipient does not respond to our 

notification within 30 days, destruction will occur. 

 Customs and Border Protection is undertaking significant measures to protect U.S. 

residents from controlled substances manufactured abroad. Specifically, we are 

instituting a strategy that includes identifying national importation trends by centralizing 

this function under one of our field analytical units, using these trends along with shipper 

information identified from interdictions at our mail facilities to electronically target 

illegal shipments, and conducting both national and localized enforcement operations. 

 CBP is also an active participant on an inter-agency task force that works 

cooperatively with the DEA, the FDA, U.S. Immigration and Customs Enforcement 

(ICE), the Office of National Drug Control Policy (ONDCP), and the Department of 

Justice (DOJ). 

 The task force’s law enforcement participants conducted three-day enforcement 

blitzes named “Operation Safeguard” at all international mail branches (IMBs) and two 

express courier facilities. These enforcement efforts are designed to identify the type, 

volume, and quality of such shipments. Results from Operation Safeguard indicate that 

many importations are of questionable origin. Specific results from recent phases of 

these blitzes are: 

JFK Airport, New York, June 29 through July 1, 2004 

• 300 packages contained illicit products. 

• 137 of the 300 packages contained a controlled substance. 

Seattle, Washington, July 27 through July 29, 2004 

• 300 packages contained illicit products. 

• 64 percent of the illicit products were manufactured in Canada, 27 percent did 

not list a country of manufacture, and 9 percent were manufactured in the 

United States, Japan and Western Europe. 

• 2 of the 300 packages contained controlled substances. 

Chicago, Illinois, August 17 through August 19, 2004 

• 300 packages contained illicit products. 

• 30 percent of the illicit products were manufactured in Mexico, 15.8 percent 

were manufactured in Canada, 22.8 percent did not list a country of 

manufacture, 7.4 percent were manufactured in the United Kingdom, and 4.9 

percent were produced in the United States. 

• 7 of the 300 packages contained controlled substances. 

Newark, New Jersey, September 21 through September 22, 2004 

• 24 packages contained illicit products. 

• Most of the packages were person to person shipments from China and 

Norway. 

• Many of the packages from China contained either herbal products or could not 

be identified. 

FedEx Hub, Memphis, Tennessee, October 25 through October 27, 2004 

• 153 packages contained illicit products. 
111

• 88 of the parcels were exported from Germany. 

• 90 of the 153 packages contained controlled substances. 

United Parcel Service Hub, Louisville, Kentucky, November 16, through 

November 18, 2004 

• 35 packages contained illicit products. 

• The majority of the parcels were exported from Canada and China. 

Honolulu, Hawaii, March 15 through March 17, 2005 

• 183 packages contained illicit products. 

• Canada was the country of manufacture for 18 percent of the products, 

Germany was the country of manufacture for 11 percent of the products, 6.5 

percent were manufactured in Thailand, and the country of manufacture could 

not be determined for 37 percent of the products. 

• 4 of the 183 packages contained controlled substances. 

San Francisco, California, August 9 through August 11, 2005 

• 301 packages contained illicit products. 

• Canada was the country of manufacture for 23 percent of the products, 9 

percent were manufactured in Thailand, and for 37 percent the country of 

manufacture could not be determined. 

• 4 of the 301 packages contained controlled substances. 

Dallas-Fort Worth, Texas, December 6 through December 8, 2005 

• 300 packages contained illicit products. 

• Canada was the country of manufacture for 56.7 percent of the products, 5.6 

percent were manufactured in Mexico, and for 30.3 percent the country of 

manufacture could not be determined. 

• 19 of the 300 packages contained controlled substances. 

 The task force has accomplished other significant efforts. During my testimony last 

year before the Senate Permanent Subcommittee on Investigations, I stated that a public 

service announcement communicating the potential dangers of foreign-made controlled 

substances was being jointly developed by CBP and the FDA. I am pleased to report that 

the public service announcement has been completed and can be found on both CBP’s 

and FDA’s web sites. 

 The task force also worked with Google, Inc. to provide consumers searching for online pharmacies the ability to obtain information on importation restrictions concerning 

controlled substances. Specifically, individuals who query Google for items such as 

steroids are provided with a link to a page on CBP’s web site which informs them of 

importation restrictions. This is an excellent example of the private and public sectors 

partnering to protect the public from the illegal acquisition of controlled substances. 

 In addition, the task force is currently discussing with leading Internet companies, 

parcel carriers, and payment providers efforts that these industries can undertake to assist 

federal authorities in curtailing the supply of illicit Internet sales. 

 I would also like to recognize efforts undertaken by U.S. Immigration and Customs 

Enforcement (ICE). ICE has conducted Operation Apothecary to address, measure and 

attack potential vulnerabilities in the entry process that might allow for the smuggling of 

commercial quantities of illegal products. This special operation includes investigative 

work by the Cyber Crimes Center and enforcement blitzes at international mail branches, 

express courier facilities, and land border ports of entry. 
112

CONCLUSION

 Customs and Border Protection officers are vigilant in detecting imported products 

that violate the Controlled Substances Act. However, given our agency’s available 

resources and priority of protecting U.S. residents against the threat of terrorism, 

experience shows that our officers are unable to identify all of the parcels containing 

controlled substances arriving via mail and express courier each day. Even though we 

have made strides in addressing this problem, the growing volume presents a formidable 

challenge. 

 We are aggressively using our existing enforcement tools to combat the proliferation 

of controlled substance importations purchased on the Internet, and we will continue to 

evaluate approaches that might enhance these efforts. 

 Thank you for the opportunity to testify. I look forward to responding to any 

questions you may have. 

 MR. WHITFIELD. Dr. Meyer, you're recognized for five minutes. 

 DR. MEYER. Thank you. 

 Mr. Chairman, Ranking Member Stupak, Congressman Norwood, I'm 

Doctor Robert Meyer. I'm the Director of FDA's Office of Drug 

Evaluation II in the Center for Drug Evaluation and Research, or CDER. 

I oversee the Division of Anesthetic, Analgesic, and Rheumatologic 

products, a division where many of the scheduled drugs are regulated, 

including the opiate analgesics. This division works closely with the 

Center's controlled substances staff which coordinates CDER's activities 

related to controlled substances and the DEA, and I thank you for the 

opportunity to talk to you today about our role in regulating controlled 

substances. 

 Before any drug is approved for marketing in the U.S., FDA must 

decide whether the studies submitted by the drug's sponsors have 

adequately demonstrated the drug is safe and effective under the 

conditions of use proposed in the drug's labeling. It's important to realize 

“safe” does not mean free of risk, as there is always some risk of 

potential adverse drug reactions when therapeutic drugs are used. 

Rather, safe in this context means that, for the indications or indication 

approved, FDA has determined that when it's used according to the 

product labeling the benefits outweigh the risk. 

 So during the approval process, FDA assesses a drug product's 

potential for use and misuse; and the agency utilizes animal, clinical and 

epidemiological data to determine whether a drug under review requires 

abuse liability studies, scheduling under the CSA, or warrants a risk 

minimization action plan designed to reduce abuse, overdose or 

diversion. 

 Abuse liability assessments are based on a constellation of the drug's 

properties, including its chemistry, its pharmacology, its clinical effects, 

its similarity to other drugs with known abuse potential, and its potential 

for public health risk following introduction of the drug to the general 
113

population. If potential for abuse exists, the drug's sponsor is required to 

provide FDA with all the data pertinent to the abuse of the drug, a 

proposal for scheduling under the CSA and data on overdoses. FDA's 

job is not done, however, after a drug is approved and/or scheduled. The 

goal of FDA's post marketing surveillance is to continue to monitor 

marketed drugs for safety. Safety and risk assessment, combined with 

efforts to minimize known risks, comprise what FDA calls risk 

management. Risk management is the overall and ongoing process of 

assessing that product's benefits and risks, taking action, where 

necessary, to decrease known risks, and tracking safety and making sure 

adjustments are made to assure that benefits continue to outweigh risks 

as new safety information emerges. 

 As part of risk management, FDA may ask companies to collect 

specific information to improve the speed and sensitivity of detecting 

suspected safety problems. 

 When this enhanced data collection is requested by FDA, it is called a 

pharmacovigilance plan. Actions to minimize risks that go beyond 

providing an informative package insert are themselves called risk 

minimization action plans or Risk MAPS. These are strategic safety 

programs designed to decrease identified product risk by using one or 

more interventions such as specialized education or targeting prescribing, 

dispensing, or use. 

 All of these risk management mechanisms are in place to ensure safe 

and effective products are available and used in a responsible manner. 

 FDA is continuing to meet with DEA, other Federal agencies, and 

industry to share information and insights needed to address the problem 

of prescription drug abuse and misuse. We participate in a number of 

task forces and other working groups. DEA is the lead Federal agency 

responsible for regulating controlled substances and enforcing the CSA. 

 However, the complexity of the cases and the solutions to the 

problems of misuse, overdose, and diversion of prescription drug 

products requires the collaboration of DEA and FDA as well as other 

governmental agencies and other State and nongovernmental entities. 

 For instance, FDA's office of criminal investigations works closely 

with DEA on criminal investigations where there is a nexus between 

sales of noncontrolled and controlled substances. 

 Both FDA and DEA have utilized the full range of regulatory, 

administrative and criminal investigative tools available, as well as 

engaged in extensive cooperative efforts with local law enforcement 

groups to pursue cases involving controlled substances. 

 FDA will continue to work with other agencies to address the myriad 

issues related to synthetic drugs and prescription drugs abuse. These 

problems are broad in reach and implications. And we are committed to 
114

a collaboration with our partners, Federal, state, and local, as well as 

professional societies and industry to prevent abuse and help ensure these 

important drugs remain available to appropriate patients through 

appropriate channels. 

 I would like to thank the subcommittee, again, for the opportunity to 

testify today on this important issue, and I would be pleased to answer 

any questions. 

 MR. WHITFIELD. Dr. Meyer, thank you. 

 [The prepared statement of Robert Meyer follows:] 

PREPARED STATEMENT OF ROBERT MEYER, M.D., DIRECTOR, OFFICE OF DRUG 

EVALUATION II, OFFICE OF NEW DRUGS, CENTER FOR DRUG EVALUATION AND RESEARCH,

FOOD AND DRUG ADMINISTRATION

INTRODUCTION 

 Mr. Chairman and Members of the Subcommittee, I am Robert J. Meyer, M.D., 

Director of the Office of New Drug Evaluation II, Center for Drug Evaluation and 

Research (CDER), U.S. Food and Drug Administration (FDA or the Agency). I oversee 

CDER’s Division of Anesthetic, Analgesic and Rheumatologic Products, a division 

where many of the scheduled drugs are regulated, including opiate analgesic products. 

This division works closely with CDER’s Controlled Substances Staff, which coordinates 

CDER’s activities related to controlled substances and the Drug Enforcement 

Administration (DEA). I appreciate the opportunity to talk to you today about FDA’s 

role in regard to controlled substances. 

 FDA is aware and concerned that some consumers are able to obtain controlled 

substances without a prescription, using the Internet. We recognize the seriousness of 

this issue and sympathize with the families and friends of individuals who have lost their 

lives as a result of prescription drug abuse and misuse. The Agency has taken many 

steps to prevent abuse and misuse of prescription drugs, while making sure they are 

available for patients who need them. FDA is committed strongly to promoting and 

protecting the public health by assuring that safe and effective products reach the market 

in a timely manner and monitoring products for continued safety after they are in use. 

THE FDA DRUG APPROVAL PROCESS 

 Under the Federal Food, Drug, and Cosmetic (FD&C) Act, FDA is responsible for 

helping ensure that all new drugs are safe and effective. Before any drug is approved for 

marketing in the U.S., FDA must decide whether the studies submitted by the drug’s 

sponsor (usually the manufacturer) have adequately demonstrated that the drug is safe 

and effective under the conditions of use proposed in the drug’s labeling. It is important 

to realize, that “safe” does not mean free of risk, and that there always is some risk of 

potential adverse reactions when using prescription drugs. FDA’s approval decisions, 

therefore, always involve an assessment of the benefits and the risks for a particular 

product. When the benefits of a drug are determined to outweigh the risks, and the 

labeling instructions allow for safe and effective use, FDA considers a drug safe for 

approval and marketing. 

 During the approval process, FDA assesses a drug product’s potential for abuse and 

misuse. Abuse liability assessments are based on a composite profile of the drug’s 

chemistry, pharmacology, clinical manifestations, similarity to other drugs in a class, and 
115

the potential for public health risks following introduction of the drug to the general 

population. If a potential for abuse exists, the product’s sponsor is required to provide 

FDA with all data pertinent to abuse of the drug, a proposal for scheduling under the 

Controlled Substances Act (CSA), Title 21, United States Code (U.S.C.) §801 et seq., and 

data on overdoses. 

 The CSA requires the Secretary of Health and Human Services (HHS) to notify the 

Attorney General through DEA, if a “new drug application is submitted for any drug 

having a stimulant, depressant, or hallucinogenic effect on the central nervous system, 

...” because it would then appear that the drug had abuse potential (21 U.S.C. §811(f)). 

HHS has delegated this function to FDA. 

 The Agency assesses preclinical, clinical, and epidemiological data to determine 

whether a drug under review requires abuse liability studies, scheduling under the CSA, 

or a risk minimization action plan, (RiskMAP) designed to reduce abuse, overdose, or 

diversion. FDA’s job is not over after a drug scheduled as a controlled substance is 

approved. The goal of FDA’s post-marketing surveillance is to continue to monitor 

marketed drugs for safety. This is accomplished by reassessing drug risks based on new 

data obtained after the drug is marketed and recommending ways of trying to manage that 

risk most appropriately. 

THE IMPORTANCE OF RISK MANAGEMENT 

 Safety or risk assessment combined with efforts to minimize known risks comprise 

what FDA calls risk management. Risk management is the overall and ongoing process 

of assessing a product’s benefits and risks, taking action as necessary to decrease known 

risks, and then tracking safety and making adjustments as necessary to assure that risks 

are kept in line with benefits. 

 As part of risk management, FDA may ask companies to collect specific information 

to improve the speed and sensitivity of detecting suspected safety problems. When this 

enhanced data collection is requested by FDA, it is called a pharmacovigilance plan. 

These exist for many long-acting and potent opioid products and contribute to safe use of 

the product by detecting, as rapidly as possible, adverse outcomes, including misuse, 

overdose, abuse and diversion. Once problems are detected there need to be actions to 

address them. 

 Actions to minimize risks that go beyond providing an informative package insert are 

called risk minimization action plans or RiskMAPs. These are strategic safety programs 

designed to decrease known product risks by using one or more interventions, such as 

specialized education or restrictions on typical prescribing, dispensing, or use. The small 

number of RiskMAPs that exist are largely customized programs, although consistent 

approaches are being sought, for example, in the control of drugs that cause birth defects, 

such as thalidomide and isotretinoin. 

FDA COLLABORATES WITH OTHER GOVERNMENT AGENCIES, 

PROFESSIONAL GROUPS, AND INDUSTRY 

 Under the FD&C Act, FDA is responsible for the approval and marketing of drugs 

for medical use and for monitoring products for continued safety after they are in use, 

including controlled substances. DEA is the lead Federal agency responsible for 

regulating controlled substances and enforcing the CSA. The CSA separates controlled 

substances into five schedules, depending upon their abuse potential and medical use. 

Schedule I controlled substances have the highest potential for abuse and have no 

medical use while Schedule V substances have the lowest abuse potential. Schedule II 

substances also have a very high potential for abuse but are approved for medical use. 

Schedules III, IV, and V substances and drugs have lower abuse potential and fewer 
116

controls under the CSA. The U.S. Immigration and Customs Enforcement (ICE) is the 

lead agency for enforcing transborder smuggling laws. ICE focuses its efforts on 

individuals and organizations involved in the smuggling of counterfeit pharmaceuticals 

both controlled and non-controlled, scheduled narcotics, medical devices and medical test 

kits via the Internet. 

 The President’s 2005 National Drug Control Strategy has recognized the 

effectiveness of state prescription drug monitoring programs, and called on the 

pharmaceutical industry, medical community and state governments to become partners 

in an effort to prevent the illegal sale, diversion, and use of prescription drugs in a way 

that does not impede legitimate medical needs. 

 FDA is continuing to meet with DEA, ICE, the Substance Abuse and Mental Health 

Services Administration (SAMHSA), the National Institute on Drug Abuse (NIDA), the 

Office of National Drug Control Policy (ONDCP), the Centers for Disease Control and 

Prevention, the American Medical Association (AMA), and industry to share information 

and insights needed to address the problem of prescription drug abuse as described 

below. 

 FDA and DEA meet regularly to discuss new ways to prevent prescription drug 

abuse and misuse. In addition to assisting one another with criminal investigations, as 

described below, FDA (or other components of HHS) is working on the following 

initiatives: 

 Task Force Participation – FDA participates in a number of task forces and other 

groups. Agents of FDA’s Office of Criminal Investigations (OCI) frequently participate 

in and/or assist many DEA-led Federal-state task forces throughout the country focusing 

on the illegal sale of controlled prescription drugs. FDA and DEA are members of the 

following working groups: Cross Border Pharmacy Working Group, Interagency 

Pharmaceutical Task Force, Permanent Forum on International Pharmaceutical Crime, 

Interagency Committee on Drug Control, Federal Trade Commission/FDA Health Fraud 

Working Group, and a working group composed of representatives from HHS (including 

FDA, SAMHSA, the National Institutes of Health, and NIDA), DEA, ONDCP, and other 

agencies to address issues of drug abuse and control under the CSA. ICE and CBP 

participate in many of these working groups in an effort to collaborate with FDA in 

reducing the quantity of illegal dangerous drugs imported into the U.S. as well as to 

improve information sharing, increase public awareness and work cooperatively with 

industry. 

 In March of 2004, a cooperative effort was announced which included various efforts 

aimed at addressing prescription abuse, including careful consideration of labeling and 

commercial promotion of opiate drug products and additional efforts to investigate and 

prosecute “pill mills” - Internet pharmacies that provide controlled substances illegally. 

In addition, FDA is a member, along with other HHS agencies (SAMHSA and NIDA), 

DOJ, DEA, DHS, ONDCP, and other Federal agencies, of the Synthetic Drugs 

Interagency Working Group (SDIWG), which was established to implement the 

recommendations of the National Synthetic Drugs Action Plan. Prescription drug abuse 

is one of the many topics that the Plan’s recommendations address. Some other topics 

directly involving FDA include the use of over-the-counter pseudoephedrine to 

manufacture methamphetamine, Internet sales of drug products, and working with drug 

manufacturers to reformulate abused drug products . 

 Assessment of New Products With Abuse Potential – FDA provides DEA with a 

scientific assessment of a certain drug product’s potential for abuse and misuse. In 

addition, DEA often participates in FDA public meetings to provide advice and 

recommendations to the Agency on scheduled drugs. 
117

FDA/DEA JOINT ENFORCEMENT EFFORTS 

 DEA is the lead Federal agency responsible for regulating controlled substances and 

enforcing the CSA. However, the complexity of the cases and the solutions to the 

problems of misuse, overdose, and diversion of prescription drugs requires the 

collaboration of DEA and FDA, as well as state and non-governmental entities. 

 FDA’s OCI works closely with DEA, as well as ICE, on criminal investigations 

when there is a nexus between sales of non-controlled and controlled substances. Both 

FDA and DEA have utilized the full range of regulatory, administrative, and criminal 

investigative tools available, as well as been engaged in extensive cooperative efforts 

with local law enforcement groups, to pursue cases involving controlled substances. 

FDA regularly consults with ICE on their web monitoring procedures for Internet 

pharmacies. Headquarters representatives from both FDA and ICE meet on a regular 

basis to share information, and to coordinate investigations. 

CONCLUSION 

 FDA will continue to carefully review the new drug applications for controlled 

substances, create effective RiskMAPs, and work with DEA to appropriately schedule 

controlled substances and enforce the FD&C Act and CSA to take down bad actors trying 

to illegally sell these products over the Internet. We continue to work with other 

agencies to address the myriad of issues related to synthetic drugs and prescription drug 

abuse. These problems are broad in reach and implications and we are committed to 

collaborating with our partners – Federal, state and local officials, professional societies, 

and industry - to prevent abuse and help ensure that these important drugs remain 

available to appropriate patients through appropriate channels. 

 I would like to thank the Subcommittee for this opportunity to testify today on this 

important issue. I would be pleased to respond to any questions. 

 MR. WHITFIELD. And I thank all of you for your testimony. On this 

first panel, we have individuals with a lot of experience in this area, 

FDA, Customs, DEA, GAO, and many of you heard Bart Stupak in his 

opening statement say, well, there has been a lot of hearings, repeated 

hearings on this issue, and not a lot seems to be accomplished in really 

dealing with the problem. Each of you, as I said, has experience and 

expertise in the area, and we have interagency task forces working on 

this issue. We have working groups working on this issue. 

 So I would like to ask each of you individually, what do you see as 

the major obstacle to effectively dealing with this problem of controlled 

substances being sold on the Internet? Just from your individual 

responsibilities, from your experience, what would you say are some of 

the major obstacles in really effectively dealing with this issue? Mr. 

Stana. 

 MR. STANA. Well, I think there are a number of obstacles. First, just 

the nature of how these websites and Internet sites work make it very 

difficult for law enforcement to trace and do anything about the sales of 

the drugs. They are up for a while, they are down for a while. They 
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change Web names. They change locations. It is just tough to get a 

handle on it. 

 The second thing, though, and I think it is something we can work at, 

is to forge a more committed union among task force members, to be 

sure that we get better data on the exact nature and scope of the problem 

so we can better justify the need for more resources, if the data shows the 

need for it. We can then better target what resources we do get, and we 

get the information needed to assign accountability, not just an ad hoc 

task force operation, but assign accountability for doing something and 

follow up on it, to make sure that this has teeth. 

 Now, in the past, there have been task forces that have tried to do the 

right thing. And I think they do have some success stories as the other 

members of the panel have mentioned. But at the same time, unless you 

have a mechanism that commits resources, assigns accountability, 

establishes performance measures, and measures against predetermined 

goals and objectives, we are just doing more task forces. Finally, I 

would say if you're looking for one dagger to thrust into the heart of this 

dragon, it probably isn't there. If you're going to kill this dragon, it is 

going to be death by a thousand cuts. Every means at every agency's 

disposal needs to be brought to bear to address this problem. 

 MR. WHITFIELD. Mr. Rannazzisi. 

 MR. RANNAZZISI. Thank you, sir. If we were dealing with 

pharmacies that were located domestically only, this wouldn't be a 

problem, because with our indices and our tools to track pharmaceuticals 

that are created in the United States and moved throughout the normal 

chain of commerce to our registrants, we would be able to basically 

handle the problem. 

 The unfortunate thing is that we are dealing with a lot of so-called 

pharmacies that are operating overseas that are not really pharmacies. 

For instance, a couple years back, we worked with FDA on an 

investigation where the pharmacy was not really a pharmacy. It was a, 

for lack of better word, store front in Central America that was not only 

manufacturing, but distributing from a website that was allegedly located 

in Canada. 

 What we are seeing more and more is, websites that are operated 

independently in the United States, but the drugs are coming from one 

overseas site, the financial transaction and the money are going to 

another overseas site. They are not consolidated. It is not like our drug 

traffickers domestically, where if we find the money, we will find the 

drugs; if we find the drugs, we will find the money. 

 There is no regulatory control of these sites. Absolutely none. We 

have regulatory control over all of our registrants here. We can take 

administrative action or criminal action. I don't have a method of 
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reaching out and taking regulatory action against a foreign site. We don't 

have control over them. 

 The same token, it is very difficult to reach out and take criminal 

action against a lot of these sites. Now we have talked about steroids 

already. A couple of people mentioned steroids. Steroids are not 

universally controlled. In fact, they are uncontrolled in several countries. 

For us to go after a violator in that country and ask our counterparts to 

take criminal action against them could be difficult because the 

counterparts are going to say, well, it's legal here. 

 That's the biggest obstacle we are facing right now. Thank you. 

 MR. WHITFIELD. Mr. Ahern. 

 MR. AHERN. Thank you very much. Certainly one of the things we 

need to be doing at our borders is feeding off of information. When 

we're dealing with the millions of parcels that come into our international 

mail facilities and carrier systems, we need to be able to have 

information to do electronic targeting in advance so we can use the 

concepts of risk management successfully upon arrival. Some of the 

things that have been stated by the other panel members about the 

overseas aspect of this and changing identity on a frequent basis adds to 

these challenges. But one of the things we do, as with other drug 

problems, we need to be able to attack it on two fronts, one on the 

demand side and one on supply side. 

 And I think we need to continue to attack through the demand by 

doing the outreach and dealing with those issues that we have been doing 

successfully with the examples that I spoke of in my opening statement. 

And also we need to be able to continue with the supply aspects through 

good strong enforcement operations. We have done some of that through 

Operation Safeguard. And we are going to continue to do that. 

 But I think one of the successful things we will be undertaking in 

January of this year is a very focused special operation that we will be 

using some of the information we have taken historically from the 

seizures and using that for proactive targeting so we can focus on what 

we believe are some of the foreign locations of risk or shippers of risk so 

we can focus our interdiction efforts, our resources, at the border in a 

much more focused and more successful fashion. 

 And then lastly, I would state that in the last year when we have had 

the opportunity to streamline the seizure process which was taking close 

to an hour per seized item, whether it is 10 pills or a pound of cocaine, 

we still had to use the same seizure process, but be able to take this more 

efficient streamline processing and actually do the summary forfeiture 

where we are cutting it down to a minute to two minutes for the 

administrative aspect of it, those types of operational impediments are 

realities that really do constrain our abilities. 
120

 MR. WHITFIELD. Dr. Meyer. 

 DR. MEYER. Well, as is clear from my testimony, I work on the new 

drug approvals side. And we spend quite a bit of time assuring that the 

drugs that we do approve meet acceptable standards of safety and 

efficacy and quality, and that they are scheduled, if they need to be 

scheduled, such that there is informed prescribing and prescribing by 

doctors who are registered under the Controlled Substances Act or under 

the DEA. 

 So speaking from a personal standpoint, I guess it is quite disturbing 

as a physician to see that these mechanisms that we have in place are 

being undermined. And I suppose, again, just speaking from the 

personal standpoint that these ever-changing Internet sites with differing 

sites for the money versus the source of the drugs seems to just 

undermine what is a very well well-tuned system in other ways. 

 So I suppose if I had to name one thing that seems frustrating to me 

on a personal level, it is the lack of being able to really get at some of 

these sources and to identify what they are and how they act. 

 MR. WHITFIELD. Has anyone on the panel had any meetings with the 

IntegriChain representatives? Are any of you aware of IntegriChain? 

 MR. RANNAZZISI. There is at least two, maybe three offices from 

DEA who did meet with IntegriChain. I was not present. 

 MR. WHITFIELD. Okay. The task force that, Mr. Rannazzisi, that 

your agency is a part of, and I guess the Customs is a part of it, what 

other agencies are involved in the task force dealing with this issue? 

 MR. RANNAZZISI. FDA, CBP leads the task force, ICE, DOJ, 

ONDCP. Is there another component of HHS? That's basically it. 

 MR. WHITFIELD. And how often does the task force meet? 

 MR. RANNAZZISI. I believe on a quarterly basis. 

 MR. WHITFIELD. Have you all developed a legislative package or 

anything that you feel would be helpful in dealing with this issue? Have 

you -- I know in reading the testimony, there are few legislative 

suggestions that had been mentioned, but has any -- has the task force 

coming up with any comprehensive legislative method of dealing with 

this? 

 MR. RANNAZZISI. I don't know of any. But I would like to defer to 

my colleague. He might be more familiar with the legislative package 

that comes out of the task force. 

 MR. AHERN. There has not been any legislative framework that has 

actually come out. At this point, the strategic framework has been one of 

the recent undertakings of the group in developing our strategies further 

for the Federal agencies to collaborate with one another on various 

special operations. 
121

 We have also added, as far as the performance measures, taking a 

look at what we can do for improving performance measures, but there 

has not been a legislative undertaking at this point. 

 MR. WHITFIELD. Do you feel there needs to be? 

 MR. STANA. Well, that is really the crux of the recommendation we 

made about having an improved, stronger strategic framework. I think 

experience has shown, since 1999, that these task forces are useful, but 

they have been limited because no one has been placed in charge. 

Discrete milestones have not been established in many areas, and 

accountability hasn't been fixed for certain actions being taken. And I 

think if we strengthened what we already have in place, and assigned 

those tasks and responsibilities, we would go a long way. 

 We would get the kinds of proposals and the kind of legislation, 

perhaps, once we bring to bear all we have in Government and in the 

private sector. 

 MR. RANNAZZISI. May I add something? ONDCP, HHS, and the 

Department of Justice share the National Synthetic Drug Action Plan 

Working Group that investigates -- it looks at all synthetic drugs, 

including pharmaceuticals, methamphetamine. There is a specific sub 

group that is looking at the pharmaceutical problem, and I think that is 

where your recommendations will come from. 

 I think the CBP-led working group is more of a investigative tool. It 

is our ability to not only meet with the public and private sector, but also 

meet with each other and share ideas and network. The National 

Synthetic Drug Action Plan Working Group is where you will see 

recommendations coming from. 

 MR. WHITFIELD. My time is expired. So I will recognize Mr. 

Stupak. 

 MR. STUPAK. Well, thank you, Mr. Chairman. Mr. Rannazzisi, am I 

saying that right? 

 MR. RANNAZZISI. Yes, sir, Rannazzisi. 

 MR. STUPAK. You said you didn't think there was a lot we could do 

because a lot of these are foreign sites, but yet the chairman you asked 

about IntegriChain. And in their investigation, they find that 65 percent 

of these websites are partly or wholly within the United States. So why 

can't we do something here in the United States, if 65 percent of these 

sites are partly or wholly here in the United States? 

 MR. RANNAZZISI. Just because the websites are in the U.S. does not 

mean that is where the trafficking is occurring. 

 MR. STUPAK. Why can't you shut them down if they are in the U.S.? 

 MR. RANNAZZISI. To shut them down, we initiate a criminal 

investigation, which we do. 
122

 MR. STUPAK. And by the time you get that done -- it takes quite a 

while, doesn't it? 

 MR. RANNAZZISI. Yes. 

 MR. STUPAK. There are many more that have taken its place by then, 

right? 

 MR. RANNAZZISI. Yes. 

 MR. STUPAK. Who is in charge of this task force? Is anyone in 

charge? Or are these agencies at this task force level equal partners? 

Mr. Ahern? 

 MR. AHERN. I believe we have a lead responsibility within Customs 

Border Protection because it does focus on the border entry aspect of 

this. But I would say it is a full partnership. And it is a collaborative 

effort and all the different agencies are there. We are bringing together 

both the health aspects of it as well as the regulatory aspects as well as 

the investigative aspects of it. 

 MR. STUPAK. So you would be in charge? Because we talk about 

holding people accountable. So your agency then should be held 

accountable for the lack of nothing being done? 

 MR. AHERN. We would certainly accept responsibility for our role at 

the borders, yes. 

 MR. STUPAK. My frustration, my concern is here is the hearing from 

July 30, 1999, when I asked questions about the interagency task force. 

They had met once or twice. And they were going to do things. And as 

it shows throughout page 231, 232, nothing really got done. And here 

we are six years later still talking about interagency task force, and then 

how that is going to somehow magically solve the issue. But if we listen 

to GAO and in their study, they basically said that look, while the task 

force may be a step in the right direction, as I said in my opening, and we 

have heard here today, you have to really define the scope of the problem 

at the mail and carrier facilities, determine the resources, establish 

performance measures and evaluate progress. And there just doesn't 

seem to be any work around that. Have you looked at the GAO report, 

Mr. Ahern? 

 MR. AHERN. Yes, I have. 

 MR. STUPAK. Well, are you guys working to establish this strategic 

framework? 

 MR. AHERN. Yes, the strategic framework has been completed. 

 MR. STUPAK. What have you done then to address the problem at the 

mail and at the carrier facilities then? 

 MR. AHERN. Within the resource levels we are currently working in, 

as I stated earlier, we are working on targeted and focused enforcement 

operations. We conducted 19 of those operations. We are also looking 

in January of this year to run special operations at our carrier facilities 
123

because I am not satisfied that the results we have had at our express 

consignment facilities thus far, when you compare the interdiction efforts 

we have had at the mail facilities. 

 MR. STUPAK. What recommendations have you made for mail and 

carrier sites? Have you asked them to do anything differently? 

 MR. AHERN. Specifically what we did going back in September 1st 

of 2004, we implemented the abandoned property aspect of it, we were 

capacity challenged with just doing the seizure forms for the -- we 

showed the pictures earlier for mail facilities. Those were at JFK. That 

is when we had actually over a five- or six-month period, 40,000 seizures 

that had accrued over that period of time. 

 Again, as I stated, the one hour for processing actually took our 

officers off of doing front line interdiction efforts just doing the seizure 

paperwork involved. We actually did implement this process to 

streamline it so that we could go ahead and get that down to a minute to 

two minutes for processing so we can get our front line officers back out 

there doing the interdiction effort. I think that is a substantial step 

forward. 

 MR. STUPAK. I am disturbed when you look at the mail places here, 

you take at Miami, from September 1st, to August 31st, 2005, September 

1st, 2004 to August 31st, 2005, one year, Miami, U.S. mail seizes 33,000, 

and yet the FedEx Memphis seizes only six packages. 

 Memphis is the largest facility in the United States and only seizes six 

packages, where Miami seizes 33,000 packages. It doesn't sound like it 

is working very well. 

 MR. AHERN. That is exactly why we are focusing the efforts 

beginning in January with having our resources to focus on special 

operations at consignment hubs. 

 MR. STUPAK. January, have you worked with FedEx or UPS to try to 

get at their facilities? Because there has to be more than six of them 

coming through the largest UPS place -- excuse me, FedEx place in the 

country at Memphis. 

 MR. AHERN. We have a very strong relationship with FedEx -- 

 MR. STUPAK. You have a strong relationship. But what have you 

done to try to knock down on all these things coming through here? 

 MR. AHERN. We have a targeting system that we jointly use with 

their information that provides electronic data for us -- 

 MR. STUPAK. Is this the targeting system that should only take two 

or three minutes to identify a package? 

 MR. AHERN. This will help us with that process, and one of the 

things we are doing additional is having one our field -- 
124

 MR. STUPAK. But has FedEx and UPS accepted that process that 

takes two, three minutes, your surveillance here to get your packages, 

target these packages? 

 MR. AHERN. I think we are talking about two different things as far 

as being able to get the electronic information in advance from FedEx so 

we can actually use that for targeting. We think that is something that 

will prove very fruitful to us, because we are now going to be utilizing, 

through one of our field analysis units, based in Cleveland, specifically 

focused on historical seizure data we have seen in mail facilities, we are 

going to take that to see if there is trends we can identify, to use targeting 

rules for the express consignment facilities. And we begin the operation 

in January. 

 MR. STUPAK. All right. GAO, and Mr. Stana, if I may, you have 

indicated in your report that Customs and DEA and FDA need to come 

up with a strategic framework by which to go after these rogue Internet 

sites, yet, as we have examined our former hearing records and 

correspondence to this committee, I submitted quite a bit here to the 

chairman for entry into the record. They have all promised to do this 

before and they are all working together and they have great cooperation 

and they formed these interagency task forces, but what exactly have 

they been doing wrong up to this point in time? 

 MR. STANA. Well, first, let me say that maybe three months has 

passed since we completed our work, but at the point in time that we 

completed the work, we had not seen a strategic framework in place. 

Now, if that came to be in the last three months, that is really good. But 

we haven't seen it nor have we examined it. 

 MR. STUPAK. Mr. Ahern, will you provide them the strategic 

framework so we can have GAO look at it? 

 MR. AHERN. We would be happy to do that. 

 MR. STANA. Some of the shortcomings of the task forces in the past 

have really circled around nobody being in charge, and no one being 

assigned accountability in a real sense. The commissioner of Customs, 

to his credit, formed the latest task force and they have working groups 

which have done some things, like these special operations and public 

service announcements and other things along those lines. But as far as a 

true partnership with the private sector, as far as sitting with the other 

agencies and the private sector and getting a better handle on the 

dimensions of the problem, how many resources need to be devoted to 

certain areas, which locations, to understand better what type of drugs 

are coming in and which agency is in the best position to address that 

problem, those are things that really haven't been done to any degree. 

And we would be looking for that kind of analysis in a strategic 

framework. 
125

 MR. STUPAK. So in this task force where we are all studying as equal 

partners, you should really have someone in charge to that is going to 

accept responsibility. 

 MR. STANA. Certainly that would be helpful, because someone has to 

assign responsibility, and monitor results. 

 MR. STUPAK. Mr. Rannazzisi, I mentioned in my opening the report 

by the National Center on Addiction and Substance Abuse at Columbia 

University, and it noted that Americans are now abusing prescription 

drugs more than cocaine, hallucinogens, inhalants, and heroin combined. 

The report also found that the abuse rates of prescription drugs by teenagers has increased substantially in just the past decade. One reason 

cited for the recent increase in abuse is easy access of prescription drugs 

through the Internet. Your current approach to these problems seems to 

be failing the American people. 

 What do you believe you can do differently to stop this click with 

your mouse and buy drugs over the Internet? 

 MR. RANNAZZISI. Well, first, I don't think we are failing the 

American people. We are doing what we are charged to do. DEA 

investigates organizations. We go after the largest organizations, the socalled baddest of the bad. For us to go after -- we triage our Internet 

investigations. We make sure that the Internet investigations we are 

going after, like Cyber RX and Cyber Chase, have multiple sites. Cyber 

RX has 200 sites operating domestically. Cyber RX, hundreds of sites 

operating domestically and worldwide and drugs coming in from, you 

know, places like India, we had no idea what those drugs, what the drugs 

coming in, if they are pure drugs, if they are adulterated. We didn't even 

know if those drugs were what they purported to be. 

The fact is, that is what we are supposed to be doing -- 

 MR. STUPAK. What are you doing differently? That is my question. 

 MR. RANNAZZISI. We are doing what we do, what we are charged to 

do, go after organizations, going after the largest organizations behind 

those websites. The public is getting more bang for their buck if we go 

after an organization that is running 200 websites -- 

 MR. STUPAK. I mentioned rapid increase of use of teenagers in the 

last decade. Are you going after teenagers? 

 MR. RANNAZZISI. I am sorry, that -- 

 MR. STUPAK. I mentioned Internet, the increase in use of prescription 

drug abuse by teenagers has increased substantially. You said you are 

going after the baddest of the bad. If this is the biggest increase, are you 

going after those people using, teen-agers using the Internet? 

 MR. RANNAZZISI. I don't think teenagers are running these 

organizations. If you're talking about teenager users, we don't target 

users. 
126

 MR. STUPAK. We are miscommunicating. We are seeing, as 

Dr. Norwood and all of us had indicated, sort of like the click of the 

mouse, while you're out there chasing the bad guy, we are worried about 

the click of the mouse and how to keep that out of here. Maybe we 

ought to look at the Web servers, mail houses, U.S. postal services, to try 

to stop the flow of these drugs instead of worrying about who is behind a 

website. Sixty-five percent of them, as the report shows, are right here in 

the United States. 

 MR. WHITFIELD. The gentleman's time has expired. 

 At this time, I recognize the gentleman from Texas, Dr. Burgess. 

 MR. BURGESS. Thank you, Mr. Chairman. I apologize that I had to 

be out of the room and missed a portion of the testimony. 

 But Dr. Meyer, if I could ask you, there was a, seems like it was 

almost two years ago now when one of the New Orleans television 

stations produced a local news show about drugs that they had bought 

over the Internet. And they had, oh, a fellow there with a mass 

spectrometer to test the drugs to see what was in the drugs. And this was 

not so much done to test whether the active ingredients were present in 

the drugs, but their findings were rather startling to me, the levels of 

cadmium, the levels of chromium, the levels of nickel that presumably 

were in the inert components of these drugs that they bought over the 

Internet. 

 We go into a tailspin up here about Thimerisol, but these were levels 

of cadmium that were clearly in the toxic range. They did some more 

investigation in this report and traced it back to a street corner pharmacy 

in Mexico who bought their drugs from India. 

 I guess my question is, does the FDA have any role in monitoring 

these compounds once they get into our country? Do you all concern 

yourselves at all with these counterfeiters or knock-off medications? 

These were not even generics. These were copies of, I believe, it was 

Lipitor was the drug that they had been mimicking. 

 Since that is a drug that is already approved by the FDA, do you do 

any type of surveillance to see if this -- if we have breached our supply 

chain with these products? 

 DR. MEYER. We are certainly concerned by those kinds of 

considerations. The FDA is, at least as far as the new drugs go, spends 

its time, as I am sure you're well aware, assuring the quality of the 

domestic supply. 

 To the degree that these products are imported, I guess FDA certainly 

has a role in trying to interdict them at entry if they appear to pose a risk. 

 Of course, there is a resource issue there in terms of identifying them 

and then successfully stopping their distribution, if we know them to be 

adulterated or misbranded. 
127

 I am not sure that I have directly answered your question. 

 MR. BURGESS. Is there any type of ongoing surveillance that the 

FDA undertakes so that when we, as consumers, go and buy Lipitor, or 

any other product, that it, not only is it safe and effective and approved 

by the FDA, but any ongoing surveillance to make sure that our supply 

chain has not been compromised, that pharmacies are not stocking drugs 

that they bought off the Internet? It would be pretty tempting if you 

could buy for pennies on the dollar. 

 DR. MEYER. I am not aware of any such efforts but I would be happy 

to take that question back and get you an answer. 

 MR. BURGESS. Very good. I would be very interested in knowing 

that. In general, what is the FDA doing to educate physicians about 

these problems with controlled substances over the Internet? 

 DR. MEYER. Again, I am unaware of any specific educational efforts 

about controlled substances over the Internet. But I will be happy to get 

back to you with that as well. I am not personally aware of it. 

 MR. BURGESS. Well, the chairman referenced a couple of very 

unfortunate cases that occurred in the recent past, and just thinking as a 

clinician in the exam room as you are taking a history of something that 

the doctors really ought to have, ought to have some awareness of, they 

ought to have at their, as part of their perhaps part of their differential, 

could this individual, this young person be taking a controlled substances 

that they have gotten illegally off the Internet? How do you and the 

DEA work together on criminal investigations? 

 DR. MEYER. I know that our Office of Criminal Investigation, 

particularly in cases where controlled substances and noncontrolled 

substances are involved together, do work in collaboration and share 

resources to prosecute such cases. So there is certainly that level. 

 The DEA and the FDA also work together in other ways, as well as 

participating in this task force, and also other discussions about, for 

instance, the education of doctors and patients about the correct 

prescribing use of prescription opiates and other drugs that are highly 

valuable, but also clearly have potential for abuse and danger when used 

in an inappropriate manner. 

 MR. BURGESS. Just overall, what is your impression of the -- how big 

a problem is this, from the FDA's perspective? 

 DR. MEYER. I can't say in terms of the magnitude, you know, the 

volume of the problem. But clearly, the opiates, in particular, are a 

narrow, therapeutic indexed drugs. You need to be well educated. You 

need to know what kind of drug you're dealing with. You need to be 

well educated in how to use them, how to prescribe them. That is part of 

the spirit behind having a registration of physicians. 
128

 So to the degree that the Internet pharmacies may be circumventing 

all those safeguards that the FDA and DEA carefully try to effect, I 

would be very concerned by it. So I can't, again, personally speak about 

the magnitude of it. Clearly from a clinician standpoint, it is very 

concerning indeed to think that there may be circumvention of our 

system that otherwise, I think, is very reasonable and very well thought 

out and executed. 

 MR. BURGESS. To me, it seems like the damage may extend far 

beyond just the, as you point out, the narrow opportunity for someone 

with drugs seeking behavior to find another avenue. Of course, through 

my professional career, people with drug seeking behavior, we will 

occasionally identify those individuals, and it also was a challenge on 

what to do. But if it is just a mouse click away, that sort of takes it out of 

the clinician's office and into a different realm. 

 Just last week, we had a hearing in this committee, or perhaps was a 

health subcommittee about our doctors prescribing enough pain medicine 

to their patient who are in chronic pain. So here we see the other side of 

that dilemma where Mr. Stupak correctly points out that the diversion of 

prescription drugs may be one of the greatest opportunities for misuse or 

for drug abuse in this country, particularly among teenagers. And at the 

same time, we have people on the other side of the equation who 

legitimately need these compounds, and if their doctor has been 

challenged in the past by someone with drug seeking behavior and 

burned, they may be less likely to prescribe the medication that is now 

needed by the verifiable chronic pain patient. 

 So it is a tough problem, one that we need to continue to keep our eye 

on and continue to work on. I want you to please feel free to 

communicate with my office if there are things we can do to be helpful. 

We want to. 

 Mr. Chairman, with that, I have no further questions. I will yield my 

time to any other member who would like to follow up. 

 MR. WHITFIELD. Thank you, Dr. Burgess. At this time, I recognize 

Mr. Ferguson for his questioning. 

 MR. FERGUSON. Thank you, Mr. Chairman. You and Mr. Stupak 

and Dr. Burgess have been asking some really good questions about 

enforcement, largely about enforcement, very important questions, 

serious questions that need to be addressed. 

 I want to pick up on one of Dr. Burgess's themes, which is a little bit 

more toward the drug safety side. And I want to follow up with 

Dr. Meyer if I might. 

 I was reading this -- this is an FDA news release from January of 

2004. It is almost two years ago. And it is on import blitz exams by 

FDA investigators. This news release, which you are likely familiar 
129

with, in that news release, the FDA said that in these blitzes at the mail 

processing facilities all across the country, they found numerous 

examples of improperly labeled drugs, potentially recalled drugs, socalled foreign versions of FDA approved drugs, and, what we are talking 

about a lot today, controlled substances in general. 

 Of the close to 2,000 packages that were searched of the 1,982 

packages that were searched, we are told in this news release, 1,728 of 

them, so, 1,700 and change of the 1,900 and change of those packages 

that were searched had unapproved drug products found in them. That is 

a staggering number. It blows the mind. 

 Dr. Meyer, at the mail facilities, Customs screens packages and then 

refers packages to FDA for review where Customs suspects packages 

contain prescription drugs. Customs suspects them. They are passed to 

FDA. How does FDA determine whether the package contains a 

prescription drug at all, as opposed to an over-the-counter drug or 

vitamins or something, how does FDA determine what the drug is and 

then whether it is a controlled substance? 

 DR. MEYER. I can't give you specifics, but I can say that since the 

time of that report, there were standard operating procedures put in place 

by the FDA at the international mail facilities to best expend our limited 

resources, and clearly, this is a huge issue that outstrips our resources -- 

but to better spend those in a risk-based manner to try to identify which 

packages, perhaps, had the most egregious examples of unsafe drugs, and 

then those are opened and, actually if they contain controlled substance, 

another thing that has more recently happened is those are then given or 

sent to the DEA for DEA action on those. 

 MR. FERGUSON. If you determine that it is a controlled substance, 

because Customs doesn't make that determination. Is that correct? 

 DR. MEYER. Right. That is my understanding. Yes. 

 MR. FERGUSON. So if you determine -- you go through the process 

that you go through and you determine if it is a prescription drug or a 

controlled substance -- and it sounds like what you're describing is a, if I 

can use a different term, an overwhelming problem, you're talking about 

a problem that outstrips the resources that you currently have. 

 DR. MEYER. Well, clearly we saw depictions of the volume that we 

are talking about. To determine what is in the box, you essentially have 

to open it. It is a resource-intensive thing to open it and then to 

determine what is in there, whether they are just prescription drugs, 

whether they are other over-the-counter drugs, whether they are 

controlled drugs, how to handle those particular packages. 

 MR. STUPAK. Would the gentleman yield on that point? 

 MR. FERGUSON. I would be happy to yield. 
130

 MR. STUPAK. Thanks, because I'm a little confused here. Dr. Meyer, 

it seems to me from what staff had told us, it takes you one to two hours, 

close to two hours of paperwork to identify the drug, where Customs and 

Border Patrol does it in three minutes. Why the difference? 

 DR. MEYER. I cannot speak to that personally, Congressman. I 

would be happy to get you an answer, but I can't speak to that personally. 

 MR. AHERN. The three minutes that was talked about was actually 

the administrative processing, not a laboratory analysis or determination. 

 MR. STUPAK. But you don't do laboratory analysis in these two 

hours, that is just to process your paperwork. So I am trying to get at 

why the difference, because what Mr. Ferguson points out is a classic 

example of the pictures we showed, when you go down to Dulles, no 

matter where it is, you guys are doing it in three minutes to see if it 

should or not and you guys are taking two hours. 

 Can you get back with an answer then? 

 DR. MEYER. I will do so, sir. 

 MR. FERGUSON. Reclaiming my time. Getting back to figuring out 

what these substances are, when they are determined that they might not 

be exactly what they say they are, from your knowledge, from FDA's 

knowledge, and your expertise in approving legitimate therapeutic uses 

of controlled substances, that is one of the things that FDA does, you 

figure out what are legitimate uses for these various products, and then 

properly test them and label them and whatnot. 

 How would, and given the scope of this what sounds like a deluge, 

and overwhelming, at times, problem, or situation, that is faced, how 

would you characterize the public health threat that is posed by 

controlled substances that are sold by these rogue Internet pharmacies? 

 DR. MEYER. I'm not sure I can speak to the magnitude of that, but 

clearly FDA has, if you will, a closed system for drug approval where we 

are involved with the domestic distribution of the drugs and the 

prescribing and so on. To the extent that these are outside of that, and 

outside of the normal regulatory and legal framework, I think it is clearly 

a concerning situation that is a very serious situation from the public 

standpoint. 

 MR. FERGUSON. We can boil it down and say is it serious or is it not 

serious. We would probably agree it is serious. You use the term “very 

serious.” 

 DR. MEYER. And I think that is fair. Because clearly, this is -- the 

opiates, in particular, are a very important class of drugs that have very 

legitimate use and perhaps they are underused for legitimate purposes. 

But at the same time, to have a source of these that is outside any kind of 

standard legal and regulatory framework is very serious, yes. 
131

 MR. FERGUSON. What about counterfeit drugs? How would you 

characterize the public health threat posed by counterfeit drugs sold by 

rogue Internet pharmacies? 

 DR. MEYER. I don't know enough about that issue to really opine. 

Clearly, there is probably a very wide spectrum of what a counterfeit 

may be. Some of them may contain the active that they are purported to. 

They may have various impurities. 

 MR. FERGUSON. Just assuming that a counterfeit drug is, by a very 

simple definition, not what it is supposed to be. 

 DR. MEYER. Obviously, that is of great therapeutic concern. 

 MR. FERGUSON. If you were a patient and you needed a particular 

product or drug to address a specific ailment that you had, and you took 

something, whether that made you sick or not, if it wasn't what you 

thought you were taking -- 

 DR. MEYER. It is obviously very concerning. Just to get back to the 

FDA, to the degree that these, any product that is bought over the 

Internet and shipped, is not necessarily assured to be what it purports to 

be, I think that is of significant concern. 

 MR. FERGUSON. The FDA report that I was citing before talked 

about improperly labeled drugs, potentially recalled drugs, so-called 

foreign versions of drugs and controlled substances. So that is why I am 

asking these -- I am using FDA categories to ask these questions. 

Counterfeit drugs, we have talked about controlled substances, I think 

you said you characterized it as a very serious public health threat, could 

we say the same for counterfeit drugs sold on rogue Internet pharmacies? 

 DR. MEYER. I think it potentially could be. It certainly poses a 

serious concern. Whether I would say it is a serious threat or not, I think 

that is integrating other considerations. But it is certainly a serious 

concern. 

 MR. FERGUSON. What about recalled drugs? 

 DR. MEYER. Recalled drugs, they are recalled for a purpose, which is 

they do not meet their regulatory standards to assure their safety and 

efficacy. 

 MR. FERGUSON. For someone getting a recalled drug through a rogue 

Internet pharmacy, would you say that posed a serious public health 

threat? 

 DR. MEYER. I think the very fact that we recalled the drug product in 

the first place implies that, yes. 

 MR. FERGUSON. What about an improperly labeled drug, someone is 

taking a drug that is actually something else but the label says it is, as 

FDA found in these examined packages, an improperly labeled drug. 

Would that, in your estimation, pose a serious public health risk? 
132

 DR. MEYER. That is probably more of a spectrum, because an 

improper label may be a dated label, all the way up to saying it is drug X, 

when, in fact, it is drug Y. So that is clearly a spectrum. But again, that 

would be at least a potential concern. 

 MR. FERGUSON. So essentially, the point I am raising, and I 

appreciate your answering these various questions, we are talking about 

controlled substances today, but you know FDA has cited, and I think it 

is a very legitimate public health concern, if not a very legitimate public 

health threat, that when we are talking about Internet pharmacies, 

particularly these rogue Internet pharmacies, which are multiplying, it 

seems, as Mr. Stupak and others have pointed out, it seems to be 

multiplying, whether it is counterfeit drugs or recalled drugs, or 

improperly labeled drugs or controlled substances, it just seems to me 

there is a very serious public health threat, at least a very potentially 

serious public health threat and certainly, in many cases, a very serious 

legitimate public health threat that are posed by these Internet 

pharmacies. 

 I know that I am out of time, Mr. Chairman. So I appreciate your 

generosity. And I yield back. 

 MR. WHITFIELD. Mr. Norwood is recognized for his questions. 

 MR. NORWOOD. Thank you very much Mr. Chairman. Gentlemen, I 

want you to understand my questions are not intended to criticize you or 

your agency. It is pretty clear that we can hear the frustration in your 

voice that we are having a hard time getting this job done, and that isn't 

necessarily something that should be laid at your door. 

 But let me start by establishing a baseline. Perhaps all of you are 

fathers or grandfathers. Would you agree with this statement: that your 

children can go on the Internet and order today a controlled substance? 

Does anybody disagree with that? 

 MR. STANA. No, I wouldn't disagree with that. 

 MR. NORWOOD. Let the record show, Mr. Chairman, all the panel 

agrees with that. 

 Could anyone tell me then if your grandchild ordered a controlled 

substance, what is the probability today that they would get it? What is 

the percent? What is the possibility that will actually get it in their hand? 

 MR. STANA. Well, in our sample, we ordered 22, we received 14. So 

if you use that as any indication, it would be over 50 percent. 

 MR. NORWOOD. Gentlemen, any other comment? I am impressed if 

we are stopping 50 percent now. Any thoughts? 

 MR. AHERN. I wouldn't offer a sample at this point as far as what we 

would actually intercept. 

 MR. NORWOOD. Well, we do know we are not intercepting a lot, and 

a lot is getting through. Too many. If one gets through, if it is your 
133

grandchild, that is one too many, I guess. Though we are putting a great 

deal of effort into trying to stop this. But I hear in your voices, that you 

are not sure we can stop this, that we have the ability to stop this, or that 

we know how to stop this. 

 Would any of you care to tell me, if there are any Internet pharmacies 

in this country -- in this country, now, not from overseas -- selling illegal 

controlled substances? Do we have them in this country? 

 MR. RANNAZZISI. Absolutely. 

 MR. NORWOOD. Are we closing them down? 

 MR. RANNAZZISI. Yes, we are. 

 MR. NORWOOD. How many are left? 

 MR. RANNAZZISI. That I couldn't tell you, sir, because, again, the 

Internet pharmacies, as we go through our investigations we find more. 

So if I gave you a number today, that number would probably change 

tomorrow. 

 MR. NORWOOD. I am not trying to get too specific. I guess the point 

I am saying is the harder we work, the further behind we get it seems to 

me. So maybe we need to start thinking about another solution to this 

problem. And I don't know what it is. That is part of what I am here to 

try to look and see if any of you have a solution. 

 Most of you have been talking about intercepting drugs once they 

have been ordered, how do we catch them once the grandchildren 

ordered them, OxyContin. 

 Now are any of the agencies having any thoughts or making any 

efforts on how to address this problem, say, at the point of sale? Is there 

another way we could go about this other than checking the mail as it 

comes into the airports and so forth? Have you any thoughts about that? 

 MR. STANA. Most of the existing statutes focus on importation rather 

than purchase. In many of these countries where the Internet sites 

operate, it is not illegal to purchase the drugs in those countries. That is 

why we try to intercept them at the border where importation becomes an 

issue. But I think that there are opportunities to think more creatively 

about a partnership with the private sector, to see what the credit card 

companies, the banks, the consignment carriers, and others can do, to see 

what the Internet operators can do to help us identify the sources of these 

drugs and help take action. 

 It is not enough just to suspect someone is doing something wrong 

with respect to selling controlled substances. You have to prove it. And 

the private sector has been reluctant to engage in these kind of 

investigations and “stop actions” unless they have a lot of evidence to 

help them do so. 
134

 MR. NORWOOD. Well, would it not be illegal today for any citizen 

actually to try to order a controlled substance over the Internet without a 

doctor's prescription? Is that legal? 

 MR. RANNAZZISI. No, sir. It is not legal. 

 MR. NORWOOD. It is not legal. So actually there is something maybe 

can be done. It may be legal for Canada to sell us a drug or India to sell 

us a drug, but it is illegal for us to order it. 

 Are we doing anything in thinking in those terms? 

 Well, you have got a hard job gentlemen and we are not -- the 

problem is, we are not solving the problem. It is not, I think, any fault of 

your own. 

 Mr. Chairman, with your permission, I would like to ask each of you 

to go back to your agencies and submit to this committee some thoughts 

about what else can be done. We are struggling trying to come up with 

an answer. You're struggling to try to solve a problem. But you are very 

involved in it, and you maybe could have some suggestions that 

legislatively or otherwise, that this Congress can do. Because this thing 

has got to get stopped one way or the other. And the way we are doing it 

apparently is not going to stop it. So we have got to find another solution 

to this problem. 

 I thank you for your work gentlemen. I know you're trying. Mr. 

Chairman I yield back. 

 MR. WHITFIELD. Dr. Norwood, thank you. And to follow up on 

Dr. Norwood's comments, when the GAO issued their report in 

September, you recommended a strategic framework, and then 

Mr. Ahern, I think in your testimony a few minutes ago, you said you 

now have a strategic framework. I don't guess the GAO has seen it. And 

this committee is not aware of it either. 

 But what I want to do is, I want to have our staff contact you, 

Mr. Ahern, because I am assuming you're sort of the focal point in this 

task force in developing this framework. And we are going to have 

another panel of witnesses, and IntegriChain is going to be one of the 

companies represented in that testimony, in that second panel. But we 

would like to get with you, our staffs would get together and like for you 

to brief this subcommittee more in detail about this strategic framework, 

and specifically about some issues that we can help address this problem, 

as Dr. Norwood talked about trying to get to the bottom of it and develop 

some sort of solution. 

 So, we will be in touch with your staff and look forward to meeting 

you to go into more detail on that. 

 At this time, I would recognize Mr. Stupak. He had a few additional 

questions he wanted to pursue. 

 MR. STUPAK. Thank you, Mr. Chairman. 
135

 Now, Mr. Norwood, before you leave, there if you take a look at the 

GAO report on page 32 and 33, you will see that back in May, this 

subcommittee asked, May 2001, we asked the FDA commissioner and 

HHS to change some of their procedures so we could deny the personal 

use drugs coming into this country as of July 2005. And we still have 

never received any changes. And you said the changes will have to be 

made legislatively. We just never get a proposal from FDA or HHS to 

make those changes. So I think that is one of the frustrations we see up 

here. 

 Mr. Stana, let me ask you this: In a July 26, 2004 letter Mr. Dingell 

received from the Drug Enforcement Agency, DEA, we had asked 

specifically whether DEA had a coordinated comprehensive written plan 

to address this growing threat to our public health. And DEA indicated 

they had a national drug control strategy of this current administration. 

 Have you had a chance to review that strategy, the GAO? 

 MR. STANA. We have seen the response to Mr. Dingell's letter, yes. 

We haven't reviewed all the actions and all the implementation steps that 

have been taken in response to the plan but we have seen the broad 

strokes it outlines. 

 MR. STUPAK. Was it similar to the recommendations you made here 

that we need to get a strategic plan going? 

 MR. STANA. Well, there is a difference between a strategic plan and 

a strategic framework. And not to get too wonkish on you, but with a 

strategic plan you outline broad themes and goals and objectives. But 

with a strategic framework, we are talking about assigning responsibility, 

placing someone in charge, establishing milestones and holding people 

accountable. It has worked with other governmental organizations with 

other issues. And we think it can work here. But it is not simply a 

strategic plan. 

 MR. STUPAK. Does everyone on the panel, Mr. Rannazzisi and 

Mr. Ahern and Dr. Meyer, do you all agree that Customs are basically 

the lead agency on this? Can we establish that today? Mr. Rannazzisi. 

 MR. RANNAZZISI. I think the problem is that each agency has a 

different component of the overall problem. 

 MR. STUPAK. Yes or no? 

 MR. RANNAZZISI. It depends on what component you're talking 

about. Are you talking about the distribution of controlled substances 

domestically from Internet sites? 

 MR. STUPAK. Maybe that is the problem we have. Maybe you are 

too busy fighting over turf and not taking the lead. We have to establish 

someone is in charge here. This has obviously been going on -- this is 

my sixth year in this hearing. I will be here next year doing number 
136

seven and eight too, if we leave it to this kind of rigmarole. Someone 

has to be in charge, right? 

 MR. RANNAZZISI. Again, since there is so many different 

components of this problem, you have CBP is in charge of the task force. 

And we are working well together. We are working well with FDA and 

the rest of the components. 

 MR. STUPAK. If you're working so well, why is there a dramatic 

increase every year? It is not working. That is the reason why we are 

having this hearing. Right? 

 MR. RANNAZZISI. No. I don't believe that is the case. 

 MR. STUPAK. Okay. Let me ask this. 

 Dr. Meyer, do you believe to require Internet pharmacies on their 

Web page, since 65 percent are, in part or wholly, served here in the 

United States, that if they had their name address and telephone number 

and a place of business do you think that would help? 

 DR. MEYER. I am not sure I have the expertise to say that. But I 

think it certainly makes sense that any Internet pharmacy -- 

 MR. STUPAK. How about a list of each state where the pharmacy is 

licensed or dispenses prescription drugs. Would that help? 

 DR. MEYER. To the degree that the practice of pharmacy is under 

state control, it seems that would make sense. 

 MR. STUPAK. How about the name of each individual who serves as 

a pharmacist for the purpose of the site in each site where the individual 

is authorized by law to dispense prescription drugs. Would that help? 

 DR. MEYER. Again, to the degree that these would match what is 

required of pharmacies that are bringing brick and mortar, I think they 

certainly make sense. 

 MR. STUPAK. How about that if the site provides medical 

consultations and the name of those providing the consultation type of 

license is held and the states in which the licenses are held, would that be 

helpful? 

 DR. MEYER. I think if there is going to be medical consultation it 

would be helpful to know who is providing the consultation. I would 

certainly expect that if I were in a doctor's office. 

 MR. STUPAK. Do me a favor, go back to whoever is in charge at the 

FDA ask them to comment on that, that legislation that has been sent 

since 2000, we have been waiting for the FDA to comment on. 

 DR. MEYER. I will do so, sir. 

 MR. STUPAK. Let me ask this question. I think I went through that 

one already. 

 Let me go back to Mr. Ahern. We talked a little bit about Memphis 

having six packages, and yet Miami is getting 33,000. Customs have 

people at Memphis, do they not, at this facility? 
137

 MR. AHERN. Yes, we do. 

 MR. STUPAK. Why the difference then, if one is 33,000 packages, the 

other one is only six. Why the big discrepancy? 

 MR. AHERN. I can't explain the discrepancy. And that is one of the 

things I share your same concern, and that is why we are going to have 

the undertaking for a special enforcement operation beginning in 

January. 

 MR. STUPAK. Is it the use of x-rays? Does FedEx there use x-rays? 

 MR. AHERN. There is x-ray technology. 

 MR. STUPAK. Does everything go through those x-ray equipments 

like they do at Miami? 

 MR. AHERN. No. 

 MR. STUPAK. Do you know what percentage goes through? 

 MR. AHERN. No, I don't. But I would be happy to report back on 

that. 

 MR. STUPAK. Hasn't that ever puzzled you, why if you only get six 

packages in Memphis, which is the largest facility, and you get 33,000 

out of Miami? 

 MR. AHERN. Absolutely. And that is exactly why we are taking a 

look through two different initiatives, beginning with a special operation 

in January, taking a look at all the historical seizures we have made in 

our mail facilities throughout the country, using that shipper and 

commodity information to develop targeting rule so we can use a more 

efficient risk-based approach with the career facilities. 

 MR. STUPAK. When you were made aware of this great discrepancy 

between Miami and FedEx in Memphis? 

 MR. AHERN. I reviewed the year end numbers back at the end of this 

fiscal year. 

 MR. STUPAK. So November, just a year, October 1st. 

 MR. AHERN. Within the last couple of months, yes. 

 MR. STUPAK. Other than working together cooperatively, do any of 

you others have any other comments we could possibly do that would 

help establish a good framework so we can try to crack down on this 

drug Internet pharmacy problem? I mentioned a couple. Any of you 

have any like websites, like, medical consultants? 

 MR. AHERN. Some of the things we talked about earlier, acting as far 

as the demand, making sure people are aware as far as the concerns that 

they purchase from online pharmacies, also looking through the task 

force, to go ahead and have the Department of Justice attorneys take a 

look at, if there can be a government and public sector partnership to 

provide information about online pharmacies so we can, again, have 

some information about the reliability of what people may be purchasing 
138

online. So that is another undertaking that we are in the final stages of 

review at this point through the task force. 

 MR. STUPAK. Have you taken a look, Mr. Ahern, at this GAO report, 

Strategic Framework Would Promote Accountability and Enhance 

Efforts, have you taken a look at it at all? 

 MR. AHERN. Yes, I have. 

 MR. STUPAK. Do you agree with the notification process which you 

seem to use, your agency, on your summary forfeiture, do you think we 

could really dry up a lot of these drugs coming in if we use a summary 

forfeiture which basically says this, if I have it right, that when you get a 

drug in you don't think it looks proper, you send a letter to the addressee 

that basically says, we have received a shipment here that doesn't look 

proper, we don't know if this is obtained properly in this country, 

therefore, if you want to come claim it, otherwise we are going to discard 

it. Is that basically summary forfeiture? 

 MR. AHERN. I would say absolutely, and that would increase our 

capacity to do effective interdiction at the borders much more so. 

 MR. STUPAK. That takes about three minutes when you do it, right? 

 MR. AHERN. Three minutes versus one hour and beyond, as far as the 

72,000 pieces we seized last year when we went through this forfeiture 

process, we only had 120 people that came back looking to go through 

the full -- 

 MR. STUPAK. Is there any reason why FDA can't do the same thing 

so we crack down on these big supplies we see at Dulles and Miami, 

can't they do a summary forfeiture? 

 MR. AHERN. I don't know what their capabilities would be for 

summary forfeiture. But that is certainly something that works as an 

opportunity for us and I would defer to FDA and HHS on that. 

 MR. STUPAK. I would refer FDA and you to page 32 and 33 outlines. 

That is what I talked about earlier when I talked about May 2001, when 

we finally impressed upon FDA to do this and here we are five years 

later waiting for legislative proposals. 

Mr. Stana, any reason why, though, you couldn't do a summary 

forfeiture. 

 MR. STANA. Obviously they need legislation to do that. If CBP or 

FDA summarily destroys drugs, they may be losing an evidence trail, 

which could attempt to connect dots among purchasers. Number two, 

watch for due process. Again, they would need a legislative change. 

 MR. STUPAK. But the process, due processing does not take effect 

until you take control of it. So if you reject the package when it comes 

in, then there is probably requirements. 

 MR. STANA. That's a possibility. 

 MR. STUPAK. Dr. Meyer, care to comment on that? 
139

 DR. MEYER. As far as the actual seizure of the package, I think 

clearly as is stated there are legal problems. 

 MR. STUPAK. Such as? 

 DR. MEYER. Well, I'm not sure I understand all the ramifications of 

that, but I think they were cited properly by the GAO, the gentleman 

from GAO. 

 MR. STUPAK. We're talking about summary -- my time is up -- 

summary forfeiture. That doesn't kick in unless you take control of it. If 

it comes in and not properly marked, physical location and address, you 

can reject so it can never get that. 

 MR. WHITFIELD. I might ask DEA one other question, Mr. 

Rannazzisi. I understand there is some difficulty with doctor-patient 

relationship as relates to prosecutions. Would you elaborate on that 

briefly? 

 MR. RANNAZZISI. There's no statutory definition of what a doctorpatient relationship is. DEA has taken the view there should be inperson examination and medical history before any prescription is given. 

That view is shared by the American Medical Association and the 

Federation of Medical Boards, national association. 

 MR. WHITFIELD. I want to thank the first panel, and I look forward to 

working with Mr. Stupak when Mr. Ahern, and you and whoever you 

want to come with you, comes up and does the briefing on the strategic 

framework. As I said, our staff will be in touch with you about that. 

 It's going to take about five minutes for them to set up for this second 

panel, so we're going to recess for about five minutes, then we're going to 

come back and start the second panel. Thank you very much. 

 I want to thank you on the second panel. It has been quite exciting to 

sit and listen to these questions and comments, but we do appreciate your 

being here on this important subject, and we look forward to your 

testimony. 

 On the second panel today we have Mr. Joshua Halpern with 

IntegriChain. We have Mr. James Dahl, who is formerly with the FDA 

Office of Criminal Investigations. We have Mr. Mark MacCarthy, who 

is senior vice president, public policy, at VISA U.S.A.; Mr. Michael 

McEneney, who is an attorney with Sidley, Austin, Brown, & Wood, 

representing, I suppose, MasterCard International. We have Mr. Bruce 

Townsend, who is vice president of corporate security for FedEx. We 

have Mr. Dan Silva, corporate security manager for UPS; Mr. Andrew 

McLaughlin, senior policy counsel for Google; and Mr. John Scheibel, 

vice president of Yahoo!. So once again, thank you for being with us. 

 As you understand, whenever we do an investigation and oversight, 

we ask that everyone testify under oath, and before doing so, do any of 
140

you have any attorneys that will be advising you today? Okay. Do you 

object to testifying under oath? 

 If you would stand, and I will swear you in. 

 [Witnesses sworn]. 

 MR. WHITFIELD. Okay. All of you are sworn in now and we look 

forward to your testimony. 

 And, Mr. Halpern, you are recognized for your opening statement. 

TESTIMONY OF JOSHUA HALPERN, VICE PRESIDENT, 

INTEGRICHAIN, INC.; JAMES DAHL, FORMERLY WITH 

FOOD AND DRUG ADMINISTRATION, OFFICE OF 

CRIMINAL INVESTIGATIONS; MARK MacCARTHY, 

SENIOR VICE PRESIDENT, PUBLIC POLICY, VISA, U.S.A., 

INC.; MICHAEL McENENEY, ATTORNEY, SIDLEY AUSTIN 

BROWN & WOOD, LLP, MASTERCARD INTERNATIONAL; 

BRUCE TOWNSEND, VICE PRESIDENT, CORPORATE 

SECURITY, FEDEX CORPORATION; DAN SILVA, 

CORPORATE SECURITY MANAGER, UPS; ANDREW 

McLAUGHLIN, SENIOR POLICY COUNSEL, GOOGLE, 

INC.; AND JOHN SCHEIBEL, VICE PRESIDENT YAHOO! 

INC. 

 MR. HALPERN. Thank you, Mr. Chairman and members of the 

committee. My name is Josh Halpern, and I represent IntegriChain, a 

Princeton, New Jersey, company that helps pharmaceutical 

manufacturers to combat illicit activities that threaten their products and 

supply chains. 

 In November of this year, IntegriChain examined 180 websites that 

claimed to sell Schedule II, III or IV prescription medicines. We 

reviewed each website for the purported availability of 9 scheduled 

substances and 13 branded medicines containing those substances. No 

purchases were made as part of this survey; however, we examined in 

each case whether our researchers could add one of the nine substances 

to an electronic shopping cart and whether we were then invited to 

provide payment and other information to complete the transaction. 

 We also examined whether certain websites in our sample appeared 

to be operated by a common entity or whether they engaged in a, 

quote/unquote, bait and switch, ultimately selling the consumer not a 

product, but an informational or pharmacy listing service. Please also 

note that no VIPPS-approved Internet pharmacies were included in our 

sample of 180 websites. 

 At this time we can share the following findings from our survey. 

First, excluding paid information and listing services, and filtering for 
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related websites that are part of a website ring where you have multiple 

portals and an anchor website, we believe our sample of 180 websites 

represents a maximum, and I emphasize maximum, of 103 distinct 

operations that sell scheduled prescription medicines. 

 Two, only 18 percent of this filtered list of websites claim to sell 

Schedule II medicines in our product lists. Only 44 percent claimed to 

sell Schedule III medicines in our product list. By comparison, 

83 percent claim to sell Schedule IV medicines in our product list. 

 Three, 58 percent of surveyed websites, according to the free Internet 

information service, the Wayback Machine at archive.org, appear to have 

been active Internet pharmacies or related services for over one year. 

 And, finally, 65 percent, as has been mentioned earlier today, of the 

surveyed websites are hosted on servers located within the United States. 

 Because fraud and misrepresentation are commonplace in what might 

be called the deep Web, the actual on-line availability of Schedule II and 

III medicines may be even lower than our findings suggest. Purdue 

Pharma has given us permission to share the summary findings of an 

analysis of an on-line OxyContin distribution we prepared on their behalf 

in August and September of this year. In that project we conducted indepth reviews at 122 websites that solicited consumer business for 

products containing oxycodone. We researched businesses related to 

those websites, and we also used chat rooms and forums related to online drug buying to examine consumer comments about their experience 

with these websites. 

 Through this process we found only 6 websites out of 122 that 

credibly offered to sell OxyContin. Even then, no purchases having been 

made, we could not exclude the possibility that the six websites do not 

actually ship OxyContin to the consumer, but rather a counterfeit or other 

product that does not contain oxycodone. 

 Ultimately we believe that our survey offers good news for law 

enforcement and private sector companies responsible for the integrity of 

U.S. prescription medicine distribution. While our survey found 

Schedule IV prescription medicines to be broadly advertised in Internet 

pharmacies, our findings seriously questioned whether Schedule II and 

III prescription medicines are as available on line as might be indicated 

by a casual search of the Internet through a search engine like Google or 

even a scan of Internet pharmacies that claim to sell those products. 

 Admittedly, our product list and website sample are not 

comprehensive. However, we believe our survey's constraints and the 

potential for fraud we have cited above make our estimate of Schedule II 

and III availability if anything conservatively high. Our sample of 

websites is limited to those that at least offered a Schedule IV medicine. 

Thus, our survey does not reflect the many transient websites that market 
142

erectile dysfunction products together with a handful of other 

unscheduled prescription medicines. 

 Industry estimates of the total number of Internet pharmacies vary 

greatly. In our work with the pharmaceutical industry, we often work 

from the assumption that no more than 5,000 distinct website rings 

distribute prescription medicine on the Internet at a given time. If one 

accepts this assumption, fewer than 1,000 distinct website rings 

distribute Schedule II prescription medicines. Meanwhile, other data 

points in our survey suggest a concerted effort to take down those 

websites that illegally distribute scheduled prescription medicines could 

have a significant impact on illicit product availability. 

 Given that a majority of the websites in our sample appear to have 

been on line for over one year, it is likely that many consumers have 

become accustomed to purchasing from specific websites at specific 

domains; meanwhile nearly two-thirds of those websites appear to be 

hosted in the United States. If the number of websites selling Schedule II 

and III prescription medicines is limited, and if many, perhaps most, 

have multiyear histories, we believe that a comprehensive assessment of 

such websites is feasible. We also believe that programmatic action 

against those websites proven to illegally distribute would disrupt what 

appears to have been historically a stable community of websites. 

 We do not suggest that increased action can altogether eliminate 

illicit on-line distribution. At the end of the day, some consumers will go 

to great lengths and take shocking risks to buy scheduled medicines from 

on-line sources. Rather, we suggest that for some suppliers the apparent 

stability of the status quo may hold a commercial appeal that would be 

absent in the presence of increased risk and instability. 

 We hope that by sharing our findings at this time, we have conveyed 

the potential for programmatic ongoing action to materially reduce illicit 

on-line availability of scheduled prescription medicines. Thank you for 

the opportunity to testify today, and I welcome your questions. 

 MR. WHITFIELD. Thank you. 

 [The prepared statement of Joshua Halpern follows:] 
143

PREPARED STATEMENT OF JOSHUA HALPERN, VICE PRESIDENT, INTEGRICHAIN, INC. 
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 MR. WHITFIELD. Mr. Dahl, former Assistant Director, Office of 

Criminal Investigations, FDA. 

 MR. DAHL. Mr. Chairman, Mr. Stupak, members of the committee, 

thank you for the opportunity to testify today before you on this 

important issue. I'm here today because I share some of Mr. Stupak's 

frustrations on these matters. I do not purport to represent the official 

position of the Government on any topic, but I do hope to share the 

interests and opinions and probably frustrations of the 185 Special 

Agents of FDA's Office of Criminal Investigations. 
167

 The dangerous drug products being discussed today are sold using a 

number of schemes with an endless number of variations. The most 

common is the direct Internet sell of finished dosage form drugs. The 

websites of most concern are those that offer controlled substances along 

with many noncontrolled lifestyle drugs. 

 The interdiction of the small parcels containing the drugs is a difficult 

situation given the enormous volume of packages, the lack of sufficient 

government resources, and the cumbersome bureaucracy surrounding the 

seizure and ultimate destruction of the products. The purveyors of these 

products operate in a largely anonymous fashion through the use of 

complex networks, sometimes involving hundreds of foreign and 

domestic domain registrations, dozens of Internet service providers and 

host computers at sites all over the globe, multiple packaging and 

shipping centers, and numerous domestic and international credit card 

processing and banking relationships. 

 Another problem is the use of the Internet to distribute dangerous 

pharmaceutical chemicals intended for use by young people as 

hallucinogenic, weight loss, rave, or party drugs. Some of these 

chemicals are new designer drugs which may not be covered by the 

Controlled Substance Act. Others are used in over-the-counter drugs 

often sold in bulk quantities and frequently consumed by teenagers in 

superpotent capsules. 

 A common method of distribution of these chemicals is the use of 

Internet chat rooms or message boards at which the products are 

discussed anonymously. The chat rooms provide methods for use, 

including the required dosage and identities of websites offering the 

dangerous products. 

 The websites themselves are usually full of disclaimers such as not 

intended for human use or for research purposes only. These products 

are extremely dangerous because of the experimental method of dosage 

and the word-of-mouth tendency to call them legal and, by inference, 

safe products. 

 A couple of examples. Earlier this year five young people died over a 

three-month period after overdosing on DXM, a common ingredient in 

OTF cough medications. The bulk material was purchased from an 

Asian chemical supplier, shipped to the U.S., placed in the capsules in 

Indiana, and sold nationwide over a domestic Internet site. Although the 

FDA public health notice and follow-up on this particular case was weak, 

OCI was very successful in quickly arresting the seller of this deadly 

product, thereby shutting down his operation. 

 In a 2003 case, an OCI investigation led to a mail fraud conviction for 

an individual selling DNP under the name Dr. Evil. He was promoting 

DNP for weight loss and body-building uses, and his sales were linked to 
168

the death of at least one individual and several other serious overdoses. 

DNP used for weight loss resulted in numerous deaths in the 1920s and 

1930s and has been cited as one of the primary reasons of the passage of 

the Food and Drug Act in 1938. Here we are again. 

 Other illegal drug schemes involve products intended for athletic 

enhancement. The well-publicized BALCO case being investigated by 

the IRS and FDA/OCI involves the illegal distribution of THG to 

professional and world-class athletes. Because THG was not yet listed as 

a controlled substance analog, the primary criminal drug violation is a 

Food, Drug and Cosmetic Act offense. You can be sure that other 

steroid analogs are constantly being developed for use in international 

athletic circles. 

 Along the same line, huge quantities of human growth hormone are 

being illegally imported from Asia and sold to aspiring young athletes 

along with illegal steroid products. 

 OCI has been involved in many joint criminal investigations with 

DEA and other agencies. OCI actively seeks these joint investigations in 

order to leverage its meager resources and weak laws. 

 In August 2005, I and other OCI colleagues received a briefing at the 

DEA Special Operations Division on their relatively new program for 

including Internet controlled substance offenses as part of DEA's 

multiagency SOD effort. This is clearly a step in the right direction and 

seeks to integrate and analyze all available U.S. Government information 

in one location. DEA extended an invitation to OCI to participate in this 

effort, but to date resource limitations have precluded OCI from 

assigning anyone to DEA/SOD. 

 In my opinion FDA will not act on its own to emphasize and enhance 

OCI's potential contributions to a more robust law enforcement effort. 

Congress will have to prod the agency through direct appropriations for 

these efforts and/or through more aggressive congressional oversight. 

 I believe new legislation should be introduced, and OCI has 

suggested to FDA that new legislation be introduced for years, to 

enhance the law enforcement part of the agency. Let me suggest today 

that this legislation in the least should call for more FTEs and operational 

funding so OCI can enhance its field and headquarters investigative and 

analytical efforts, begin to establish a more formal program to pursue 

criminal targets in foreign countries, and fully participate in multiagency 

efforts such as DEA/SOD initiatives. 

 The legislative effort should also call for better laws to address 

pharmaceutical crime, including stronger maximum penalties, improved 

sentencing guidelines, administrative subpoena authority, direct 

forfeiture authority, and a simplified and efficient method for interdicting 
169

and disposing of illegal imports. I'll be pleased to continue to assist the 

committee staff in any way and to answer any questions. 

 MR. WHITFIELD. Thank you very much. 

 [The prepared statement of James Dahl follows:] 

PREPARED STATEMENT OF JAMES DAHL, FORMERLY WITH OFFICE OF CRIMINAL 

INVESTIGATIONS, FOOD AND DRUG ADMINISTRATION

 Mr. Chairman and members of the committee, thank you for the opportunity to 

testify today on this important issue. I appear before you as the recently retired Assistant 

Director of the FDA’s Office of Criminal Investigations (OCI). I do not purport to 

represent the official position of the government on any topic, but I do hope to share the 

interests and opinions of the hard working special agents of FDA/OCI who have had 

considerable experience with many of the issues you are addressing today. 

 As you know the problem of foreign and domestic internet sales of controlled 

substances and other dangerous pharmaceutical products is a large and complex issue that 

appears to be growing exponentially. The problem is complicated by a myriad of 

political, commercial, public health, education, legal, and enforcement issues. I would 

like to direct my comments today to matters most closely related to the criminal 

enforcement component of the issue. 

 These dangerous drug products are sold using a number of schemes with an endless 

number of variations. The most common is the direct internet sale of finished dosage 

form drugs which too many Americans have come to view as a quasi- legal source for 

obtaining what they choose to believe, but are unable to verify, are legitimate drugs. The 

websites of most concern are those that offer controlled substances along with many noncontrolled “lifestyle” drugs. These websites often tout on-line physician consultations 

that almost always result in the sought after prescription. Although DEA regulations do 

not recognize this as a valid doctor patient relationship the various state laws regulating 

non-controlled prescription drugs vary widely on what constitutes that relationship. The 

propensity of these websites to accept any type of consumer supplied prescription ensures 

their continued growth in sales. Many other websites offer these dangerous products 

without any prescription whatsoever. The only real concern of the owners of these 

internet operations is not the health and well being of the consumer, but their ability to 

collect payment through the credit card used for the purchase. 

 Any kind of meaningful interdiction of the small, and not so small parcels, containing 

these drug products is almost impossible given the enormous volume of packages, the 

lack of sufficient government resources, and the cumbersome bureaucracy surrounding 

the seizure and ultimate destruction of the products. The purveyors of these products 

operate in a largely anonymous fashion through the use of complex networks sometimes 

involving hundreds of foreign and domestic website domain registrations, dozens of 

internet service providers and host computers at sites all over the globe, multiple 

packaging and shipping centers, and numerous domestic and international credit card 

processing and banking relationships. 

 Another problem is the use of the internet to distribute dangerous pharmaceutical 

chemicals usually intended for use by young people as hallucinogenic, weight loss, rave 

or party drugs. Some of these chemicals may themselves be controlled by the DEA, but 

others are new designer drugs that may or may not be legally defined as controlled 

substance analogs. Even some over the counter (OTC) drugs are being sold in bulk 

quantities, put into capsules or other forms, and sold to teenagers as “legal” products. A 

common method of distribution of these chemicals is the use of internet “chat rooms” or 

message boards in which the products are “discussed” anonymously by interested parties. 

Methods of use including dosage and preparation are “discussed,” and websites selling 
170

the dangerous products are identified in the “chat rooms.” The websites themselves are 

usually full of disclaimers saying “not intended for human use” or “for research purposes 

only.” But our experience is their customers intend to use and/or further distribute the 

drugs, and the sellers clearly understand and cater to the (human) uses to which their 

products will be put. 

 The above described products are extremely dangerous not only because of the 

chemicals themselves, but especially because of the experimental method of self-dosage 

and the word of mouth tendency to call them “legal” or “natural” and by inference “safe” 

products. A few examples: 

•Earlier this year five young people died over a three month period after overdosing 

on DXM (dextromethorphan), a common ingredient in OTC cough medications. The 

bulk material was purchased from an Asian chemical supplier, shipped to the United 

States, placed into capsules in Indiana, and sold nationwide over a domestic internet 

site. Although the FDA public health notice and follow up on this particular case 

was extremely weak, OCI was very successful in quickly identifying and arresting 

the seller of this deadly product thereby putting him out of business. 

•In another OCI case worked jointly with the DEA, search warrants executed at a 

location selling DXM, ecstasy analogs, and other controlled substance analog 

products disclosed a drug production and distribution operation that was filled with 

trash, lacked any attempt at GMPs, and had hazardous materials and other chemicals 

stored without any regard to safety. At least one death has been directly linked to 

this operation. 

•A 2003 OCI investigation led to a mail fraud conviction for an individual selling 

DNP (2,4 Dinitrophenol) over the internet using the name “Dr. Evil.” He was 

promoting DNP for weight loss and body building uses, and his sales were linked to 

the death of one individual and several other very serious overdoses. DNP use for 

weight loss resulted in numerous deaths in the 1920s and 1930s and has been cited as 

one of the reasons for the passage of the Food and Drug Act in 1938. 

 Other illegal drug schemes involve products intended for athletic enhancement. The 

well publicized BALCO case being investigated by the IRS and FDA/OCI involves the 

illegal distribution of THG (tetrahydrogestrinone), to professional and world class 

athletes. Because THG was not yet listed as a controlled substance analog the primary 

criminal drug violation charged in the indictments is a Federal Food Drug and Cosmetic 

Act offense. You can be sure that other steroid analogs are constantly being developed 

for use in international athletic competition circles. 

 Along the same line huge quantities of human growth hormone (HGH) are being 

distributed illegally in the U.S. for athletic enhancement, fat loss, and age-slowing 

purposes. Because of its propensity for abuse and the dangers associated with 

unapproved use, HGH is addressed by a specific FD&C Act section making all off-label 

distribution and possession with the intent to distribute illegal. 21 USC 333(f). The 

growing abuse of human growth hormone can be linked to FDA’s inaction with respect to 

enormous quantities of Asian HGH being allowed to cross our borders. Many American 

firms now openly import bulk amounts of HGH, and the problem is worsening daily. 

Too often these growth hormone products end up being distributed to aspiring young 

athletes along with illegal steroid products. 

 OCI has been involved in many joint criminal investigations with the Drug 

Enforcement Administration, the Bureau of Immigration and Customs Enforcement, the 

Federal Bureau of Investigation, the Postal Inspection Service, and various state and local 

law enforcement agencies. OCI actively seeks these joint investigations in order to 

leverage its very meager FTE resources of only 185 special agents. Joint cases also assist 

OCI investigations through the application of modern law enforcement powers, which 
171

otherwise are not always available to the FDA. These include criminal laws that 

adequately address the offensive conduct, maximum sentences and sentencing guidelines 

that effectively deter and punish that conduct, direct forfeiture authority that allows for 

effective dismantling of criminal organizations and the seizure of illegal proceeds, and 

administrative subpoena authority to promote timely, efficient and effective 

investigations. 

 In August 2005 I and an OCI colleague received a briefing at the DEA Special 

Operations Division (SOD) on their relatively new program for including internet 

controlled substance intelligence as part of the multi-agency SOD effort to analyze and 

track this type of criminal activity. This is clearly a step in the right direction and seeks 

to integrate and analyze all available U.S. Government information in one location. DEA 

extended an invitation for OCI to participate in this effort and it was clearly understood 

that there were mutual benefits to be obtained through the sharing of information on a 

real time basis and leveraging our combined skills and interests. To date, resource 

limitations have precluded OCI from assigning anyone to DEA/SOD. 

 The most current information I have is that FDA/OCI has two headquarters FTEs 

whose primary duties are to address internet crime (although drugs are their primary 

focus other illegal products sold over the internet are also their responsibility). There are 

no field agents fully devoted to this or any other specific issue within OCI’s jurisdiction. 

In addition OCI has no presence in overseas locations where much of this problem 

originates. 

 Although most of the drugs discussed here today fall within the primary jurisdiction 

of the DEA and the Controlled Substances Act, FDA/OCI must be part of the overall 

enforcement strategy if the problem is to be fully addressed. There are just too many 

emerging, and as yet non-controlled, designer drugs, lifestyle drugs, and other related 

prescription drug investigations to leave OCI and FDA out of the enforcement part of the 

solution. But in my opinion FDA will not act on its own to emphasize and enhance 

OCI’s potential contributions to a more robust enforcement effort. Congress will have to 

prod the agency through direct appropriations for these efforts or through more 

aggressive Congressional oversight. 

 Recent Congressional efforts to pass new legislation to regulate internet drug sales 

have become bogged down in the complex political, legal, and commercial issues we 

read so much about. These problems must be overcome. In my personal (FDA/OCI 

influenced) opinion, any new legislation should also enhance the FDA portion of the 

enforcement solution to this problem. I suggest that the legislation include provisions 

for: 

•More FTEs and operational funding so OCI can enhance its field and headquarters 

investigative and analytical efforts, begin to establish a formal strategy to effectively 

pursue criminal targets in foreign countries, and fully participate in multi-agency 

efforts such as the DEA/SOD initiative; 

•Better laws to address pharmaceutical crime including: more severe maximum 

penalties linked to the actual or potential harm to individuals; improved sentencing 

guidelines; administrative subpoena authority; direct forfeiture authority; and a 

simplified and efficient method for interdicting and disposing of illegal imports. 

•Extra-territorial jurisdiction allowing all U.S. law-enforcement agencies to prosecute 

foreign based individuals and organizations selling illegal dangerous drugs in the 

U.S. marketplace. 

 I would be pleased to continue to assist Committee staff in addressing any of the 

issues discussed here today. Thank you for the opportunity to contribute to this important 

discussion. 
172

SUMMARY 

•Description of the problems associated with internet drug distribution 

 Direct finished dosage form drugs through complex international systems 

 

 Pharmaceutical chemical and CS analog sales advertised through internet “chat 

rooms” and message boards 

 Dangerous drugs for athletic enhancement, weight loss and other uses 

 

 Not all of our most dangerous products are covered by the CSA 

•Effective enforcement methods 

 Joint investigations (FDA/OCI – DEA – FBI – ICE, etc.) 

 Sharing/Analysis of intelligence (DEA/SOD offer to FDA/OCI) 

 

•Needs / Solutions 

 Realization by FDA that criminal enforcement cannot remain status quo 

 Increased in FTE resources and operational funding for FDA/OCI 

 New legislation to provide FDA with necessary enforcement tools including 

stricter penalties, better sentencing guidelines, administrative subpoena authority, 

direct forfeiture authority, and authorization the efficiently interdict violative 

products at ports of entry 

 MR. WHITFIELD. Mr. MacCarthy, with VISA. 

 MR. MACCARTHY. Thank you, Chairman Whitfield, Ranking 

Member Stupak and members of the committee. My name is Mark 

MacCarthy, senior vice president for public policy for VISA U.S.A. 

Thank you for the invitation to participate in this hearing. VISA 

appreciates this opportunity to testify as part of the committee's 

investigation into the safety of imported prescription drugs. 

 The VISA payment system consists of VISA itself, which performs 

various communications and settlement services for its member financial 

institutions, and VISA member financial institutions themselves. Some 

of these financial institutions issue VISA payment cards, and some of 

them authorize merchants to accept VISA cards. But VISA itself does 

not have direct relationships with merchants. VISA member financial 

institutions do have those direct relationships with merchants. 

 We do require our members to submit only legal transactions into our 

system, and in particular they must ensure that Internet merchants do not 

violate laws governing prescription medications. 
173

 VISA has a long history of working with law enforcement, with 

Secret Service, with the FBI, with the FTC, and with state and local law 

enforcement. VISA has met with representatives of the DEA and the 

FDA to discuss enforcement measures and other areas of interest in the 

area of Internet pharmacies. The latest such meeting was in August of 

2005, this year. 

 In March of 2004, in May of 2005, and again in September of 2005, 

VISA reminded its member financial institutions of their responsibilities 

regarding Internet pharmacies. We directed their attention to the list of 

controlled substances and problematic drugs that are maintained at the 

FDA and the DEA websites. We noted that a safe website should be 

licensed by the state board of pharmacy where the website is operating, 

and must require a prescription from a U.S.-licensed doctor. VISA also 

advised its members to allow a reputable seal program such as the VIPPS 

program as a means of identifying reputable Internet pharmacies. 

 VISA has retained the services of an outside firm to search the 

Internet for websites selling controlled substances and accepting VISA 

payment cards. We have hired additional in-house staff to direct this 

program, which builds on our global initiative for monitoring the Internet 

for child pornography. 

 Our vendor looks for websites that display the VISA logo; that sells 

Schedule II controlled substances or other prescription drugs that the 

FDA and the DEA have indicated are most abused; and, three, that do 

not require a prescription or medical exam. These sweeps are ongoing, 

they're conducted daily, and search hundreds of millions of Web pages 

every month. As a result of this monitoring effort, we have had 

discussions with some of our member financial institutions regarding 

their merchants who appear to be involved in selling controlled 

substances. These member financial institutions have conducted their 

own investigations and have terminated or restricted the activity of 

merchants that have been found to be dealing in controlled substances. 

 In May of 2004, VISA updated its consumer website to provide 

safety messages to consumers regarding the dangers of purchasing 

pharmaceuticals over the Internet. As part of their due diligence 

responsibilities, VISA U.S.A. members must examine the websites of 

Internet merchants before signing them and must periodically reexamine 

them. In addition, all of these merchant websites must contain the 

address of the merchant's permanent establishment. 

 We have also taken steps to ensure illegal Internet pharmacies cannot 

enter our system indirectly as merchants that are sponsored by 

aggregators. As of March 2005, Internet pharmacies cannot accept VISA 

cards as sponsored merchants. This added control will help ensure that 
174

acquirers conduct meaningful due diligence reviews before merchants in 

this category are signed. 

 Mr. Chairman, I would be happy to answer any questions that you or 

other members of the committee might have in this area. 

 MR. WHITFIELD. Thank you very much. 

 [The prepared statement of Mark MacCarthy follows:] 

PREPARED STATEMENT OF MARK MACCARTHY, SENIOR VICE PRESIDENT, PUBLIC POLICY,

VISA, U.S.A., INC. 

 Chairman Whitfield, Ranking Member Stupak and the Members of the 

Subcommittee, my name is Mark MacCarthy. I am the Senior Vice President for Public 

Policy for Visa U.S.A. Inc. Thank you for the invitation to participate in this hearing. 

Visa appreciates this opportunity to testify as part of the Committee’s investigation into 

the safety of imported prescription drugs. 

 The Visa Payment System, of which Visa U.S.A.1

 is a part, is one of the leading 

consumer payment systems in the world. The Visa Payment System consists of Visa, 

which performs communication and settlement services for its member financial 

institutions, and Visa’s member financial institutions that issue Visa payment cards or 

that authorize merchants to accept Visa payment cards in payment for transactions. 

Accordingly, Visa, and Visa member financial institutions that only issue credit cards, do 

not have direct relationships with Internet pharmacies or other merchants that accept Visa 

payment cards. On the other hand, Visa member financial institutions that acquire 

transactions from merchants do have a direct relationship with the merchants that accept 

Visa payment cards. Visa rules require these acquiring financial institutions to assume 

responsibility for certain aspects of their relationships with merchants. A fundamental 

Visa rule is that acquiring financial institutions submit only legal transactions into the 

Visa payment system. In particular, acquirers must ensure that Internet merchants do not 

violate laws governing prescription medications. 

 Visa plays a pivotal role in advancing new payment products and technologies, 

including technology initiatives for protecting personal information and preventing 

identity theft and other fraud, for the benefit of its member financial institutions and their 

hundreds of millions of cardholders. Visa recognizes that payment cards are an important 

part of electronic commerce. 

 Visa believes that the Visa Payment System has responded, and continues to respond, 

effectively to the challenges posed by Internet transactions. In this regard, Visa has a 

keen interest in curbing illicit pharmaceutical sales, as well as other illegal activity, in 

which Visa cards are used. Visa rules prohibit the use of the Visa Payment System for 

illegal transactions. Visa has a long history of working with law enforcement (including 

the Secret Service, the Federal Bureau of Investigation, the Federal Trade Commission, 

and state and local law enforcement) where the Visa Payment System may have been 

used in connection with illegal transactions. 

 In the specific area of illicit sales of prescription pharmaceuticals over the Internet, 

Visa has met with representatives of the Drug Enforcement Administration (“DEA”) and 

the Food and Drug Administration (“FDA”) to discuss approaches to the problem of 

illicit transactions with Internet pharmacies, and has alerted its member financial 

institutions to the problem of illicit activities by Internet pharmacies. 

 

1

 Visa U.S.A. is a membership organization comprised of U.S. financial institutions licensed to use 

the Visa service marks in connection with payment systems. 
175

 In March of 2004, in May of 2005, and again in September of 2005, Visa reminded 

its member financial institutions of their responsibilities to ensure that only legal 

transactions enter the Visa Payment System and directed their attention to the lists of 

controlled substances and problematic drugs maintained at the FDA and DEA websites. 

Visa also directed its members to the FDA public safety bulletins on the FDA website on 

buying medicines online and noted that a safe website should be licensed by the state 

board of pharmacy where the website is operating, have a licensed pharmacist available 

to answer questions, require a prescription from a U.S. licensed doctor or other healthcare 

professional licensed in the U.S. to write prescriptions and provide a way to speak to a 

person about problems. Visa also advised its members to consider relying on a reputable 

seal program, such as the Verified Internet Pharmacy Practices Site Program (“VIPPS”) 

operated by the National Association of Boards of Pharmacy, as a means of identifying 

reputable Internet pharmacies. When alerted that specific Internet pharmacies may be 

accepting Visa cards for illicit transactions, Visa has worked with its member financial 

institutions to investigate these pharmacies and to terminate the acceptance of Visa cards 

for illicit activity. 

 Visa has retained the services of an outside firm to search the Internet for websites 

selling controlled substances and accepting Visa payment cards. Using this firm, Visa 

has initiated a program of monitoring the Internet on a regular basis to ensure that our 

payment services are not used for the sale of Schedule II controlled substances. We have 

hired additional staff in-house to direct this program. This program builds on our global 

initiative for monitoring the Internet for child pornography, uses the same web crawling 

and filtering technology, and the same outside search firm to conduct the Internet sweeps. 

Our vendor looks for websites that display the Visa logo, that sell Schedule II controlled 

substances or other prescription drugs that the FDA or DEA have indicated are especially 

dangerous, and that do not require a prescription or an exam. The sweeps are ongoing; 

they are conducted daily and search hundreds of millions of web pages each month. As a 

result of this monitoring effort, we have had discussions with some of our member 

financial institutions regarding their merchants who appear to be involved in selling 

controlled substances. These member financial institutions have conducted their own 

investigations and have terminated or restricted the activity of merchants found to be 

selling controlled substances. 

 In May of 2004, Visa updated its consumer website to provide safety messages 

regarding the dangers of purchasing pharmaceuticals over the Internet, to provide links to 

the websites of the DEA and the National Association of Boards of Pharmacy and to 

remind consumers that they should only use their Visa payment cards for legal purposes. 

 More broadly, Visa requires its U.S. members to periodically examine the websites 

of merchants that they service and requires all Visa merchant websites to contain the 

address of the merchant’s permanent establishment to help consumers determine the 

identity and assess the nature of an entity with which he or she seeks to do business over 

the Internet. 

 We have also taken steps to make sure that illegal Internet pharmacies cannot enter 

our system indirectly. In 2004, we learned that some Internet pharmacies have been 

signed up to accept Visa cards as “sponsored merchants” by aggregators or other 

payment providers. As result, some of our acquiring financial institutions have been 

unaware that potentially illegal merchants have been operating in their portfolios. To 

help ensure that our financial institutions remain compliant with Visa regulations that 

prohibit illegal transactions, in March 2005, Visa modified its rules to make certain that 

Internet pharmacies or Internet pharmacy referral sites cannot accept Visa cards as 

sponsored merchants. Acquirers could still sign Internet pharmacies, but they must have 

direct relationships with them. This added control will help ensure that acquirers conduct 

meaningful due diligence reviews before merchants are signed and will help increase the 

level of risk management scrutiny provided to this category of merchant. 
176

 Although Visa aggressively tries to prevent the Visa Payment System from being 

used to support illegal transactions, Visa believes that, in many cases, the only parties 

that can accurately and effectively determine the legality of transactions, including 

Internet transactions, are the parties to the transactions themselves. Legality may depend 

on a variety of factors, such as the geographic location of the parties to the transaction, 

possession of a required license, intent, or age, among other factors, that cannot be known 

to third parties that are merely intermediaries in the transmission of payment information. 

 Accordingly, telephone companies, payment systems and delivery services typically 

are not required to know whether transactions that are effected using their facilities or 

services are legal. Historically, it has been only in those circumstances where the use is 

so unusual as to suggest illegality in its own right (such as transactions that trigger 

Suspicious Activity Report or Currency Transaction Report requirements) or where the 

illegality is so overt and egregious (such as child pornography and Schedule II controlled 

substances) that Congress and law enforcement have enlisted the aid of the third-party 

intermediaries to monitor the use of their facilities or services for policing illegal 

transactions. 

 Visa appreciates the opportunity to appear before you today. I would be happy to 

answer any questions that you may have. 

 MR. WHITFIELD. Mr. McEneney, representing MasterCard, is 

recognized for five minutes. 

 MR. MCENENEY. Thank you. 

 Good afternoon, Chairman Whitfield, Ranking Member Stupak. My 

name is Michael McEneney, and I'm a partner in the law firm of Sidley, 

Austin, Brown, & Wood here in Washington, D.C. I am pleased to 

appear before you today on behalf of MasterCard International, 

Incorporated, to discuss the important issue of the sale of 

pharmaceuticals over the Internet. 

 MasterCard deplores the use of its system for any illegal purchase, 

including the illegal sale of pharmaceuticals. In addition to a standing 

prohibition against the use of its system for illegal activities, MasterCard 

has recently taken a number of steps to help stop Internet pharmacies 

from accepting MasterCard cards for illegal pharmaceutical sales. To 

date these efforts have resulted in more than 500 websites being shut off 

from accepting MasterCard payment cards. 

 By way of background, MasterCard is a global organization 

comprised of more than 23,000 financial institutions that are licensed to 

use the MasterCard service marks in connection with a variety of 

payment systems. MasterCard itself does not issue payment cards, nor 

does it contract with merchants to accept those cards. Instead, those 

functions are performed by its customer financial institutions. 

 The financial institutions that issue payment cards bearing the 

MasterCard brands are referred to as card issuers, and the financial 

institutions that enter into contracts with merchants to accept 

MasterCard-branded cards are referred to as acquirers. MasterCard 

provides the networks through which customer financial institutions 
177

interact to complete payment transactions, and MasterCard sets the rules 

regarding those interactions. 

 MasterCard first became involved in efforts to address this issue after 

an inquiry from the House Energy and Commerce Committee on 

December 9 of 2003. Less than a week later, MasterCard met with 

Majority staff of the House Energy and Commerce Committee to discuss 

the issue, and shortly thereafter MasterCard met with staff of the Senate 

Permanent Subcommittee on Investigations and Democratic staff of the 

House Energy and Commerce Committee to discuss how MasterCard 

handles these issues and to discuss what role MasterCard could play in 

the future. 

 These meetings with congressional staff were particularly helpful in 

highlighting the magnitude of the problem and in clarifying some of the 

legal issues surrounding the Internet sale of pharmaceuticals, particularly 

the issues as they relate to controlled substances. 

 Based on the information received during these meetings, MasterCard 

embarked on a three-pronged proactive approach to address this issue. 

First, MasterCard established a working relationship with appropriate 

officials at the DEA and FDA. As a result, MasterCard had a number of 

productive meetings and conversations to identify ways in which 

MasterCard could be helpful to the agencies in connection with their 

efforts. 

 Second, MasterCard sent a number of bulletins to its customer 

financial institutions worldwide reminding them of their obligation to 

ensure that the MasterCard system is not used for illegal activity. The 

bulletin specifically highlighted Internet transactions as involving a 

heightened risk of potential illegal activity. The bulletin also reminded 

customer financial institutions of their obligation to perform due 

diligence to determine the legitimacy of each Internet pharmacy before 

allowing the pharmacy to accept MasterCard cards. 

 Acquirers that failed to comply with the rules may be required to 

absorb the cost of any illegal transactions, may be assessed fines, may be 

suspended or even terminated in MasterCard's sole discretion. 

 Third, MasterCard directed its merchant security team to search the 

Internet for pharmacies that purport to accept MasterCard-branded cards 

for illegal sales of controlled substances. Their initial effort identified 

approximately 400 websites that appeared to be engaged in the illegal 

sale of pharmaceuticals. For each of these sites, MasterCard attempted 

to identify the acquirer that contracted with the Internet pharmacy to 

accept MasterCard-branded cards. MasterCard then directed each of the 

identified acquirers to immediately stop the Internet pharmacy from 

accepting MasterCard cards as payment for the illegal sale of 

pharmaceuticals. 
178

 MasterCard also directed each of the acquirers to respond in writing 

either to confirm that it had stopped the merchant's acceptance of 

MasterCard cards, or to confirm that the merchant was not engaged in 

illegal activities, and to provide all documentation regarding the steps the 

acquirer took to confirm the legality of those activities. MasterCard is 

pleased to report that to date these efforts have been largely successful in 

shutting off the acceptance of MasterCard cards at more than 500 

websites. 

 Chairman Whitfield and Ranking Member Stupak, thank you again 

for the opportunity to discuss these important issues with you today. 

MasterCard is fully committed to doing its part to prevent the illegal sale 

of pharmaceuticals over the Internet, and it looks forward to continuing 

its work with you. It has also been our pleasure to work with 

subcommittee staff and the DEA, FDA, and others, and I'd be happy to 

answer any questions you may have. 

 MR. WHITFIELD. Thank you very much. 

 [The prepared statement of Michael McEneney follows:] 

PREPARED STATEMENT OF MICHAEL MCENENEY, PARTNER, SIDLEY, AUSTIN, BROWN, &

WOOD, LLP, ON BEHALF OF MASTERCARD INTERNATIONAL INCORPORATED

 Good morning, Chairman Whitfield, Ranking Member Stupak and Members of the 

Subcommittee. My name is Michael McEneney and I am a partner in the Washington, 

DC office of the law firm Sidley Austin Brown & Wood. I am pleased to appear before 

you today on behalf of MasterCard International Incorporated to discuss the important 

issue of the sale of pharmaceuticals over the Internet. 

 MasterCard deplores the use of its system for any illegal purposes, including for the 

illegal purchase of pharmaceuticals. In addition to its standing prohibition against the use 

of its system for illegal activities, MasterCard has recently taken a number of steps to 

help prevent Internet pharmacies from accepting MasterCard cards for illegal 

pharmaceutical sales. MasterCard takes its obligations very seriously and is committed 

to doing its part to address this important issue. These steps, which are discussed in 

greater detail below, include: (i) working with MasterCard’s customer financial 

institutions to shut off more than 500 web sites from accepting MasterCard-branded 

payment cards in connection with the illegal sale of pharmaceuticals over the Internet; 

(ii) publishing a bulletin to all of its customer financial institutions worldwide reminding 

them of their obligations to ensure that the MasterCard system is not used for illegal 

pharmaceutical sales or other illegal transactions; and (iii) working with the Drug 

Enforcement Administration (“DEA”) and the Food and Drug Administration (“FDA”) in 

a collaborative fashion. The efforts MasterCard has taken to date represent important 

steps in fulfilling MasterCard’s commitment to play an appropriate role in addressing this 

issue. 

Background 

 MasterCard is a global organization comprised of more than 23,000 financial 

institutions that are licensed to use the MasterCard service marks in connection with a 

variety of payments systems. It is important to note that MasterCard itself does not issue 

payment cards nor does it contract with merchants to accept those cards. Instead, those 

functions are performed by its customer financial institutions. The financial institutions 
179

that issue payment cards bearing the MasterCard brands are referred to as “Card Issuers.” 

The financial institutions that enter into contracts with merchants, including Internet 

pharmacies, to accept MasterCard-branded cards are referred to as “Acquirers.” 

MasterCard provides the networks through which the customer financial institutions 

interact to complete payment transactions and sets the rules regarding those interactions. 

 A fundamental rule of the MasterCard system is that each customer financial 

institution must conduct its MasterCard programs and activities in accordance with all 

applicable laws. This includes, for example, ensuring that any transaction a customer 

submits into the MasterCard system pertains to only legal activity. MasterCard also has a 

series of rules that require Acquirers to ensure that the merchants they contract with to 

accept MasterCard-branded cards are legitimate and engage in solely legal activities. 

These rules mandate, among other things, that Acquirers perform due diligence on a 

merchant before authorizing the merchant to accept MasterCard cards and that Acquirers 

monitor merchants for compliance with the rules. Customer financial institutions that fail 

to comply with the rules may be required to absorb the cost of any illegal transactions, 

and may be assessed fines, suspended or terminated, in MasterCard’s sole discretion. 

MasterCard also works extensively with law enforcement officials to address situations 

where the legality of activities related to MasterCard payment card transactions is in 

question. For example, in the U.S., MasterCard works with a variety of federal and state 

law enforcement agencies on these issues generally, including state Attorneys General, 

the DEA, the FDA, the U.S. Secret Service, the Federal Bureau of Investigation, and 

other branches of the Department of Justice. A major objective of these efforts is to 

ensure that MasterCard provides appropriate support to law enforcement in their efforts 

to address illegal activity. MasterCard is sensitive to the fact that its efforts to enforce the 

MasterCard rules have the potential to hinder ongoing law enforcement investigations 

and the like. For example, when a merchant is shut off from accepting MasterCardbranded cards because the merchant violated MasterCard’s rules, law enforcement’s 

ability to gather evidence through MasterCard’s system can be impeded and shutting off 

a merchant might be a tip-off to that merchant of an ongoing investigation. 

Efforts to Address Illegal Pharmaceutical Sales 

 MasterCard first became involved in efforts to address the important issue of illegal 

pharmaceutical sales over the Internet after an inquiry from the House Energy and 

Commerce Committee on December 9, 2003. Less than a week later, on December 15, 

2003, MasterCard met with majority staff of the House Energy and Commerce 

Committee who explained the efforts that were underway in Congress to find solutions to 

this issue, including solutions that may involve payments systems. Shortly thereafter, 

MasterCard met with staff of the Senate Permanent Subcommittee on Investigations and 

Democratic staff of the House Energy and Commerce Committee to discuss how 

MasterCard handles these issues, and what role MasterCard could play in the future. The 

meetings MasterCard has had with congressional staff, including the staff of this 

Subcommittee, were particularly helpful in highlighting the magnitude of the problem 

and in clarifying some of the legal issues surrounding the Internet sale of 

pharmaceuticals, particularly the issues as they relate to controlled substances. 

MasterCard has also met with staff of the DEA and FDA to exchange information and to 

explore ways in which MasterCard could be helpful to them in their efforts against illicit 

Internet pharmacies. Prior to this series of meetings, MasterCard did not have sufficient 

knowledge of the legal issues involved in the Internet pharmacy debate to take action. 

 Based on the information it received during these meetings, MasterCard embarked on 

a three-pronged proactive approach to address this issue. First, MasterCard established a 

working relationship with appropriate officials at the DEA and FDA. As a result, 

MasterCard has had a number of meetings and conversations to identify ways in which 

MasterCard could be helpful to the agencies in connection with their enforcement efforts, 
180

and it successfully established lines of communication that remain open in order to 

exchange information and do its part to assist in apprehending those violating the law. 

MasterCard has also provided information to the DEA on several occasions to help it 

with ongoing investigations. 

 Second, MasterCard sent a bulletin entitled “MasterCard Rules Prohibit MasterCard 

Transactions for Illegal Activities” to all of its customer financial institutions worldwide. 

This bulletin reminded MasterCard’s customer financial institutions of their obligation to 

ensure that the MasterCard system is not used for illegal activity. The bulletin 

specifically highlighted Internet pharmacy transactions as involving a heightened risk of 

potential illegal activity. The bulletin also reminded customer financial institutions of 

their obligation to perform due diligence of merchants, including Internet pharmacies, 

before allowing them to accept MasterCard cards, to properly identify MasterCard 

transactions that are submitted into the system, and to ensure that merchants accepting the 

MasterCard cards comply with applicable law. The bulletin went on to note that if there 

was a lack of clarity regarding the legality of particular transactions, the customer 

financial institution should not submit those transactions. 

 Third, MasterCard directed its merchant security team to search the Internet for 

Internet pharmacies that purport to accept MasterCard-branded cards for illegal sales of 

controlled substances. These initial efforts identified approximately 400 web sites that 

appeared to be engaged in the illegal sale of pharmaceuticals—both controlled substances 

and other prescription drugs. For each of these sites, MasterCard attempted to identify 

the Acquirer that contracted with the Internet pharmacy to accept MasterCard-branded 

cards. In some cases, MasterCard could readily identify the Acquirer through “dummy” 

transactions. However, because MasterCard and its employees are prohibited by law 

from knowingly making illegal buys, MasterCard security personnel could not legally 

complete any transactions, making it difficult to identify the Acquirer in some 

circumstances. MasterCard then directed each of the identified Acquirers to immediately 

stop the Internet pharmacy from accepting MasterCard cards as payment for the illegal 

sale of pharmaceuticals. MasterCard also directed the Acquirer to respond in writing 

either to confirm that it had stopped the merchant’s acceptance of MasterCard-branded 

cards or to confirm that the merchant was not engaged in illegal activities and to provide 

all documentation regarding the steps the Acquirer had taken to confirm the legality of 

those activities. MasterCard also reminded the Acquirer that any failure to comply with 

MasterCard’s instructions might subject the Acquirer to fines, penalties, suspension, or 

termination by MasterCard. MasterCard is pleased to report that, to date, these efforts 

have been largely successful in shutting off the acceptance of MasterCard cards at more 

than 500 web sites. It is important to note, however, that MasterCard has seen already 

some web sites that have been terminated through one Acquirer popping up elsewhere in 

its system. Unfortunately, this reflects one of the limitations of private enforcement 

efforts by industry. Although MasterCard can be successful in shutting off web sites 

engaged in illegal activity, it does not have the ability to uproot the bad actors the way 

state and federal law enforcement could. 

 Although MasterCard has had success to date in addressing this situation, the task 

has been made more difficult by a lack of clarity on what sales of prescription drugs by 

Internet pharmacies are actually illegal. In this regard, it appears that there are unlikely 

scenarios that the sale could be legal if it met a variety of standards, which generally can 

only be confirmed through actually completing a purchase from the web site which, as 

mentioned above, MasterCard cannot legally do at this time. It is MasterCard’s 

understanding from staff of the DEA and FDA that these standards are almost never 

achieved. However, the lack of a clear prohibition has made it more difficult to educate 

MasterCard’s Acquirers about the illegality of the sale of pharmaceuticals over the 

Internet to U.S. cardholders. In addition, this lack of clarity increased the risk of 
181

litigation. In fact, MasterCard is being sued in Israel by a merchant who was blocked 

from accepting MasterCard-branded cards in connection with the sale of pharmaceuticals. 

 Chairman Whitfield and Ranking Member Stupak, thank you again for the 

opportunity to discuss these important issues with you today. MasterCard intends to do 

its part to prevent the illegal sale of pharmaceuticals over the Internet, and it looks 

forward to continuing its work with each of you. It has also been our pleasure to work 

with Subcommittee staff and the DEA, FDA, and others, and we look forward to 

continuing these efforts. I would be glad to answer any questions you may have. 

 MR. WHITFIELD. Mr. Townsend of FedEx is recognized. 

 MR. TOWNSEND. Good afternoon, Mr. Chairman. On behalf of 

FedEx Corporation, I would like to thank you as well as the 

distinguished Ranking Member and the other members of the 

subcommittee for the opportunity to testify today to add our voice of 

concern regarding the safety of imported prescription drugs. 

 FedEx strongly supports efforts to address the sale of controlled 

substances over the Internet, particularly international sales. FedEx has a 

long history of working cooperatively with law enforcement and other 

government agencies to prevent the transportation of illegal drugs, 

especially controlled substances. Over the years FedEx has worked 

diligently with DEA, FDA, U.S. Customs, U.S. Postal Service, and 

others on this issue, and will continue to do so. 

 We have met and talked with staff of both this committee and the 

Senate Permanent Subcommittee on Investigations on numerous 

occasions since this issue was brought to our attention. Our conclusion 

from these meetings and our own research is that this is a complicated 

and difficult law enforcement issue which presents no easy solutions. It 

requires a new way of thinking about the problem on the part of both the 

government and the private sector. Traditional government efforts to 

arrest and criminally prosecute offenders must be supplemented with 

new government-led initiatives that engage the private sector to help 

disrupt the offenders' illicit operations. 

 From our perspective enforcement is complicated by two primary 

factors. First, one must consider the nature of the Internet. These socalled Internet pharmacies are virtual entities and cannot be linked by us 

to a shipping site unless law enforcement makes that association for us. 

We have retained a digital asset protection company to analyze the 

public information available on several thousand Internet pharmacies that 

are using the FedEx brand on their website without our permission. 

 A second fundamental problem is even if the identities of foreign 

Internet shippers were readily available, our experience indicates that law 

enforcement agencies have numerous obstacles to overcome in order to 

institute a criminal prosecution. In many instances the United States 

Attorney may not authorize prosecution on small amounts of 

pharmaceutical drugs. Additionally, prosecution may not be successful, 
182

in any event, without testimony or evidence from the originating foreign 

country. Also, present reporting requirements for the FDA and Customs 

and Border Protection may be severely limiting their abilities to process 

their seizures; and finally, they may lack sufficient manpower to handle 

the suspected volume of illegal shipments now arriving in our ports. 

 These obstacles suggest the need for a parallel enforcement strategy 

aimed at disrupting illicit operations, in addition to pursuing complex 

and lengthy criminal investigations leading to judicial action. We 

applaud the work of the men and women of law enforcement who are on 

the front lines every day carrying out a difficult and dangerous mission. 

The criminal prosecution of drug traffickers is critical to the security of 

our country and cannot be replaced. However, we would welcome the 

opportunity to work with these government agencies to find a way to 

supplement traditional efforts with an approach aimed at disrupting the 

distribution networks and processes of known offenders. 

 FedEx Corporation does not tolerate any attempted use of our global 

network or the FedEx brand for illegal purposes, and we take immediate 

steps to stop it when it comes to our attention. If we receive information 

from law enforcement agencies that a particular customer is violating the 

law, we will assist in the gathering of evidence for the government 

pursuant to legal requirements and other restrictions, and we will cease 

accepting packages from that company. 

 No Internet pharmacies are authorized to use the FedEx logo to 

promote their service. Unfortunately, there are numerous cases where 

our brand is used without our consent. To the extent possible, we are 

taking appropriate legal action to stop such activity. 

 In closing, I want to emphasize that we believe we have a role to 

play, and that we want to be part of what must be a joint effort to shape a 

new approach to this problem. We have package tracking technology 

that can be of significant assistance to law enforcement agencies, and we 

can specifically target suspect packages identified by authorities for 

inspection. 

 FedEx welcomes the opportunity to continue to work with the 

Congress, law enforcement and our private sector colleagues to find 

ways to disrupt these networks that negatively impact the health and 

safety of our citizens; however, we do not have law enforcement 

authority and do not have available the tools that would allow us to solve 

this problem on our own. 

 Mr. Chairman, thank you for the opportunity to address this 

subcommittee. I'd be happy to respond to Members' questions. 

 MR. WHITFIELD. Thank you, Mr. Townsend. 

 [The prepared statement of Bruce Townsend follows:] 
183

PREPARED STATEMENT OF BRUCE TOWNSEND, VICE PRESIDENT, CORPORATE SECURITY,

FEDEX CORPORATION

 Good afternoon, Mr. Chairman. On behalf of FedEx Corporation, I would like to 

thank you as well as the distinguished Ranking Member and the other members of the 

Subcommittee, for the opportunity to testify today to add our voice of concern regarding 

the safety of imported prescription drugs. FedEx strongly supports efforts to address the 

sale of controlled substances over the Internet, particularly international sales. 

 The FedEx family of companies specializes in fast, reliable transportation services 

for documents, packages and freight and employs more than 215,000 American workers. 

FedEx has a large global delivery network reaching more than 220 countries and 

territories including every address in the U.S. Additionally, FedEx moves more than 5 

million packages each day, providing jobs for more than 246,000 employees and 

contractors worldwide. FedEx Express operates 674 aircraft and FedEx Corporation has 

revenues of approximately $30 billion annually. 

 FedEx has a long and successful history of working cooperatively with law 

enforcement and other governmental agencies to prevent the transportation of illegal 

drugs, especially controlled substances. Over the years FedEx has worked diligently with 

the Drug Enforcement Administration (DEA), Food and Drug Administration (FDA), 

U.S. Customs, the U.S. Postal Service and others on this issue and will continue to do so. 

 The recent GAO report on Prescription Drugs (issued September 8, 2005) makes it 

clear that the proliferation of illegal Internet pharmacies offering controlled substances is 

a serious and growing problem. FedEx representatives have worked with a variety of 

federal, state, and local governmental agencies to address the Internet pharmacy issue 

over the last two years. Our first meeting on the subject was held on May 13, 2002 with 

representatives from the DEA, FDA Office of Criminal Investigations, U.S. Customs & 

Border Patrol and the U.S Postal Inspection Service. At that meeting we offered our 

assistance to do whatever was required to assist the agencies in their investigations and 

we described what our capabilities were in that regard. We learned that the agencies 

were well aware of the problem, working on ways to attack it and appreciative of our 

offer of assistance. 

 Since then we have had several additional face-to-face meetings, telephone calls, and 

exchanged e-mail messages with various members of agencies represented at that original 

meeting. We have furnished information to law enforcement agencies as appropriate, and 

have discontinued business with specific customers when requested by those agencies. 

 We have met and talked with staff of both this committee and of the Senate 

Permanent Subcommittee on Investigations on numerous occasions since this issue was 

brought to our attention. Our conclusion from these meetings and our own research is 

that this is a complicated and difficult law enforcement issue which presents no easy 

solutions. It will require a new way of thinking about the problem on the part of both the 

government and the private sector. Traditional government efforts to arrest and 

criminally prosecute offenders must be supplemented with new government-led 

initiatives that engage the private sector to help disrupt the offenders’ illicit operations. 

 From our perspective, enforcement is complicated by two primary factors. First, one 

must consider the nature of the Internet. These so called Internet pharmacies are “virtual 

entities” and cannot be linked by us to a shipping site unless law enforcement makes that 

association for us. We have retained a digital asset protection company to analyze the 

public information available on several thousand Internet pharmacies that are using the 

FedEx brand on their website without our permission. 

 Last year we commissioned, NameProtect, Inc., a private company, to help us with 

this problem. They analyzed approximately 400 million web pages and found 650,310 
184

instances where the FedEx brand was used on the same page as a specified list of the top 

22 drug names including some controlled substances.1 These initial search results 

contained multiple pages from the same root domain name; however, NameProtect was 

able to distill these hundreds of thousands of pages down to 12,200 unique domain 

names. These reported results were as of March 9, 2004. 

 Because in virtually all instances the actual brick and mortar address of the Internet 

pharmacy is not listed on the website, we asked NameProtect to obtain whatever public 

information is available about the owners of these 12,200 unique domain names. They 

compiled so-called “WhoIs” information on each website registrant, including names, 

street addresses, telephone numbers and e-mail addresses. Due to the hundreds of 

different registrars that control their own WhoIs data, however, a complete Reverse 

WhoIs analysis was not available for this project. Furthermore, because the legal 

requirements for registering a website are so lax, this registrant information is deemed 

highly unreliable. Clearly, individuals who sell illegal drugs go to great lengths to 

maintain their anonymity and seldom list their real names or their real addresses. In fact, 

our experience is that Federal law enforcement agencies have difficulty in tracing the real 

address through internet address protocols. An electronic copy of all of this information, 

which runs some 18,000 pages, has been provided to the appropriate government 

agencies and is available to this committee upon request. 

 To further complicate this situation, many of these websites are just “fronts” for an 

Internet pharmacy. Even if we could identify the registrant of one of these websites as a 

FedEx customer the entity is not likely to be the real owner of the Internet pharmacy. It 

is more likely the website host is several layers removed from the actual shipper utilizing 

FedEx services. NameProtect identified many Internet pharmacies that use multiple 

servers linked to each other, sometimes in different countries and found that the actual 

drug shipments come from a location that is not linked to the Internet site. 

 Additionally, we suspect that even if we were able to identify the real owners of the 

Internet pharmacies they may not be a Fedex customer because (1) our logo may appear 

on the website but they do not actually use FedEx services, (2) they may ship using a 

different account name, (3) they may use a third party distributor to maintain inventory 

at a different brick-and-mortar address, or (4) they may use a drop shipper to arrange for 

shipping the product via FedEx or some other delivery service. Many of these drop 

shippers are legitimate businesses serving a variety of online stores and would have no 

knowledge or reason to know that the underlying transaction is illegal. Therefore, we 

would need law enforcement to make the determination of which persons are acting 

illegally and share those findings with us. We could then use that verified information to 

take appropriate action up to and including closing an illicit shipper’s FedEx account. 

 A second fundamental problem is even if the identities of foreign Internet pharmacy 

shippers were readily available our experience indicates that government law 

enforcement agencies have numerous obstacles to overcome in order to institute a 

criminal prosecution. In many instances 1) the United States Attorney may not authorize 

prosecution on small amounts of pharmaceutical drugs; 2) successful prosecution may 

not be successful in any event without testimony or evidence from the originating foreign 

country; 3) present reporting requirements for the FDA and Customs and Border 

Protection may be severely limiting their abilities to process their seizures; and 4) they 

 

1

 400 million web pages is less than one-tenth of the actual Internet; therefore, it is estimated these 

results represent approximately 9.93 percent of the internet pharmacy web pages using the FedEx 

brand available in a typical Google search. In fact, on March 9, 2004 the same queries were run in 

Google and generated 6,546,700 hits. However, the number of unique domain names represented in 

this number cannot be determined using the standard Google search engine. That is why we relied 

on the smaller NameProtect database. 
185

may lack sufficient manpower to handle the suspected volume of illegal shipments now 

arriving at our ports. 

 These obstacles suggest the need for a parallel enforcement strategy aimed at 

disrupting illicit operations, in addition to pursuing complex and lengthy criminal 

investigations leading to judicial action. We applaud the work of the men and women of 

law enforcement who are on the frontlines every day, carrying out a difficult and 

dangerous mission. The criminal prosecution of drug traffickers is critical to the security 

of our country and cannot be replaced. However, we would welcome the opportunity to 

work with these government agencies to find a way to supplement traditional efforts with 

an approach aimed at disrupting the distribution networks and processes of known 

offenders. 

 FedEx Corporation does not tolerate any attempted use of our global network or the 

FedEx brand for illegal purposes and we take immediate steps to stop it when it comes to 

our attention. If we receive information from law enforcement agencies that a particular 

customer is violating the law, we will assist in the gathering of evidence for the 

government, pursuant to legal requirements and other regulations, and we will cease 

accepting packages from that company. No Internet pharmacies are authorized to use the 

FedEx logo to promote their service. Let me repeat that, NO INTERNET PHARMACIES 

ARE AUTHORIZED TO USE THE FEDEX LOGO TO PROMOTE THEIR SERVICE. 

Unfortunately, there are numerous cases where our brand is used without our consent. To 

the extent possible, we are taking appropriate legal action to stop such activity. 

 In closing, I want to emphasize that we believe we have a role to play and that we 

want to be part of what must be a joint effort to shape a new approach to this problem. 

We have package tracking technology that can be of significant assistance to law 

enforcement agencies and we can specifically target suspect packages identified by 

authorities for inspection. FedEx welcomes the opportunity to continue to work with the 

Congress, law enforcement, and our private sector colleagues to find ways to disrupt 

these networks that negatively impact the health and safety of our citizens. However, we 

do not have law enforcement authority and do not have available the tools that would 

allow us to solve this problem on our own. 

 Mr. Chairman, thank you for the opportunity to address the subcommittee. I would 

be happy to respond to Member’s questions. 

 

 MR. WHITFIELD. Mr. Silva with UPS is now recognized. 

 MR. SILVA. Thank you, Chairman Whitfield. Mr. Stupak and 

members of the subcommittee, my name is Dan Silva, and I'm the 

corporate security manager for UPS. I have responsibility for security 

matters worldwide for the company. I'd like to thank you for the 

opportunity to appear this afternoon to discuss the issue of the sale of 

controlled substances over the Internet and the efforts of UPS to work 

with law enforcement to ensure that our system is not used to transport 

these substances. 

 It's the clear policy of UPS, as stated in our tariff, that illegal products 

of any type are prohibited from being transported through our system. 

We have a long history of working with law enforcement agencies at all 

levels to enforce legal requirements. 

 While our company privacy policy prohibits us from disclosing 

customer information in general, we regularly provide law enforcement 

agencies with information required by a lawful subpoena. Since 2001, 
186

we have conducted an on-line pharmacy monitoring program. Through 

our outside counsel we conduct weekly searches of the Internet to 

identify on-line pharmacies that use the term “UPS.” We send cease and 

desist letters and are prepared to follow up with appropriate legal 

remedies to on-line pharmacies that offer UPS services and offer to sell 

pharmaceuticals without a prescription and the display of UPS trademark 

or logo to avoid any appearance of sponsorship or endorsement. We've 

shared information about Internet pharmacy sites that we have gathered 

through our monitoring program with the U.S. Food and Drug 

Administration and the U.S. Drug Enforcement Administration. 

 Since much of the concern in this area arises from the imported 

pharmaceuticals, I'd like to mention efforts we've undertaken with the 

U.S. Bureau of Customs and Border Protection and the FDA. First of all, 

UPS identifies to Customs and FDA all packages it delivers into the 

United States that are declared to be pharmaceuticals. Customs and FDA 

have the ability to pull any of these packages for further examination and 

enforcement action. 

 Additionally, in conjunction with our automated air hub in Louisville, 

Kentucky, we developed a computer program called Target Search for 

the use of Customs. This is a sophisticated and flexible tool that enables 

Customs to search manifest information for all imported packages 

passing through that facility. 

 Customs can use this system to help identify illicit shipments by 

screening for a wide variety of data. On an ongoing basis we respond to 

subpoenas with information requested in support of ongoing 

investigations by the DEA and FDA. We've had periodic meetings with 

the DEA and FDA on the issue of the sale of controlled substances over 

the Internet. Additionally, we have met periodically with officials of 

FDA and DEA here in Washington to discuss ways in which we might 

further our cooperation concerning illegal pharmaceutical shipments. 

These meetings have been productive, and we'll continue to meet as 

needed in the future. 

 As I have already indicated, we have shared information about 

Internet pharmacies we've identified through our monitoring program 

with both agencies. I'd like to specifically mention some of the activity 

we've undertaken in the State of Kentucky. After an increase in Internet 

pharmaceutical activity was reported in southeastern Kentucky about a 

year ago, we became more involved with state, Federal and local 

enforcement in dealing with the problem. 

 I have traveled to Hazard, Kentucky, in April of this year and met 

with Operation Unite, the local drug task force, and we agreed on certain 

actions we could take together. Subsequently the State of Kentucky 

passed a law to tighten up requirements relating to Internet pharmacies, 
187

including requiring registration of Internet pharmacies. We have met 

twice with the attorney general's office and the Kentucky Bureau of 

Investigation to discuss ways in which we can work together to 

implement the new law. 

 While the Kentucky law appears to be having a positive effect, we 

believe this is a problem that calls for a national response. A number of 

bills have been introduced in both the House and Senate. We support 

legislation that would establish clear standards for Internet pharmacies. 

In particular, we support requiring Internet pharmacies to be licensed and 

to meet a number of common-sense requirements, such as providing the 

address of the principal place of business, the names of persons serving 

as pharmacists, and State license information. 

 In addition, we support provisions that would prohibit Internet sales 

of pharmaceuticals to individuals without a prescription obtained from a 

practitioner with a qualifying medical relationship which requires at least 

one in-person medical evaluation. Such legislation would help ensure 

that requirements for the safety and efficacy of drugs are met when U.S. 

consumers make purchases in this new marketplace. From the 

standpoint of a package delivery company, we would welcome more 

certainty that the products we are carrying meet the requirements of law 

and, therefore, meet our own tariff requirements. As a carrier we can 

take actions such as those I have described in conjunction with law 

enforcement agencies, but we do not have the independent ability to 

judge the validity of prescriptions or the legitimacy of a particular drug. 

 Thank you for the opportunity to share the views of UPS, and I look 

forward to any questions you hey have. 

 MR. WHITFIELD. Thank you very much, Mr. Silva. 

 [The prepared statement of Dan Silva follows:] 

PREPARED STATEMENT OF DAN SILVA, CORPORATE SECURITY MANAGER, UPS

 Chairman Whitfield, Mr. Stupak and members of the subcommittee, my name is Dan 

Silva and I am the Corporate Security Manager for UPS. I have responsibility for 

security matters worldwide for the company. Thank you for the opportunity to appear 

this afternoon to discuss the issue of the sale of controlled substances over the internet 

and the efforts of UPS to work with law enforcement to ensure that our system is not 

used to transport these substances. 

 It is the clear policy of UPS, as stated in our tariff, that illegal products of any type 

are prohibited from being transported through our system. We have a long history of 

working with law enforcement agencies at all levels to enforce legal requirements. While 

our company privacy policy prohibits us from disclosing customer information in 

general, we regularly provide law enforcement agencies with information required by a 

lawful subpoena. 

 Since 2001 we have conducted an Online Pharmacy Monitoring program. Through 

our outside counsel, we conduct weekly searches of the internet to identify online 

pharmacies that use the term “UPS.” We send cease and desist letters and are prepared to 
188

follow-up with appropriate legal remedies to online pharmacies (1) that offer UPS 

services and offer to sell pharmaceuticals without a prescription, and (2), that display a 

UPS trademark or logo (to avoid any appearance of sponsorship or endorsement). We 

have shared information about internet pharmacy sites that we have gathered through our 

monitoring program with the U.S. Food and Drug Administration (“FDA”) and the U.S. 

Drug Enforcement Administration (“DEA”). 

 Since much of the concern in this area arises from imported pharmaceuticals, I would 

like to mention efforts we have undertaken with the U.S. Bureau of Customs and Border 

Protection (“Customs”) and FDA. First of all, UPS identifies to Customs and FDA all 

packages it delivers into the Untied States that are declared to be pharmaceuticals. 

Customs and FDA have the ability to pull any of these packages for further examination 

and enforcement action. Additionally, in conjunction with our automated international 

air hub in Louisville, Kentucky, we developed a computer program called Target Search 

for the use of Customs. This is a sophisticated and flexible tool that enables Customs to 

search manifest information for all imported packages passing through that facility. 

Customs can use this system to help identify illicit shipments by screening for a wide 

variety of data. 

 On an ongoing basis, we respond to subpoenas with information requested in support 

of ongoing investigations by the DEA and FDA. We have had periodic meetings with the 

DEA and FDA on the issue of the sale of controlled substances over the internet. 

Additionally, we have met periodically with officials of FDA and DEA here in 

Washington to discuss ways in which we might further our cooperation concerning illegal 

pharmaceutical shipments. These meetings have been productive, and we will continue 

to meet as needed in the future. As I have already indicated, we have shared information 

about internet pharmacies that we identified through our online pharmacy monitoring 

program with FDA and DEA. 

 I would like to specifically mention some of the activities we have undertaken in the 

state of Kentucky. After an increase in internet pharmaceutical activity was reported in 

southeastern Kentucky about a year ago, we became more involved with state, federal 

and local law enforcement in dealing with the problem. I traveled to Hazard, Kentucky 

in April of this year and met with Operation Unite, the local drug task force, and we 

agreed on certain actions that we could take together. Subsequently, the state of 

Kentucky passed a law to tighten up requirements relating to internet pharmacies, 

including requiring registration of internet pharmacies. We have met twice with the 

Attorney General’s Office and the Kentucky Bureau of Investigations to discuss ways in 

which we can work together to implement the new law. 

 While the Kentucky law appears to be having a positive effect, we believe this is a 

problem that calls for a national response. A number of bills have been introduced in 

both the House and Senate. We support legislation that would establish clear standards 

for internet pharmacies. In particular, we support requiring internet pharmacies to be 

licensed and to meet a number of common sense requirements, such as providing the 

address of the principal place of business, the names of persons serving as pharmacists, 

and state license information. In addition, we support provisions that would prohibit 

internet sales of pharmaceuticals to individuals without a prescription obtained from a 

practitioner with a qualifying medical relationship, which requires at least one in-person 

medical evaluation. 

 Such legislation would help ensure that requirements for the safety and efficacy of 

drugs are met when U.S. consumers make purchases in this new marketplace. From the 

standpoint of a package delivery company, we would welcome more certainty that the 

products we are carrying meet the requirements of law and therefore meet our own tariff 

requirements. As a carrier, we can take actions such as those I have described in 

conjunction with law enforcement agencies, but we do not have the independent ability to 

judge the validity of a prescription or the legitimacy of a particular drug. 
189

 Thank you for the opportunity to share the views of UPS and I look forward to any 

questions that you may have. 

 MR. WHITFIELD. At this time I recognize Mr. McLaughlin with 

Google. 

 MR. MCLAUGHLIN. Thank you very much, Mr. Chairman and Mr. 

Stupak. 

 Let me make one big point, then I'll make three small points. The big 

point is this: We get what a serious problem this is. Google is an 

Internet company. We see what is going on. It is evident to us as much 

as anybody that there is a serious problem with illegal sales of on-line 

drugs over the Internet. 

 We have been trying to think through for a couple of years, in dialog 

with the staff of this subcommittee and with Senate PSI and so forth, 

what's the right approach for a company that deals in information. We 

have been trying to think through what's the right balance here. 

Information can be used for good; it can be used for ill. We don't want to 

be too restrictive, we don't want to be too permissive, so we're trying to 

strike a balance that puts restrictions on our advertising system and 

focuses on getting good information in front of consumers and users 

through our search engine and through the free ads that we provide. 

 So let me refer specifically to the three things that we're doing, and 

I'll say as I go through these we're looking for better ideas, too. We're 

looking for things that we can do that would be smarter, but consistent 

with that balance. 

 So the first thing I want to mention is that on our advertising system, 

where Google makes most of its money, we've implemented a third-party 

verification system which focuses on licensing. If some entity wants to 

advertise on Google using pharmaceutical terms, scheduled substances, 

the brand names that go along with them, or any of the numerous 

creative misspellings or terms that look like drug names, they have to be 

a licensed pharmacy. And so we have partnered with a company called 

SquareTrade, which is a verification company, and their job is to go and 

verify that the company that wants to advertise on Google has a license 

in the jurisdiction where it's located. 

 To date, since we've launched this program, we've rejected more than 

30,000 ads. We have somewhere in the neighborhood of about 250 

advertisers that have qualified by demonstrating their licensing status 

today, and from what we can tell, the system seems to be working pretty 

well. Again, we are interested in feedback, trying to figure out ways to 

make it work better, but for our advertising system our focus is squarely 

on making sure an advertiser that wants to show ads in the U.S. is 

licensed in the state in the U.S. where it's operating. 
190

 Point two, as I said, we try to also provide good information, and so 

in that spirit we have been providing free advertising to any Government 

agency that wants to run a public service campaign on these issues. We 

are pleased the CBP and the DEA have taken up that offer and running 

ads targeted at various substances. In my testimony I have given an 

example. It's an open offer. We hope more agencies will take advantage 

of it in the future, and we've also offered up the assistance of our teams 

of advertising experts to help them figure out how to target the ads, how 

to write them better, how to get more users to see them in a way that's 

relevant and direct given those searches. 

 The third thing, we have been actively cooperating and collaborating 

with the Interagency Federal Task Force that you have heard about. 

There's an effort organized through Harvard University that includes 

academics, some government officials, prosecutors, companies like 

Google trying to create a meaningful partnership. 

 As I said, our goal here is to help an American with a legitimate 

prescription to find a licensed pharmacy. That's a useful service that 

Google can provide. 

 In some ways the easy road would be just to block all 

pharmaceutical-related advertising, and that's something we thought 

about, but then you have removed a source of legitimate connections 

between people with prescriptions and the pharmacies that are properly 

licensed to fill them. So we'd like to continue doing that. It seems like 

the more responsible thing to do for our users. 

 At the same time, we don't want to block information from detox 

centers, from treatment facilities, from medical authorities that can 

provide legitimate information, so we're not a big fan of doing acrossthe-board blocking of specific terms. Some of those terms can be used, 

as I said, for bad; they can be used for good. We're trying to strike the 

right balance. 

 Finally, we have been thinking about legislation. I don't have any 

brilliant ideas to recommend to you about what legislatively can fix this 

problem in our area. It does seem like it's a huge enforcement problem. 

In that spirit I think there are some promising avenues where we can 

contribute to enforcement efforts that are going on. 

 One of the earlier witnesses from IntegriCheck, if I have said that 

right, mentioned a couple of these promising avenues. There are ways 

that you can use the Internet to identify these websites and go after them 

more quickly. I know they are trying hard, but it could be done in a more 

speedy and effective way with more sophistication about how the 

Internet works and how you track people down in a forensic way. 

 Google is an index to the Web. It can help law enforcement. We 

would like to do more of that. As I said, we're looking for better ideas all 
191

the time, and with your help and the help of the members of this 

subcommittee and staff, I hope we'll able to do that. Thank you very 

much, Mr. Chairman. 

 MR. WHITFIELD. Thank you very much for that testimony. 

 [The prepared statement of Andrew McLaughlin follows:] 

PREPARED STATEMENT OF ANDREW MCLAUGHLIN, SENIOR POLICY COUNSEL, GOOGLE 

INC.

 The Internet enables consumers to make better health care decisions, giving 

consumers on-demand access to a vast realm of useful information about medical and 

pharmaceutical products and services. At the same time, the Internet is a means by which 

would-be customers can find, purchase and obtain controlled substances from rogue, 

unlicensed, online drug-merchants. Today’s hearing highlights the need for strong, 

sustained, and coordinated action to disrupt illegal online sales of controlled substances. 

Google stands ready to do its part. 

 In the following testimony, I detail two of the voluntary steps that Google has taken 

to ensure that our online advertising services protect our users by providing access to safe 

and reliable information. 

 First, Google has implemented a rigorous third-party review and verification process 

that allows only licensed pharmacies and pharmacists to display advertisements in the 

United States. 

 Second, Google is actively assisting those agencies of the federal government that are 

leading the fight against illegal drug sales. The Google Grants program provides free 

advertising to U.S. government agencies, allowing them to run public information 

campaigns that utilize Google’s sophisticated targeting techniques to reach Internet users 

right as they perform relevant online searches. In addition, Google has been actively 

contributing to several interdisciplinary efforts, including the federal inter-agency 

working group, to improve coordination and develop effective strategies against 

dangerous, rogue online drug-merchants. 

 We appreciate the hard work of the Subcommittee to explore and understand the 

entire system surrounding illegal online drug sales, and to pinpoint the potential points of 

interdiction. We look forward to working with you and your staff as you continue to 

explore these important issues. 

Google’s Advertising Products 

 Google’s mission is to organize the world’s information and make it universally 

accessible and useful. In 2000, Google added advertising to complement our growing 

search services business and to provide another method for users to find pertinent and 

useful information easily on the Internet. In doing so, Google put to the test our belief 

that highly relevant advertising can be as useful as our search results. Our advertising has 

the same aim as our search results: give users information they will find useful. 

 Google first built an advertising system to accompany our search engine. When a 

user searches on a keyword, advertisers may bid to be placed next to the search results for 

that keyword. For example, when typing the word ‘flowers’ into the search box, relevant 

search results will appear accompanied by relevant advertisements about flowers 

displayed along the right-hand side. Google then extended the search advertising 

platform to provide highly-relevant ads for any website with content. Here’s how it 

works: Google’s system analyzes the content of a partner’s web page to determine which 

advertisements would likely be relevant to the content; based on that analysis, the Google 

system selects relevant ads to appear on the page. The result is that advertisers can match 
192

their advertising to broader content concepts, allowing their ads to reach a wider audience 

through many different channels beyond the various Google websites. 

 We offer our advertising technologies to advertisers through our AdWordsTM service, 

and to publishers of websites through our AdSenseTM service. 

Google AdWordsTM

 Launched in autumn 2000, Google AdWords allows any potential advertiser — from 

a neighborhood drycleaner in Louisville to a Big Three automaker in Detroit — to easily 

create text- or image-based ads and to display them online in a targeted manner. 

AdWords is principally a self-managed program, meaning that most advertisers create 

and control their advertisements through an online interface. 

 Google’s advertising ranking algorithm aims to target ads according to relevance, so 

that we show only ads that our users will find useful. The AdWords system monitors in 

real time how well each ad is performing in order to calculate the relevance of a given ad 

or keyword to the user. An ad’s performance is measured largely in terms of its 

clickthrough rate, a measure of how often the people who view the ad click on it. The 

most relevant, and therefore the most useful, ads are displayed more prominently and 

more frequently; conversely, ads and keywords with consistently low clickthrough rates 

may not be shown. Our focus on relevance means that an advertiser cannot secure top ad 

placement in the AdWords program simply by paying more—rather, advertisers have 

every incentive to make their ads as relevant to users as possible. 

Google AdSenseTM

 In 2003, we expanded the reach of AdWords through a new service called Google 

AdSense. AdSense is a program that permits website publishers to deliver relevant ads 

generated by Google on their own sites, and thereby to earn money every time a user 

clicks on one of those ads. AdSense gives web publishers of any size —from an 

individual weblogger or hobbyist to a global news site—a powerful new means to 

generate revenue and to enhance the user experience on their sites. AdSense essentially 

allows anyone who publishes through a website to become part of the Google Network, 

to include relevant, targeted, unobtrusive Google ads on their webpages, and to earn 

shared revenues when readers click on them. Like AdWords, AdSense is largely a selfmanaged program, allowing even the smallest of web publishers to participate. 

Google Standards and Policies for AdWords and AdSense

 The AdSense and AdWords services employ numerous automated and manual 

checks, program policies, and enforcement mechanisms to provide our users, publisher 

partners, and advertisers with advertising services that are high-quality and relevant. 

 Google recognizes that the success of any of our products ultimately depends on 

quality. We have therefore implemented rigorous quality standards for all our ads, and 

have developed a range of tools to help our users and publishing partners identify the 

advertising content that’s right for them. For example, most Google ads on AdSense 

partner websites display an “Ads by Google” label, which links to a feedback form. 

Through this form or by an email to customer support, users are invited to report poorly 

targeted ads or ads they may find objectionable. 

 From the launch of our advertising services, in keeping with our company values and 

mission, Google has had policies restricting the types and content of advertising we 

accept. The policies and Terms and Conditions for AdWords and AdSense are posted 

online, addressing editorial, content, and usability issues.1

 Advertisers, their 

 

1 AdWords Terms and Conditions are available at 

<https://adwords.google.com/select/tsandcsfinder> . AdWords Editorial Guidelines are 

available at <https://adwords.google.com/select/guidelines.html>. AdSense Terms and 
193

advertisements and the websites to which they point must adhere to these standards as a 

condition of joining and continuing to participate in either program. 

 Some of these policies prohibit specific forms of online advertising. For example, 

we have never supplied pop-up advertising, nor do we permit pop-up windows to be 

launched from clicking on the link in the ads. Other policies relate to the nature of what 

is being advertised. For example, we do not allow the advertising of tobacco or tobacco 

products, regardless of its legality in the different jurisdictions in which we serve 

advertising. 

Enforcement of Google’s Standards and Policies

 The AdWords system begins performing automated policy checks as soon as an 

advertiser submits an ad. Ads entered through our online system are subject to real-time 

automatic screening for potentially sensitive or objectionable terms, as defined in our 

policies. If the ad and its list of associated keywords pass this automated screening 

process, it will be displayed initially on the Google website. If not, the ad is flagged for 

further review by the Google AdWords team, and will not appear anywhere until it has 

been reviewed and approved. 

 All ads and keywords must eventually pass review to ensure that they meet Google's 

advertising standards. Only ads that have passed review are permitted to run in the 

Google Network, which includes not only Google’s own website, but also the sites and 

products of our AdSense partners. 

Google’s Online Pharmacy and Pharmacist Policy 

 Internet users want information about pharmaceuticals. At Google, we recognize that 

providing relevant information from trusted sources can be critically important. Over the 

past few years, we have received numerous emails from individuals who have found lifesaving information through Google’s search and advertising results. We handle many 

queries every day from users looking for information about pharmaceuticals — how they 

work, what they do, where to fill prescriptions for them, and so on. Google’s role is to 

make relevant information available, whether for a homebound patient searching for 

access to prescribed medication or for a doctor looking for diagnosis and treatment 

indications beyond what can be found on her shelves. In addition to our search results, 

relevant and trustworthy advertising has a role to play helping all of these users. 

 Google believes that our users benefit from advertising by licensed pharmacies and 

pharmacists, addiction treatment and detoxification centers, pharmaceutical 

manufacturers, and other organizations with involvement or interest in pharmaceuticals. 

Advertising by licensed pharmacies and pharmacists helps consumers locate services, 

compare among options, and make cost-effective choices when tending to their health. 

For all these reasons, Google is committed to providing its users with information about 

pharmaceuticals, pharmacies, and pharmacists. 

 Of course, pharmaceutical advertising carries risks along with its benefits. We 

recognize that there are bad actors on the Internet, including unlicensed online 

pharmacies that peddle unsafe and counterfeit products. Consequently, we have 

implemented policies that will protect our users from encountering potentially dangerous 

rogue drug-merchants through our advertising services. 

Google’s Approach: Third-Party Verification

 As the online pharmaceuticals market has become more complex, Google has taken 

proactive steps to ensure that information going from our advertisers to our users and 

 

Conditions are available at <https://www.google.com/adsense/localized-terms>. 

AdSense Program Policies are available at <https://www.google.com/adsense/policies>. 
194

partners is as relevant, useful, and trustworthy as possible. In the context of pharmacies 

and pharmacists, Google has voluntarily implemented a third-party verification process. 

 In order for an online pharmacy to advertise with Google, it must establish, to the 

satisfaction of our trusted third-party verification service, that both the pharmacy and its 

pharmacist are properly licensed; that the Internet website associated with the ad is 

owned by the licensed pharmacy; that it will not dispense prescription drugs without 

receiving and verifying a lawful and valid prescription from a personal practitioner; and 

that it will perform age verification for all prescriptions, among other requirements. 

 In practical terms, this means that online pharmacy advertisers must be members in 

good standing of the SquareTrade Licensed Pharmacy Program and must meet all other 

conditions of the Google AdWords Online Pharmacy Qualification Process. 

 One practical consequence of these requirements is that Google policy does not 

permit pharmaceutical-related advertising from outside the United States and Canada. 

SquareTrade Licensed Pharmacy Program

 SquareTrade is a leading online trust infrastructure company. Its Licensed Pharmacy 

Program has been reviewed and approved by the National Community Pharmacists 

Association (NCPA).2

 SquareTrade verifies that the online pharmacy and its pharmacist are licensed by an 

appropriate governmental entity, and requires that members commit to industry- and 

NCPA-approved practices, which include compliance with all laws and regulations in the 

jurisdiction where the pharmacy is located as well as the jurisdiction where the buyer is 

located. SquareTrade regularly monitors the licensure status of member pharmacies and 

their pharmacists and will investigate disputes or complaints against a member pharmacy. 

If a change in SquareTrade member status occurs, SquareTrade notifies Google so that 

we may take appropriate action. 

 SquareTrade has a multi-step verification process to confirm that the online 

pharmacy is appropriately licensed. To begin with, the licensing information of both the 

pharmacy and the pharmacist is verified with the state or federal licensing body, a 

process which is repeated every three months. After this has been completed, the 

pharmacy is called at its number on record to confirm employment of the pharmacist, 

who must then go through an identity verification process, either by providing his/her 

Social Security Number and going through a credit header check or by providing copies 

of two government issued pieces of identification. As a final check, the ownership of the 

website by the pharmacy is confirmed, and, if the online pharmacy meets all required 

criteria, two physical letters are sent to the pharmacy, one addressed to the pharmacist 

and one addressed to the Head of Finance of the pharmacy, confirming the application 

and their obligations. 

 The SquareTrade Licensed Pharmacy Program requires its pharmacies to adhere to a 

stringent set of conditions that are designed to protect consumers against dangerous 

online practices. SquareTrade-certified pharmacies must agree to full compliance with 

all applicable laws, rules, regulations, and accepted industry standards of ethical business 

conduct. The SquareTrade program is only open to online pharmacies based in the U.S. 

or Canada.3

 A SquareTrade-certified pharmacy must also, at all times, employ a licensed 

 

2

 More information about SquareTrade is available at <http://www.squaretrade.com>. 3 While licensed Canadian pharmacies are permitted to obtain SquareTrade certification, 

they are also required to agree that they will not target US consumers, whether by 

providing shipping rates and information, by comparing the efficacy of Canadian drugs to 

FDA-approved drugs, or by any other means that would lead a US consumer to believe that 

s/he can purchase pharmaceutical drugs from Company's website. Canadian pharmacies 

must also put a disclaimer on the home page of their website that states: "The FDA, due to 

the current state of their regulations, has taken the position that virtually all shipments of 
195

pharmacist in charge of its pharmacy and only permit licensed pharmacists to dispense 

prescription drugs. A certified pharmacy is required to notify SquareTrade immediately 

if one of its pharmacists becomes the subject of adverse government or other regulatory 

action relating to its licensure or the dispensing of prescription or controlled substances. 

 SquareTrade-certified pharmacies must agree to a series of requirements relating to 

the dispensing of prescription drugs. For example, they cannot provide prescription 

drugs without receiving and verifying a lawful and valid prescription from the customer’s 

personal healthcare practitioner, and further, must ensure that the prescription was not 

obtained via an online or telephone consultation only. SquareTrade-certified pharmacies 

are required not to dispense any controlled substance in violation of state or federal law 

or without verifying the prescriber’s current DEA number and conducting age 

verification. Finally, to qualify for SquareTrade certification, a pharmacy must agree that 

deliveries of prescription drugs will be made only through U.S. mail or a delivery service 

that requires the signature of an adult for package delivery. 

 SquareTrade issues a patented electronic seal to licensed pharmacies. This electronic 

seal has the licensure information of the pharmacy embedded into it, ensuring that 

consumers have transparency and visibility into why the pharmacy is legitimate. If a user 

clicks on the online pharmacy’s SquareTrade seal, the user is able to review the 

SquareTrade Seal Member Profile, allowing them to confirm the pharmacy’s 

participation in and commitment to the program. 

 Together, these requirements mean that U.S. consumers will not be confronted with 

unlicensed, rogue pharmacies or pharmacists through Google advertising services. 

The Benefits of the Google / SquareTrade Partnership

 Google makes every effort to provide an advertising service that is effective for 

advertisers and useful to our users. Our emphasis on technological innovation and ad 

relevance helps us reach the goal of effectiveness. Reaching our second goal, usefulness, 

depends in part on our ability to verify that our pharmaceutical advertisers are licensed 

and trustworthy and remain so throughout the course of their relationship with Google. 

This is SquareTrade’s area of expertise. 

 SquareTrade provides the resources and experience needed to implement Google’s 

pharmacy-related advertising policies on a consistent and sustainable basis without 

compromising our ability to focus on our search technology and advertising programs. 

Our partnership with SquareTrade allows each company to focus on what each does best. 

As a result, we permit only licensed pharmacies to advertise through Google, allowing us 

to say with confidence that we are providing a means by which individuals in need of 

education, rehabilitation, or medical care can find the information they seek and can trust 

that it comes from a reputable source. 

The Google Online Pharmacy Qualification Process

 It may be helpful to explain in some detail how Google has integrated the 

SquareTrade Licensed Pharmacy Program into our advertising systems. 

 Most importantly, to have its ads appear in the United States or its territories an 

online pharmacy must provide Google with a valid SquareTrade I.D., certifying its 

licensing status and agreement to operate in a legal and responsible manner. In addition 

to the requirements of the SquareTrade Licensed Pharmacy Program, Google’s own 

advertising policies impose further requirements on online pharmacy advertisers. For 

example, websites advertising prescription drugs or using prescription drug names as 

keywords must clearly state the prescription requirement. And Google prohibits the 

advertisement of certain non-FDA-approved drugs. 

 prescription drugs imported from a Canadian pharmacy by a U.S. consumer will violate the 

law.”
196

 We monitor all AdWords ads and keyword lists including drug-related terms. Ads 

that contain certain restricted drug-related terms will not appear to users until they have 

been reviewed by a Google client service representative. After reviewing the ad, the 

client service representative will either approve or reject the ad, according to Google’s 

policies for online pharmacy advertisers. 

 Moreover, Google’s policy is to reject ads or sites promoting controlled substances or 

any items that are primarily intended or designed for use in manufacturing, concealing, or 

using a controlled substance. References to certain Schedule I and II substances are 

closely monitored. Drug-related keywords may be approved if they are for ads and 

websites marketing addiction treatment and rehabilitation services, provided that illegal 

drugs aren’t being marketed as a means of treatment. 

 The list of drugs and drug-related terms is updated regularly based on publicly 

available information found in a number of sources, including the news and drug names 

and schedules detailed within the Diversion Control Program web pages of the Drug 

Enforcement Administration website.4

 

The Evolution of Google’s Online Pharmacy Advertising Policy

 Google has monitored and enforced policies on all drug-related ads and keyword lists 

since the AdWords service was first launched. In mid-2003, Google began requiring 

online pharmacies to clearly state on their websites that a prescription from a licensed 

physician was required to obtain prescription pharmaceuticals. A team of Google 

representatives has since been dedicated to enforcing all aspects of Google’s online 

pharmacy policies. Toward the end of 2003, in response to user feedback and our 

commitment to improving advertising quality, we began developing a new policy 

requiring pharmacy-related AdWords advertising to pass even more rigorous quality 

checks. As part of that process, we evaluated several companies that could provide thirdparty verification services to help us ensure policy compliance. During this time Google 

also talked with staff at the Federal Drug Administration about our intended policy 

changes and received strongly positive feedback, especially on our plan to implement 

third-party verification. Based on a number of factors, including specific experience and 

ability to scale, Google selected, in January 2004, SquareTrade L.L.C. as the trusted 

third-party vendor for verifying online pharmaceutical advertisers. 

 Google also built an automated system that identifies pharmaceutical-related 

advertisers before they even create their first ad. When the system identifies a 

prospective advertiser as an online pharmacy attempting to run ads in the United States or 

its territories, the AdWords interface immediately presents the advertiser with several 

options, including the option to submit a valid SquareTrade I.D. Without a valid 

SquareTrade I.D., the advertiser is able to set up an account, but will not be able to run an 

ad until the advertiser submits a valid SquareTrade I.D., or a client service representative 

reviews the account and determines that a SquareTrade I.D. is not needed. For example, 

informational medical sites, addiction treatment and detoxification facilities, and drug 

rehabilitation support groups may advertise and are not required to obtain a SquareTrade 

I.D. 

The Impact of Google’s Online Pharmacy Advertising Policy

 Today, Google has approximately 250 SquareTrade-certified advertisers, ranging 

from large to small enterprises. Since launching our third-party verification program for 

online pharmaceutical advertisers, Google has rejected more than 30,000 pharmaceuticalrelated advertisements. 

 We believe that the SquareTrade program has been very successful in many ways. 

Rather than simply rejecting all drug-related advertising, our partnership with Square 

 

4

 Available at <http://www.deadiversion.usdoj.gov>. 
197

Trade has enabled Google to connect users with licensed pharmacies and trustworthy 

information. The number of advertisements being rejected because of failure to comply 

with SquareTrade requirements shows that the program has teeth. We have rejected on 

average over 1500 advertisements per month since the start of the program – driving 

legitimate advertisers to get certified by proving their licensure if they want to advertise 

through Google. Of course, we are continually evaluating our efforts, and intend to 

improve our use of SquareTrade over time. 

Google Grants: Free Advertising for Public Information Campaigns 

 To help educate users about the dangers of rogue, unlicensed drug-merchants, 

Google is utilizing its Google Grants program to provide free advertising to government 

agencies that wish to run public education campaigns. Google Grants is a unique in-kind 

advertising program that supports organizations that share our philosophy of community 

service in areas such as science and technology, education, global public health, the 

environment, youth advocacy, and the arts. Google Grants has awarded AdWords 

advertising to hundreds of non-profit groups whose missions range from animal welfare 

to literacy, from supporting homeless children to promoting HIV education. 

 Though designed for 501(c)(3) non-profit organizations, Google has made Google 

Grants available to selected government agencies that are seeking to inform and engage 

their constituents online. For example, the federal Department of Health and Human 

Services is currently running, in cooperation with the Advertising Council, the following 

public service education ad: 

 

 This ad is triggered by search queries such as “diet help”, “fast weight loss tips”, and 

“foods that help you lose weight”. It is a good example of the kind of public education 

campaign that Google Grants supports. 

 In the area of controlled substances, the Drug Enforcement Agency is currently 

running several targeted “Online Drug Alert” ads, such as: 

 This ad, and others like it, is triggered by a long list of keywords such as “buy online 

prescriptions”, “internet drugs”, “no prescription needed”, “cheap oxycontin”, and “buy 

vicodin”. As a result, Google users conducting searches on those kinds of keywords will 

be presented with the ad above. Though Google Grants advertising is free, the DEA 

maintains full control over its online advertising campaign (subject to Google’s usual 

guidelines and policies), giving it the ability to change the ad text and adjust the list of 

keywords. The ability to constantly update the ad campaign allows the DEA to 

experiment with various ad and keyword combinations, measure the results, learn from 

experience, and make changes, thereby maximizing the overall impact. Google has 

likewise offered the expertise of its creative ad experts to help the DEA calibrate and 

target its campaigns to greatest effect. 
198

Assistance to Federal and Private-Sector Initiatives to Coordinate Policy, Strategy 

and Enforcement 

 In addition to Google Grants, Google has been contributing actively to various 

initiatives to coordinate policy, strategy, and enforcement. For example, we have 

participated in meetings of the federal inter-agency task force on this issue, which 

includes a presence from the Drug Enforcement Agency, Department of Justice, Federal 

Bureau of Investigation, Food and Drug Administration, Federal Trade Commission, U.S. 

Postal Service, and U.S. Customs and Border Protection, along with various other 

private-sector entities in the Internet community. We have worked cooperatively to help 

those agencies understand the Internet environment and more effectively address the 

problem of illegal online drug sales. 

 We also actively participate in a task force coordinated through Harvard University 

that has been examining the issues around illegal online pharmaceutical sales. This task 

force is attended by prominent criminal and Internet law professors, government 

prosecutors, medical doctors, federal agency representatives, federal law enforcement 

officials, non-profit drug education executives, and a variety of business and legal 

representatives from the Internet and payment processing industries. This task force is 

aimed at the creation of a public/private/academic partnership to think through and craft 

possible solutions to the problem of illegally available drugs on the Internet. 

Other Approaches: Thoughts on Filtering Search Results 

 Google believes that promoting trustworthy advertising, providing a voice for 

government agencies, and offering expertise and assistance to law enforcement are the 

most effective and appropriate tools we have to contribute to this problem. Some have 

asked why search engines do not simply prohibit searches based on certain drug-related 

search terms, or block suspect sites from our search index. Such an approach may at first 

glance have some appeal, but we think it would be a serious mistake. We are deeply 

committed to providing objective search results and we only interfere with the neutrality 

of our search index in very rare instances. More importantly, Google does not believe 

that tampering with searches or search results would be an effective approach: 

 Screening search results is impractical and inappropriate – Google indexes a 

tremendously large number of web pages and other online content, and we 

serve up responses to a vast number of search queries in the U.S. every day. It 

is simply not practical for our employees manually to review all the web pages 

in our index for all drug-related terms, and then to filter out potentially 

unlawful from apparently lawful sites – nor should Google be making those 

judgments, as we are not a law enforcement agency. Likewise, automatically 

banning certain search queries – like all searches for “oxycontin” - would be 

overbroad and prevent users from getting valuable information about addiction, 

treatment, and lawful prescription. 

 Filtering search results is not effective - Search engines are a mere reflection of 

the Internet. In a sense, search engines are to the World Wide Web what the 

table of contents and index are to a book. Removing search results from the 

Google search index does nothing to remove the offensive sites from the web 

itself. Even worse, it would eliminate an important tool for law enforcement 

and other investigators in identifying potential illegal activity. Law 

enforcement officials have told us that they use Google daily to find and 

identify the websites of unlicensed, rogue drug-merchants. Moreover, blocking 

specific URLs tends to be ineffective against sophisticated sites that simply 

change domain names frequently to evade blocking. Experience has shown 
199

that users seeking to find illegal activity online are quite able to do so despite 

filtering at the search level, if the illegal sites are allowed to remain active. 

 For these reasons, we will continue to focus our energies on the efforts that we 

believe are likely to be most helpful to users and most effective in combating illegal drug 

sales online. 

Conclusion 

 Google believes that the Internet is a valuable resource that can provide individuals 

with crucial information needed to make informed health care decisions. At the same 

time, we recognize that it can facilitate the sale and delivery of dangerous substances 

from rogue, unlicensed drug-merchants. We are proud to have taken a leadership role in 

improving the quality and safety of online prescription drug advertising. In particular: 

 1. Though the SquareTrade license-verification program, Google works to protect 

our users. We make sure that the only pharmaceutical-related ads we display in the 

United States are from properly licensed pharmacies that are legally authorized to fill 

prescriptions in the United States. 

 2. Through the Google Grants program, Google offers free advertising to 

government agencies that wish to run public education campaigns And we have 

dedicated significant employee time and energy to assisting the federal inter-agency task 

force and other policy coordination and strategy initiatives, and will continue to do so for 

as long as they exist. 

 Thank you for the opportunity to share our views on the important issues addressed 

by this hearing. We appreciate the Subcommittee’s attention to these issues and hope 

that this testimony has been helpful. 

 MR. WHITFIELD. Mr. Scheibel, you're recognized for five minutes. 

Mr. Scheibel is with Yahoo!. 

 MR. SCHEIBEL. Chairman Whitfield, Ranking Member Stupak and 

members of the subcommittee, thank you for the opportunity to testify on 

the actions Yahoo! has taken to address the serious issues presented by 

prescription drug sales over the Internet. We share Congress's interest in 

protecting consumers from the potential dangers of illegal prescription 

drug sales. For that reason Yahoo! has taken a leadership position in the 

industry. In November of 2003, we took groundbreaking action to better 

ensure our sponsored search listings of on-line pharmacies meets high 

standards of integrity and accountability. 

 MR. WHITFIELD. Mr. Scheibel, excuse me, do you have your 

microphone on? 

 MR. SCHEIBEL. I'm sorry, Mr. Chairman. I was saying how we took 

groundbreaking action in 2003 to better deal with the issue of sponsored 

search and the availability of prescription drugs over sponsored search. 

And sponsored search is a program under which advertisers bid on 

search terms relative to their businesses, and those with the highest bid 

gets the best placement in our sponsored search results. 
200

 In November 2003, we took the unprecedented action of removing all 

sponsored search pharmacy listings for prescription drugs as an interim 

step to develop a more comprehensive program that would maintain our 

commitment to providing consumers, advertisers, and partners with the 

best on-line experience possible. Our message was clear: until we could 

create a safer environment for such on-line advertising, there would be 

no sponsored search listings for prescription drugs on Yahoo!. 

 Beginning in February of 2004, we launched our more 

comprehensive program, which was the first of its kind. Our goal is to 

enable a more trusted marketplace for legitimate on-line pharmacies to 

competitively offer consumers access to prescription drugs. 

 Yahoo!'s on-line pharmacy qualification program employs a fivefacet approach to enhance consumer trust of participating on-line 

pharmacies. First, we determine whether an advertiser is participating in 

the sale of prescription drugs. If it is, Yahoo! requires the advertiser to 

participate in the qualification program in order to advertise in sponsored 

search. 

 Second, the advertiser is directed to SquareTrade, a leading on-line 

trust infrastructure company which verifies whether the appropriate 

governmental body where the company is located has licensed both the 

pharmacy itself and its associated pharmacist. Unless SquareTrade 

determines that the advertiser and its associated pharmacist are currently 

licensed, Yahoo! will not allow the pharmacy to advertise. 

 Third, the advertiser is required to certify that it engages in a set of 

industry best practices that have been approved by the National 

Community Pharmacists Association, including certification that it is 

acting lawfully in the jurisdiction where it is located as well as each 

jurisdiction in which it sells, that it is operating consistent with the terms 

of its license, and it will not provide prescription drugs without verifying 

the existence of a valid prescription from the person's personal health 

care practitioner, and such prescription was not obtained solely by means 

of an on-line or telephone prescription. 

 Fourth, SquareTrade, in a program administered in conjunction with 

NCPA, regularly monitors the licensure status of participating 

pharmacies and additionally responds to any complaints it receives 

regarding these pharmacies. Any negative action taken by the licensing 

entity or any complaints substantiated by SquareTrade are reported to 

Yahoo!, and the advertiser will be removed as appropriate. Complaints 

will be forwarded by SquareTrade to the appropriate government 

licensing authority. 

 Finally, Yahoo! prohibits on-line pharmacies from advertising the 

most dangerous and abused prescription drugs, Schedule II controlled 

substances, in the Yahoo! marketplace. To do this, we prohibit 
201

pharmacies from bidding on keyword terms associated with Schedule II 

drugs. We only allow rehabilitation clinics to advertise in connection 

with such terms. We are currently enabling the DEA to run public 

service announcements free of charge in connection with search terms 

related to Schedule II controlled substances. 

 Prior to finalizing the terms of our program, we briefed officials of 

the Food and Drug Administration. They warmly received our program 

and were very encouraged by the fact that we were taking a leadership 

role in this area. Based on our experience, we believe it has made a 

positive change in the quality of advertisers. We knew going in only a 

small percentage of on-line advertisers of prescription drugs would go 

through the process we have imposed. We estimate that in October 

of 2003, prior to implementation of the program, we had several 

thousand advertisers of prescription drugs on sponsored search. Of 

these, only approximately five percent are participating in the program 

and therefore eligible to advertise through sponsored search. Each is a 

licensed pharmacy. 

 Approximately 10 percent of the approved pharmacies have been 

disqualified as part of the ongoing review process. Of those, nearly one 

in three has been later reinstated. 

 Mr. Chairman and members of the subcommittee, we at Yahoo! are 

proud of the steps we have taken to create a safer environment for online advertising of prescription drugs. We are constantly looking for 

ways to improve our services to Internet users, and this area is no 

exception. This program is only 18 months old, and we are interested in 

your feedback in how we may improve the program. 

 We recognize, however, that even the most robust program will not 

preclude consumers from finding on-line sites that illegally sell 

prescription drugs. The program I have just described applies to 

sponsored search in which advertisers bid on search terms. As a search 

engine, however, Yahoo! acts as a card catalog of what is on the Internet. 

Yahoo! now has approximately 20 billion different objects in its search 

index, including Internet Web pages, images, and audio files. In Web 

search we facilitate user access to the vast array of information that is 

available across the Internet. Web search produces rules that reflect the 

most relevant results in response to a request typed in by a user. 

 A single search term can produce a broad spectrum of results. Typing 

in the name of a prescription drug can produce results that vary from 

where to buy such a drug, to information about the harmful effects of 

such a drug, to antidote, to treatment centers of the drug. It may provide 

for more choices for consumers that may enable them to produce 

prescription drugs in a legal manner at a lower manner. 
202

 We have taken additional steps to curb illegal sales of prescription 

drugs on line. We have participated in the joint industry-government 

dialog on this issue. We have also had one-on-one meetings with FDA 

and DEA. To support law enforcement efforts we held a training event 

with DEA in October of 2005. At this training event DEA shared 

information regarding law enforcement concerns with on-line 

pharmaceutical sales and Yahoo! provided training to the DEA on what 

information is available from on-line providers to assist in law 

enforcement investigations. 

 Finally, Yahoo! has provided funding to allow DEA to place public 

service announcements. Recently a search for Vicodin brought up a 

sponsored search result for DEA stating ordering prescription drugs on 

line may be illegal. Yahoo! has also included links to FDA safety 

materials regarding on-line drugs and Yahoo! health. 

 Yahoo! is committed so supporting the work of the government, the 

law enforcement community in their efforts to enforce the laws that 

regulate the distribution of these substances. We look forward to 

continuing to improve our programs to better address this important 

issue. Thank you so much for this opportunity to appear before you. 

 MR. WHITFIELD. Thank you, Mr. Scheibel, very much. 

 [The prepared statement of John Scheibel follows:] 

PREPARED STATEMENT OF JOHN SCHEIBEL, VICE PRESIDENT, PUBLIC POLICY, YAHOO! INC.

 Chairman Whitfield, Ranking Member Stupak, and Members of the Subcommittee, 

thank you for the opportunity to testify on the actions Yahoo! has taken to address the 

serious issues presented by prescription drug sales over the Internet. I am John Scheibel, 

Vice President of Public Policy for Yahoo! 

 Yahoo! is a leading provider of comprehensive online products and services to 

consumers and businesses worldwide. Yahoo! is the Number 1 Internet brand globally 

and the most trafficked Internet destination worldwide. Yahoo! offers a broad and deep 

array of communications, commerce and content services. 

 We share Congress’ interest in protecting consumers from the potential dangers of 

illegal prescription drug sales. For that reason, Yahoo! has taken a leadership position in 

the industry. First in 2002, Overture, which later became a wholly-owned subsidiary of 

Yahoo!, instituted a policy prohibiting online pharmacies from advertising that 

prescription drugs could be purchased without a prescription. Then, in November of 

2003, we took ground breaking action to better ensure that our sponsored search listings 

of online pharmacies meet high standards of integrity and accountability. Sponsored 

search is a program under which advertisers bid on search terms relevant to their 

businesses and those with the highest bids get the best placement in our sponsored search 

results. 

 In November of 2003, Yahoo! took the unprecedented action of removing all 

sponsored search pharmacy listings for prescription drugs as an interim step to develop a 

more comprehensive program that would maintain our commitment to providing 

consumers, advertisers and partners with the best online experience possible. Our 

message was clear: until we could create a safer environment for such online advertising, 

there would be no sponsored search listings for prescription drugs on Yahoo! 
203

 Beginning in February of 2004, we launched our more comprehensive program, 

which was the first of its kind. Our goal is to enable a more trusted marketplace for 

legitimate online pharmacies to competitively offer consumers access to prescription 

drugs. Yahoo!’s Online Pharmacy Qualification Program employs a five-facet approach 

to enhance consumer trust in participating online pharmacies. 

 First, we determine whether an advertiser is participating in the sale of prescription 

drugs. If it is, Yahoo! requires the advertiser to participate in the Qualification program 

in order to participate in sponsored search. 

 Second, the advertiser is directed to SquareTrade, a leading online trust infrastructure 

company, which verifies whether the appropriate governmental body where the company 

is located has licensed both the pharmacy itself and its associated pharmacist. Unless 

SquareTrade determines that the advertiser and its associated pharmacist are currently 

licensed, Yahoo! will not allow the pharmacy to advertise. 

 Third, the advertiser is required to certify that it engages in a set of industry best 

practices that have been approved by the National Community Pharmacists Association 

(NCPA), including certification that the pharmacy is acting lawfully in the jurisdiction 

where it is located as well as each jurisdiction in which it sells, that it is operating 

consistent with the terms of its license, and that it will not provide prescription drugs 

without verifying the existence of a valid prescription from the person’s personal health 

care practitioner and such prescription was not obtained solely by means of an online or 

telephone consultation. 

 Fourth, SquareTrade, in a program administered in conjunction with the NCPA, 

regularly monitors the licensure status of participating pharmacies and additionally 

responds to any complaints it receives regarding these pharmacies. Any negative action 

taken by the licensing entity or any complaints that are substantiated by SquareTrade are 

reported to Yahoo! and the advertiser will be removed as appropriate. Complaints will 

also be forwarded by SquareTrade to the appropriate government licensing authority. 

 Finally, Yahoo! prohibits online pharmacies from advertising the most dangerous and 

abused prescription drugs--- Schedule II controlled substances—in the Yahoo! 

marketplace. To do this, we prohibit pharmacies from bidding on keyword terms 

associated with Schedule II drugs. We only allow rehabilitation clinics or other similar 

sites to advertise in connection with such search terms. We are currently enabling the 

DEA to run public service announcements free of charge in connection with search terms 

related to Schedule II controlled substances. 

 Yahoo! believes that this five-pronged Online Pharmacy Qualification Program 

complements our mission of bringing consistency to the interests of consumers, 

advertisers, and Internet destination sites. Other Yahoo! programs such as banner ads 

and Yahoo! store are in alignment and at the very least, Yahoo! will not accept 

advertising dollars unless an online pharmacy is participating in Yahoo!’s Online 

Pharmacy Qualification Program. 

 Prior to finalizing the terms of our program, we briefed officials at the Food and 

Drug Administration on its terms. They warmly received our program and were very 

encouraged by the fact that we were taking a leadership role in this area. 

 Based on our experience with our Program, we believe it has made a positive change 

in the quality of advertisers in the Sponsored Search area. We knew going in that only a 

small percentage of online advertisers of prescription drugs would go through the process 

we have imposed. We estimate that in October 2003, prior to implementation of the 

program, we had several thousand advertisers of prescription drugs on sponsored search. 

Of these, only approximately 5% are participating in the program and are therefore 

eligible to advertise through sponsored search. Each one of these advertisers is a licensed 

pharmacy. Approximately 10% of the approved pharmacies have been disqualified as 

part of the ongoing review process. Of those, nearly one in three were later reinstated. 
204

 Mr. Chairman, and Members of the Subcommittee, we at Yahoo! are proud of the 

steps that we have taken to create a safer environment for the online advertising of 

prescription drugs. We are constantly looking for ways to improve our service to Internet 

users, and this area is no exception. This program is only 18 months old and we are 

interested in your feedback on how we may improve the program. We always reserve the 

right to get better. 

 We recognize, however, that even the most robust program will not preclude 

consumers from finding online sites that illegally sell prescription drugs. The program I 

have just described applies to sponsored search, the program in which advertisers bid on 

search terms and those with the highest bids, get the best placement in our sponsored 

search results. 

 As a search engine, however, Yahoo! acts as a card catalogue of what is on the 

Internet. Yahoo! now has approximately 20 billion different objects in its search index, 

including internet web pages, images, and audio files. In web search, we facilitate user 

access to the vast array of information that is available across the Internet. Web search 

produces results that reflect the most relevant results in response to a request typed in by 

a user. 

 A single search term can produce a broad spectrum of results. Typing in the name of 

a prescription drug, even a Schedule II drug, can produce results that vary from where to 

buy such a drug, to information about the harmful effects of such a drug, to antidotes to 

the drug, to treatment centers for abuse of the drug. It may also provide more choices for 

consumers that may enable them to purchase prescription drugs in a legal manner at 

lower cost. 

 Yahoo! has taken additional steps to curb illegal sales of prescription drugs online. 

We have participated in the joint industry-government dialogue on this issue. We have 

also had one-on-one meetings with FDA and DEA. To support law enforcement efforts, 

we held a training event with the DEA at our Sunnyvale campus in October 2005. At this 

training event, DEA shared information regarding law enforcement concerns with online 

pharmaceutical sales and Yahoo! provided training to the DEA on what information is 

available from online providers to assist in law enforcement investigations. Yahoo! 

frequently cooperates with law enforcement agencies that are conducting investigations 

that involve the Internet. 

 Finally, Yahoo! has provided funding to allow the DEA to place public service 

announcements regarding the dangers of online drug sales in Sponsored Search. For 

example, recently a search for “vicodin” on Yahoo! brought up a sponsored search result 

for DEA stating: “ordering prescription drugs online may be illegal.” Yahoo! has also 

included links to FDA safety materials regarding online drug sales in Yahoo! Health. 

 Members of the Subcommittee, what you see before you today are two Internet 

companies who are fierce competitors. We have taken the initiative to create a safer 

environment for the online advertising of prescription drugs. We also agree on the need 

to protect the value of web search. That said, we are also committed to supporting the 

work of the government, law enforcement community, and state licensing authorities in 

their efforts to enforce the important laws that regulate the distribution of these 

substances. We look forward to continuing to improve our programs to better address this 

important issue. 

 Thank you so much for this opportunity to appear before you. 

 MR. WHITFIELD. Mr. Halpern, in your white paper on page 23, you 

mention an action campaign focused on the drug website's digital 

infrastructure would seem to hold real promise. What type of ideas 

should be pursued as part of this action campaign, and tell me why you 

believe that would be an effective way to go. 
205

 MR. HALPERN. Thank you, Mr. Chairman. I would say two avenues 

of action: First of all, a concerted effort to work with the domain 

registrars to eliminate access to the websites via the domain name would 

be helpful in the sense that consumers become accustomed to accessing a 

website via its domain name. They are not going to use the underlying 

technical information to get to the site, at least not the average consumer. 

So if we can force websites to change their domain names with increased 

frequency, and given that our study found that a majority had the same 

domain name for at least a year, that would seem to be quite possible, 

that would make it more difficult for consumers to get to the websites. 

 Second, we would encourage law enforcement to focus on trying to 

seize those web servers that are, at least at present, located within the 

United States. The web servers themselves, let me be clear, may only 

have a limited role in the operation of the overall Internet pharmacy. We 

acknowledge this. However, those web servers may have either -- some 

form of digital relationship or financial relationship that ties back to 

physical brick-and-mortar parties responsible for the website's operation. 

For example, there may be back-end systems that are difficult to identify 

from the surface of the website. However, if the web server itself were 

seized and forensic examinations were performed, it may be possible to 

learn some of this additional, very valuable intelligence in that process. 

Then a principle of learn it once and use it many times would apply. If 

you know a given website is related to rings of websites that are overseas 

and not in the U.S., and you get the information from the U.S. web 

server, you have an opportunity to leverage that in taking action against 

websites that are more difficult to get to. 

 MR. WHITFIELD. I also want to thank IntegriChain for working with 

our subcommittee on this issue. You all have provided a lot of useful 

and helpful information, and we really do appreciate that as well. 

 Mr. McEneney, in your testimony you made a reference that the lack 

of clarity on what prescription drugs are actually illegal. Would you 

explain that issue in a little more detail for us? 

 MR. MCENENEY. Absolutely. I think on the Schedule II and III 

drugs that MasterCard has been focusing on, MasterCard has gotten a lot 

of clarity, including from staff of the subcommittee and others, that those 

sales over the Internet are clearly illegal. 

 What is happening around the world is there is more confusion on the 

part of the banks as to where the lines are in terms of which transactions 

are legal and which are not. One of the things MasterCard has asked for 

in that context that would be very helpful would be some database or list 

of pharmacies that are authorized to sell prescription drugs in the United 

States via the Internet. If MasterCard had a list like that, it would greatly 

simply MasterCard's efforts to police its own system. For example, 
206

MasterCard could then go to the acquiring banks that sign up merchants 

and say, look, if you want to sign up an Internet pharmacy to sell 

prescription drugs in the United States, this is the universe of pharmacies 

that are eligible to do so. 

 Anyone else you either cannot sign up to accept MasterCard cards, or 

you at least can't sign them up to sell into the United States. It is that sort 

of clarity that I think would be very helpful in making the private sector 

policing of a system like MasterCard's be more efficient. 

 MR. WHITFIELD. Can any of you think of any negative reasons why 

the Federal Government should not require a Federal legislation of 

registering any entity that sold controlled substances on the Internet? 

 MR. MACCARTHY. On behalf of Visa, we think such a list could be 

very helpful. It could be based on whatever registration criteria that you 

deem to be appropriate. But that kind of list, as my friend from 

MasterCard indicated, would greatly simplify and help our job of 

keeping our systems clear of people who are engaged in illegal 

transactions. 

 MR. WHITFIELD. DEA does require registration of some pharmacists. 

Does that help in any way? 

 MR. MCENENEY. At this point, I am not aware that DEA has a 

database that you can identify as the universe of pharmacies that are 

authorized to sell prescription drugs over the Internet. 

 And as I was listening to the earlier panel, one of the things that I 

could see that the folks on that panel had in common with I believe all of 

the private sector folks who are out here trying to address this problem, is 

everybody is independently going through this process of searching on 

the Internet, trying to identify the Internet pharmacies, trying to figure 

out what their real business is, trying to figure out what they are selling. 

And that whole process could be greatly truncated and be made far more 

efficient if we really understood who is authorized to sell these drugs and 

who is not. 

 MR. WHITFIELD. I thought DEA did require registration for any 

pharmaceutical company selling a controlled substance. 

 He tells me there is 12. There are 12 that have been authorized in 

DEA's testimony. So what would prevent you from looking at that list? 

 MR. MCENENEY. I don't think there is anything that would prevent 

us from looking at that list. I would imagine that that list is a universe of 

domestic companies. Obviously there are a lot of companies that are 

involved internationally, and the idea would be that regardless of where 

the entity is located, if the Federal Government had a centralized 

database that companies like these could consult with to decide who is 

authorized and who is not, that would make the process far more -- 
207

 MR. WHITFIELD. Mr. McLaughlin, do you have any thoughts on 

that? You had mentioned something about that registration in your 

testimony. 

 MR. MCLAUGHLIN. Yes. I totally agree. Actually, you know, we are 

now using an independent third-party company to go out and verify 

licensing status. And if there was a centralized registry of the entities, 

not just pharmacists with their DEA numbers, but actual entities that 

were qualified to sell, pharmacies consistent with whatever set of 

practices you might want to attach to that registry, we would be gleeful, 

frankly, to rely on it instead of having to have that work done by an 

independent entity. 

 MR. WHITFIELD. Okay. Mr. Townsend, you had mentioned in your 

testimony that we needed a new government initiative that would 

encourage the private sector to help disrupt the offender's illicit 

operations, and I was just curious. Does FedEx have any specific 

recommendations on ways that they could work with the government in 

addressing this issue? 

 MR. TOWNSEND. Mr. Chairman, you heard on the last panel, and 

you're familiar from your work in this area, about the lengthy time it 

takes to conclude criminal investigations, the legal requirements which 

are required to go through all the way up into a judicial action. The 

nature of the Internet, requiring sometimes our own U.S. agencies to 

operate outside the United States, complicates that process and lengthens 

it even further. 

 I think that one thing we would be interested in participating in is a 

strategy that identifies in some way -- and we just talked about a list -- 

but identifies in some ways those sites -- and for us it wouldn't need to be 

linked to a brick and mortar pharmacy -- which could be identified that 

DEA does not intend to undertake prosecution; that it falls in one of 

those categories -- either the amounts are small, the U.S. Attorney won't 

take it, or for some other reason merits our attention -- but is not going to 

be one of those few cases out of the many that actually gets prosecuted, 

but nonetheless is a problem. 

 And this strategy -- the gentleman on the panel talked about part of an 

action campaign. If an action campaign could be formed to address the 

digital environment, make it much more difficult by those who have 

expertise -- and they are here on the panel -- to make it much more 

difficult for the digital world, for the pharmacies to be hosted there. 

While at the same time, we could be identified -- pharmacies could be 

identified that we would not accept packages from, could have an impact 

even though they may not -- the criminal prosecution may not be 

undertaken all the way. It could have a disrupting effect and to keep the 

drugs off the streets. 
208

 MR. WHITFIELD. Mr. McEneney, how many accounts has 

MasterCard closed because of their relationship to illegal Internet 

pharmacy? Do you have any idea how many, you all? 

 MR. MCENENEY. MasterCard, working with their acquiring banks, 

the acquiring banks have shut down, I believe, somewhere in the 

neighborhood of 500 different sites. 

 MR. WHITFIELD. And what about Visa? 

 MR. MACCARTHY. Mr. Chairman, our program is recently started. 

We have 49 sites that we have worked with our acquiring financial 

institutions, and they have committed to us that they will be shut down. 

 Going forward, we are going to continue our web search program. 

And we think that going forward into the future, that kind of program 

will result in us, you know, doing a more comprehensive job than we 

have up to now. 

 MR. WHITFIELD. Okay. Mr. Stupak, you are recognized for 10 

minutes. 

 MR. STUPAK. Thank you, Mr. Chairman. 

 Mr. Halpern, DEA told our staff that they had about the same 

computer forensics capability that you have. Do you believe this to be 

the case? Why or why not? 

 MR. HALPERN. I am not aware of DEA's forensic capabilities. 

 MR. STUPAK. How long did it take you to put together this report that 

you did here? 

 MR. HALPERN. Approximately one week. 

 MR. STUPAK. Okay. Sixty-five percent of the websites hosted, in 

whole or in part, are here in the United States. Do you see this website 

issue as a manageable problem or unmanageable? 

 MR. HALPERN. I think that depends on the perspective you're asking 

the question from. We feel it is manageable to comprehensively identify, 

at least from a snapshot perspective, the websites that offer to sell 

scheduled prescription medicines. What you do with that data then 

becomes the crux of the issue. 

 MR. STUPAK. You did this report for who? I mean, who financed 

this study? 

 MR. HALPERN. No one. We do reference a paid project that we did 

on behalf of Purdue as a data point to add as a qualification. That was a 

much more in-depth examination of one specific scheduled substance, 

oxycodone; however, this survey as a whole is provided as a public 

service. 

 MR. STUPAK. Since this hearing here is about controlled substances 

and -- do you think it would be helpful if we had the manufacturers here? 

How would the websites get the controlled substance if not shipped from 

a manufacturer? 
209

 MR. HALPERN. Well, there are many ways a website can get a 

controlled substance and it doesn't need to come from a manufacturer 

within the United States or authorized by the FDA. 

 MR. STUPAK. But that is pretty easy to track, isn't it, if I am a 

manufacturer and my drugs are being sold on a illegal site? 

 MR. HALPERN. Not necessarily. With respect to controlled 

substances, it is easier to track where a controlled substance goes than a 

noncontrolled. However, we are frequently helping manufacturers with 

that very problem of they know who they sell to. They do not always 

know who the person they sell then goes and sells to. 

 MR. STUPAK. Exactly. But they could put pressure on the person 

they sell it to. 

 MR. HALPERN. It is our understanding that many manufacturers are 

working aggressively to get exactly that knowledge. 

 MR. STUPAK. Thank you. That was a pretty interesting report. Let 

me ask you this. And on your -- in the payment options, since we have 

Visa and MasterCard here, of the 129 websites you looked at in that area, 

99 offered Visa, 94 offered MasterCard, I understand you didn't actually 

make the purchases. So whether they actually did or did not, but -- and 

that is what they were advertising, right? 

 MR. HALPERN. That is what they were advertising. But that is just a 

claim on their part. 

 MR. STUPAK. Sure. Let me ask you this other one while I am asking 

you questions here. On the shipments, again, of the 103 you looked for 

on shipping options, 31 used FedEx, 15 used the U.S. Postal Service, and 

13 used UPS. 

 MR. HALPERN. That is based on the options that they list. For most 

sites, when we go to that checkout process -- 

 MR. STUPAK. Do they have multiple ones? 

 MR. HALPERN. Many would have multiple ones, yes. But, again, 

keep in mind it is just a representation. And that is all it is. 

 MR. STUPAK. As you come to buy them, they send you somewhere 

else. 

 MR. HALPERN. I could select Federal Express, and they could ship it 

some other way. There is a great deal of misrepresentation on the 

Internet as a whole, of course. 

 MR. STUPAK. That is why you believe everything you read on the 

Internet, right? 

 MR. HALPERN. Of course. 

 MR. STUPAK. Let me ask this question, MR. TOWNSEND. In the 

earlier panel, I was asking about why does Memphis only find six 

documents, where the U.S. mail at the same time used 33,000, if it is 
210

being represented by these websites that you're sort of like the preferred 

shipper of this stuff? FedEx more so than the others. 

 Why the big disparity in numbers here? 

 MR. TOWNSEND. Well, I listened with interest in the last panel about 

that number, Mr. Stupak, and I am not entirely clear about that data. 

Could you clarify that? 

 MR. STUPAK. What customs gave us where they seized documents; 

Miami U.S. mail, 31,051; JFK, 24,000; FedEx Memphis, 6. 

 MR. TOWNSEND. And is that six in what period of time sir? 

 MR. STUPAK. A year; from September 1, 2004 to August 31, 2005. 

 MR. TOWNSEND. Without having the full document in front of me, I 

am hesitant to challenge that; but it certainly does not sound right from 

my experience and from what I am told about that. 

 As you know, we have the ability to take a look at those packages 

through x-ray technology which Customs and Border Protection operates 

in the Memphis hub. If they identify packages to us, we provide them to 

them, and they can take a look through the available technology. 

 MR. STUPAK. So you don't x-ray them first, they just come in and if 

Customs Border Patrol -- if they say, well, look at that package, that is 

when you grab it? 

 MR. TOWNSEND. They are set up in a permanent fashion in our 

Memphis hub to operate on a daily basis. 

 MR. STUPAK. Right. But you don't x-ray them first. See, the mail xrays then come in before it goes any further. You don't do that at FedEx, 

I take it? 

 MR. TOWNSEND. With regard to pharmaceutical drugs, we do not. 

 MR. STUPAK. So we have no way of knowing what is in those 

packages unless there is something else on the outside of the container 

that catches someone's eye. 

 MR. TOWNSEND. Well, as you may know, we provide advanced data 

to CBP regarding our manifests. 

 MR. STUPAK. But advanced data, is there some characteristic of a 

package that you would look for for illegal Internet sales? 

 MR. TOWNSEND. It is my understanding that CBP does have 

criteria -- and I don't want to speak for them -- that they do have criteria 

that they may use to in fact profile cargo. 

 MR. STUPAK. Why won't you just x-ray it when it comes in? I mean, 

really, the numbers are staggering, 33,000 to 6. 

 MR. TOWNSEND. If one accepts those numbers sir. 

 MR. STUPAK. Do you have any reason to dispute the numbers? 

 MR. TOWNSEND. I haven't seen the data you're referring to. 

 MR. STUPAK. You have seen the folders we put up. Why wouldn't 

you just x-ray it? Because that's when you find it. 
211

 MR. TOWNSEND. My experience has been when you're referring to 

the Memphis hub, that at no time there would be six packages in there 

but, rather, it might look something like that. 

 MR. STUPAK. Sure. But answer my question. When a package 

comes in, why wouldn't you just -- why won't you just x-ray it to see if 

there is any illegal drugs in it? Just run it through? Is there a time 

concern? 

 MR. TOWNSEND. Certainly it is. 

 MR. STUPAK. Okay. 

 Would you check with your -- whoever you have to check with, and 

get an answer back on that? 

 MR. TOWNSEND. Yes, sir. 

 MR. STUPAK. One way to clamp down is just x-ray the packages, and 

we could get into these summary forfeitures, which take three minutes, 

as was testified earlier, and we can really crack down on a lot of what is 

coming through in UPS or whatever it is. 

 MR. TOWNSEND. We will be happy to take a look at those numbers 

and get back to you, sir. 

 MR. STUPAK. Let me ask Mr. MacCarthy or Mr. McEneney. 

 You both indicate that whether it is Visa or MasterCard, you certainly 

don't allow people to use your card for illegal transactions. 

 How do you monitor this? How do you know it is an illegal 

transaction? How do you know if the person bought the drugs from 

pharmacy.com -- whatever it is -- is legal or illegal? 

 MR. MACCARTHY. Mr. Stupak, the way we approach it is first we 

find out that it is a problematic site through a number of mechanisms. 

One could be referral from law enforcement. It could be from committee 

staff who have concerns about a particular site. Or it could be from our 

own search of the Internet which we think, going forward, is going to be 

the predominant way we will get the leads for problematic Internet 

pharmacies. And we search for websites where we think the activity 

involved is illegal, we think they are dealing in controlled substances, 

Schedule II -- 

 MR. STUPAK. So let's say you find a website you think is illegal. 

How do you prevent your customers then from using that website? 

 MR. MACCARTHY. Since we are an association of financial 

institutions that work directly with the merchants, we find out which 

financial institution has been working directly with that merchant. We 

pass that information on to that bank or credit union, whoever it is that is 

working with the merchant, and we say to that entity, here is what we 

found, whether it comes from law enforcement or from our own 

searches. This is what it looks like to us. It looks as though this website 

is engaged in the illegal sale of pharmaceuticals. We would like you to 
212

either shut those people down or explain to us why they are acting 

illegally. 

 MR. STUPAK. How does that prevent me from going on there, 

clicking a mouse and using my Visa to purchase this drug, whether you 

know if it is legal or illegal? 

 MR. MACCARTHY. The attempt here is not to focus on the buyer. 

The attempt is to focus on the illegal website itself. And our approach is 

to say, if we can find those illegal websites, work with our acquiring 

banks and sever our relationship with them, then, no cardholder would be 

able to use his card to deal with that website, because that website would 

not longer be authorized to accept Visa cards. 

 MR. STUPAK. How long does this process take? 

 MR. MACCARTHY. It depends. It can be very, very quick. 

 MR. STUPAK. Or very, very long? 

 MR. MACCARTHY. It depends on the investigation that the member 

financial institution is involved in. 

 MR. STUPAK. Why wouldn't you just key your computers at this 

illegal website, when someone tried to use it, it rejects that purchase? 

 MR. MACCARTHY. Again, we don't have the contractual relationship 

with the merchant. It is our member financial institution who has that 

relationship. 

 MR. STUPAK. But you have it with your customer. 

 MR. MACCARTHY. We give the financial institution a period of time 

to investigate the situation and come back to us and tell us what they 

have done. We have found when we do -- 

 MR. STUPAK. But they are using your card and company to purchase 

these drugs. 

 MR. MACCARTHY. We have found that when we bring this to the 

attention, to the acquiring banks, they uniformly -- 

 MR. STUPAK. I'm trying to get something instantaneous, because it 

all takes time and, as we know, these sites come up and down. 

 MR. MACCARTHY. We have to make sure that the website itself is 

indeed acting illegally and we have done our initial investigation. But 

the entity that is closest to the merchant is the one that has the contractual 

relationship with them. We give them a chance to look at it more 

carefully, and then we find that they have reacted properly, they have 

reacted effectively, and they have closed down the merchants that they 

have found to be engaged in the illegal sale of pharmaceuticals. 

 MR. STUPAK. Would you get back to us and tell us how long that 

takes? 

 MR. MACCARTHY. Sure. 

 MR. WHITFIELD. The gentleman's time has expired. The Chair 

recognizes Dr. Burgess for 10 minutes. 
213

 MR. BURGESS. Thank you, Mr. Chairman. Again I apologize for 

being out of the room while some of the testimony was going on. 

 Mr. Dahl, in your experience, do the Internet service providers 

cooperate with law enforcement to the degree that they should? 

 MR. DAHL. Generally they all cooperate if we can explain to them 

that there is an illegal site going on. But the problem becomes, and 

FDA's experience is that we don't have the tools to gather the 

information necessary to fully investigate the offense. 

 For instance, other agencies have administrative subpoenas and you 

can get the information on who that customer is of the Internet service 

provider. FDA does not have that authority and, therefore, that 

information is not available; therefore, you can't go back to them and 

explain the illegality of their transactions. 

 MR. BURGESS. Do you think -- there was some rule I was reading 

about this morning. It says computing power doubles every 18 months, 

or something along these lines. Do you think this is a problem that's 

gotten worse as more computing power is delivered to the desktop in the 

average user's hands? 

 MR. DAHL. It has gotten worse as we are sitting here this afternoon. 

It's getting worse all the time. I just take you about back 10 years ago or 

something, when some executives at FDA were saying why is OCI doing 

drug diversion cases? Show me why you're doing it. We said, to stop 

counterfeit drugs. We really haven't even dented the diversion of 

pharmaceutical drugs. And now we have counterfeits. The same thing is 

happening at the Internet; the problem is mushrooming every day. 

 MR. BURGESS. I think Congressman Norwood probably summed it 

up best as a serious problem. We don't know how to deal with it. And I 

guess my suspicion, or just observation, is that the generation or two 

behind us is so much more facile with dealing with things on the Internet. 

It is almost second nature to them. It is like an extension of their upper 

extremities. 

 This problem is going to continue to grow. And honestly, I don't 

know that a regulatory body that moves with the speed that Mr. Stupak 

has described today, I don't know if there is a foreseeable way to keep up 

with it. Do you think that is even within our power to do that? 

 MR. DAHL. I think it is within your power to make it better than it is. 

I don't know that we can solve the problem completely. I know that you 

heard FDA's testimony today was mostly about regulating good guys. 

And this committee is trying to address this activity conducted by bad 

guys. 

 You have got to focus on the problem. And the problem here is not 

approving new drugs that are controlled substances; the problem is 
214

attacking the criminals that would illegally distribute these products to 

Americans. 

 MR. BURGESS. Yes. I guess our only hope is they will go to 

counterfeiting Britney Spears' CDs and leave drugs alone. 

 Let me read this statement to you: On July 2005, the National Center 

on Addiction and Substance Abuse reports specifically recommended 

that Congress should clarify Federal law to prohibit sale or purchase of 

controlled prescription drugs on the Internet without an original copy of 

a prescription issued by a licensed DEA-certified physician licensed in 

the state of purchase, based on physical examination and evaluation, and 

to impose higher penalties for illegal sales to minors. 

 What is your opinion on what impacts such legislative clarification in 

the investigation and prosecution of cases involving controlled 

substances over the Internet? 

 MR. DAHL. Very helpful. I think that -- as a matter of fact, a law like 

that might put the distribution of controlled substances even more 

underground. They wouldn't be selling them openly as the branded drugs 

that we see today. 

 MR. BURGESS. I agree with you. I think it would be helpful. I have 

to tell you as I read that, though, as a physician in my former life, we 

know that the practice of telemedicine in the future is going to hold great 

promise for delivering care to areas that are perhaps affected by a 

disaster, or areas where care is just inherently difficult to render. And I 

do wonder if such restrictive regulation would pose a problem for the 

practice of telemedicine in the future. Hopefully, we will be clever 

enough to think about ways around that. 

 And I do thank you for your testimony today. I think you have really 

provided a lot of insight into this committee. 

 Mr. McLaughlin, does Google offer the DEA any assistance in its 

efforts to track down the hosts of websites that advertise or sell 

pharmaceuticals illegally? 

 MR. MCLAUGHLIN. We will be happy to do that. We have been 

talking to the DEA about what kinds of information would be useful to 

them. And I am not sure they have a very hard fix on what it is they 

could learn from us. And I am not sure we have a hard fix on what we 

can tell them. We have been talking with them about it, though. 

 We are certainly eager to fork over, in an appropriate way of course, 

information that we have that would help them catch the people that are 

peddling these drugs on line. 

 MR. BURGESS. Not just peddling them, but I think the spam that 

comes across the wires is just nothing short of mind-boggling. 
215

 In its efforts at minimizing the problem of rogue online pharmacies, 

does Google coordinate with any other private sector companies or 

entities? 

 MR. MCLAUGHLIN. We have been participating in two efforts 

recently. One is the interagency task force we have been discussing here. 

We have sat in on a couple of those meetings when we have been 

invited. And Yahoo!, AOL, Microsoft, and those companies have also 

been part of those meetings. 

 There's also been a task force that has been meeting up at Harvard 

University that Professor Hyman at the law school has been convening 

that includes prosecutors, some agency officials, academics, and some 

people from private sector companies like Google that have been talking 

through these issues and working toward what we hope will be concrete 

recommendations about pressure points in the ecosystem that allows 

people to order the drugs, get them shipped, and get the money 

transferred. 

 And we have talked about some of those pressure points here today. I 

think hopefully there will be others that can be identified in that report. 

 MR. BURGESS. Can you tell the committee what actions Google takes 

when it discovers that an ad refers to a controlled substance? 

 MR. MCLAUGHLIN. Well, it will either be from a SquareTrade 

certified advertiser, which means that it's gone to a third-party company 

and proven that it's a licensed pharmacy in the state in which it is located 

or not. And if the answer is it is not SquareTrade certified, then the ad 

gets shut down and I think our response times are well nigh immediate. 

 MR. BURGESS. Mr. MacCarthy, let me just ask you -- thank you for 

your responses. 

 Mr. MacCarthy. Let me just ask you in the time we have left, just as 

a prelude to this committee hearing I went online yesterday and looked at 

some of the online pharmacies that were available to me. It really 

seemed in the forms that we were asked if they were answering 

Mr. Stupak's questions on getting data, and the forms that I was asked to 

fill out online really seemed more geared toward assuring that I had a 

valid credit card rather than I had a valid prescription. Do you have any 

observation about that? 

 MR. MACCARTHY. Other than that, they want to make sure they will 

be paid, and that they are more careful about that than they are about 

screening what kind of drugs they are dealing with, it strikes me as being 

an important thing that you found it was more difficult, you know, to 

ascertain their interests in the prescription than the payment service. 

 If you have a name of one of those sites and you would like to 

provide it to us, we would be happy to look into it to see if it was one of 

the problematic sites that we would like to take some action on. 
216

 MR. BURGESS. I will tell you, I wasn't that careful about my search. 

I just went to the first one that popped up on Google, and went to it, and 

filled out the form. So if you have an internal group that does that sort of 

checking for you, I don't think they will find it that hard to encounter. 

But just, again, just my observation. 

 Mr. Chairman, it has been a long day. I yield back the balance of my 

time. 

 MR. WHITFIELD. Thank you, Dr. Burgess. 

 I would just like to ask a couple more questions. And I think 

Mr. Stupak may have a few. 

 But Mr. Dahl, you were involved in criminal investigations at FDA. 

And in my opening statement I made reference to a case of Todd Roady, 

who had purchased some controlled substances I believe from a foreign 

Internet pharmaceutical company. 

 Are you familiar with the Todd Roady case at all? 

 MR. DAHL. I am familiar with it. I was out of government at the 

time when it was initiated, but I certainly am familiar with it now. 

 MR. WHITFIELD. Do you know what the consequences were? Did 

they find -- did they shut that site down? Were there any prosecutions, 

or do you know? 

 MR. DAHL. OCI had made test buys from that South African website 

that had resulted in the tragic death of Mr. Roady. 

 And I know that in May of 2001, South African police authorities 

were here in Washington at an OCI-sponsored event called the 

Permanent Forum on International Pharmaceutical Crime. At that point, 

OCI agents provided all the evidence they had to South African police, 

who said they would go back and prosecute the responsible party to the 

fullest extent of their law. As we continued to press for what results they 

had gotten, it just was dragging on forever. Ultimately, they admitted 

that they didn't think they had the laws to address the problem, and they 

had referred that matter to their medical board, who was going to address 

the licensing of one of the physicians involved. 

 I believe that as we continued to press the medical board for 

information, we found that they did not do anything. We then went to 

the Department of Justice here in the United States, and got letters 

rogatory that involved the international tools available to further 

investigate that matter. 

 Ultimately, we did get some response to the letters rogatory, but they 

were not sufficient to bring criminal charges here in the United States. 

And I am told, or I have learned, that the Department of Justice closed 

their criminal file in January of 05. 

 MR. WHITFIELD. Thank you. Mr. Stupak. 
217

 MR. STUPAK. Mr. Chairman, if I may, I would like to submit for the 

record, since we have talked a lot about it today, this e-mail to Chris 

Nauer and also this e-mail copied to Mr. Slobodin of your staff on the 

stats we have been using on controlled substance -- whether it is UPS or 

FedEx or Miami or JFK through the postal service -- if you need it, so 

everyone will have access to it. 

 MR. WHITFIELD. Without objection. 

 [The information follows:] 
218

 MR. STUPAK. Thanks. Mr. Halpern, in your report here, I am 

looking at page 16. We are talking about the different registrars for these 

websites like GoDaddy and Open, SRS, Joker, Network Solutions. 

These are folks that don't use the process like Yahoo! or Google have, 

right? 
219

 MR. HALPERN. Which process, the SquareTrade process? 

 MR. STUPAK. Yes. 

 MR. HALPERN. I am not aware of what process they use for 

screening, for instance. 

 MR. STUPAK. Is there anything else you can think of, like if we use 

SquareTrade or something like that, that would help focus this down? 

 MR. HALPERN. Let me make a caution about SquareTrade. 

SquareTrade verifies that a pharmacy is licensed in the U.S, right. But 

we have seen instances, to offer an example, where a licensed pharmacy 

in the United States may be operating one website where it discloses all 

its information, its mailing address, its brick and mortar operations, its 

license number, and appears, at least on that website, to have stringent 

prescription requirements for any product it will sell via that website. 

Then we will have intelligence linking that website to multiple other 

websites where there are not those prescription requirements. So at the 

end of the day, there is only so much that SquareTrade can do to screen. 

 MR. STUPAK. So it is a solution, then, other than the -- I know there 

was some discussion on the first round of questioning here with this 

panel that the 12 sites -- or government certifies the sites? 

 MR. HALPERN. I'm sorry, can you repeat that question? 

 MR. STUPAK. What is the solution -- those 12 sites that DEA 

allegedly indicated, that would be the way to do it, is that the government 

certified the sites for pharmaceuticals? 

 MR. HALPERN. Well, I think the first step is intelligence 

management. There needs to be better communication of the 

information that is available to the private sector, to law enforcement 

bodies that are going to take those steps, whatever the regulatory steps 

may ultimately be. 

 If we are aware, for instance, through some investigation we have 

performed on behalf of a client in the manufacturing industry that a 

licensed pharmacy is engaged in highly suspicious activity, there needs 

to be a way to effectively communicate that to the parties that are going 

to make decisions about who should be on the list of good guys and who 

should not be. 

 MR. STUPAK. So what you're saying is the strategic framework is -- 

that we talked about on the first panel -- is really what we need here and 

some accountability? 

 MR. HALPERN. Absolutely. 

 MR. STUPAK. A question, more of a statement. We have been 

talking about registering sites, and the Chairman and I were just talking a 

little bit here; one of the arguments we get is if we, the government, went 

ahead and said all right, we will certify these sites and buy your drugs 

from there, then -- I don't mean to be partisan in this -- but then you're 
220

really endorsing the idea of reimportation of drugs from other countries 

that are safe and effective for use in this country, which has been 

contrary to what the administration wants to see and contrary, actually, to 

the new Medicare prescription drug law, because if you look at that, you 

can't go and reimport drugs. 

 So I think, well, we may be sitting here asking what can we do there? 

I think politically, this body has to get its act together on reimportation, 

whether or not you're going to have it or not. Especially with the Internet 

being a big part of everyone's life, we better take a look at reimportation 

of drugs as to safety and efficacy of the drugs. 

 MR. HALPERN. I would merely make the observation that when it 

comes to controlled substances, at least today, we see a mix of activities 

that are domestic in origin and international. And it is not, at least yet, 

purely a matter of importation. That may change in time. 

 MR. STUPAK. Did you do anything to -- you probably don't have this 

information. What is the age group of these people hitting the Internet 

for these pharmaceutical sites? 

 MR. HALPERN. The age group of the users, the consumers? We do 

not have that information. 

 MR. STUPAK. Does anyone have that information? Just a little bit to 

my reimportation question, I guess. Also you said a big increase in 

teenage people using controlled substances. That is why I asked the 

question. 

 MR. HALPERN. One way to probe that would be to leverage the chat 

rooms and forums that have developed as independent meeting places for 

individuals attempting to purchase and procure products, and that may 

contain information that could be used to profile age. 

 MR. STUPAK. Nothing further, Mr. Chairman. Thanks to everyone 

on the panel. 

 MR. WHITFIELD. Thank you all very much. We appreciate your 

patience and you were quite helpful in your testimony. And we look 

forward to working with all of you as we continue to explore ways to 

deal with this significant issue. 

 With that, we'll keep the record open for seven days for anyone that 

wants to file additional information. And with that, the hearing is 

adjourned. 

 [Whereupon, at 4:35 p.m., the subcommittee was adjourned.] 

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