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82–188 2014

SECURING OUR NATION’S PRESCRIPTION DRUG 

SUPPLY CHAIN 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

APRIL 25, 2013 

Serial No. 113–35 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

(II) 

COMMITTEE ON ENERGY AND COMMERCE 

FRED UPTON, Michigan 

Chairman 

RALPH M. HALL, Texas 

JOE BARTON, Texas 

Chairman Emeritus 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOSEPH R. PITTS, Pennsylvania 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

Vice Chairman 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

ROBERT E. LATTA, Ohio 

CATHY MCMORRIS RODGERS, Washington 

GREGG HARPER, Mississippi 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

PETE OLSON, Texas 

DAVID B. MCKINLEY, West Virginia 

CORY GARDNER, Colorado 

MIKE POMPEO, Kansas 

ADAM KINZINGER, Illinois 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

BILL JOHNSON, Missouri 

BILLY LONG, Missouri 

RENEE L. ELLMERS, North Carolina 

HENRY A. WAXMAN, California 

Ranking Member 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

FRANK PALLONE, JR., New Jersey 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

JERRY MCNERNEY, California 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

BEN RAY LUJAN, New Mexico 

PAUL TONKO, New York 

(III) 

SUBCOMMITTEE ON HEALTH

JOSEPH R. PITTS, Pennsylvania 

Chairman 

MICHAEL C. BURGESS, Texas 

Vice Chairman 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

MIKE ROGERS, Michigan 

TIM MURPHY, Pennsylvania 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

CATHY MCMORRIS RODGERS, Washington 

LEONARD LANCE, New Jersey 

BILL CASSIDY, Louisiana 

BRETT GUTHRIE, Kentucky 

H. MORGAN GRIFFITH, Virginia 

GUS M. BILIRAKIS, Florida 

RENEE L. ELLMERS, North Carolina 

JOE BARTON, Texas 

FRED UPTON, Michigan (ex officio) 

FRANK PALLONE, JR., New Jersey 

Ranking Member 

JOHN D. DINGELL, Michigan 

ELIOT L. ENGEL, New York 

LOIS CAPPS, California 

JANICE D. SCHAKOWSKY, Illinois 

JIM MATHESON, Utah 

GENE GREEN, Texas 

G.K. BUTTERFIELD, North Carolina 

JOHN BARROW, Georgia 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

HENRY A. WAXMAN, California (ex officio) 

(V) 

C O N T E N T S 

Page 

Hon. Joseph R. Pitts, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 1 

Prepared statement .......................................................................................... 2 

Hon. Robert E. Latta, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 2 

Hon. Frank Pallone, Jr., a Representative in Congress from the State of 

New Jersey, opening statement .......................................................................... 3 

Hon. Fred Upton, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 5 

Prepared statement .......................................................................................... 6 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, prepared statement ........................................................................... 7 

WITNESSES

Janet Woodcock, Director, Center for Drug Evaluation and Research, U.S. 

Food and Drug Administration ........................................................................... 8 

Prepared statement .......................................................................................... 11 

Answers to submitted questions ...................................................................... 129 

Elizabeth Gallenagh, J.D., Vice President of Government Affairs and General 

Counsel, Healthcare Distribution Management Association ............................ 38 

Prepared statement .......................................................................................... 41 

Answers to submitted questions ...................................................................... 131 

Christine M. Simmon, Senior Vice President, Policy and Strategic Alliances, 

Generic Pharmaceutical Association .................................................................. 48 

Prepared statement .......................................................................................... 50 

Answers to submitted questions ...................................................................... 135 

Michael Rose, Vice President, Supply Chain Visibility, Johnson and Johnson 

Health Care Systems, Inc. ................................................................................... 60 

Prepared statement .......................................................................................... 62 

Answers to submitted questions ...................................................................... 138 

Tim Davis, R.Ph., Beaver Health Mart Pharmacy, on Behalf of National 

Community Pharmacists ..................................................................................... 66 

Prepared statement .......................................................................................... 68 

Answers to submitted questions ...................................................................... 142 

Allan Coukell, Deputy Director, Medical Programs, The Pew Charitable 

Trusts .................................................................................................................... 75 

Prepared statement .......................................................................................... 77 

Carmen A. Catizone, R.Ph., D.Ph ........................................................................... 82 

Prepared statement .......................................................................................... 84 

Walter Berghahn, Executive Director, Health Care Compliance Packaging 

Council .................................................................................................................. 89 

Prepared statement .......................................................................................... 91 

SUBMITTED MATERIAL

Statement of LaserLock Technologies, submitted by Mr. Whitfield .................... 107 

Statement of the National Association of Chain Drug Stores, submitted by 

Mr. Pitts ................................................................................................................ 117 

Letter of November 7, 2012, from EMD Serono, Inc, submitted by Mr. 

Pallone .................................................................................................................. 121 

(1) 

SECURING OUR NATION’S PRESCRIPTION 

DRUG SUPPLY CHAIN 

THURSDAY, APRIL 25, 2013 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:01 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Joe Pitts (chairman of the subcommittee) presiding. 

Members present: Representatives Pitts, Whitfield, Shimkus, 

Murphy, Blackburn, Gingrey, Lance, Cassidy, Guthrie, Griffith, 

Ellmers, Upton (ex officio), Pallone, Dingell, Capps, Schakowsky, 

Matheson, Green, Butterfield, Barrow, Christensen, Castor, Sarbanes and Waxman (ex officio). 

Staff present: Clay Alspach, Chief Counsel, Health; Paul Edattel, 

Professional Staff Member, Health; Sydne Harwick, Legislative 

Clerk; Robert Horne, Professional Staff Member, Health; Carly 

McWilliams, Professional Staff Member, Health; Andrew Powaleny, 

Deputy Press Secretary; Chris Sarley, Policy Coordinator, Environment and Economy; Heidi Stirrup, Health Policy Coordinator; Tom 

Wilbur, Digital Media Advisor; Jean Woodrow, Director, Information Technology; Alli Corr, Democratic Policy Analyst; Eric Flamm, 

Democratic FDA Detailee; Elizabeth Letter, Democratic Assistant 

Press Secretary; Karen Nelson, Democratic Deputy Committee 

Staff Director for Health; and Rachel Sher, Democrat Senior Counsel. 

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF PENNSYLVANIA 

Mr. PITTS. Ten o’clock having arrived, the Subcommittee will 

come to order. 

The Chair will recognize himself for an opening statement. There 

is an echo. 

Members of this Subcommittee have been interested in securing 

our Nation’s pharmaceutical supply chain for many years. While 

some supply chain provisions were included in Title VII of last 

year’s FDA user fee bill, the Food and Drug Administration Safety 

and Innovation Act, FDASIA, a comprehensive track-and-trace 

package has yet to be finished. 

Today’s hearing will focus on the importance of securing the 

downstream pharmaceutical supply chain, which includes manufacVerDate Nov 24 2008 15:25 Mar 04, 2014 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-35 CHRIS
2 

turers, wholesale distributors, pharmacies, repackagers and thirdparty logistics providers. 

In order to ensure that counterfeit or stolen drugs do not enter 

the supply chain and harm patients, States have passed laws that 

require, or will require, those involved in the downstream supply 

chain to keep pedigrees or transaction histories of drugs. 

Some believe that these differing State requirements should be 

replaced with a reasonable, practical and feasible federal policy. 

On Monday, Representative Latta and Representative Matheson 

released a discussion draft to enhance the security of the pharmaceutical distribution supply chain and prevent duplicative or conflicting federal and State requirements. 

I would like to thank all of our witnesses for being here today. 

I look forward to hearing their thoughts on the draft. 

[The prepared statement of Mr. Pitts follows:] 

PREPARED STATEMENT OF HON. JOSEPH R. PITTS

The Subcommittee will come to order. 

The Chair will recognize himself for an opening statement. 

Members of this Subcommittee have been interested in securing our nation’s 

pharmaceutical supply chain for many years. 

While some supply chain provisions were included in Title VII of last year’s FDA 

user fee bill, the Food and Drug Administration Safety and Innovation Act 

(FDASIA), a comprehensive ‘‘track and trace’’ package has yet to be finished. 

Today’s hearing will focus on the importance of securing the downstream pharmaceutical supply chain, which includes manufacturers, wholesale distributors, pharmacies, repackagers and third-party logistics providers. 

In order to ensure that counterfeit or stolen drugs do not enter the supply chain 

and harm patients, States have passed laws that require, or will require, those involved in the downstream supply chain to keep pedigrees or transaction histories 

of drugs. 

Some believe that these differing State requirements should be replaced with a 

reasonable, practical and feasible Federal policy. 

On Monday, Rep. Latta and Rep. Matheson released a discussion draft to enhance 

the security of the pharmaceutical distribution supply chain and prevent duplicative 

or conflicting Federal and State requirements. 

I would like to thank our witnesses for being here today. I look forward to hearing 

their thoughts on the draft.Thank you. At this time, I would like to request unanimous consent for Congressman Latta to participate in the subcommittee hearing. 

Without objection so ordered. I now yield the remainder of my time to Rep. Latta. 

Mr. PITTS. At this time I would like to request unanimous consent for Congressman Latta to participate in this subcommittee 

hearing. Without objection, so ordered. 

I now yield the remainder of my time to Representative Latta. 

OPENING STATEMENT OF HON. ROBERT E. LATTA, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Mr. LATTA. Well, thank you very much, Mr. Chairman. I appreciate you having this legislative hearing today on this important 

issue of securing our Nation’s pharmaceutical supply chain. I also 

appreciate the subcommittee for allowing me to participate in the 

hearing today. 

This is an important issue that was brought to my attention 

when I was first elected to Congress over 5 1⁄2 years ago by concerned stakeholders in Ohio, and I have been working on it ever 

since. I am pleased the subcommittee is holding a hearing on the 

3 

issue, and I am honored to be leading the effort in a bipartisan effort in this Congress. 

The pharmaceutical supply chain touches every part of our 

health care system. It is imperative that we get the structure and 

the segments of it connected in a safe, secure and effective manner 

that provides the best protection for patients. This draft legislation 

Mr. Matheson and I have released on Monday is a commonsense, 

practical approach to making improvements to the current supply 

chain while facilitating continued collaboration among all parties 

before taking the next steps toward the additional requirements. 

To protect patient safety, this bill would replace the patchwork 

of multiple State laws and create a uniform national standard for 

securing the pharmaceutical distribution supply chain, therefore, 

preventing duplicative State and federal requirements. It would increase security of the supply chain by establishing tracing requirements for manufacturers, wholesale distributors, pharmacies and 

repackagers based on—Mr. Chairman, should I just continue on 

without the mike? 

Mr. PITTS. Go ahead. 

Mr. LATTA. Thank you. It would increase security of the supply 

chain by establishing tracing requirements for manufacturers, 

wholesale distributors, pharmacies and repackagers based on 

changes in ownership. The bill also establishes a collaborative, 

transparent process between the Food and Drug Administration 

and stakeholders to study ways to further secure the pharmaceutical supply chain. 

The timeline put forth in this bill is reasonable and would allow 

enough time for stakeholders to comply with these new national 

standards and ensure that through feedback from these stakeholders that the next phase of the process is done efficiently and 

effectively. 

There has been significant work done on this issue over the 

years, and I appreciate all the feedback and suggestions I have received on this bill draft. While this bill is still in draft form, Mr. 

Matheson and I intend to introduce it in bill form in the coming 

weeks, and we fully understand that California law relating to implementation of an e-pedigree system is quickly approaching. It is 

imperative that we move this bill swiftly through the committee 

and then to the House Floor. 

I look forward to working with our Senate colleagues on this legislation along with the FDA and all the other interested stakeholders, and I urge the support of this draft legislation soon to be 

in bill form. 

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

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the ranking member, Mr. Pallone, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. PALLONE. Thank you, Chairman Pitts. I am pleased that we 

are having this hearing today because drug distribution security is 

critical to public health and safety. The public deserves the piece 

4 

of mind that the prescriptions they pick up contain quality ingredients and were handled throughout the supply chain by licensed 

companies adhering to strong safety standards so that the final 

products they receive are safe and effective drugs. 

U.S. companies providing drugs to other international markets 

have already begun to serialize their products to comply with these 

countries’ track-and-trace requirements, and the American people 

should be afforded the same protections. 

Last summer, we had meaningful bipartisan bicameral conversations about this topic. While we were ultimately unable to reach an 

agreement, the discussions with our Senate counterparts and a 

number of stakeholders certainly demonstrated our commitment to 

the issue. As we revisit drug distribution security, there is a lot at 

stake, and that is why I am disappointed that we were not given 

the opportunity to work with our Republican colleagues on the 

draft bill that was released earlier this week. I am also concerned 

that this draft seems to me to not reflect where our discussions left 

off last year. Mr. Chairman, as we move forward, I urge the subcommittee to make sure we get this proposal right and that we 

work together to get there. 

Now, some States such as California have already begun to address drug distribution security to ensure the safety of their patients. It is crucial that if we are going to preempt these State efforts, that we must have a strong federal standard. This standard 

should serve as a true building block to track drugs at the unit 

level so that each and every product is authenticated at the lowest 

unit of sale before they reach patients and counterfeit or contaminated products are eliminated. We cannot rely on Congress to revisit this issue in 10 years. The time to establish this path forward 

and set up phase-in requirements is now. 

It is also important that everyone who is part of the system including the manufacturers, the repackers, the wholesale distributors, third-party logistics providers and dispensers play a role in 

tracing the safety of the Nation’s drug supply. 

In addition, I believe that in order to establish the most effective 

drug security system, it is critical that we include strong national 

license standards for distributors and third-party logistics providers so that only reliable companies are handling the Nation’s 

drug supply, and FDA has immediate access to needed company information in the event of a drug recall or other public health 

threat. 

I want to thank our witnesses here today including the FDA for 

all your hard work throughout this process. Many of you contributed to the discussions last year in a productive way to educate us 

on the supply chain process, and I look forward to better understanding what you believe is critically important to any bill that 

moves forward, and I want to extend a special welcome to Mr. Michael Rose, who is here testifying from Johnson and Johnson, 

which is headquartered in my district. I look forward to J&J and 

all the stakeholders as well as my committee colleagues to achieve 

a reasonable solution that will safeguard the public health. 

I would like to yield the remaining 2 minutes of my time, Mr. 

Chairman, to our chairman emeritus, the gentleman from Michigan, Mr. Dingell. 

5 

Mr. DINGELL. Mr. Chairman, I thank you for these hearings. I 

commend you and also my dear friend, Mr. Pallone. I want to commend Mr. Latta and Mr. Matheson for their leadership on this, 

which has been a long thorn in the side of this committee, being 

very, very difficult to achieve our purposes. 

I would observe that we have before us an opportunity where the 

two parties are working together, where the House and Senate are 

working together, and I am delighted to see that that is happening 

because there is no real Democratic or Republican way of protecting the American public. 

We have to work with all the stakeholders, and I have to observe 

that the pharmaceutical industry and the stakeholders have been 

most helpful in the matters as they have gone forward, and I want 

to thank again Mr. Latta and Mr. Matheson for their work on 

these matters. I am hopeful that we will be able to move forward 

toward legislation that will be accepted and acceptable to all parties, and I note that the industry has been working closely with us 

as has the Senate. It is my hope that we will understand that 10 

years on some things within this matter might be a bit long, and 

I think that while we do need to see to it that Food and Drug has 

clear instructions from the Congress, we don’t want to get to the 

point where we are micromanaging things and having meetings set 

up by Food and Drug which may or may not be of value to the 

country and to the industry and the consumers. 

Having said those things, I would return 22 seconds to my dear 

friend from New Jersey, who has been so gracious as to yield to 

me. 

Mr. PITTS. The Chair thanks the gentleman and now recognize 

the chairman of the full committee, Mr. Upton, for 5 minutes for 

opening statement. 

OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. UPTON. Well, thank you, Mr. Chairman, and hopefully the 

mic will work long enough before our helium bill gets to the floor. 

I appreciate today’s hearing, and that is for sure, on securing the 

prescription drug supply chain. Keeping our prescription drugs safe 

is certainly a bipartisan issue, and we have the world’s safest drug 

supply, but that doesn’t mean we can’t make it even better. 

I would like to thank the discussion draft’s authors for their bipartisan leadership on this very important issue. Earlier this week, 

as has been noted, a comprehensive discussion draft was released 

that would increase the security of the supply chain for America’s 

patients while at the same time preventing duplicative Federal and 

State requirements. The draft also sets forth a collaborative process so the Food and Drug Administration and supply chain stakeholders could work together in an effort to better understand how 

and when to move to unit-level traceability. 

We spent a significant amount of time working on this issue as 

we successfully moved the Food and Drug Administration Safety 

and Innovation Act through the legislative process in 2012 and our 

efforts continued beyond enactment. During that process, we also 

sought input from stakeholders like Pfizer and Perrigo, two important companies in my district in Michigan, as well as our small 

6 

pharmacies. This hard work allowed us to better understand the 

issue, and the bipartisan discussion draft reflects that understanding. Now it is time to move this legislation down the field and 

across the goal line. We have a lot of good friends in the Senate 

that agree with us on that sentiment, and it is certainly a priority 

for this committee to get this done, and I look forward to embarking on that, and I yield to Dr. Gingrey and then to Ed Whitfield. 

[The prepared statement of Mr. Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON

Thank you for holding today’s hearing on securing the prescription drug supply 

chain. Keeping our prescription drugs safe is a bipartisan issue. We have the world’s 

safest drug supply, but that does not mean we cannot make it even safer. 

I would like to thank the discussion draft’s authors for their bipartisan leadership 

on this very important issue. Earlier this week, a comprehensive discussion draft 

was released that would increase the security of the supply chain for America’s patients while at the same time preventing duplicative federal and state requirements. 

Their draft also would set forth a collaborative process so the Food and Drug Administration and supply chain stakeholders could work together in an effort to better understand how and when to move to unit-level traceability. 

We spent a significant amount of time working on this issue as we successfully 

moved the Food and Drug Administration Safety and Innovation Act through the 

legislative process in 2012 and our efforts continued beyond enactment. During the 

process, we also sought input from stakeholders like Pfizer and Perrigo in Michigan, 

as well as our small pharmacies. This hard work allowed us to better understand 

the issue, and the bipartisan discussion draft reflects that understanding. Now it 

is time to move this legislation down the field and across the goal line. I believe 

my good friends on the Senate side agree with that sentiment. 

Because of the hard work that already has been put in on this issue, I am confident we can get a product to the president’s desk by the August recess. I commit 

today that I will do all that I can to make it happen, including marking up the legislation in the Committee in May.Thank you. I yield to Mr. Latta. 

Mr. GINGREY. I thank the gentleman for yielding. 

Mr. Chairman, I am pleased that there has been generally bipartisan acknowledgement that a secure pharmaceutical supply chain 

is not only necessary for patient safety but becoming obtainable 

and tracking technology continues to improve, and I would hope 

that the legislation that is ultimately the result of this hearing 

today will balance both the reality of today’s emerging technologies 

with the flexibility to change as the result of innovation. It is also 

necessary that we provide a clear and a concise list of expectations 

and directives to all companies up and down the supply chain. 

Steady industry progress toward increased drug security should not 

be impeded by a lack of clarity from Congress as to the ultimate 

goal of this legislation for both the sake of innovation and security 

and for the patients who may be adversely impacted from counterfeit or stolen drugs. 

Thank you, and I yield the balance of my time to the gentleman 

from Kentucky, Mr. Whitfield. 

Mr. WHITFIELD. Well, Dr. Gingrey, thanks so much, and thank 

you all for having this hearing today, and we certainly appreciate 

the witnesses being here. 

Last week, I attended a forum over at Georgetown University 

with the title of ‘‘Combating the Threat of Counterfeit Pharmaceuticals’’, and I really was taken aback by the amount of money 

being made by organized crime and other groups and entering into 

the supply chain counterfeit prescription drugs. 

7 

Another point that came out, and I am delighted that Mr. Latta 

and Mr. Matheson have introduced legislation at the federal level 

because we know individual States are moving forth, California, I 

guess out in the front right now, and I think we need to set a federal standard in this issue because I heard a lot of concerns about 

individual States moving in this area, which can create real problems for the manufacturers, but we want to do it safely, and I really look forward to the testimony of the witnesses today. 

I would also ask unanimous consent to simply submit into the 

record a statement from a company called Laser Lock Technologies, 

if that is acceptable. They are an anti-counterfeiting company. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. WHITFIELD. And with that, I would yield back. 

Mr. UPTON. I just want to end by saying that this is a priority. 

We intend to start the markup process next month, May, and our 

goal will be to try and get a bipartisan bill to the President before 

the August recess. So we are going to work very hard and we appreciate all those that are here to help us achieve that goal. 

Thank you. I yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the Ranking Member of the Full Committee, Mr. Waxman, 5 minutes for an opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Today’s hearing will examine ways to improve the integrity of 

our drug supply chain. The entry of falsified and substandard 

drugs into our drug supply chain poses a grave public health 

threat. Time and again, we have read stories about patients getting 

drugs that were unsafe or ineffective counterfeits or that were stolen and not stored properly, so no longer worked. Without action, 

this is a problem that is likely to grow. 

Today, there is a regulatory void at the federal level because the 

United States does not have laws requiring the tracking and tracing of pharmaceuticals. So some States have stepped in and enacted their own laws. My State, California, has a law that would 

mandate one of the most robust pedigree systems in the country. 

Many have suggested there is a need for a single federal system 

that would preempt these State laws. I believe having a system at 

the federal level makes sense, if done correctly. But I have grave 

concerns about preempting a strong State law like California’s and 

replacing it with one that is not as effective at the federal level. 

Our fundamental goal in establishing a federal system should be 

to prevent Americans from being harmed by counterfeit and substandard medicines. If we cannot assure the public that legislation 

would accomplish that goal, then it is not worth doing. 

Throughout last year, members on a bipartisan, bicameral basis 

engaged in extensive discussions about how best to protect our supply chain. I was part of this group, as was Chairman Upton and 

Representatives Pallone, Dingell, Matheson and Bilbray. We heard 

loud and clear from FDA, Pew and others that if we want a secure 

8 

drug supply chain, we need an electronic, interoperable unit-level 

tracking system that can identify illegitimate product in real time 

so that it does not end up in the patients’ hands. We also heard 

that creating this kind of system is doable. In fact, it is already 

being done in China, as we will hear today from one of our witnesses. 

Last fall, the bipartisan, bicameral group issued a proposal that 

although far from being complete, reflected agreement about the 

need for assuring that we ultimately get to a unit-level electronic 

system. And just last week, the Senate distributed a draft bill built 

upon that proposal and made a concerted effort to address issues 

that were raised on both sides of the aisle throughout last year’s 

discussions. 

Unfortunately, the House discussion draft under consideration 

here today doesn’t take that approach. The bill does not require an 

electronic, interoperable unit-level system. Instead, it provides that 

in ten years, FDA and GAO would make recommendations to Congress about what legislation should be enacted to better secure the 

supply chain. And even though we never get to a unit-level electronic system, the House bill would preempt State law on day one. 

That is unacceptable to me as a California member, but it should 

be unacceptable to all members. We know how long it has taken 

Congress to act thus far. The discussion draft preempts strong 

State laws and puts a weak federal program in its place. That is 

a step backwards for public health. There simply is no reason to 

wait to put enforceable standards in place. We have been told repeatedly, and I am confident we will hear today, that in order to 

secure our drug supply chain, we need to track products at the unit 

level using an interoperable, electronic system. We fail to protect 

the Nation’s public health if we do not take this step. I yield back 

the balance of my time. 

Mr. PITTS. The Chair thanks the gentleman. That concludes the 

opening statements of the members. 

We have two panels before us today. On our first panel, we have 

Dr. Janet Woodcock, Director of the Center for Drug Evaluation 

and Research at the U.S. Food and Drug Administration. Welcome. 

Thank you for coming today. You will have 5 minutes to summarize your testimony. Your written testimony will be placed in the 

record. You are recognized now for 5 minutes. 

STATEMENT OF DR. JANET WOODCOCK, DIRECTOR, CENTER 

FOR DRUG EVALUATION AND RESEARCH, U.S. FOOD AND 

DRUG ADMINISTRATION 

Dr. WOODCOCK. Thank you, and good morning Mr. Chairman, 

Ranking Member, members of the subcommittee and authors of the 

discussion draft. 

We are all seeking the best way to protect patients from medicines that aren’t what they pretend to be. That is why we are here. 

Or that may cause harm to them without providing the help that 

they expect from their medicine, and that is the goal we want to 

achieve mutually. So I thank you for continuing to work on this 

program. We hope to do this by strengthening the safety net that 

we currently have in place for medicines so that counterfeit drugs 

can’t get in the drug supply because right now there are some loopVerDate Nov 24 2008 15:25 Mar 04, 2014 Jkt 037690 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-35 CHRIS
9 

holes where they can enter the drug supply, and they are. Diverted 

or stolen drugs can’t reenter the drug supply after being perhaps 

taken by criminals and stored in unsafe conditions, and suspect 

products that happen to get in can be rapidly identified and removed from the drug supply before they get to patients. And additionally, we need to be able to find drugs wherever they are in the 

supply chain. If dangerous products have been dispensed to patients, we want to be able to find them and get them out of the 

hands before the patients are harmed. 

And why do we need this? Well, as people have already said, the 

problems with counterfeits are well documented and actually growing. Around the world, criminal networks are counterfeiting drugs 

at a growing rate and many countries, their patients in their countries are exposed to very dangerous drugs and even some of the organisms, the resistance problems that we are seeing with drug resistance, are partly driven by these counterfeits because people are 

taking drugs that actually are subpotent that are counterfeit drugs. 

And we are seeing this in the United States where often expensive, 

lifesaving medicines are targeted. I can’t imagine what it is like for 

a person battling cancer to hear that they have been receiving a 

fake therapy or their cancer or for a diabetic to lose blood sugar 

control because their insulin came from a stolen batch that was improperly stored, and these things actually have happened in our 

country. 

And there are other equally compelling reasons to strengthen 

drug track and trace that we haven’t really discussed as much, and 

that is to enable recalls of FDA-approved drugs. This is really a 

non-trivial problem. Over the last 5 years, there have been over 

6,500 drug recalls in this country. Over 400 of these have been 

class I recalls, and a class I recall is where our doctors at FDA 

have determined that there is an immediate risk to health if people 

would take these drugs, serious risk. And we need to be able to 

find these recall drugs, as I said, and get them out of the hands 

of patients rapidly. For example, this has happened, there could be 

a label mix-up and what is labeled as an innocuous drug, perhaps 

a pain reliever or something, could actually have a dangerous drug 

such as a blood thinner or cancer chemotherapy drug in that vial, 

and so if that type of thing happens, we need to be able to rapidly 

identify the patient who may have these drugs and get them right 

down to the patient level. 

So right now, we have a great deal of difficulty finding which patients got these drugs, particularly at the lot level. What we may 

end up doing is recalling the entire drug, and sometimes these 

drugs are lifesaving drugs that we don’t want to remove completely 

from the patients; we only want to get the tainted lots. So this is 

a large and growing problem, and good track and trace would help 

the entire health care system, people taking care of these patients 

to secure these products as soon as possible and avoid further 

harm. 

And finally, I think and most importantly, I want to say, whatever is put in place by Congress should not fray or weaken the existing safety net. A recent investigation conducted by your colleagues’ Ranking Member Cummings of the House Oversight and 

Government Reform Committee and Chairman Rockefeller and 

10 

Chairman Harkin in the Senate identified a gray market of business that was capitalizing on the way drugs can move through the 

system to buy up drugs and resell them, perhaps at 1,000 times 

markup that were in shortage, and desperate hospitals, saying caring for children with cancer had no choice to buy these drugs at 

this markup because they had to treat their patients. So the existence of that paper pedigree, as noted in the report, enabled them 

to track back each transaction and figure out the markup and document what actually happened with these shortage drugs. So this 

paper pedigree right now is a mainstay of us figuring out where 

those drugs have been, not always followed but that is the law that 

they should have that pedigree and we mustn’t weaken that, so I 

really ask you that any system that you put in place not diminish 

our ability to figure out where these drugs have been. It was astonishing if you read the Cummings report the Murphy trail these 

drugs followed and their successive markup as they went through 

multiple hands, none of whom, arguably, had a real interest in getting these drugs to patients. They were simply marked up at each 

step. 

So we really ask that we not lose the ability to figure out where 

drugs have been. That is critical, and we recognized that changes 

will not happen overnight and a stepwise process is needed, but it 

should be expeditious. There are technologies available in various 

industries that can track things. I order a lot of things online so 

many of you do too and they are tracked throughout the system. 

So we have to make sure we strike the appropriate balance between the need to establish a secure system that protects the public health and the costs and feasibility of such a system and we 

need to make sure we put something in place, I think, that evolves 

over time to a common goal that we all have is a system that prevents criminals from taking advantage of our patients, prevents 

people from diverting drugs and marking them up, prevents us not 

being able to identify recall drugs and actually people being 

harmed while we are doing investigations and trying to figure out 

where these drugs ended up. 

Mr. PITTS. Could you please conclude? 

Dr. WOODCOCK. I am sorry. So our ultimate goal, as yours, is to 

protect the public from counterfeit, stolen, diverted or unfit medications and make sure that we establish a meaningful and enforceable track-and-trace system. Thank you. 

[The prepared statement of Dr. Woodcock follows:] 

11 


82188A.001

.. ~+",,~I;):;~ 

( ~ DEPARTMENT OF HEALTH AND HUMAN SERVICES 

+:::::t~~ 

Public Health Service 

STATEMENT 

OF 

JANET WOODCOCK, M.D. 

Food and Drug Administration 

Silver Spring, MD 20993 

DIRECTOR, CENTER FOR DRUG EV ALUA TION AND RESEARCH 

FOOD AND DRUG ADMINISTRATION 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

BEFORE THE 

SUBCOMMITTEE ON HEALTH 

COMMITTEE ON ENERGY AND COMMERCE 

U.S. HOUSE OF REPRESENTATIVES 

"SECURING OUR NATION'S PRESCRIPTION DRUG SUPPLY CHAIN" 

APRIL 25, 2013 

RELEASE ONLY UPON DELIVERY 
12 


82188A.002

INTRODUCTION 

Mr. Chainnan. Ranking Member Pallone and Members of the Subcommittee, I am Dr. Janet 

Woodcock, Director of the Center for Drug Evaluation and Research (CDER) at the Food and 

Drug Administration (FDA or the Agency), which is part of the Department of Health and 

Human Services (HHS). Thank you for the opportunity to be here today to discuss the important 

issue of securing the supply chain for prescription drug products. 

Securing the Supply Chain for Prescription Drugs 

As FDA has previously testified before this Committee, the increasingly complex drug supply 

chain, from raw source materials to finished products for consumers, presents multiple 

opportunities for the product to be contaminated, diverted, or otherwise adulterated. Our efforts 

to secure the supply chain include minimizing risks that arise anywhere along the supply chain 

continuum, from sourcing a product's ingredients through the overseeing of a product's 

manufacture, storage, transit, sale, and distribution. A breach at any point in this continuum 

could lead to dangerous and even deadly outcomes for patients. 

In addition, we continue to see counterfeit drugs threaten American consumers' health. 

Counterfeit drugs raise significant public health concerns, because their safety and effectiveness 

are unknown. A counterfeit drug could contain a substance that is toxic to patients. But even a 

counterfeit drug with no active ingredient could prove harmful to patients who take it, thinking 

that they are taking a lifesaving or life-sustaining medication, when they are not. For example, 

in 2003, over $20 million in illegally imported and counterfeit Lipitor (atorvastatin calcium), a 

popular cholesterol-lowering drug, was distributed throughout the United States. The source and 

2 
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82188A.003

manufacturing methods of these drugs were unknown and therefore had the potential to endanger 

patients. As another example, in 2012, FDA learned of counterfeit versions of two controlled 

substances that were being sold on the Internet: Adderall (amphetamine aspartate), a drug used 

to treat attention deficit disorder, and Vicodin ES (acetaminophen; hydrocodone bitartrate), a 

drug used to treat pain. In both of these incidents, the counterfeits contained different active 

ingredients than the products they purported to be. Also in 2012, FDA alerted over 500 U.S. 

medical practices that they had purchased unapproved drugs, some of which may have included 

a counterfeit version of a cancer medicine. At least some of the counterfeit drugs contained no 

active ingredients. These examples are troubling because patients may not have received needed 

therapy or may have experienced harmful side effects. 

Counterfeit drugs are not the only problem; stolen or diverted products also pose a threat to 

patients. Once products leave the legitimate supply chain, we have no idea how they are being 

stored or handled--or even if they have expired. When those drugs make their way back into the 

supply chain, they can pose a danger to patients. For example, in one case in 2009, 

approximately 129,000 vials of Levemir (insulin detemir) were stolen. Insulin is used to control 

blood sugar levels in patients with diabetes and should be stored in a refrigerator before use. A 

patient who received the stolen insulin had poor blood glucose control, likely as a result of it not 

being stored properly. In 2008, a shipment ofCarbatrol (carbamazepine), a drug to treat 

seizures, was stolen while traveling from a company's manufacturing facility to its distribution 

center. The manufacturer reported that expired Carbatrol from the stolen lots made it back into 

the legitimate supply chain and was being returned for credit. In a case from 2011, a criminal 

diverted $2.7 million in prescription drugs by purchasing them from physicians who get 
14 


82188A.004

discounted rates, and then reselling them to wholesalers at a profit. These diverted drugs 

included sterile injectable drugs, which usually require special storage and handling. 

While we recognize that we may not be able to eliminate all problem products from the supply 

chain, we take every step we can to make the supply chain more secure to keep the illegitimate 

products out. Implementation of a system to fully track and trace prescription drugs throughout 

the supply chain would help in combating incidents like these counterfeit examples. In February 

2013, the Institute of Medicine issued a report entitled "Countering the Problem of Falsified and 

Substandard Drugs," identifying a combination of actions that could reduce counterfeit and 

substandard drugs domestically and globally. The report recommends implementing a 

mandatory drug tracking system in the United States and recognizes how knowledge of where a 

product is and where it has been can greatly reduce the risks introduced by product diversion and 

porous supply chains. 

A robust track-and-trace system, in which each drug produced would be tracked as it passes 

through the distribution system and allows purchasers to verify its distribution history, would 

improve the ability to identify and detect potentially harmful products if they enter the supply 

chain. Another potential benefit would be to improve the efficiency of product recalls. Imagine 

a system that enables the distributor or pharmacist to readily determine if they have sold or now 

have in stock a drug that had been identified as a counterfeit or subject to a recall. They could 

quickly remove that product from the supply chain, keeping the patient out of harm's way. The 

only way this can be done effectively is if all supply chain stakeholders participate in the system 

and if all legitimate products have a way to be identified and tracked as they are distributed from 

the point of manufacture. 

4 
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FDA's Current Activities 

The Food and Drug Administration Amendments Act of2007 (FDAAA; Public Law 110-85) 

gave FDA authority to set standards for identification, validation, authentication, and tracking 

and tracing of prescription drugs; but, it did not provide the Agency with explicit authority to 

require an effective track-and-trace system for all drug products throughout the supply chain. In 

March 2010, FDA issued a final guidance for industry describing the Agency's current thinking 

for standardized numerical identification (also known as serialization) for prescription drug 

packages. This guidance was the first of several steps that FDA intends to take to implement 

these provisions ofFDAAA. We held a Track-and-Trace Public Workshop in February 2011 to 

obtain public input on the necessary elements to achieve effective authentication and the 

desirable attributes of a track-and-trace system. FDA continues to work on developing these 

standards. 

The Food and Drug Administration Safety and Innovation Act (FDASIA; Public Law 112-144) 

provided the Agency with new authorities that will help to secure the safety and integrity of 

drugs imported into, and sold in, the United States. For example, the law includes provisions 

that allow FDA to refuse admission of a product to the United States if inspection of the 

manufacturing facility is delayed, limited, or denied; require foreign and domestic companies to 

provide complete information on threats to the security of the drug supply chain; and improve 

current registration and listing information, making sure FDA has accurate and up-to-date 

information about foreign and domestic manufacturers. A robust track-and-trace system would 

complement these new authorities to further ensure that stolen, diverted, and counterfeit drugs do 

not enter the supply chain or are found more quickly if they do. 
16 


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Next steps 

FDA has worked closely with Members of this Committee, your colleagues in the Senate, and 

other stakeholders to provide technical assistance in response to legislative proposals to secure 

the downstream pharmaceutical supply chain. Consistent with the position articulated by the 

President's Intellectual Property Enforcement Coordinator, FDA is focused on establishing an 

effective track-and-trace system. Broadly speaking, such a system should include: 

y A clear path toward implementing an effective track-and-trace system to fully secure the 

supply chain and enhance protection of public health. 

Y Enforcement authority to ensure that parties adhere to implementation requirements. 

Y Requirements for all stakeholders to maintain the distribution history for drugs they 

handle, unless the system provides a way to verify a drug's authenticity and identify its 

complete history, when needed. 

Y Reasonable time frames for implementation based on what is technologically possible 

and what will result in the best possible outcome for public health. 

CONCLUSION 

An effective national track-and-trace system for all drug products throughout the supply chain 

would improve the security and integrity of the drug supply and ensure transparency and 

accountability of product distribution. Many of the challenges we have with securing the supply 

chain-including contamination, diversion, counterfeiting, and other adulteration-could be 

addressed by such a system. We look forward to continuing to work with the Committee to 

develop a system that meets this promise. 

6 
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82188A.007

I appreciate the opportunity to testifY before you today and would be happy to answer any 

questions that you may have. 

7 
18 

Mr. PITTS. The Chair thanks the gentlelady and we will now 

have questioning, and I will recognize myself for 5 minutes for that 

purpose. 

Dr. Woodcock, if the FDA has a particular concern that a drug 

could cause an immediate threat to individuals and the sponsor refuses to take action, what would the agency do? Do you believe that 

the agency’s persuasive authority is strong enough that sponsors 

will take corrective action? Does today’s regulatory regime seem 

adequate given the increase in quantity and sophistication of counterfeiting? 

Dr. WOODCOCK. Well, we have authorities to—seizure authorities 

and other authorities that require judicial actions to do. We also, 

though, usually will go public with our concerns rapidly and start 

notifying the health care system. It is uncommon but does happen 

that firms argue with us over recalling drugs or removing them. It 

is uncommon but can occur. 

Mr. PITTS. Will national uniformity increase the security of the 

supply chain and improve patient safety? Please explain. 

Dr. WOODCOCK. An effective system will help secure the supply 

chain from the incursions that we have seen that probably are a 

growing threat over the years by criminals, so that will protect patients and probably prevent harm that we have seen. 

Mr. PITTS. Is it important to preserve the States’ ability to license and enforce national standards? 

Dr. WOODCOCK. Obviously, national standards are useful because 

of the uniformity because most drugs move across State lines. So 

I think it is important that both the federal government and the 

States have the ability to enforce appropriate laws. 

Mr. PITTS. Will product serialization increase the security of the 

supply chain and improve patient safety? Please explain with your 

answer. 

Dr. WOODCOCK. All right. So companies make batches or lots of 

drugs, OK, and those are large amounts of a same drug. It might 

be a thousand, it might be a million units would be made. Those 

are packaged into crates or whatever and sent to distributors, who 

then send them around the country. At some point those are broken up and then sent to pharmacies and, you know, all around to 

hospitals and so forth. At that point that’s when incursions by 

counterfeiters can come in if they simply use the same lot number. 

The criminals are becoming very sophisticated so they can get a 

few vials of that lot, they can copy the label and put something 

that is totally fake into the system. So a serialization procedure 

coupled with some verification at the various levels of distribution 

would enable us to rapidly identify incursions like that of fake 

parts of the lot and remove them quickly, and I believe that’s why 

the manufacturers, the pharmaceutical manufacturers, as I think 

you will hear later today, are moving towards serialization. 

Mr. PITTS. Will data exchange and systems between participants 

in the supply chain increase the security of our drug supply and 

improve patient safety? Please explain. 

Dr. WOODCOCK. Well, I think it is necessary. It gets to what we 

were talking about earlier about the pedigree. If we don’t know the 

chain of custody of the product, and if we have to reconstruct that 

later when—say some defective product, dangerous product is 

19 

found out there in the hands of a consumer, or worse, they have 

a side effect which happens, we have to deal with that, and we get 

a report of serious side effects, then we want to know where did 

it come from, how many are out there, is it real drug and so forth. 

And so unless we have that pedigree and we know what hands it 

moved through, and if we have to reconstruct that later by 

querying people, that will cause great delays. So if you intend to 

replace the paper pedigree system, it needs to be replaced by something that has capacity to do that tracking back. So we can rapidly 

identify other people at risk if we get, say, adverse events or report 

of a substandard drug, we can rapidly identify where that came 

from and how it happened. 

Right now, we have instances where we get adverse-events report, people die, and we get a large number of reports like this 

every year for various reasons but some of them might be related 

to substandard drugs, and we have a very difficult time tracking 

that back from the patient to the pharmacy and figuring out what 

the patient actually got. So we would really ask that that pedigree, 

that whatever is established is at least equivalent in performance 

to the pedigree we have now. 

Mr. PITTS. So finally, would a national track-and-trace standard 

increase the efficiency of product recalls? 

Dr. WOODCOCK. Absolutely. That would be a tremendous tool for 

us. 

Mr. PITTS. Thank you. The Chair now recognizes the ranking 

member of the subcommittee, Mr. Pallone, 5 minutes for questions. 

Mr. PALLONE. Dr. Woodcock, your written testimony lays out a 

disturbing series of cases illustrating the risk to our drug supply 

chain posed by counterfeit and stolen or diverted products, and it 

is not a new problem. We tried to address all the way back in 1987 

with the Prescription Drug Marketing Act but for a variety of reasons that didn’t work. You described the fact that we need a robust 

track-and-trace system. I know there are a variety of ways this 

could potentially, be done and the summary of the House discussion draft indicates that it would require lot-level tracing. Other 

proposals set up a system that would track at a more granular 

level at the packaging or unit level. You talked about this with 

questions from the chairman. Can you describe the differences? I 

mean, I know you basically have described the differences between 

the two types of systems but tell me the benefits to a unit-level 

tracking system that cannot be achieved by the lot level. 

Dr. WOODCOCK. Right. Well, to reiterate because I think this is 

sometimes unclear, all right, having a unit-level tracking means 

that fake units couldn’t be put in, and often there are thousands 

of them that would be made by a counterfeiter right down to the 

lot number and inserted into the supply chain somewhere and then 

distributed to patients. By having that verification down at the 

unit level, we would know that those were extra, those were illegitimate and they could be rapidly identified and removed. And also 

it would help us, I think, in determining what patients got, what 

lot they got. 

Mr. PALLONE. I mean, it sounds like the lot level would certainly 

be better nothing but that the gold standard is the unit level, but 

it seems to me in order to have an effective unit-level system, it 

20 

simply has to be an electronic one in which information is exchanged quickly and is available in real time. And I don’t think it 

makes sense over the long term. We would not move beyond a relatively primitive system in which this information is maintained 

and passed with pieces of paper going back and forth. 

So I recognize that creating an electronic system is no small feat, 

a lot of technology, time, I am sure, investment. But I think we 

need to ensure that we allow time for an electronic interoperable 

system be set up. So let me ask you this: do you agree that an electronic interoperable system is ultimately the goal so as long as we 

allow for enough time to get that kind of a system set up? 

Dr. WOODCOCK. I agree, because that would provide the greatest 

protection for our patients. 

Mr. PALLONE. Now, my concern is that the House discussion 

draft does not even set up the goal of an electronic interoperable 

unit-level system. It merely requires that the FDA and GAO report 

back to Congress in 10 years on ways to enhance the safety and 

security of the pharmaceutical distribution supply chain. If we all 

agree that our goal should be an electronic interoperable unit-level 

system, we need to spell that out. We need to require that it be 

the end game and set a date certain when it must be implemented. 

Congress can play an important role in driving the technology, and 

as I said, we need to allow for sufficient time for it to develop and 

we don’t want to set it up with unrealistic expectations, but I think 

we do need to set requirements or it will never happen. So again, 

Dr. Woodcock, do you agree that it would be important for Congress to require that this system ultimately be set up? 

Dr. WOODCOCK. The goal is ultimately to protect patients and 

make sure the drug distribution system as drugs are distributed 

through the system is not porous at different points and has holes 

or gaps where counterfeits or other things can be inserted. So to 

reach that goal, ultimately you want to have an electronic system 

that can identify down to the unit level. However, there obviously 

are logistic and timing issues, but I think we all mutually share 

that goal of patient protection. 

Mr. PALLONE. But I am just trying to get you to say—I mean, 

don’t you think we should require this at some point, that Congress 

should require it at some point? 

Dr. WOODCOCK. Articulating that goal would certainly probably 

speed achievement of the desired end, which is to have a system 

that is capable of preventing these incursions. 

Mr. PALLONE. I appreciate that. I mean, look, you know me. I 

have been around here for a while, and I just can’t say there is a 

phase I and hope for the best. If Congress wants a phase II, I think 

they should say. Otherwise we are not going to get phase II because inertia unfortunately often characterizes this place unless 

you spell something out. So I really hope we can work together 

with our colleagues to improve upon the bill. I think we all share 

the same goal. We need to better safeguard our Nation’s drug supply but we need to make sure whatever legislation we enact actually achieves that goal, it doesn’t just give people the hope that 

someday we will achieve it. That is my concern, Mr. Chairman. 

21 

Mr. PITTS. The gentleman’s time is expired. The Chair thanks 

the gentleman and now recognizes the gentleman from Louisiana, 

Dr. Cassidy, 5 minutes for questions. 

Mr. CASSIDY. Listen, you explained as well as anybody as I have 

heard it the need for serialization today so I am going to ask some 

things to explore, not to challenge. As I gather, California has 

pushed for a more rapid implementation, but as I gather, they have 

had to delay this, correct? They have had to delay the implementation of their law. Is that true? 

Dr. WOODCOCK. I am not familiar with what California has done. 

I am sorry. 

Mr. CASSIDY. I have learned to say what I have been told, not 

what I know, but that is what I have been told, which suggests to 

me that even in a market as large as that that there could be problems with rapid implementation of this serialization. 

Dr. WOODCOCK. Well, I think some of your other witnesses may 

be more familiar with the pragmatic aspects of this. 

Mr. CASSIDY. Yes, I think really what is a key here is not the 

goal which we should go to serialization, it sounds, but the question is, how do you track supply chain, how do you have in one 

sense an in-the-cloud inventory where someone is not gaming it to 

figure out that they need to suddenly purchase because it is about 

to go in shortage. Fair statement? 

Dr. WOODCOCK. There is one issue. That is right. 

Mr. CASSIDY. And as I gather, those issues have not been entirely 

worked out? 

Dr. WOODCOCK. No. 

Mr. CASSIDY. And so putting a date certain that has to be done 

in a year presumes that they will be worked out within a year but 

that is clearly not—that is imagining, that is not necessarily knowing that that will occur. 

Dr. WOODCOCK. Right. Well, clearly there should be a stepwise 

approach, but whatever is built now should enable the attainment 

of the ultimate goal, and there should probably be, as Mr. Pallone 

was saying, some kind of time frames put so that everyone’s mind 

is focused on the ultimate goal. 

Mr. CASSIDY. I accept that. There is nothing like a deadline to 

sharpen a man’s mind. I totally get that. On the other hand, I 

think we have seen with some things like the exchanges in the Affordable Care Act just putting a date certain doesn’t mean that it 

is going to smoothly happen, and so knowing everyone is impatient 

to protect patients from criminals, we still have to recognize there 

are issues to resolve. 

Dr. WOODCOCK. Yes. 

Mr. CASSIDY. Let me change gears a little bit and talk about 

drug shortages. You have written a paper. I have had to look over 

it, the state of the art about the economic factors involved with 

that, and it seems—no offense—you give a little bit of a short shrift 

to the role of price competition. Knowing that you know this paper 

like the back of your hand, in figure two you have a little bubble 

saying price competition as a factor. But it makes sense to me that 

if you have declining margins and a 6-month lag so ASP plus six, 

the provider can only be reimbursed which was the price 6 months 

ago if it has hit this low point, you can try and raise the price, but 

22 

if the provider is only getting paid the lower price from 6 months, 

she cannot afford to pay for the higher price. Fair statement? 

Dr. WOODCOCK. Yes, but I am sure you appreciate, I can’t really 

comment on federal—— 

Mr. CASSIDY. I understand that, but you can observe that, as 

your paper does, that lower margins may decrease the ability of a 

company to invest in manufacturing redundancy, quality, etc. Is 

that a fair statement? 

Dr. WOODCOCK. That is a fair statement, and we feel that there 

is only competition on price because quality is non-transparent to 

the buyers. 

Mr. CASSIDY. Now, theoretically, though, FDA is going to ensure 

that there is adequate quality to ensure safety, correct? 

Dr. WOODCOCK. That is our job. 

Mr. CASSIDY. Yes, it is your job, and so if I am the purchaser, 

really, as long as I know that it at least meets my minimum standard, why not. 

Dr. WOODCOCK. Yes, except—and this is what we try to raise in 

the paper—there is another aspect to quality, which is reliability, 

which any of you purchase a car or electronic or anything realize 

is true, and some of that is reliability of supply. 

Mr. CASSIDY. But if you have concentration of manufacturers, 

you are down to five, six or seven, really, it is not as if you can 

go someplace else. 

Now, let me ask you just in the interest of making this—I understand the numbers of shortages are now down. 

Dr. WOODCOCK. Yes, a 50 percent decrease. 

Mr. CASSIDY. Are these shortages down because we have actually 

addressed these issues of lack of redundancy or because we are allowing more foreign product to be introduced? 

Dr. WOODCOCK. Primarily because of actions we have taken. We 

thank the Congress for your leadership in dealing with shortages 

in the Safety and Innovation Act that was passed last year. We 

have intervened. We have earlier notification. 

Mr. CASSIDY. I got 26 seconds. And so is it from more product 

coming overseas or is it the ability to work out things domestically? 

Dr. WOODCOCK. I don’t think the domestic supply has improved. 

Mr. CASSIDY. So it is actually more product coming from overseas? 

Dr. WOODCOCK. Yes. 

Mr. CASSIDY. Let me toss out one thought. I just spoke to a man 

who has got extensive contacts with foreign pharmacies. He suggests that you put an RSS feed on your Web site. He says that my 

guys elsewhere have to constantly monitor what is in shortage. 

They really can’t do that. If there is an RSS feed, look, boom, 

propathol is going on shortage, and it would feed out to them, then 

they would be able to come to you and solicit. So can our office follow up with you regarding that? 

Dr. WOODCOCK. I would be happy to do so. 

Mr. CASSIDY. It just seems like a great idea. 

Dr. WOODCOCK. Yes, good suggestion. 

Mr. CASSIDY. OK. I yield back. Thank you. 

Dr. WOODCOCK. Thank you. 

23 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the Ranking Member Emeritus, Mr. Dingell, 5 minutes for questions. 

Mr. DINGELL. Mr. Chairman, I thank you for your courtesy. 

Dr. Woodcock, you know that there is a lot to be done here so 

I will ask that you respond with a yes or no to my questions. Do 

you agree that a traceability system would help to better secure 

our drug supply chain from counterfeits, theft and intentional adulteration? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do you agree that a traceability system would help 

identify and detect illegitimate pharmaceuticals? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do agree that a traceability system would help to 

ensure the safety of pharmaceuticals for patients and consumers? 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do you agree that a traceability system would improve the efficiency and effectiveness of recalls or returns? 

Dr. WOODCOCK. Absolutely. 

Mr. DINGELL. It also must be fair, must it not? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. And we have to see to it that it is of course workable? 

Dr. WOODCOCK. Right. 

Mr. DINGELL. And not impose undue burdens on anybody if we 

could possibly avoid it? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do you agree that a federal traceability system 

should include participation from everyone in the supply chain? 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do you agree that a federal traceability system 

should take a phased-in approach, meaning the first phase would 

implement lot-level tracing and the second phase would implement 

unit-level tracing? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. And there are reasons for differences in the different parts of the system for manufacturing and delivering the 

commodities to the ultimate consumer. Is that right? 

Dr. WOODCOCK. That is correct. 

Mr. DINGELL. And those make it necessary that we should consider not only the differences but to phase in because of the different levels of difficulty that Food and Drug will confront, right? 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Now, do you agree that a federal traceability system with a phased-in approach should include clear requirements 

and a clear time frame for a second phase? Yes or no. 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Do you agree that the goal of any federal 

traceability system should be unit-level tracking? Yes or no. 

Dr. WOODCOCK. Yes, an ultimate goal. 

Mr. DINGELL. Ultimate goal but very, very difficult to achieve? 

Dr. WOODCOCK. It should be the goal. 

Mr. DINGELL. Well, and it will also cause a lot of difficulty to get 

everybody together on this. 

24 

Dr. WOODCOCK. Absolutely, because there are tradeoffs here. 

Mr. DINGELL. Do you agree that traceability legislation should 

avoid placing undue burdens on FDA so that the FDA can focus on 

proper and efficient implementation of this particular program and 

all of the others which we have been loading Food and Drug down 

with lately? 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. And with which we have not been giving you 

enough money? You may not want to comment on that, but that 

is my feeling. 

Dr. WOODCOCK. It is difficult. We try our best. 

Mr. DINGELL. I know you do, and it is an enormously difficult 

task. Do you believe that the traceability legislation should ensure 

adequate systems are in place to trace prescription drugs before 

current pedigree requirements are eliminated? Yes or no. 

Dr. WOODCOCK. Absolutely. 

Mr. DINGELL. Now, this traceability system and the phase related to it must also focus very carefully upon imports. Is that 

right? 

Dr. WOODCOCK. Yes. 

Mr. DINGELL. Particularly imports that are components of pharmaceuticals ala the situation which we had with heparin but other 

examples of this, and of course, as a matter of fact, also with regard to food and other things that you have to contend with. Is that 

right? 

Dr. WOODCOCK. Yes. Well, I think the components of drugs is different, and the supply chain issue is different than the distribution 

chain but equally important to keep substandard ingredients out. 

Mr. DINGELL. And I am not here to sell foods at this particular 

time but we have to look at that and other things too. 

Now, Doctor, do you agree that traceability legislation should 

provide FDA with adequate enforcement authority to ensure stakeholders comply with the intent of Congress? Yes or no. 

Dr. WOODCOCK. Yes. Can I say, we don’t want to be a paper tiger 

on this? 

Mr. DINGELL. I sure don’t want that. It is also fair to observe 

that Food and Drug has been working very carefully with Members 

of Congress, House and Senate, Democrats and Republicans, but 

also that you have been working with the industry to try and see 

that we get something with which everyone can work and to do so 

comfortably. Is that right? 

Dr. WOODCOCK. That is correct. 

Mr. DINGELL. And of course, that would be the goal of Food and 

Drug, as it would be of everybody, I think, in this room. 

Mr. Chairman, I return 19 minutes. Thank you. 

Mr. PITTS. Seconds. Thank you. 

Mr. DINGELL. Nineteen seconds. 

Mr. PITTS. The Chair now recognizes the gentleman from Illinois, 

Mr. Shimkus, 5 minutes for questions. 

Mr. SHIMKUS. Thank you, Mr. Chairman. 

Dr. Woodcock, welcome. Glad to have you back. 

Dr. WOODCOCK. Thank you. 

Mr. SHIMKUS. I am going to do a kind of intro and then go to 

my specific question on a specific item. 

25 

We have seen many instances in recent years of how technology 

can help us modernize and create efficiencies in communications, 

and I am referring to stuff that we moved, actually signed by the 

President in my other subcommittee, which is a hazardous-waste 

issue, and we were able to through legislation kind of relieve the 

burden of paper copies throughout the supply chain all the way to 

the fact when the President signed the law, and we know in the 

old days carbon copies, triplicate papers, they are stored throughout the entire chain, that can be costly. We also have recently seen 

where the EPA has on their own with some prodding from us now 

is able to notify water users—the water plants can notify the users 

of the water on changes based upon email notifications versus 

mailing paper copies of changes and the like. 

So that leads me to this whole debate that Ranking Member 

Pallone is also very interested in, the e-labeling requirements reflected. There are some reflected in this discussion draft with more 

standardized electronic approach that will increase, we believe, patient safety and provide significant quality improvements and cost 

reductions to patients and industry. This is something that, as I 

mentioned, that we have been following, and Ranking Member 

Pallone has also been leading on this. Do you support this e-labeling policy? 

Dr. WOODCOCK. I have long supported this. We have worked with 

the National Library of Medicine. We have something called Daily 

Med, and Daily Med has, I think, 24-hour update so at the National Library of Medicine you can get any drug label, the actual 

on-time, real-time label with any safety updates within a day of 

FDA changing that label. So that should enable easy electronic access from almost anywhere. 

Mr. SHIMKUS. So with respect to this proposed legislation and 

what the bipartisan members are trying to work out, there is obviously some language that deals with this. I guess we would be concerned as to where are you at as an agency in issuing guidance and 

moving forward on your own? 

Dr. WOODCOCK. My understanding is, this requires rulemaking. 

The fact is that we are planning to issue a rule is on our agenda, 

and we plan to issue a rule this year, we would hope, a proposed 

rule. 

Mr. SHIMKUS. So I guess from the cosponsor of the legislation 

and the committee and ranking member would have to look and 

see the time, your time frame as rulemaking sometimes takes a 

long time and a decision made of whether we want to add that in 

legislative language, but you are really supportive of the overall 

process and principles, it seems like. 

Dr. WOODCOCK. For drugs, all the pieces of this are in place so 

there is a labeling repository. We do all our reviews electronic at 

the agency at CDER and so everything is in place to enable electronic access from anywhere to the real-time drug label. 

Mr. SHIMKUS. And the real-time drug labeling is the key because 

things can change pretty rapidly, and you can get it electronically 

versus something stuffed in a box that gets transmitted forward. 

So I appreciate your response and I appreciate you being here, and 

Mr. Chairman, I yield back my time. 

26 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. Track-and-trace is an important issue, and I want to thank my colleague and neighbor, Representative Matheson, for his leadership on our side on this issue. 

Finding bipartisan agreement on any issue is difficult, and on more 

complex issues, such as supply chain for pharmaceuticals, remains 

even more elusive. However, I do have some concerns about the 

Latta-Matheson. Most importantly, the bill never really gets us to 

an interoperable electronic unit-level system. In fact, it prohibits 

FDA from moving ahead with interoperable electronic system in 

absence of new legislation, which we won’t on until 10 years after 

the enactment. I understand the concerns that market participants 

have problems moving too fast toward such a system. We should 

be sensitive to this and make sure the law we pass is workable. 

But we have an opportunity to move the ball further down the 

field, and it my understanding that quite a bit of necessary technology already exists. Pharmaceutical companies, large and small, 

have stated they can work on a shorter timetable. We can do more 

to ensure the safety and security of our drug supply, and I think 

we should. But instead of moving toward requiring an enhanced 

system, the bill only requires the FDA to conduct one or more pilot 

projects and conduct public hearings and report back to Congress 

on the result within 10 years. I am concerned that these pilot 

projects do not seem to be designed to test the electronic interoperable unit-level system that everyone seems to agree we need. 

My question is, if the goal is to get to an electronic interoperable 

unit-level system, which I thought was based on last fall’s draft 

with indeed a shared goal, wouldn’t it make sense for the legislation to explicitly direct the FDA to conduct the pilot program, testing out whether such a system could be established, and instead 

of just mentioning in vague language about better securing the 

supply chain. Would you like more definitive black-letter law and 

guidance instead of come back to us every 6 months and in 10 

months from now we might get to this? 

Dr. WOODCOCK. As I said earlier, I think within the standards 

world where people are being asked to conform to a standard over 

time and they have to change processes, they have to make investments to do that, clarity is critical and predictability so that people 

know what is going to happen and they can plan for it and plan 

their investments, plan their programs. So I think to the extent 

that there is a shared goal that Congress can provide clarity on 

where we are going as a country and where we plan to end up, that 

would be beneficial to all the stakeholders, even those who feel 

right now that this is a tremendous burden to provide clarity of a 

path would be extremely helpful. 

Mr. GREEN. And we authorize legislation and sometimes Congress doesn’t reauthorize, we just kick the can down the road, and 

telecom is a great issue. The 1996 Telecom Act, I think it was outdated when we passed it but it is well outdated now. So my worry 

is that we won’t continue to oversee it. 

My next question is my concern about, it requires the FDA to 

conduct a public hearing every 6 months until FDA submits a report to Congress, which could be up to 10 years from enactment. 

27 

Transparency is important. I agree that open and public hearings 

of these issues with interested stakeholders makes sense, but twice 

a year for 10 years seems like it is a little much. Can you talk 

about all that is involved in setting up a public meeting? Do you 

have any sense how much these meetings may cost over the 10 

years twice a year for 10 years? 

Dr. WOODCOCK. These meetings often cost, maybe up to $20,000, 

depending on how they are structured, but I think the opportunity 

cost is the cost we are really talking about here. Don’t forget, we 

are trying to work with patient groups, and they are extremely excited about having meetings about their disease and how we can 

better study it, and under PDUFA that you all passed, we agreed 

to have 20 of these meetings over the next 5 years. Now, we would 

like to have more. We have heard from so many patient groups 

that they aren’t maybe on the list and they are really concerned 

about their disease. So it is really important. We also have pediatrics and how we develop drugs in children. We have many other 

pressing issues that have immediate impact on patients that we 

need to have various public meetings on. So there is a tremendous 

opportunity cost there if we are having—if we meet on a certain 

subject excessively. 

Mr. GREEN. I only have about 30 seconds left, and I would like 

to match our chairman emeritus in giving time back. I think the 

bill is a good step, but I don’t think it goes far enough and it fails 

to give us an interoperable electronic unit-level system before 10 

years, and frankly, I think industry may be ready much earlier 

than that, and we don’t want to tie our hands where we can’t do 

it. 

So Mr. Chairman, I appreciate the hearing today and hopefully 

we will provide some more flexibility. Thank you, and I yield back 

my time. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Dr. Woodcock, I appreciate you being here today, and I have 

heard a number of folks say this is not an issue where there is one 

side or the other, and that is true. I do have some concerns. 

I represent a very rural district, and we have a lot of community 

pharmacists tucked in various nooks and crannies of my community. That being said, people are used to going to those pharmacies. 

They like those pharmacies. And I am just wondering as we go forward, you know, these folks have a lot of competing issues that 

they are facing already from other issues. As we go forward in looking at this, while we all want to make sure our supply chain is 

safe, can you describe what efforts the FDA has taken into account 

to accommodate and incorporate the small community pharmacies 

and make sure that they are not overly burdened by any system 

that we put into place? 

Dr. WOODCOCK. Well, we talked to all stakeholders about this. As 

I said earlier, developing standards and implementing that in a 

stepwise way is probably the best approach to not impacting small 

entities excessively so they know what is coming and they can plan 

for it over time, and if Congress were to establish that plan, then 

vendors will come in and develop solutions over time and they can 

28 

be adopted somewhat earlier by a larger chain, say, and would be 

affordable for smaller groups. 

So I think we need to—if Congress decides to put forth a plan, 

I think that would be very helpful in having everyone understand 

where we are going and then getting the power of commerce and 

entrepreneurialism and invention to develop the technologies that 

will make this or actually craft these technologies to this situation 

in a way that will make it affordable. 

Mr. GRIFFITH. Well, I have to say that makes sense to me. If you 

give people time to respond and to figure things out and there is 

enough time to come up with new ways of doing things, I do believe 

that vendors will come forward. Of course, the key is, as I have 

heard from some folks, they want to do things faster, and we have 

to find that sweet spot, which is why we have draft language to 

talk about as opposed to an actual bill at this point. But I do appreciate the sponsors who brought it forward for us to at least have 

something to work on, and I appreciate you being here today. 

You also mentioned in your testimony a track-and-trace public 

workshop held in February of 2011. Can you just speak generally 

about feedback you received, and keeping in mind my community 

pharmacies that are a big concern? It is not that I don’t care about 

the big chains but they are in a much better position to adapt 

quickly to the changes that may be coming. 

Dr. WOODCOCK. We understand the concerns of the community 

pharmacists, and there testimony today that I read that was submitted and last year also, so we understand and certainly we have 

talked to that community and heard at our public meeting about 

these concerns—logistical concerns, time concerns, the fact that 

they feel stressed already between various demands on them. 

There is other competition. But it is really important in these rural 

communities to have a pharmacy there. So we understand all that, 

and I guess what I am saying is that putting in the goal and predictability over a time frame I think would be very helpful for everyone because they get their mind around what is going to happen 

in the future. 

Mr. GRIFFITH. Yes, ma’am. I appreciate that. It makes sense to 

me as well. 

Mr. Chairman, with that, unless somebody wants my time, I will 

yield back. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady from Virgin Islands, Dr. Christensen, for 5 minutes 

for questions. 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman, and I look forward to this discussion because I have a specific issue that I wanted to discuss, and of course, the issue of altered, counterfeit, substandard or tampered-with medicines entering the drug supply is 

a real concern and it is a very important issue for FDA and this 

subcommittee to address, but I want to raise a consequence that 

may or may not be intended but it is not warranted, and I hope 

that the proposed legislation can help or that there is something 

that FDA can do about it. 

In the efforts to keep substandard drugs out of the U.S. marketplace, re-importation from a foreign jurisdiction is prohibited. The 

U.S. Virgin Islands, as the name indicates, is a part of the United 

29 

States. Our pharmacists are U.S. trained. They have U.S. licenses. 

Our pharmacies are regulated by U.S. law, and our pharmacies including our hospitals only order medication from U.S. distributors. 

As a provision of the treaty that was signed when the United 

States bought the Virgin Islands, we are outside of the U.S. custom 

zone so for shipping only we are international. Again, we are totally domestic except for shipping, and because of that, our pharmacies have been unable to ship back their medication that might 

have been oversupplied, spoiled, expired. They are unable to ship 

it back to their supplier, and it incurs costs and those costs are 

passed on to the patients. So we have met on this in the past in 

the past Administration. I have legislation to try to address it. But 

we are willing to work on anything that can be worked on and 

maybe, you know, we want to work with our colleagues on the committee but maybe there is something that FDA would be able to 

do. 

So if this national track-and-trace system in place, would that be 

a way to help us fix that, do you think? 

Dr. WOODCOCK. Probably, but I can’t opine on the legal aspects 

because it would require analysis. You raised this issue with me 

last year, and we agreed that your staff would talk to our folks, 

and I had thought this had been resolved or improved. So I would 

also urge you to talk to FDA staff again and raise this issue. We 

can follow up with you. But I do believe obviously things can be 

put into legislation that would remedy a situation like this as well. 

Mrs. CHRISTENSEN. But you would not oppose it, would it, if we 

were—— 

Dr. WOODCOCK. No, I think—— 

Mrs. CHRISTENSEN [continuing]. Only shipping back to the distributor? 

Dr. WOODCOCK. Well, a track-and-trace system would actually 

enable this because we would know what the drugs were. 

Mrs. CHRISTENSEN. And I thought it was resolved also. They 

were shipping by FedEx and it wasn’t being checked but now it is 

back to square one. So thank you very much, and I don’t have any 

further questions, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentlelady from North Carolina, Ms. Ellmers, 5 minutes for 

questions. 

Mrs. ELLMERS. Thank you, Mr. Chairman, and thank you, Dr. 

Woodcock, for being here today. 

I have a couple of questions on the basically moving towards the 

electronic access for, you know, data for patients, which now of 

course are the package inserts that accompany medication. I do believe that the real-time access is very, very important but I am concerned about our seniors and their ability to have that information 

right there for them. I have heard from many seniors who—as a 

nurse, I know how important it is for them to have that information. So what exactly is the push there? I mean, I understand the 

technology, the ability to access it online is very important, but 

there again, many of our seniors are not Internet savvy, and I am 

concerned that maybe we are moving a little quickly with this. So 

what are your thoughts on that? 

30 

Dr. WOODCOCK. Well, what we are talking about is package inserts, and many physicians have trouble with the package insert. 

Mrs. ELLMERS. Well, it is a lot of information. 

Dr. WOODCOCK. Yes, so we are also working an initiative we call 

Patient Medication Information, all right, and we have been working on that for some time, and we are about the only country in 

the world that doesn’t give patients a leaflet about their drug in 

patient language. So we are moving to do that, and it would be a 

combination of electronic and paper, depending on what the individual desired. 

Mrs. ELLMERS. OK. 

Dr. WOODCOCK. Yes. And it would be one page probably with access to more if people wanted more information or instructions on 

how to get more information. 

Mrs. ELLMERS. So that wouldn’t automatically come with the 

medication is what you are saying? 

Dr. WOODCOCK. It would. 

Mrs. ELLMERS. It would automatically come? 

Dr. WOODCOCK. Yes. 

Mrs. ELLMERS. Because I am thinking a combination approach is 

definitely the way—— 

Dr. WOODCOCK. For consumers. 

Mrs. ELLMERS [continuing]. That we should go, and, you know, 

certainly, again, the package inserts do come with more than 

enough information obviously for different reasons. So you do favor 

more of a combination approach? 

Dr. WOODCOCK. For the patient. 

Mrs. ELLMERS. For the patient? 

Dr. WOODCOCK. That is right. We feel that people who prescribe 

drugs or dispense them, all of them are going to have electronic access. 

Mrs. ELLMERS. Right, and availability. So the electronic access is 

more for the physicians? 

Dr. WOODCOCK. Technical. 

Mrs. ELLMERS. OK. Thank you for clarifying that for me because 

that was definitely an area I was very concerned about. 

Now, I do want to talk a little bit about—oh, I only have a few 

moments. But the track-and-trace as far as, how do you basically 

figure out which things would be tracked and traced based on 

drugs and based on other things like saline or additives, things 

that mix drugs? I mean, will that also be included in track-andtrace? 

Dr. WOODCOCK. They are drugs, so obviously whatever is included is up to Congress, but we would feel that anything that goes 

into a drug should be. So we regulate saline bags and so forth as 

pharmaceuticals now. They have their own code, they have lot 

numbers and so forth, and often we have to recall those. 

Mrs. ELLMERS. OK. So you are looking at anything that is considered a drug? 

Dr. WOODCOCK. Yes. 

Mrs. ELLMERS. Thank you very much. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the Ranking Member of the Full Committee, Mr. Waxman, for 5 

minutes for questions. 

31 

Mr. WAXMAN. Thank you, Mr. Chairman. 

Dr. Woodcock, as you know, California has a law that once completely implemented will require that all transfers of ownership of 

prescription drugs from the manufacturer through to the final 

pharmacy dispenser be accompanied by a so-called pedigree that 

maintains a record of each successive transfer and tracks information about the drug product at the unit or package level. Under the 

law, these pedigrees must be transferred electronically and the entire system will have to be interoperable so that all the information 

on any prescription drug will be readable and updatable by all 

members of the drug distribution chain. This law is quite comprehensive and ambitious and has been the subject of criticism by 

some industry members as being too ambitious, either in its scope 

or its time frame for implementation. 

But I was glad to hear on your answers to Mr. Pallone’s questions that you agree that an electronic interoperable unit-level system should be the goal here. I agree that we need to allow enough 

time for the technology to evolve and for the system to be put in 

place. We don’t want to set unrealistic expectations. But I think 

California had it right when they insisted upon this kind of system, 

and I think this system is ultimately the right one for the country. 

As Mr. Pallone mentioned, the Latta-Matheson draft doesn’t even 

set this up as a goal even at some distant point in the future, to 

create an electronic interoperable unit system. In fact, they prohibit FDA from moving forward with this kind of system ever. I 

think that is the wrong policy. The Latta-Matheson bill also doesn’t 

require any kind of tracing of drugs until 5 years after enactment 

at the earliest. But perhaps even more concerning to me is that on 

day one, as soon as this bill would be passed, it would preempt 

State law even though they never created an effective alternative 

at the federal level. On day one, all State laws on the subject are 

wiped out, and to be clear, this is not just California’s law. According to the Health Care Distribution Management Association, at 

least 11 States have laws requiring distributor licensing and pedigree requirements. Some States like Florida have a requirement 

that a pedigree be passed with most drug transactions, and you 

mentioned this in your testimony, but last year Representative 

Cummings and Senator Rockefeller issued a report detailing their 

investigations of the gray market in drug trade in the United 

States and some of the dangers it poses, and they discussed the importance of pedigrees for law enforcement in these cases. But the 

very law requiring these pedigrees would be erased under the 

House’s bill on day one. 

Again, you mentioned this in your testimony but I would like to 

hear more. Can you tell us whether you think preempting these 

State laws on day one makes sense when we never get to the system you say we need? Please explain in more detail what would be 

the consequence of wiping out currently existing pedigree requirements? I am deeply concerned about preempting not only California’s law but the other States’ laws that clearly provide a benefit 

today, I agree that if we can’t get to a strong federal system, it 

might make sense to preempt State laws. But the Latta-Matheson 

draft certainly does not create a system worthy of broad preemption on day one. Would you elaborate on this? 

32 

Dr. WOODCOCK. I think it is really important that whatever is 

enacted does not lower the safety of the drug supply, doesn’t decrease or put bigger holes in the safety net. That is really important. So the pedigree requirements now, as I said—— 

Mr. WAXMAN. Just for clarification, safety net—— 

Dr. WOODCOCK. Of tracking. 

Mr. WAXMAN. We are not talking about poor people. That is usually what—— 

Dr. WOODCOCK. Oh, I see. OK. Maybe I used the wrong term. 

But the safety around drugs, of the drug supply, OK? Eliminating 

the paper pedigree until we have something else in place would be 

creating greater loopholes for insertion of counterfeit drugs and 

substandard drugs into the distribution chain because we wouldn’t 

be able to track them backwards, all right? And putting a law in 

place that eliminated States’ ability to require that tracking without providing something comparable in its place would be lowering 

the safety of the drug supply for whatever time it took. 

Mr. WAXMAN. I agree. Let me ask you one other question in the 

few seconds I have. California law also ensures that all entities in 

the supply chain participate in the e-pedigree system. One of the 

major issues we have confronted in the context of this debate is 

whether pharmacies should be required to be part of the system. 

Do you think it makes sense to exempt pharmacies from a nationwide track-and-trace system? 

Dr. WOODCOCK. I think ultimately if we want to know what drug 

the patient got, OK, and several times in the last several years 

that has been imperative for us to figure out what drug each patient got because sometimes we hear about the problem from the 

patient dying—— 

Mr. WAXMAN. So you think the pharmacies should be included so 

we know what the patient got? 

Dr. WOODCOCK. Eventually, that is the only way to know what 

the patient got, and so we end up doing these elaborate investigations to figure out which drug the patient got, and yet often, as I 

said, we can’t pull the drugs out of the patient’s hands because 

they may be lifesaving medicines. So we may in the next several 

years get into a tragic situation because of that. So I think the ultimate goal really ought to be our ability to track down to that level. 

Mr. WAXMAN. Thank you. Thank you, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Pennsylvania, Dr. Murphy, 5 minutes for questions. 

Mr. MURPHY. Dr. Woodcock, great to have you back here. I always appreciate your candid testimony. 

This may have been asked before, and I apologize if I am asking 

it again, but I would like to know. So how are things done now? 

How are you made aware that if there is a problem with something 

that may be counterfeit, toxic, contaminated, what is the process 

now by which we find out? 

Dr. WOODCOCK. Well, there are a whole variety. We may be 

alerted from the health care system. They may find it and they 

look at it and they see something is wrong. We may be alerted by 

whistleblowers who see, you know, this drug’s label is in Turkish, 

this can’t be right, OK? We may—and the ones that we are very 

33 

concerned about is where we get harm, patient harm, and so we 

get adverse-event reports, people are dying and we don’t know why, 

and then we have to go out and do a huge investigation of what 

did they get and so forth. 

Mr. MURPHY. So right now it is towards the end of the supply 

chain that you may find something by an adverse event or someone—— 

Dr. WOODCOCK. Yes, and we feel with the law that was passed 

last year, now manufacturers have to tell us if they get a component that is falsified or substandard, they need to tell us that now, 

but out in the world, usually it is sort of voluntary. Pharmacists 

will call us, a nurse or whatever, and we will find out about it that 

way. 

Mr. MURPHY. And this may be at the end of things. What about 

in terms of the ingredients that go into these? Do you pick up anything on that too, or is that the manufacturers on their site testing 

the quality of their ingredients? 

Dr. WOODCOCK. We ask them to test, and as I said, the Innovation and Safety Act included additional provisions on the supply 

side, the incoming side to make a drug, to strengthen that, making 

them strengthen their controls on the supply chain and the testing 

and so forth when they receive the components. 

Mr. MURPHY. So now if the FDA has a particular concern about 

a drug that would cause an immediate threat to individuals, what 

would the agency do? 

Dr. WOODCOCK. We talk to the company and ask them to do a 

recall or they may have instituted a recall themselves. We do a risk 

assessment, which we call Health Hazard Evaluation, and we determine the level of possible harm, and if it is a class I recall, then 

we have to decide should it go down to the patient level and be 

pulled out of the hands of the patients and then we do— the company is supposed to be in charge of that but we audit that, the effectiveness, to make sure it is happening, and if it is a really bad 

problem, we may collaborate with the CDC or the public health departments in the States, you know, to make sure this all happens. 

Mr. MURPHY. OK. Let me ask something. A witness on our second panel, Walter Berghahn, notes in his testimony there has been 

‘‘a tremendous amount of effort expended in the last 10 years to 

tighten up and secure the supply chain. Those efforts certainly 

have closed many of the cracks and yet counterfeits still appear, 

and the FDA has opened more investigations in the last few years 

than ever before, more than 70 instances in 2010 alone.’’ What do 

you attribute to these increased investigations? Is it that the FDA 

is getting better at it or the problem is getting worse? 

Dr. WOODCOCK. Always hard to know, right? I think the problem 

is getting worse. We know from our colleagues around the world 

that in some parts of the world, 50 percent of the drug supply is 

counterfeit, but those folks in that part of the world don’t pay a lot 

for their drugs, so our market is ideal because the drugs are expensive and you get a lot of money for them. And so we see more professional criminals getting involved, racketeering, very high-level 

criminal elements, conspiring to do this and penetrate the U.S. 

drug supply because there is a lot of money to be made. 

34 

Mr. MURPHY. We hear a lot about people who offer drugs online. 

Your recommendations on whether or not people should purchase 

anything when they go to a Web site and they say, oh, here is my 

prescription, I will just get it from there, your recommendation is 

should they or should they not purchase from those? 

Dr. WOODCOCK. There is a program called VIPPS, which offers 

certified online pharmacies. Certainly some of the pharmacies are 

fine. Many of them, we have looked, we have ordered, we have 

done this. You can get counterfeit drugs very easily or substandard 

drugs ordering from an online pharmacy that you don’t know anything about. 

Mr. MURPHY. So make sure you know who that online pharmacy 

is. Finally, let me ask you this, and this relates to what I was just 

asking about too. Could this legislation eventually lead to less drug 

shortages or more because you are watching more closely? What do 

you think the outcome will be? 

Dr. WOODCOCK. I don’t think it will have a huge impact on drug 

shortages, frankly. I think that problem, as we discussed earlier, 

has other root causes other than—obviously the existence of shortages is another temptation for people to introduce counterfeit because people are desperate to get these medicines and they will pay 

a lot for them. But I don’t that is the root cause of shortages. 

Mr. MURPHY. Thank you very much. Yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady from Florida, Ms. Castor, for 5 minutes for questions. 

Ms. CASTOR. Thank you, Mr. Chairman, and I want to thank my 

colleague, Congressman Matheson, for bringing the discussion draft 

to us, and welcome. 

Dr. WOODCOCK. Thank you. 

Ms. CASTOR. Dr. Woodcock, a critical part of an effective drug 

supply chain is the ability to secure a stable supply of medically 

necessary drugs, and I know this isn’t a hearing on drug shortages 

but there is a very serious issue and I feel compelled to ask you 

about it, and that is the critical shortages involved with babies in 

the NICUs right now, the neonatal intensive care units in children’s hospitals in NICUs all across the country. We are talking 

about the calcium, zinc trace elements, magnesium. I have been advised by some children’s hospitals that they have less than 2 weeks 

of nutrients left, and this is already impacting their ability to provide the top standard of care for the most vulnerable of patients. 

I do understand that you have been very aggressive in tackling this 

problem along with your drug shortage professional staff, the children’s hospitals and the manufacturers, but it is so serious now 

that a medical director at one children’s hospital is calling is the 

worst crisis he has ever seen in 30 years. What is happening on 

this now and what is the outlook here over the coming months? 

Dr. WOODCOCK. Well, we have worked with one manufacturer to 

allow them to ship product along with filters to filter out the product that is precipitating, because you can’t give particles in IV 

fluids. It can embolize into the lungs. So that should provide some 

of the products. We are also working with manufacturers outside 

the United States to make sure their product is OK and bring it 

into the country. We recognize this is a critical issue and it is 

35 

reaching a critical stage, and we need to get product out there for 

these babies. We understand that. 

Ms. CASTOR. So what is your time frame? Because they are saying they only have the product for the remaining 2 weeks, and 

what is happening is there are professionals are calling all over the 

country trying to find the elements that they need. Are they going 

to be able to see some relief here over the next week or two? 

Dr. WOODCOCK. We hope so. As I said, some of these products 

are being shipped now with filters, all right, then others we negotiating on importing some of those other elements into the country, 

and once we can give the green light that we are assured of the 

safety, then they can be made available pretty rapidly. 

Ms. CASTOR. OK. That is the short-term solution. What is the 

longer-term answer? 

Dr. WOODCOCK. The long-term solution appears to be some structural problems, as we talked about earlier, in how these drugs are 

manufactured and delivered to patients and the lack of a robust 

supply. So if one manufacturer goes down in the United States, 

they may be the sole source of some of these life-maintaining products, and that is a really bad situation. It is sort of outside of the 

scope of FDA, though, to figure out how to have more manufacturers. 

Ms. CASTOR. And drug shortages in general, have you noticed a 

ramp-up in counterfeits that try to fill that void in the market over 

the past few years? 

Dr. WOODCOCK. In some cases people, unscrupulous people, exploit the existence of a shortage to try to introduce substandard 

products. 

Ms. CASTOR. Which particular areas have you seen that? 

Dr. WOODCOCK. We would have to get back to you on that as far 

as all the details. 

Ms. CASTOR. OK. Thank you very much. I yield back. 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from Utah, Mr. Matheson, 5 minutes for questions. 

Mr. MATHESON. Well, thank you, Mr. Chairman. You know, this 

is an issue that a lot of us have been working on for a number of 

years, and I want to acknowledge some of the colleagues, Congressman Boulier and Congressman Bilbray, who both worked on this 

issue, and then I am pleased to be working with Mr. Latta. And 

I think this year we have an opportunity to really get something 

done, and I think we should all embrace that opportunity to try to 

work together. We put out a discussion draft. This is not a bill. It 

is an opportunity for us to really start to dig into this issue and 

have a substantive discussion, and I hope that is what we do, and 

this hearing is the first good step in that process. 

And I really want to thank Dr. Woodcock, who has spent a lot 

of time on this issue, has been very open, has talked to me on the 

phone about this issue before and been engaged for a long time on 

it, and I know you have a strong desire to come up with a national 

standard that sets the rules for everybody. I think there is a need 

for preemption. I heard some questions earlier concerned about 

timing of preemption but I think we all know we need one set of 

rules in this country and not 50 different State rules, and I think 

you would acknowledge that, but I do appreciate all you have done. 

36 

You put your own time in and your staff in offering resources on 

this. 

In your testimony, you describe several situations or instances of 

counterfeit drugs finding their way into the supply chain. Many 

have been reported in the press reports. Can you describe for us 

how the product was able to really get in the supply chain, and you 

can talk about the emerging level of sophistication that the bad actors are deploying right now to do this? 

Mr. WOODCOCK. Yes. We see a range of sophistication, and of 

course, the ones we are most worried about are those who are actually able to copy, really make a counterfeit. It looks like the authentic product. It has the label of the authentic product and yet 

it isn’t. It may often have nothing in there, or we have had that 

had regular water, which is very dangerous to just give to people, 

say, intravenously. So they are introduced at some point in the distribution chain. It may be a secondary distributor level. It may be 

the pharmacy level. It may be somewhere in between there. It may 

be where something is shipped to a clinic and they buy from a distributor who actually probably due to perhaps the amount of oversight that we should have of some these licensed distributors, they 

are sort of the launderers. They launder these products and then 

put them into a legitimate chain, send them out to, say, cancer 

clinics and then people use those drugs that are not effective. 

Mr. MATHESON. And it is safe to say with over a $300 billion annual prescription drug market in the United States, this is pretty 

attractive. 

Dr. WOODCOCK. That is right. 

Mr. MATHESON. The reason I ask this, I know this sounds obvious to everybody but this is why we are doing this. I mean, our current system is not necessarily structured where it can best mitigate 

this challenge of counterfeiters, and I think there are a lot of important issues, a lot of important details in this discussion draft, 

but I think it is important we all acknowledge why we need a national standard, why we have to do something better than we have 

now because the bad guys are getting smarter, more aggressive 

and there is just too much money on the table for them not to want 

to do some bad things. 

One other question, and then I will let you go. You touched on 

this a little perhaps in other questions but can you walk us 

through how moving forward with a robust track-and-trace system 

would complement the work that this committee undertook last 

year in the latest version of PDUFA, how that is going to complement what that bill already gave you some authority to do? 

Dr. WOODCOCK. Absolutely. There are two sides to the whole 

chain of medicines. One is the supply chain where you get all the 

components, maybe the IV bags, the active pharmaceutical ingredient and all other components. They go into the manufacturer. 

That is one area where the Innovation and Safety Act really addressed that supply chain and tightened up some big loopholes that 

existed. Now this is a distribution chain, OK, the manufacturer 

makes the product, but then as I described, they send it out all 

over through a chain of distributors and so forth down to the pharmacy or clinic or hospital level, and that is the chain where there 

are big loopholes still where these fake products can be inserted or 

37 

we just don’t know where the products are going, and so once we 

have an approach and a goal laid out for this distribution chain 

side, then we will have a very intact system that we can have 

much more confidence in. 

Mr. MATHESON. Thanks. Mr. Chairman, I yield back. 

Mr. PITTS. The chair thanks the gentleman. That concludes the 

questions from the members. I am sure they will have some followup questions, some other questions. We will send those and ask 

that you please promptly. 

Dr. WOODCOCK. We will be delighted to work with you. 

Mr. PITTS. Thank you very much, Dr. Woodcock, for your testimony. 

That concludes the first panel. We will ask the staff to set up for 

the second panel. We have seven witnesses. We will take a 2- 

minute break while they set up. 

[Recess.] 

Mr. PITTS. The Subcommittee will reconvene. On our second 

panel today, we have seven witnesses, and I will introduce them 

in order of their presentations. First, Ms. Elizabeth Gallenagh, Vice 

President of Government Affairs and General Counsel, Healthcare 

Distribution Management Association. Then Ms. Christine Simmon, Senior Vice President of Policy and strategic Alliances, Generic Pharmaceutical Association. Mr. Michael Rose, Vice President 

of Supply Chain Management, Johnson and Johnson Health Care 

Systems. Dr. Tim Davis, owner, Beaver Healthmart Pharmacy on 

behalf of the National Community Pharmacists Association. Mr. 

Allan Coukell, Director of the Medical Programs of the Pew Charitable Trust. Dr. Carmen Catizone, Executive Director, National Association of Boards of Pharmacy. And finally, Mr. Walter 

Berghahn, President of Smarter Meds for Life and Executive Director of the Healthcare Compliance Packaging Council. 

Thank you all for coming. You will each be given 5 minutes to 

summarize your testimony. Your written testimony will be placed 

in the record. 

Ms. Gallenagh, we will start with you. You are recognized for 5 

minutes. 

38 

STATEMENTS OF ELIZABETH GALLENAGH, J.D., VICE PRESIDENT OF GOVERNMENT AFFAIRS AND GENERAL COUNSEL, 

HEALTHCARE DISTRIBUTION MANAGEMENT ASSOCIATION; 

CHRISTINE M. SIMMON, SENIOR VICE PRESIDENT, POLICY 

AND STRATEGIC ALLIANCES, GENERIC PHARMACEUTICAL 

ASSOCIATION; MICHAEL ROSE, VICE PRESIDENT, SUPPLY 

CHAIN VISIBILITY, JOHNSON AND JOHNSON HEALTH CARE 

SYSTEMS, INC.; TIM DAVIS, R.PH., BEAVER HEALTH MART 

PHARMACY, ON BEHALF OF NATIONAL COMMUNITY PHARMACISTS; ALLAN COUKELL, DEPUTY DIRECTOR, MEDICAL 

PROGRAMS, THE PEW CHARITABLE TRUSTS; CARMEN A. 

CATIZONE, R.PH., D.PH; AND WALTER BERGHAHN, EXECUTIVE DIRECTOR, HEALTH CARE COMPLIANCE PACKAGING 

COUNCIL 

STATEMENT OF ELIZABETH GALLENAGH 

Ms. GALLENAGH. Good morning, Chairman Pitts, Ranking Member Pallone and members of the subcommittee. I am Liz Gallenagh, 

Vice President, Government Affairs, and General Counsel at 

HDMA. Thank you for this opportunity to inform you about the 

critically important issue of prescription drug pedigree, traceability 

and supply chain safety. I would also like to thank Chairman 

Upton, Congressman Latta and Congressman Matheson for their 

leadership in this area as well as the hard work and dedication of 

their staff. 

The pharmaceutical distribution industry’s primary mission is to 

operate the safest, most secure and efficient supply chain in the 

world. As part of this mission, HDMA’s members work to eliminate 

counterfeit and diverted medicines by capitalizing on the technological innovation and constant improvements in efficiency that are 

the foundation of our industry. 

Today, on behalf of our 33 members, I am here to express 

HDMA’s strong support for a national, uniform approach to pedigree and the traceability of medicines throughout the supply chain. 

I will speak with more detail later in my testimony, but I want to 

state that we support the core elements of the Latta-Matheson proposal and look forward to working with you and your Senate colleagues on the final bill. 

HDMA believes that any reform and modernization of the supply 

chain should raise national wholesaler standards and include a 

new federal ceiling for pedigree and traceability requirements to 

improve safety and uniform and establish the foundation for 

longer-term electronic solutions such as unit-level serialization and 

product tracing. In addition to fundamentally addressing counterfeit and diverted medicines, a national approach may be a useful 

tool in discouraging gray market activities associated with drug 

products in short supply. More importantly, it will put the United 

States on par with other countries around the world that are currently beginning to engage in serialization and traceability efforts. 

After many years of debate, it appears that we finally may have 

an opportunity to enact federal legislation in this area. This is in 

large part due to a broad consensus among supply chain partners 

as well as growing support from Members of Congress. While Congress, FDA, and industry have been working at this diligently for 

39 

several years, it is critical that Congress act now due to the uncertainties faced by the industry, the need for uniformity across the 

supply chain, and to ensure patient safety. 

Basic guidelines for pedigree were set forth 25 years ago with the 

enactment of the federal PDMA. Since that time, activity at the 

State level has varied with some enacting very complex laws and 

others never going further than the original guidelines. Based on 

our experience, the complexities of dealing with multiple approaches in the States will only get worse if we fail to solve this 

problem now at the national level. 

Since Florida’s first foray into raising pedigree and licensure 

standards in 2003, we have seen dramatic variations across the 

country. This variation has occurred despite HDMA’s attempts to 

work in every State along with fellow stakeholders to achieve more 

uniformity. Today, for example, 29 States have acted beyond the 

federal PDMA standards. The States of Florida and California are 

viewed as leaders in this area. However, they take completely different approaches, California being the most complex and forwardlooking with track-and-trace and electronic pedigree implementation beginning in 2015, and Florida being the most stringent today 

in terms of what is happening in the supply chain with pedigree 

requirements. 

This patchwork not only creates operational challenges but also 

leaves openings for bad actors shopping for more lenient State 

rules, openings that could mean the difference between a fake or 

diverted medicine being dispensed to an innocent patient in need 

of important treatment. Because of this State-by-State variation, 

we believe pedigree and traceability should be under the purview 

of Congress and the FDA. 

We have been a leader in this field and we are dedicated to 

working with supply chain partners and stakeholders on a consensus approach to pharmaceutical traceability. We are an active 

member also of PDSA, the Pharmaceutical Distribution Security 

Alliance. 

The bipartisan discussion draft released by the committee this 

week achieves these goals and captures the core consensus elements that will significantly improve the integrity and safety of the 

supply chain. Specifically, the proposal does include national requirements for wholesaler licensing while preserving a critically 

important role for the States; uniform direct purchase and standard pedigree options; eliminating the current 50-State patchwork, 

manufacturer serialization at the unit level and case level, enabling 

unique identification of prescription drug products for the first time 

in the United States; the development of electronic systems and 

processes to facilitate traceability and transaction data exchange to 

provide additional efficiency and safety benefits within the supply 

chain, and appropriate transition times and development phases 

for the migration to traceability for each segment. 

There is no single element that will protect the supply chain 

from every threat but rather a comprehensive solution should incorporate each of these elements. We applaud your work and urge 

the committee to advance this important issue this year. Now is 

the time for Congress to act to bring cohesion and consistency to 

our national drug supply chain. 

40 

[The prepared statement of Ms. Gallenagh follows:] 

41 


82188A.008

HEALTHCARE DISTRIBUTION MANAGEMENT ASSOCIATION 

Testimony before the 

House Energy and Commerce Committee 

Subcommittee on Health 

United States House of Representatives 

April 25, 2013 

Elizabeth A. Gallenagh 

Vice President, Government Affairs and General Counsel 

Healthcare Distribution Management Association 
42 


82188A.009

Testimony Before the Snbcommittee on Health 

Committee on Energy and Commerce 

United States House of Representatives 

Statement of 

Elizabeth A. GaUenagh 

Vice President, Government Affairs and General Couusel 

Healthcare Distribution Management Association 

April 25, 2013 

Good morning Chairman Pitts, Ranking Member Pallone and Members of the Energy and 

Commerce Subcommittee on Health. I am Elizabeth Gallenagh, Vice President, Government 

Affairs and General Counsel for the Healthcare Distribution Management Association (HDMA). 

Thank you for the opportunity to inform the Subcommittee regarding the critically important 

issue of prescription drug pedigree and pharmaceutical supply chain safety. I also would like to 

thank Chairman Upton, Congressman Latta and Congressman Matheson for their leadership in 

this area. 

HDMA represents the nation's primary pharmaceutical distributors that deliver more than 

nine million prescription drugs and other healthcare products every day to 200,000 pharmacy and 

provider settings across the country. 

Our 33 member companies purchase products from manufacturers and are responsible for 

storing, managing and delivering nearly 90 percent of all prescription medicines sold in the U.S. 

This critical public health function is performed with tremendous efficiency, resulting in nearly 

$42 billion in annual savings to the nation's healthcare system. 

The pharmaceutical distribution industry'S primary mission is to operate the safest, most 

secure and efficient supply chain in the world. As part of this mission, HDMA's members work 

2 
43 


82188A.010

to eliminate counterfeit and diverted medicines by capitalizing on the technological innovation 

and constant improvements in efficiency that are the foundation of our industry. 

Today, I am here to express HDMA's strong support for a national, uniform approach to 

pedigree and the traceability of medicines throughout the supply chain. We support the core 

elements of the Latta-Matheson proposal and look forward to working with you and your Senate 

colleagues to enact federal legislation. 

HDMA supports enhanced national wholesaler licensing standards and a new federal 

ceiling for pedigree and traceability requirements to improve safety and uniformity across the 

country, while establishing the foundation for longer-term electronic solutions, such as unit-level 

serialization and product tracing. 

In addition to fundamentally addressing counterfeit and diverted medicines, a national 

approach to pedigree and traceability may be a useful tool in discouraging gray market activities 

associated with drug products in short supply. More importantly, it will put the U.S. on par with 

countries around the world engaging in serialization and traceability efforts. 

After many years of debate, it appears that Congress finally may be poised to enact 

federal pedigree legislation. This is, in large part, due to a broad consensus among supply chain 

partners as well as growing support from Members of Congress and the leadership of 

Congressmen Latta and Matheson. While Congress, FDA and industry stakeholders have been 

working at this diligently for several years, it is critical that Congress act now due to the 

uncertainties faced by the industry, the need for uniformity across the supply chain and to ensure 

patient safety. 

3 
44 


82188A.011

Because of the unique role HDMA members play in the supply chain between 

manufacturers and providers, they witness firsthand the complexities of dealing with the current 

50-state patchwork oflicensing and pedigree laws (see attached map of state pedigree legislation 

and regulations). 

Basic guidelines for pedigree were set forth nearly 25 years ago with the enactment of the 

federal Prescription Drug Marketing Act (PDMA). Since that time, activity at the state level has 

varied with some enacting complex electronic pedigree laws and others never going further than 

the original 1988 guidelines. Based on our experience, the complexities of dealing with multiple 

approaches in the states will only get worse if we fail to solve this problem now, at the national 

level. 

Since Florida's first foray into raising pedigree and licensure requirements in 2003, we 

have seen dramatic variations across the country in both legislative activity and regulatory 

interpretation. This variation has occurred despite HDMA's attempts to work in every state along 

with fellow stakeholders and interested legislators and regulators to achieve more uniformity. 

Today, for example, 29 states have acted beyond the federal PDMA standards. The states of 

Florida and California are viewed as leaders in this arena. However, they take completely 

different approaches, with Florida considered to be the most stringent in terms oftoday's 

requirements, and California's law thought to be the most complex, with track-and-trace and 

electronic pedigree implementation beginning in 2015. 

This patchwork not only creates operational challenges, but also leaves openings for bad 

actors to shop around for more lenient state rules openings that could mean the difference 

between a fake or diverted medicine being dispensed or administered to an innocent patient in 

4 
45 


82188A.012

need of treatment. Because of this state-by-state variation, we believe that pedigree and 

traceability should be under the purview of Congress and the FDA. 

HDMA has been a leader in this area, forming and participating in industry task forces 

and working groups that bring together manufacturers, distributors and pharmacies dedicated to 

identifYing the operational and technical requirements for electronic pedigree, track-and-trace 

and traceability implementation. HDMA is also an active member ofPDSA, the Pharmaceutical 

Distribution Security Alliance. 

A comprehensive, practical approach would result in increased safety, continued 

efficiencies and minimal inconsistencies among competing state requirements - all of which 

will enable HDMA distributors and our supply chain partners to continue to deliver prescription 

drugs safely and efficiently every day. 

HDMA commends Congressmen Latta and Matheson, along with the committee 

leadership, on continuing the dialogue and moving this effort forward with the release of the 

Latta-Matheson discussion draft. We believe that the framework of the draft is consistent with 

the basic foundation HDMA has supported through the years. 

The bipartisan proposal includes the following core elements: 

National Unifonnity 

Adoption of national requirements for wholesaler licensing standards while preserving 

the states' ability to license and enforce, as well as uniform direct-purchase and standard 

pedigree (documentation of product transaction history) requirements. Taking this 

immediate first step will help to ensure the efficient flow of prescription drugs in 

5 
46 


82188A.013

interstate commerce, raise the bar for states that have not gone beyond the current federal 

PDMA "floor" and enhance protections for the most secure prescription drug supply 

chain in the world - further ensuring patient safety and access to lifesaving medicines. 

Unit-level Serialization 

Currently, there is no mechanism required to identifY a unique bottle of medicine. This 

proposal will require manufacturers to apply a unique identifier to prescription drugs at 

the unit and case levels. This would be the first in a series of steps designed to help 

protect the supply chain against counterfeit, adulterated or other substandard products by 

facilitating improved ability to identify non-legitimate items. Prescription drugs would be 

identified at the unit and case level with a serial number (SNI), lot number and expiration 

date. 

• Data Exchange and Systems Development 

Once product is serialized, it is believed that product traceability initially can be achieved 

at the lot level, with potential for traceability at more discrete levels as systems mature. 

As a result, exchange of transaction data will be possible and can be leveraged to provide 

additional eftlciency and safety benefits within the supply chain. HDMA supports a 

migration toward traceability that includes deliberate, careful evaluation and assessment 

by FDA and stakeholders at each step. 

There is no single element that will protect the supply chain from every threat but 

rather, a comprehensive solution should incorporate each of these elements. 

6 
47 


82188A.014

We applaud the work that has been done to date and urge the Subcommittee to act on this 

important issue this year. Now is the time for Congress to act to bring cohesion and consistency 

to our national drug supply chain. 

Thank you. 

7 
48 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

Ms. Simmon for 5 minutes for an opening statement. 

STATEMENT OF CHRISTINE M. SIMMON 

Ms. SIMMON. Thank you. Good morning, Chairman Pitts, Ranking Member Pallone and members of the Subcommittee. Thank you 

for inviting me to testify here today on the important topic of securing our Nation’s pharmaceutical supply chain. I am Christine 

Simmon, Senior Vice President of Policy at the Generic Pharmaceutical Association. We represent the finished-dose generic drug 

manufacturers and bulk pharmaceuticals and suppliers to the industry. 

For the past year, the effort to develop a national solution to securing the supply chain received strong support from key members 

in both the House and Senate but unfortunately was not enacted 

into law. We applaud this Committee for taking up this issue 

today, and we recognize and appreciate the dedicated attention to 

this issue and leadership by Congressmen Latta and Matheson. 

GPhA believes that every patient in America deserves a safe and 

secure prescription drug supply. For many years, GPhA has worked 

closely with multiple stakeholders across the supply chain to ensure just that. As the makers of 80 percent of scripts dispensed in 

the United States, our industry is deeply committed to preventing 

and detecting the distribution and sale of counterfeit and adulterated medicines. We strongly supported last Congress’s historic Generic Drug User Fee Act, which recognizes that while providing 

earlier access to medicines is critical, FDA’s central mission is ensuring drug safety. We applaud the efforts of this Committee in enacting the user fee program into law. 

GPhA is a member of the Pharmaceutical Distribution Security 

Alliance along with many others in the supply chain and including 

others at this table. The group’s primary goal is to ensure patients 

have uninterrupted access to safe, authentic FDA-approved medicine. So today I am going to share with you our support for a system build on three core principles: a uniform federal standard, 

technical requirements that support achievability, and a building 

block approach to ensuring orderly implementation and avoid unintended consequences. 

It is vital to ensure that any supply chain security system put 

in place is practical, focused, and uniform across the country. California’s drug pedigree model that will be effective in 2015 would require implementation of full electronic track-and-trace capabilities 

where the entire distribution history and location of every unit in 

the supply chain can be determined at any time. At present, the 

technology to support such a system is unproven and the costs associated would be billions. Any attempt to hastily implement such 

a system could lead to confusion in the supply chain, aggravate 

product shortages and dramatically increase costs for all prescriptions including generic medicines. 

In contrast, GPhA believes that a building block enables the industry to attain interoperability in achievable steps all the while 

applying the knowledge and experience gained over time to refine 

the model. While the generic industry is still reviewing recently reVerDate Nov 24 2008 15:25 Mar 04, 2014 Jkt 037690 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-35 CHRIS
49 

leased drafts, many elements are consistent with our proposed approach. 

Specifically, as outlined in Phase I of the Latta-Matheson Discussion Draft, generic manufacturers have committed to identifying individual saleable units of medicine with labels and maintaining 

and managing data in their systems that would associate the identifiers on individual bottles of medicine with the lot numbers of the 

products. Verification that a specific unit was serialized by a manufacturer within a given production lot can provide information and 

security that is a major step forward from current practices. The 

system would help identify and prevent the introduction of suspect 

product through full lot traceability and allow regulatory authorities to validate the unique identifier of a product at the unit level. 

The stepped approach in the House draft would provide immediate measures to increase supply chain security. The system established under the proposals will improve the efficiency and effectiveness of drug recalls and returns. In planning for the future, it 

would provide critical building blocks that can be expanded as public health threat standards and technologies evolve. 

Because American consumers today expect the convenience and 

simplicity inherent in the digital transfer of information, GPhA 

strongly supports the e-labeling requirement in the discussion draft 

to provide more standardized electronic prescription drug information that would increase patient safety and provide significant 

quality improvements and cost reductions through a more accurate, 

cost-effective, and sustainable alternative to paper inserts. 

In conclusion, Mr. Chairman, GPhA and the industry share the 

concerns of the committee with regard to maintaining the security 

of our country’s drug supply. The development of a uniform National system is needed to give regulatory authorities another tool 

for enforcement, make it more difficult for criminals to breach the 

supply chain, and enhance the ability of the supply chain to respond quickly when a breach has occurred. We believe the model 

proposed by the House includes many elements to achieve these 

goals. We look forward to working together with Congress to develop a consensus measure on this important issue that can be enacted into law. 

Thank you, and I would be happy to answer any questions you 

may have. 

[The prepared statement of Ms. Simmon follows:] 

50 


82188A.015

TESTIMONY OF CHRISTINE SIMMON 

SENIOR VICE PRESIDENT, POLICY & STRATEGIC ALLIANCES 

GENERIC PHARMACEUTICAL ASSOCIATION 

"SECURING OUR NATION'S PRESCRIPTION DRUG SUPPLY 

CHAIN" 

BEFORE THE ENERGY AND COMMERCE SUBCOMMITTEE ON HEALTH 

UNITED STATES HOUSE OF REPRESENTATIVES 

APRIL 25, 2013 

1 
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82188A.016

Good morning Chairman Pitts, Ranking Member Pallone and Members of the House 

Energy and Commerce Subcommittee on Health. Thank you for inviting me to testify 

before the subcommittee on the important topic of securing our nation's pharmaceutical 

supply chain. 

I am Christine Simmon, Senior Vice President, Policy & Strategic Alliances at the 

Generic Pharmaceutical Association. GPhA represents the manufacturers and 

distributors of finished dose generic pharmaceuticals, bulk pharmaceuticals and 

suppliers of other goods and services to the generic industry. Generic pharmaceuticals 

now fill 80 percent of all prescriptions dispensed in the United States, but account for 

only 27 percent of the total spending for prescription medicines. According to an 

analysiS by IMS Health, the world's leading data source for pharmaceutical sales, the 

use of FDA-approved generic drugs in place of their brand counterparts has saved U.S. 

consumers, patients and the health care system more than $1 trillion over the past 

decade and $192.8 billion in 2011 alone - which equates to $1 billion in savings every 

other day. The quality and affordability of generic medicines is vital to public health and 

the sustainability of the health care system. 

Introduction 

For many years, GPhA has worked closely with multiple stakeholders across the supply 

chain to ensure that American consumers will continue to benefit from the safest and 

most secure prescription drug supply in the world. Both industry and the FDA are 

2 
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82188A.017

exceptionally vigilant against the distribution and sale of counterfeit and adulterated 

medicines. 

Any presence of counterfeit and adulterated pharmaceuticals in our supply chain 

threatens both the health of patients and the integrity of our industry. As the makers of 

80 percent of the prescriptions dispensed in the United States, the generic 

pharmaceutical industry is deeply committed to ensuring the security of our country's 

drug supply. GPhA believes that the problem of counterfeit medicines raises a 

significant public health concern that must be addressed systemically on a range of 

levels - from local to global, and throughout the drug supply chain. 

Our commitment to this issue is further evidenced by our industry's strong support of 

last Congress' historic Generic Drug User Fee Act, which recognizes that while 

providing earlier access to effective medicines is critical - and the key aim of all other 

existing user fee programs - FDA's central mission is ensuring drug safety. We also 

applaud the efforts of this Committee in enacting the user fee program into law. The 

program holds all players, foreign or domestic, contributing to the U.S. generic drug 

system to the same Good Manufacturing Practices (GMP), and inspection standards, 

while expediting access to more affordable, high quality generic drugs; the generic drug 

user fee program also enhances FDA's ability to identify, track and require the 

registration of all contributors involved in each generic drug product sold in the U.S. 

We also are members of the Pharmaceutical Distribution Security Alliance, or PDSA: 

3 
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82188A.018

a multi-stakeholder and interdisciplinary initiative whose membership spans the entire 

spectrum of the U.S. pharmaceutical distribution system, including manufacturers, 

wholesale distributors, third-party logistics providers and pharmacies. 

The PDSA's mission is to develop, and help enact, a federal policy proposal that 

enhances the security and integrity of the domestic pharmaceutical distribution system 

for patients, and to articulate a technical migratory pathway to implement such a policy. 

The coalition's primary goal is to ensure patients have uninterrupted access to safe, 

authentic, FDA-approved medicine. 

It is worth noting that low-cost generic drugs are rarely, if ever, targeted by 

counterfeiters. And in general, as the FDA acknowledges, "counterfeiting is quite rare 

within the U.S. drug distribution system." Nevertheless, the generic industry has been a 

leader in supporting numerous anti-counterfeiting efforts and developing methods to 

further protect the integrity of the pharmaceutical supply chain. The generic industry is 

committed to ensuring the safety of the millions of consumers nationwide who use safe, 

affordable generic medications. As such, we support a system built on the core 

principles of: a uniform, federal standard; technical requirements that support 

achievability; and a building-block approach to ensure an orderly implementation and 

avoid unintended consequences. 

Last year, the effort to enact a national solution received strong support from key 

members in both the House and Senate but unfortunately was not enacted into law. We 

4 
54 


82188A.019

applaud this Committee for picking up where the previous effort left off, and we 

recognize and appreciate the dedicated attention to this issue given by Congressman 

Matheson and Congressman Latta. 

Uniform Federal Standard 

As these efforts move forward, however, it is vital to ensure that any system is practical, 

focused, and uniform across the country. A uniform system founded on reliable 

technology and business practices would preclude the unintended consequence of 

erecting cost barriers to the distribution of safe and effective medicines. 

For example, some anti-counterfeiting efforts, such as the drug pedigree model 

currently set to take effect in 2015 under California law, would require implementation of 

full electronic "track-and-trace" capabilities, where the entire distribution history, and the 

location, of every unit in the supply chain can be determined at any time. At present, 

the technology to support such a system is unreliable and underdeveloped, and the 

costs associated with such a model would be billions. Considering the myriad of 

manufacturers, packaging operations and potential exceptions, this is not a realistic 

expectation. An attempt to implement such a system would lead to confusion in the 

supply chain, aggravate product shortages and dramatically increase costs for all 

prescriptions, including generiC medicines. The California law does include language 

providing for preemption of its requirements in the event that federal legislation is 

enacted, which we support. 

5 
55 


82188A.020

Achievability 

As the Committee begins its consideration of legislation to address this important issue, 

it is critical to understand how previous efforts at regulating the pharmaceutical supply 

chain - at both the state and federal level - have led us to where we stand today. 

In 1988, Congress passed the Prescription Drug Marketing Act, or PDMA, requiring 

drugs to be tracked when they passed outside of the normal chain of distribution, which 

begins at the manufacturer, goes to authorized distributors and finally to the pharmacy. 

Congress found this necessary because the majority of drugs that were counterfeit, 

stolen, expired or obtained through fraud were handled by secondary wholesalers, who 

were not authorized to distribute a manufacturer's product. Manufacturers and their 

authorized distributors were exempted from these requirements, because the 

introduction of counterfeit medicines would rarely, if ever, occur in this link of the supply 

chain. However, the law was stayed by the FDA, and finally enjoined in 2006 by a 

federal district court in New York, in large part because the creation of a national drug 

tracking system including all supply chain participants had not been mandated, making 

the requirements potentially too difficult or impossible to fulfill for many legitimate 

distributors. 

Since that time, this Committee and the Congress passed the Food and Drug 

Administration Amendments Act of 2007 (FDAAA), which directs the FDA to develop 

standards for the identification, validation, authentication and tracking of prescription 

drugs, as well as a standard numerical identifier to be applied to a prescription drug at 

6 
56 


82188A.021

the point of manufacturing and repackaging. While most of these standards have yet to 

be established, the FDA envisions a full track-and-trace system similar to that in 

California. We believe that the technology and processes necessary to achieve full 

track-and-trace are not fully mature at this time. 

Additional federal legislation also has been introduced in recent years that would urge 

the establishment of national standards for an electronic tracking system. These 

proposals pursue the worthy goal of a single, uniform national standard for supply chain 

security, as opposed to a patchwork of differing state-by-state laws. However, the 

measures proposed would ultimately require an extensive track-and-trace model for 

each individual saleable unit of medicine that is simply unachievable within the 

proposed timeframes. GPhA believes that adoption of the California model, or one with 

very similar features, would raise the cost of medicine by billions of dollars over time, 

would be prone to error, and would have, at best, similar results to a less-expensive, 

more efficient model. 

Building-block Approach 

GPhA recognized the shortcomings of the California-type approach early on and 

proposed its own alternative model in 2011 by publishing a white paper on an end-point 

authentication model. At that time, we began to work in PDSA with representatives from 

all sectors of the supply chain and helped create an industry consensus model that we 

believe makes large safety strides in incremental steps over time. We believe that a 

building-block approach enables the industry to achieve the necessary interoperability in 

7 
57 


82188A.022

achievable steps, all the while applying the knowledge and experience gained over time 

to refine the model. While our member companies are still reviewing the recentlyreleased House draft, many elements of that draft are consistent with our proposed 

approach. 

Specifically, as outlined in Phase I of the Latta-Matheson discussion draft, generic 

manufacturers have committed to identifying individual saleable units of medicine with 

labels, and maintaining and managing data in their systems that would associate the 

identifiers on individual bottles of medicine with the lot numbers of products. Verification 

that a specific unit was indeed identified by a manufacturer within a given production lot 

can provide information and security that is a major step forward from current practices. 

Unit-level identification provides greater granularity of a lot and improves the visibility of 

its distribution throughout the supply chain, and also provides unit-level data as an 

additional check. This system would help identify and prevent the introduction of 

suspect product through full lot traceability and allow regulatory authorities to validate 

the identifier of a product at the unit level. 

And unlike a full track-and-trace system, which we do not believe is technologically 

feasible in the near term, the House language would provide immediate measures to 

increase supply chain security. The system established under the proposal will improve 

the efficiency and effectiveness of drug recalls and returns. In planning for the future, it 

would provide critical building blocks that can be expanded as public health threats, 

interoperability standards, and technologies evolve, and establish connectivity and 

8 
58 


82188A.023

infrastructure throughout the supply chain that will enable a variety of other capabilities 

and efficiencies. We also strongly support the e-Iabeling requirement in the discussion 

draft to provide more standardized, electronic prescription drug information that would 

increase patient safety and provide significant quality improvements and cost reductions 

to patients, manufacturers, prescribers and providers of pharmaceuticals by developing 

a more accurate, cost-effective and sustainable alternative to existing paper inserts. The 

discussion draft would also create more stringent federal standards and state licensing 

for wholesale distributors, and streamline requirements for manufacturers who also 

operate as distributors. 

In keeping with many years of existing law, GPhA agrees with the Latta-Matheson 

discussion draft that intravenous (IV) products must be exempted from these 

regulations and urges that this exemption be maintained. 

In short, the House proposal will replace the patchwork of inconsistent state laws, while 

increasing patient safety and enhancing our ability to identify and prevent the 

introduction of suspect products. It is important to recognize the limitations of 

technology and the necessity of other means of vigilance to address the issues of 

counterfeiting and diversion of drugs. There is no technology or tracking system that 

will stop all thieves and counterfeiters from attempting to divert products, or profit 

illegally. 

9 
59 


82188A.024

GPhA supports the development of pilot programs to explore and evaluate methods to 

enhance the safety and security of the pharmaceutical distribution supply chain as well 

as the inclusion in the discussion draft of report mandates for the Government 

Accountability Office and Food and Drug Administration to assess implementation and 

pilot programs, respectively. 

Conclusion 

In conclusion, Mr. Chairman, GPhA and the industry share the concerns of the 

Committee with regard to maintaining the security of our country's drug supply and 

preventing the entry of counterfeit, diverted, stolen or other substandard medicines. 

The development of a uniform, national system is needed to give regulatory authorities 

another tool for enforcement, make it more difficult for criminals to breach the supply 

chain and enhance the ability of the supply chain to respond quickly when a breach has 

occurred. We believe the model proposed by the House includes many elements to 

achieve these goals. We look forward to working together with the House and Senate 

to develop a consensus measure on this important issue that can be enacted into law. 

Thank you and I would happy to answer any questions you may have. 

10 
60 

Mr. PITTS. The Chair thanks the gentlelady and now the Chair 

recognizes Mr. Rose for 5 minutes for an opening statement. 

STATEMENT OF MICHAEL ROSE 

Mr. ROSE. Thank you for your introduction, Mr. Chairman, and 

thank you, Mr. Pallone. I work for and am representing Johnson 

and Johnson Health Care Systems Inc. Johnson and Johnson 

Health Care Systems Inc. is the principle supply chain commercial 

entity within the Johnson and Johnson family of companies in the 

United States. 

Securing our Nation’s supply chain is an important concern for 

our company. We believe it is vital for the patients who use our 

products receive our genuine products. We have already taken 

steps to secure our supply chain and protect our products. As a 

member of PhRMA and BIO and a participant in PDSA, I will 

share with you our perspectives on serialization and track-andtrace, our serialization experience and views on the draft legislation. 

Serialization regulations have become increasingly common 

across many countries including the European Union, Turkey, Argentina, China, India, and Brazil. In the United States, the California law requires manufacturers to serialize and pedigree all 

pharmaceutical products sold in the State of California 50 percent 

of our products by January 1, 2015, and the remaining 50 percent 

by January 1, 2016. Additionally, more than 50 percent of the 

States have pedigree laws with varying approaches, that is, some 

require electronic pedigrees, others use paper. Some start the pedigree at the primary distributors, others will start it with the secondary wholesaler, et cetera. This patchwork quilt of regulations 

leaves us with a complicated, inefficient regulatory landscape creating unforeseen gaps where bad actors can introduce illicit drugs 

into the legitimate supply chain, thereby placing our citizens at 

risk of counterfeit medicines. 

While the risk of encountering counterfeit medicines may be 

small within the legitimate domestic supply chain, when a patient 

receives a counterfeit medicine, the effects can be extremely dangerous, have long-lasting impact and can even be life-threatening. 

Our company believes that Federal Serialization and Track-andTrace legislation is necessary to properly secure our pharmaceutical supply chain by eliminating varying and conflicting State 

regulations. Federal legislation should help close the gaps where illicit drugs enter the U.S. supply chain as well as provide additional 

mechanisms to help authenticate the legitimacy of medicines distributed and dispensed within the United States to help protect the 

patients who use our medicines. 

Next I would like to share our company’s domestic serialization 

experience. We are preparing our packaging sites, distribution centers, business and information technology systems to serialize and 

track and trace our products so that we can comply with the California e-pedigree law. Here is an example of the first product that 

we have serialized for the U.S. market. This product is Prezista 

600-milligram tablets. For your reference, I have attached a label 

of serialized Prezista 600 milligrams to my testimony. 

61 

Let me draw your attention to the product license plate on the 

side of the label. This space is similar to the prescription drug 

product identifier prescribed in the House bill. We provide both 

machine and human readable forms for easy and accurate identification. Similarly, we apply a standard serialized barcode to every 

homogenous case to facilitate handling during distribution. This 

identification space complies with both the FDA’s serial number 

identifier guidance and the widely adopted international standards 

developed by GS–1. 

Additionally, we are establishing processes to exchange serialized 

data with the distributors who distribute our products and with the 

pharmacies that dispense our medicines to patients who need 

them. We are required to provide this information to the distributors and pharmacies so that they can use it to help verify both the 

authenticity of the package as well as the transactions related to 

the product. 

Bottom line: While it is complicated work and a lot still remains, 

we are doing our part to comply with the California law. However, 

if any States were to adopt slightly different regulations, the inconsistencies could compromise the integrity of the supply chain, 

hence supporting the need for Federal action now to secure our National security chain. 

Lastly, I would like to comment on the proposed legislation. In 

2011, our company along with several other PhRMA and BIO members, and other supply chain participants helped form PDSA. 

PDSA’s mission is to help enact a Federal policy proposal for one 

unified national system enhancing the security of the domestic supply chain for patients and to define a migratory implementation 

pathway. 

Johnson and Johnson Health Care Systems supports Representatives Latta and Matheson for tackling this important issue and 

making progress on a legislative solution. This legislation incorporates many of PDSA’s proposed provisions including a uniform 

national standard with a phased implementation. It is vitally important that both government and the private sector work together 

to protect our national drug supply in a manner that makes sense. 

We believe this legislation will help us secure the domestic pharmaceutical supply chain by providing additional protection to our 

citizens, patients who depend on the integrity of our medicines to 

treat their diseases and life-threatening conditions from counterfeit 

medicines. Johnson and Johnson Health Care Systems’ commitment to patient safety is unwavering. We look forward to 

Congress’s enactment of this legislation and we are committed to 

work with Congress, the FDA and our supply chain stakeholders 

to implement it successfully. Again, thank you for the opportunity 

to provide this testimony to the Committee. 

Before concluding my remarks, I would like to recognize Steve 

Drucker, an industry colleague from Merck, who passed away last 

week. We will miss Steve’s immense contributions, commitment to 

patient safety and especially his humorous insights. Our thoughts 

and prayers go out to Steve’s family, especially his wife Ann and 

the entire Merck team. 

[The prepared statement of Mr. Rose follows:] 

62 


82188A.025

425 Hoes Lane 

Piscataway, NJ 08855 

April 25, 2013 

Thank you for your introduction, Mr. Chairman. I work for, and am representing, Johnson & 

Johnson Health Care Systems Inc. Johnson & Johnson Health Care Systems Inc. is the principal 

supply chain commercial entity within the Johnson & Johnson Family of Companies in the u.s. 

Thank you for the opportunity to speak here today. Securing Our Nation Supply Chain is an 

important concern for our company. 

We believe it is vital that the patients who use our products receive our genuine products. We 

have already taken steps to secure our supply chain and protect our products. As a member of 

PhRMA (Pharmaceutical Research and Manufacturers of America) and BIO (Biotechnology 

Industry Organization), and a participant in PDSA· the Pharmaceutical Distribution Security 

Alliance, I will share with you our perspectives on serialization and track & trace, our 

serialization experience, and views on the proposed legislation. 

Serialization regulations have become increasingly common across many countries, including 

the European Union, Turkey, Argentina, China, India, and Brazil. 

In the U.s., the California law requires manufacturers to serialize and pedigree all 

pharmaceutical products sold in the State of California - 50 percent of our products by January 

1, 2015 and the remaining 50 percent by January 1, 2016. Additionally, more than 50 percent 

of the states have pedigree laws with varying approaches - that is, some require electronic 

pedigrees, others use paper, some start the pedigree with the primary distributor, others start 

it with the secondary wholesaler, etc. 

This patchwork qUilt of regulations leaves us with a complicated, inefficient regulatory 

landscape, creating unforeseen gaps where bad actors can introduce illicit drugs into the 

legitimate supply chain, thereby, placing our citizens at risk of counterfeit medicines. While 

the risk of encountering counterfeit medicines may be small within the legitimate domestic 

supply chain, when a patient receives a counterfeit medicine, the effects can be extremely 

dangerous, have long lasting impact, and can be even life threatening. 

Our company believes that Federal serialization and track & trace legislation is necessary to 

properly secure our pharmaceutical supply chain by eliminating varying and conflicting state 
63 


82188A.026

regulations. Federal legislation should help dose the gaps where illicit drugs enter the U.S. 

supply chain, as well as provide additional mechanisms to help authenticate the legitimacy of 

medicines distributed and dispensed within the US to help protect the patients who use our 

medicines. 

Next, I'd like to share our company's domestic serialization experience. 

We are preparing our packaging sites, distribution centers, business and information 

technology systems to serialize and track & trace our products so that we can comply with the 

California e-Pedigree law. Here is an example of the first product that we have serialized for 

the U.S. market. This product is PREZISTA ® (darunavir) 600mg tablets. 

For your reference, I have attached a label of serialized PREZISTA® 600mg to my testimony. 

Let me draw your attention to the product license plate on the side of the label. This space is 

similar to the Prescription Drug Product Identifier prescribed in the House bill. We provide both 

machine and human readable forms for easy, accurate identification. Similarly, we apply a 

standard, serialized bar code to every homogeneous case to facilitate handling during 

distribution. This identification space complies with both the FDA's Serial Number Identifier 

guidance, and the widely adopted international standards developed by GS1. 

Additionally, we are establishing processes to exchange serialized data with the distributors 

who distribute our products, and with the pharmacies that dispense our medicines to patients 

who need them. We are required to provide this information to the distributors and 

pharmacies so that they can use it to help verify both the authenticity of the package as well as 

the transactions related to the product. 

Bottom line, while it is complicated work and a lot still remains, we are doing our part to 

comply with the California law. However, if any other states were to adopt slightly different 

regulations, the inconsistencies could compromise the integrity of the supply chain, hence, 

supporting the need for Federal action now to secure our national supply chain. 

Lastly, I would like to comment on the proposed legislation. 

In 2011, our company, along with several other PhRMA and BIO members, and other supply 

chain participants helped form PDSA. PDSA's mission is to help enact a federal policy proposal 

for one unified national system enhancing the security of the domestic pharmaceutical 

distribution system for patients, and to define a migratory implementation pathway. 

Johnson & Johnson Health Care Systems supports Representatives Latta and Matheson for 

tackling this important issue and making progress on a legislative solution. This legislation 

incorporates many of PDSA's proposed proVisions including a uniform national standard with a 

phased implementation. 
64 


82188A.027

It is vitally important that both government and the private sector work together to protect our 

nation's drug supply in a manner that makes sense, We believe this legislation will help us 

secure the domestic pharmaceutical supply chain by providing additional protection to our 

citizens, patients who depend on the integrity of our medicines to treat their diseases and lifethreatening conditions, from counterfeit medicines. 

Johnson & Johnson Health Care Systems commitment to patient safety is unwavering. We look 

forward to Congress' enactment of this legislation, and we are committed to working with 

Congress, the FDA and our supply chain stakeholders to implement it successfully, 

Again, thank you for the opportunity to provide this testimony to the Committee. 

Before concluding my remarks, I'd like to recognize Steve Drucker, an industry colleague from 

Merck, who passed away last week. We will miss Steve's immense contributions; unwavering 

commitment to patient safety; and especially his humorous insights. Our thoughts and prayers 

go out to Steve's family, especially his wife, Anne; and to the entire Merck team. 
65 


82188A.028

Exhibit 1- Serialized Label for PREZISTA@600mg 

N 11111111111111111, I 

3 59676-562-01 6 PREZISTA' 

(danmavir) t{lblafS 

tiooma 

"-

Janssen! 

PREZISTA ® (darunavir) 600mg tablets 
66 

Mr. PITTS. The Chair thanks the gentleman. Dr. Davis, you are 

recognized for 5 minutes for an opening statement. 

STATEMENT OF TIM DAVIS 

Mr. DAVIS. Chairman Pitts, Ranking Member Pallone and members of the Committee, thank you for conducting this hearing and 

for providing me the opportunity to share my perspective as an 

independent pharmacist and small business owner on the issue of 

securing the pharmaceutical supply chain. My name is Tim Davis 

of Beaver County, Pennsylvania, and I am the owner of Beaver 

Health Mart Pharmacy and have been a practicing pharmacist for 

over a dozen years. I am here today representing the National 

Community Pharmacists Association, which represents the pharmacist owners and employees of more than 23,000 independent 

community pharmacies in America. Our pharmacies provide over 

40 percent of all community-based prescriptions. 

It is my belief that the United States pharmaceutical supply 

chain is largely safe and secure. Most pharmacists today have a 

heightened awareness of counterfeit or diverted drugs and therefore recognize the critical importance of purchasing medications 

only from trusted trading partners. In addition, pharmacists, as 

part of our training and daily practice, carefully examine both drug 

packaging and the drug itself to be sure there are no suspicious 

anomalies. 

It has been my observation, though, that certain types of prescription medications tend to be the target of counterfeiters. Relatively expensive drugs that can be easily produced and readily 

sold entice these bad actors. Some drugs that I have personally 

seen are lifestyle drugs, such as Viagra, and very costly injectable 

medications such as Procrit or more recently Avastin. 

In response to concerns about the safety of prescription medications in the United States, over half of the States have passed drug 

pedigree laws that require drug products that move outside of normal distribution to be accompanied by a record of prior transactions. However, the differences in each State’s laws has created 

a patchwork of activities across the United States. As a result, 

there have been past discussions about the practicality of a system 

that would track prescription drugs at the individual unit level. 

Pharmacists have had significant concerns about any system that 

would require each individual unit of medication to be electronically scanned upon arrival in a pharmacy due to the capital, time 

and labor costs associated with such a system. Presently, the technologies required to implement such a system are not fully developed, designed or scaled to be feasible or affordable for use in individual community pharmacies. 

Of great concern is the California e-pedigree law that will begin 

to be implemented in 2015 that will require the electronic tracking 

and tracing of all drug packages in real time. This well-intentioned 

system will require each individual participant in the supply chain 

to scan each individual item to capture the transaction information. 

With each successive distribution, the e-pedigree must be updated 

with the newest transaction data as it makes its way to our pharmacies. In short, our pharmacies will have the unenviable task of 

maintaining all drug pedigree data for all distributions and must 

67 

be able to access it on demand. The cost of compliance with this 

law will be extremely high when factoring in both initial implementation and ongoing expenses necessary to maintain and access the 

data. Imposing these challenges, particularly on community pharmacies, is not logical at a time when the Nation is focused on trying to reduce health care costs. 

All of these factors bring us to a place in which we need a uniform federal framework to provide further assurances of supply 

chain security and that could be used to assist federal regulators 

in instances of drug recalls or inquiries. We need a reasonable, 

commonsense federal approach that will strike the appropriate balance between enhanced patient safety and minimizing unreasonable burdens on supply chain stakeholders, particularly small business pharmacies like myself. 

NCPA is a member of the Pharmaceutical Distribution Security 

Alliance, a working group comprised of representatives of all sectors of the pharmaceutical supply chain, which has been collaborating over the past year and a half to address supply chain security issues. This group has reached a consensus around a number 

of topics. One is that of establishing National requirements for 

wholesaler licensure standards. Raising the standards for wholesaler licensure in a uniform fashion would provide the community 

pharmacist with an additional layer of confidence in the integrity 

of the medications purchased. The second concept is that of attaching a unique identifier to prescription drugs at the unit and case 

levels. Products would be identified with a two-dimensional matrix 

barcode including the serial number, lot number and expiration 

date. The PDSA coalition has also built consensus around being 

able to use the serialized identifier information to track products 

at the lot level. NCPA is pleased to note the inclusion of national 

wholesaler licensure standards, product serialization and lot-level 

tracking in both the recently released House discussion draft and 

the Senate draft. NCPA believes that the proposed lot-level system 

is one that could be built upon at some point in the future. 

Community pharmacists take very seriously our role in ensuring 

the safety of medications that we personally dispense to our patients and we remain committed to working with our colleagues in 

the supply chain as well as with State and Federal authorities to 

make any needed improvements. Moving forward, it is essential 

that all stakeholders make a concerted effort to keep the lines of 

communication open so consumers can continue to trust the integrity of the medications that we all so depend on. 

Thank you. 

[The prepared statement of Mr. Davis follows:] 

68 


82188A.029

United States House Energy and Commerce Committee 

Subcommittee on Health 

Hearing on "Securing Our Nation's Prescription Drug Supply Chain" 

Testimony of Timothy Davis, Independent Pharmacist and Member of the 

National Community Pharmacists Association 

April 25, 2013 

Chairman Pitts, Ranking Member Pallone and Members of the Committee: 

Thank you for conducting this hearing and for providing me the opportunity to 

share my views and perspective as an independent pharmacist and small business 

owner on the issue of securing the pharmaceutical supply chain. My name is Tim 

Davis of Beaver, Pennsylvania. I am the owner of Beaver Health Mart Pharmacy 

and have been a practicing pharmacist for 12 years. I am here today representing 

the National Community Pharmacists Association (NCPA) which represents the 

pharmacist owners, managers and employees of more than 23,000 independent 

community pharmacies across the United States. These pharmacies provide 

about 40 percent of all community-based prescriptions. 

It is my belief that the United States pharmaceutical supply chain is largely safe 

and secure. Most practicing pharmacists today have a heightened awareness of 

the possibility of counterfeit or diverted drugs and therefore recognize the critical 

importance of purchasing medications only from trusted trading partners or 

wholesalers. 
69 


82188A.030

In addition, pharmacists, as an integral part of their training and day to day 

practice, are taught to carefully examine and make note of both the drug 

packaging and the appearance of the drug itself to be sure there are no suspicious 

anomalies. 

It has been my observation that certain types of prescription medications tend to 

be the target of counterfeiters or "bad actors" in the supply chain. Relatively 

expensive drugs that can be easily produced and readily sold enable 

counterfeiters to create an attractive profit margin. Some drugs that I have seen 

that are particularly susceptible are lifestyle drugs, such as Viagra, as well as very 

costly injectable medications such as Procrit or more recently Avastin, that are 

not always carried in community pharmacies, but rather are dispensed through 

consolidated specialty pharmacies, health systems, or directly by physicians. In 

my career, I have seen one example of counterfeiting at a local level. We received 

manufacturer information that a particular drug, Procrit, had entered the drug 

supply chain in counterfeit form and we were instructed how to recognize the 

genuine product against the fake. Upon receipt of a daily shipment from our local 

wholesale distributor, we checked and found that an item that we received was 

indeed one of the counterfeit products. We immediately contacted and discussed 

the situation with our wholesaler. Our particular solution was actually to stop 

doing business with that wholesaler due to the lack of a believable and reliable 

response. 

2 
70 


82188A.031

In response to concerns about the safety of prescription medications in the 

United States, over half of the states have passed "drug pedigree laws" that 

require drug products that move outside of "normal distribution" to be 

accompanied by a "pedigree" or record of prior transactions. However, this 

approach and the differences in each state's laws has created a "patchwork" of 

varying pedigree laws across the United States. Federal policy makers and supply 

chain participants alike have been discussing what a possible federal system to 

provide further assurances of supply chain security would look like for a number 

of years but due to the widely varying business models, financial resources and 

technological capabilities of those involved in the pharmaceutical supply chain, 

the process has not yielded a coherent, comprehensive national proposal yet on 

the federal level. 

In the past, there have been numerous discussions about the practicality of a 

system that would track prescription drugs at the individual unit level. 

Pharmacists have had significant concerns about any system that would require 

each individual unit of medication to be electronically "scanned" upon arrival in a 

pharmacy due to the capital outlays that would be required and the time and 

labor costs associated with such a system. At the present time, the technologies 

that would be required to implement such a system are not fully developed and 

have not been designed or scaled to be feasible or affordable for use in individual 

community pharmacies. 

3 
71 


82188A.032

Of great concern is the California "e-pedigree" law that will begin to be 

implemented for manufacturers in 2015 that will require the electronic tracking 

and tracing of all drug product packages, in real-time, in the drug distribution 

supply chain at the individual unit level through "electronic pedigrees" in an 

interoperable system. This well-intentioned system will require each individual 

participant in the supply chain to scan each individual item that will capture the 

transaction information. With each successive distribution, the e-pedigree must 

be updated with the new transaction data so that the e-pedigree continually 

grows as it makes its way to the pharmacy. In short, pharmacies will have the 

unenviable task of maintaining all drug pedigree data for all distributions above 

them and must be able to access it at any time. With the billions of drug product 

packages distributed, there will be billions of e-pedigrees and e-pedigree data 

that must be maintained and accessible-a massive amount of data. In addition, 

pharmacies must then pass back this information for each drug return. 

The cost of compliance with this law will be extremely high especially for small 

community pharmacies-when factoring in both initial implementation and 

ongoing expenses necessary to maintain and access the data. Imposing these 

challenges particularly on small business supply chain participants like community 

pharmacies is not logical at a time when the nation is focused on trying to reduce 

the costs of healthcare. 

4 
72 


82188A.033

All of these factors bring us to a place in which we need a uniform, federal 

framework to provide further assurances of supply chain security and that could 

be used to assist the FDA and other federal regulators in instances of recalls and 

other investigations. We need a reasonable, commonsense federal approach that 

will strike the appropriate balance between enhanced patient safety and 

minimizing unreasonable burdens on supply chain stakeholders, particularly small 

business pharmacies like myself. 

NCPA is a member of the Pharmaceutical Distribution Security Alliance (PDSA), a 

working group comprised of representatives of all sectors of the pharmaceutical 

supply chain, which has been collaborating over the past year and a half to 

address supply chain security issues. The group has reached consensus around a 

number of different concepts. One of these concepts is that of establishing 

national requirements for wholesaler licensure standards. At the current time, 

there are some states in which the requirements necessary to obtain licensure as 

a drug wholesaler are less rigorous than others. 

Raising the standards for wholesaler licensure in a uniform fashion would provide 

the community pharmacist at any location in the United States with an additional 

layer of confidence in the integrity of the medications purchased from such 

companies. The second concept is that of attaching a unique identifier to 

prescription drugs at the unit and case levels. Products would be identified at the 

unit and case level with a two dimensional matrix bar code including the serial 

number (SNI), lot number and expiration date for the product in machine and 

human readable form. 

5 
73 


82188A.034

Once a product is serialized, this would essentially pave the way for all supply 

chain partners to eventually be able to use this data in increased ways and to be 

able to collaborate with one another to more easily locate particular products 

that may have been compromised in some way. The PDSA coalition has built 

consensus around being able to use the unique identifier information to track 

products at the lot-level. NCPA is pleased to note the inclusion of all of these 

consensus points in both the recently released House Discussion Draft and the 

Senate Discussion Draft. NCPA believes that the proposed lot-level system is one 

that could be built upon at some point in the future if it was determined that this 

was advisable and if there were significant inroads made on the associated 

technologies so that it would not be prohibitively expensive or burdensome for 

small business pharmacies. 

I have a greater degree of confidence in the United States drug supply than I did 

just a few years ago-largely due to the heightened awareness of those in the 

supply chain to the possibility of counterfeit or diverted medications. That being 

said, community pharmacists take seriously our role in ensuring the safety of 

medications that we personally dispense to our patients and remain committed 

to working with our colleagues in the supply chain as well as with state and 

federal authorities to make any needed improvements. Moving forward, it is 

essential that all stakeholders make a concerted effort to keep the lines of 

communication open so that consumers can continue to trust the integrity of the 

medications that they depend on. 

6 
74 


82188A.035

I appreciate the opportunity to address the Committee today and would be happy 

to address any questions that you may have. 

Thank you ..... . 

7 
75 

Mr. PITTS. The Chair thanks the gentleman. Mr. Coukell, you are 

recognized for 5 minutes for an opening statement. 

STATEMENT OF ALLAN COUKELL 

Mr. COUKELL. Chairman Pitts, Ranking Member Pallone and 

members of the Committee, thank you for the opportunity to testify. My name is Allan Coukell. I direct drug and medicine device 

work at The Pew Charitable Trusts, an independent research and 

public policy organization. 

Pew supports the creation of a strong national system to protect 

American patients from the risks of counterfeit, stolen and diverted 

drugs. We do so based on our analysis of the risks to the supply 

chain and the feasibility of solutions. The principles that I will outline today are supported by other consumer, patient, public health 

and industry stakeholders, and I ask that a number of statements 

be included in the record with my written testimony. 

There is general agreement on the need for a national system 

and how it would work. Manufacturers would put a unique serial 

number on each package of drugs. The drugs would be tracked as 

they pass from hand to hand through the complex distribution system and they could be checked to be sure they are authentic. This 

approach would bring the United States into line with other countries and individual States. Providing it creates a meaningful advance in safety, a single national system would be preferable to the 

current patchwork of State laws. 

A recent example demonstrates how verifying a serial number on 

a drug package could have prevented a significant crime and risk 

to patients. Last year, the U.S. Attorney in New York charged 48 

people in a large-scale diversion scheme to buy half a billion dollars 

worth of medicines from patients on the street, repackage them, 

sometimes with fake labels, and sell them back into distribution 

through licensed wholesalers who in turn sold the drug to pharmacies. This massive criminal recycling of government-subsidized 

drugs—similar schemes are well documented in other States— 

could be prevented if the drug package had a serial number and 

the serial number was retired after the drugs reached the pharmacy. This requires that pharmacies and wholesalers purchasing 

the drugs check that serial number. Without checking, the same serial, real or fake, could be sold again and again without detection. 

Manufacturers are already making investments in drug serialization. To justify the expense and the preemption of strong State 

laws, it is essential that any Federal law achieve the following 

within a reasonable time frame: Participation of all members of the 

supply chain. We need traceability of drugs at the package level, 

not merely by lot, which can include thousands or tens of thousands of bottles, and routine checking of serial numbers. In a soonto-be-released Pew Booz Allen Hamilton report, supply chain stakeholders overwhelmingly said that all sectors, manufacturers, distributors and pharmacies, need to participate in a national system 

without exception. 

The technology is feasible, and package-level serialization and 

verification already exist or soon will in China, Brazil, Turkey, 

Italy and across the EU. A system that does not track drugs by the 

unit level would fail to catch unsafe drugs in many scenarios. Take 

76 

the example of a narcotic or any drug in shortage that is sold illegally or in the gray market. Without unit-level traceability, neither 

the purchaser nor an investigator would have any way to know 

who had sold that product or where it had come from. 

Today, some companies are required to track a drug’s transaction 

history through paper pedigree. An electronic system would be a 

welcome replacement, but Congress should certainly not replace 

pedigrees, which are used by regulators and law enforcement, with 

a structure that does less to capture the chain of custody than today’s systems. Regular checking of drug serial numbers by supply 

chain partners is a powerful way to ensure that illegitimate products do not enter distribution. Take, for example, a truckload of insulin, 129,000 refrigerated vials, that was stolen from a highway 

rest stop a few years ago. After several months, some of that drug 

showed up on the shelves of chain drugstores in Texas, Georgia 

and Kentucky, having been handled by licensed wholesalers in at 

least two other States. Nobody knows how much of that product 

was resold but only 2 percent of it was recovered. We need a system that can flag suspect of illegitimate and flag it automatically. 

Recognizing the danger, some companies have already taken 

steps. For example, the pharmaceutical company EMD Serono, 

after its human growth hormone was counterfeited, put in place a 

secure distribution program with unique serial numbers on each 

vial that are checked by the dispensing pharmacy. The core of that 

program shows how a national system can work. 

Mr. Chairman, I thank you for this hearing and for your commitment to this issue. The discussion draft released by this committee 

a few days ago acknowledges the risks I have been describing. We 

urge you now to refine it to achieve the meaningful protections 

called for by patient, consumer and public health groups and the 

others I have mentioned. Indeed, we urge you to return to the bipartisan, bicameral, two-phrase framework that you and your office 

and others on this committee have spent much of the past year developing, an approach that every organization represented on this 

panel has supported. It has been 25 years since PDMA. The California law will begin to be implemented in 2 years. The opportunity 

for a federal system now is great. We would like to work with this 

committee to improve this proposal to achieve a strong national 

system that achieves what it must: meaningful protections for patients. 

Thank you, and I would welcome your questions. 

[The prepared statement of Mr. Coukell follows:] 

77 


82188A.036

Testimony before the Committee on Energy & Commerce, Subcommittee on Health 

United States House of Representatives 

April 25,2013 

Allan Coukel!, director of drugs and medical devices 

The Pew Charitable Trusts 

Chairman Pitts, Ranking Member Pallone, and members of the Committee, thank you for the 

opportunity to provide testimony. My name is Allan Coukell. I direct drug and medical device 

work at The Pew Charitable Trusts. 

Pew is an independent, nonpartisan research and public policy organization dedicated to serving 

the public. 

Based on our analysis of the risks to the drug distribution system and the feasibility of addressing 

those risks, Pew supports the creation of a strong national system to protect American patients 

from the risks of counterfeit, stolen and diverted drugs. 

The principles I will outline today are supported by other stakeholders, and I ask that a number 

of statements from consumer, patient, public health and industry groups be included in the record 

with my written testimony.l 

There is general agreement on the need for a national system and how it would work. 

Manufacturers would put a unique serial number on each package of drug; the drugs would be 

tracked as they pass from hand to hand through the complex distribution system, and could be 

checked to ensure they are authentic. 

This approach would bring us into line with standards in place in other countries and in 

individual U.S. states. Providing it creates a meaningful advance in safety, a single national 

system would be preferable to the current patchwork of29 state drug pedigree laws. 

Verification to prevent drug diversion 

A recent example demonstrates how verifying a serial number on a drug package could have 

prevented a significant crime and risk to patients. 

In July 2012, the U.S. Attorney for the Southern District of New York charged 48 individuals in 

a large-scale criminal diversion scheme to buy prescription drugs "on the street" from patients, 

re-package them and re-sell them back into distribution through licensed pharmaceutical 

wholesalers, who in turn sold the drugs to pharmacies.2 The scheme included medicines for 
78 


82188A.037

HIV, schizophrenia, and asthma. In some cases, the criminals relabeled the drugs with new, fake 

labels. 

This put patients at risk of counterfeit, outdated or mislabeled drugs. It also cost the Medicaid 

program in New York an estimated half-billion dollars. Similar schemes in other states are well 

documented, including one Tennessee in January of this year.3 

This massive criminal recycling of government subsidized drugs could have been prevented by a 

serial number on a package. If the serial number was retired after the drugs reached the 

pharmacy, it would have been caught on its second trip around. Of course, that requires that the 

pharmacies and wholesalers purchasing the drug check that serial number. Without checking, the 

same serial number - real or fake - could be sold thousands of times over without detection. 

Key elements of a national system 

Pharmaceutical manufacturers are already making investments in drug serialization technology. 

To justifY the expense - and the preemption of strong state laws - it is essential that any federal 

law achieve the following within a reasonable time frame: 

• Participation of all members of the supply chain 

• Traceability of drugs at the package level (not merely by lot, which includes thousands or 

tens of thousands of bottles), and 

• Routine checking of drug serial numbers. 

We have identified widespread support for measures to ensure that all members of the supply 

chain participate in a national system. In a soon-to-be-released study that Pew conducted with 

the consulting firm Booz Allen Hamilton, ten manufacturers, ten wholesalers, and eleven 

pharmacies were asked what features of a national unit-level serialization and traceability system 

were important to them.4 80% of respondents said that all sectors in the supply chain needed to 

participate, without exception. 

As I've mentioned, serialization beginning with the manufacturer and going through to 

verification by the dispenser is already in place or being implemented in other countries. China, 

Brazil, Turkey, Italy and the E.U. require (or will soon require) pharmacy authentication of 

serialized medicines in order to protect their citizens and prevent fraud. 5,6,7,8 

Fortunately, a number of technological advancements, including cloud-based solutions, such as 

the one used in a 2012 track and trace pilot involving Abbott, McKesson, and the U.S. 

Department of Veterans Affairs, demonstrate how pharmacies may authenticate drugs and 

participate in a traceability system through use of a simple web portal.9

,10 

Unit level serialization and traceability 
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82188A.038

Another key to improved security of drug distribution is knowing who handles the drugs as they 

move from manufacturer, through a succession of wholesalers, to the pharmacy or hospital and, 

ultimately, to the patient. 

A system that tracks drugs by the lot number instead of at the unit level may provide incremental 

benefit over the status quo, but would fail to catch unsafe drugs in many scenarios. A lot can 

contain numerous cases of many thousands of individual bottles. Each may be sold separately, 

and lot-level tracing does not allow industry or regulators to know who bought and sold a given 

drug during distribution. 

Take the example of a product like growth hormone or some other performance enhancing drug, 

or of a drug in shortage, that investigators discover is being sold in the grey or black market. 

Without unit-level traceability, there is no way to know which pharmacy, hospital or clinic may 

have possessed the products or had the inventory "leak". 

Today some companies are required to track a drug's transaction history through paper 

"pedigrees". An electronic system would be a welcome replacement to this paper-based 

paradigm; however, Congress should certainly not replace pedigrees, which are used by 

regulators and law enforcement, with a structure that does less to capture chain of custody than 

today's system. 

Routiue checking of drug serial numbers 

Regular checking of drug serial numbers by supply chain partners is a powerful way to ensure 

illegitimate products do not enter the distribution system and reach patients. In addition to 

preventing drug diversion, routing checking could also help the supply chain catch stolen and 

counterfeit drugs that criminals attempt to sell as legitimate products. 

One example is the 2009 theft of a tractor-trailer containing 129,000 vials of insulin. This drug, 

which needs to be refrigerated, disappeared for a number of months before being sold back into 

distribution. Some of the stolen medicine was found at retail chain pharmacies in Texas, 

Georgia, and Kentucky, having passed through the hands of licensed wholesalers in at least two 

other states. But only 2 percent of that stolen inventory was ever recovered. 11. 12 

In another case, thieves stole $75 million worth of pharmaceuticals from an Eli Lilly warehouse 

in Connecticut. 13 Early last year those stolen drugs were discovered stored in South Florida. 14 

Had they been sold back into distribution no automated system would have flagged them for a 

pharmacy or wholesaler as stolen. 

Counterfeits are another risk. Three times in a little more than a year, the FDA has announced 

the recovery of counterfeit Avastin® - a critical drug used to treat several types of cancer. In one 

of these cases, the supply chain included a licensed wholesaler in Tennessee. While we don't 
80 


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have full details about which members knew, or should have known, of the bogus product, the 

very existence of the fake drugs shows we can't be sanguine about the risks. Similarly, in 2001, 

counterfeit Serostim® - a human growth hormone used to treat AIDS-related wasting, was 

found in at least seven states and passed through multiple wholesalers. l5,J6,l7 EMD Serono, the 

manufacturer of Serostim,® has since put in place a secured distribution program with a unique 

serial number assigned to each vial that must be verified by the dispensing pharmacy.ls Serono's 

program is an example of how drug distribution security can, and should, be improved. 

Conclusion 

I thank the Committee for holding this hearing and for its commitment to this issue. I also thank 

you for a discussion draft released this week, However this legislation, while it acknowledges the 

problem, does not offer a solution that will create meaningful protections for patients and does 

not address the comments that industry, patient, consumer, and public health groups made when 

Congress was contemplating this issue last year. 

Congress first tried to address the kinds of risks I've been describing 25 years ago, through the 

Prescription Drug Marketing Act-a law that has never been fully implemented, Two years from 

now, California's comprehensive drug serialization law will begin to take effect The opportunity 

today is great We urge this committee to pursue a strong federal system that creates meaningful 

protections for patients. 

Thank you again for the opportunity to testifY, and I welcome your questions, 

References 

1 These groups include the American Society of Radiation Oncology; the Cancer Support Community; Children's 

Cause for Cancer Advocacy; Fight Colorectal Cancer; International Myeloma Foundation; Kidney Cancer 

Association; the Leukemia and Lymphoma Society; National Coalition for Cancer Survivorship; National Lung 

Cancer Partnership; Ovarian Cancer National Alliance; Pancreatic Cancer Action Network; Prevent Cancer 

Foundation; Sarcoma Foundation of America; Susan G. Komen for the Cure Advocacy Alliance; Us TOO 

International Prostate Cancer Education and Support Network; the American Public Health Association; the 

Association of State and Territorial Health Officials; the National Association of County and City Health Officials; 

the Trust for America's Health; Center for Medical Consumers; Community Catalyst; Consumers Union; National 

Consumers League; National Research Center for Women & Families; National Women's Health Network; US. 

PIRG; WoodyMatters, along with, EMD Serono and Hewlett Packard. 

2 United States Attorney's Office, Southern District of New York. Manhattan u.s. Attorney Announces Charges 

Against 48 Individuals in Massive Medicaid Fraud Scheme Involving the Diversion and Trafficking of Prescription 

Drugs. July 17, 2012. http:((www.justice.gov(usao(nys(pressreleases(july12(prescriptiondrugs.htmIAccessed July 

20,2012 

3 United States Attorney's Office for the Middle District of Tennessee. "Three Individuals Indicted For Prescription 

Drug Diversion Conspiracy". January 24, 2013. http://www,justice,gov!usao!tnm!pressReleases!2013!1-24-

13Ahtml 
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82188A.040

4 Ten pharmaceutical manufacturers include five branded small molecule, one generic small molecule, three 

biopharmaceutical, and one contract packager. Ten pharmaceutical wholesalers include a range of business sizes, 

including one major national wholesaler. Eleven pharmaceutical dispensers include eight hospital pharmacies, one 

chain retail pharmacy, one independent pharmacy, and one mail-order pharmacy 

5 Basta, Nicholas. "Serialization systems are going into operation around the world, but cross-industry 

collaboration awaits new legislation," Product Security Report, August 27, 2012 

http://www.pharmaceuticalcommerce.com/index.php?pg=speciaI report&articleid=26610&keyword=2012%20pr 

oduct%20report-serialization-RxTEC. 

6 Turkish Ministry of Health. "G.D. of Pharmaceuticals and Pharmacies Guidance on Implementation of 

Identification and Barcoding of Medicinal Products for Human Use, Version 1.2" Ankara, 2009. 

http://www.clinicaltrial-storage.com/index.php(regulations-in-turkey-menu(S9-turkish-drugs-barcode-guidancevl-2 

7 Frost & Sullivan. "Mass Serialisation in the European Pharmaceutical Industry: Working Together on Mass 

Serialisation: Whose Responsibility is Ensuring Patient Safety?" 200S 

8 European Union. "Directive 2011!62!EU of the European Parliament and of the Council of S." 0fficialJournalof 

the European Union. June 2011. htlp:l!eurlex.europa. eulLexUriServ (LexUriServ .do?u ri=OJ: L:2011: 174:0074 :00S7:E N: PDF 

9 RxTrace. "The Significance of the Abbott, McKesson and VA Pilot". November 12, 2012 

http://www.rxtrace.com(2012(1l/the-significance-of.the-abbott-mckesson-and-va-pilot.html/ 

10 Healthcare Distribution Management Association. "GHX Receives HDMA Distribution Management Award for 

'First-of-its-Kind' Traceability Pilot". Press release. March 5, 2013 

http://www.healthcaredistribution.org/press room/pr2013 03 05 dma.asp 

11 Ciolek, Michelle M., Special Agent, Office of Criminal Investigations, U.S. Food and Drug Administration. Affidavit 

in support of search warrant. July 21, 2009. USA v. Altec Medical Inc and RX healthcare loc. Document number: 

8:09-cr-00814-WMC 

12 U.S. Food and Drug Administration. "Update to FDA Alert about Stolen insulin". August 26, 2009. 

http://www.fda.gov/ForConsumers/Consumerupdates/ucmlS0320.htm 

13 Forsaith, Chuck. Corporate Director, Supply Chain Security, Purdue Pharma L.P. "Cargo Theft." Presentation, 

2010 PDA/FDA Pharmaceutical Supply Chain Workshop. Bethesda, MD. April 26-28, 2010 

14 United States Attorney's Office, Southern District of Florida. Eleven Indicted in Pharmaceutical Thefts. May 3, 

2012. http://www.justice.gov/usao/fls/PressReleases/120503-01.html. Accessed July 20, 2012 

15 Serono, Inc. Serostim [somatropin (rDNA origin) for injection]. Press Release, January 2001 

http://www.fda.gov/Safety/MedWatch/Safetylnformation/SafetyAlertsforHumanMedicaIProducts/ucm173895.ht 

ill. Accessed February 17, 2011 

16 Otto, Alex. Counterfeit Serostim Found Nationwide. Pharmacy Today. American Pharmacists Association. March 

1,2001. http://www.medscape.com/viewarticle/406804. Accessed October 13, 2010 

17 Dutchess Business Services Inc. V. Nevada State Board of Pharmacy. No. 46345. September 11, 2008 

http://caselaw.findlaw.com(nv-supreme-court!1219556.html. Accessed February 17, 2011 

18 Williamson, Joyce P. Statement of Serono before the task force on drug importation. 

http://archive.hhs.gov/importtaskforce/session2/presentations/Serono.pdf Accessed February 17, 2011 
82 

Mr. PITTS. The Chair thanks the gentleman. Dr. Catizone, you 

are recognized for 5 minutes for an opening statement. 

STATEMENT OF CARMEN A. CATIZONE 

Mr. CATIZONE. Chairman Pitts, Ranking Member Pallone and 

members of the subcommittee, I thank you for the opportunity to 

be here today. The National Association Boards of Pharmacy founded in 1904 and based in Illinois appreciates the chance to share 

with you comments and input from the States who are currently 

responsible for regulating this particular situation. 

The issues before the committee are not new. In fact, the 

timeline in trying to secure our Nation’s prescription drug supply 

extends far back than we care to admit. The activities that have 

ensued since the enactment of the PDMA some 25 years ago can 

best be characterized by two words: proposed and delayed. The language found throughout multiple Federal Register notices since the 

implementation of the PDMA read similarly over and over. The 

proposals presented by the FDA and supported by the States were 

continuously delayed and defeated by pressure from the industry. 

As some of you may be aware, NABP is intimately involved in 

the oversight of wholesale distributors; as a result, our verified, accredited wholesale distributors program. To date, we have surveyed 

and accredited 552 wholesale distributors across the United States. 

We have observed firsthand and reported to the applicable State 

and federal authorities breaches in and compromises to the prescription drug supply chain. These breaches and compromises include the lack of a pedigree, the lack of complete information, the 

absence of any documentation, pedigrees or other transaction documents that indicate a product passed through multiple entities, 

some licensed and others not, multiple wholesaler companies located in a one-room business office in a strip mall claiming some 

form of common ownership, wholesalers receiving and storing products under conditions that render the medications adulterated or 

contaminated, and wholesalers and pharmacies establishing as 

their sole business model the purchase and sale of shortage drugs 

and inflating the price of these products by a thousandfold, an unconscionable action when it comes to drugs that are needed by patients suffering from life-threatening diseases such as cancer. 

The States are both the frontline and last defense in the prescription supply chain. Together with NABP, they have forged an 

effective public-private partnership. That partnership was recognized by the Institute of Medicine in its report ‘‘Countering the 

Problem of Falsified and Substandard Drugs.’’ The report notes 

that crime and corruption drive the business of falsified medicines 

and that medicines can change hands many times in myriad countries before they reach patients. 

One of the primary recommendations of the IOM that is critical 

to the considerations before this committee and bears noting this 

afternoon was a recommendation they made in regard to NABP, 

and I quote: ‘‘The IOM committee calls for strengthening the drug 

distribution system in order to improve the quality of medicine and 

protect consumers. Top among its priorities is restricting the U.S. 

wholesale market to firms vetted by the National Association of 

Boards of Pharmacy. This action would tighten the American drug 

83 

distribution chain and build momentum for better controls on drug 

wholesalers in developing countries.’’ 

NABP supports the implementation of a national system for the 

oversight and regulation of prescription drug supply chain provided 

such system is comprehensive and does not discard the protections 

already in place and ready for implementation by the States, particularly California. It should take into account the existing and 

successful public-private partnership established between the 

States and NABP endorsed by the Institute of Medicine and operating effectively at no cost to the American taxpayers. NABP calls 

for no further delays. The time has long passed for the continued 

delay in addressing and resolving the challenges confronting our 

Nation’s prescription drug chain. NABP requests that all participants in the supply chain be accountable. Exemptions should not 

be granted to pharmacies. NABP supports the tracking and 

traceability of products to the package level and made operational 

in 2015 and 2016 in order not to retreat on advances made by California and the timeline already committed to by a growing number 

of the industry. NABP supports pharmacies and wholesale distributors being required to append and pass pedigrees or other equivalent transaction documents within the next 2 to 4 years, and NABP 

supports providing the Food and Drug Administration with the full 

scope of authority and resources needed to implement and enforce 

a national system. 

We thank you for the opportunity. 

[The prepared statement of Mr. Catizone follows:] 

84 


82188A.041

Testimony Before the Committee on Energy & 

Commerce, Subcommittee on Health 

United States House of Representatives 

April 25, 2013 

Carmen Catizone, M.S., RPh, DPh, executive director 

National Association of Boards of Pharmacy 
85 


82188A.042

Good moming Chairman Pitts, Ranking Member Pallone, and members of the Committee. The 

National Association of Boards of Pharmacy (NABP) appreciates the opportunity to appear 

before you today and provide information in regard to safeguarding the integrity ofthe nation's 

drug supply chain. I am Carmen Catizone, executive director of the Association. 

NABP is the impartial professional organization that supports the state boards of pharmacy in 

protecting the public health. NABP aims to ensure the public's health and safety through its 

pharmacist license transfer, pharmacist competence assessment, and accreditation programs. 

Twenty Five Years of "Proposed" and" Delayed" 

The issues before the Committee are not new. In fact the timeline for trying to secure our 

nation's prescription drug supply chain extends farther back than many would care to admit and 

farther back than should be permitted. Quoting from the FDA's web site: "The Prescription 

Drug Marketing Act of 1987 (PDMA) was signed into law by the President April 12, 1988. The 

PDMA was enacted (I) to ensure that drug products purchased by consumers are safe and 

effective, and (2) to avoid the unacceptable risk to American consumers from counterfeit, 

adulterated, misbranded, subpotent, or expired drugs. The legislation was necessary to increase 

safeguards in the drug distribution system to prevent the introduction and retail sale of 

substandard, ineffective, or counterfeit drugs." 

The activities that ensued since that time can best be described using two words, "proposed" and 

"delayed." The language found throughout multiple Federal Register notices since the 

implementation of the PDMA 25 years ago read similarly over and over. One example reads 

"On February 23,2004 (69 FR 8105), FDA published a delay of the effective date of certain 

requirements in a final rule published in the Federal Register of December 3, 1999 (64 FR 

67720)." The proposals presented by the FDA and supported by the states were continuously 

delayed and defeated by pressure from the industry. 

NABP supports the implementation of a national system for the oversight and regulation of the 

prescription drug supply chain provided such system is comprehensive and does not discard the 

effective protections already in place and readied for implementation by the states, particularly 

California. In addition, NABP supports a national system provided it allows the states to have 

input into the development and recognizes the authority of the states to implement necessary 

modifications to address significant instances that may arise and were not contemplated or 

included in any national proposal. The national system supported by NABP is absolutely 

essential to the protection of the public we serve and to ensuring that the medications patients 

across the United States are dispensed or administered are safe and not counterfeit, diverted, or 

injurious in any way. 

As some of you may be aware, NABP is intimately involved in the oversight of wholesale 

distributors as a result of our Verified-Accredited Wholesale Distributors (VA WD) program. To 

date, NABP has surveyed and accredited approximately 552 wholesale distributors across the 

states. As a result of those surveys and the valuable information and expertise that NABP 

gained, we can report to you that some of the issues originally driving the enactment of the 

2 
86 


82188A.043

PDMA in 1987 have been addressed and resolved. There are, however, still a number of critical 

concerns that threaten the distribution supply chain that must be addressed. It was our hope that 

many ifnot all ofthese issues would be the focus oflegislation proposed and adopted by the 

House and Senate. Our analysis of the legislative proposal released just a few days ago indicates 

that it may not address these serious issues. 

Besides some of the high profile abuses that have been reported in the media, NABP observed 

first hand and reported to the applicable state and federal authorities breaches in, and 

compromises to, the prescription drug supply chain. These breaches and compromises include, 

but are not limited to, the lack of complete or the absence entirely of pedigrees or other required 

transaction documents, pedigrees or other transaction documents that indicate a product passed 

through multiple entities some licensed and others not, mUltiple wholesaler companies located in 

a one-room strip mall business office claiming some fonn of common ownership, wholesalers 

receiving and storing products under conditions that render the medications adulterated or 

contaminated, and wholesalers and pharmacies, establishing as their sole operating model the 

purchase and sale of shortage drugs and inflating the prices of these products by a thousand-fold 

- an unconscionable action when it comes to drugs that are needed by patients suffering from 

life-threatening conditions such as cancer. 

The States Serve as the Last Defense for Patients and Consumers 

The states are both the front line and last line of defense in the prescription drug supply chain. 

Since the inception of the PDMA, the states have had to forge a system of oversight and 

regulation to protect the integrity of products in the supply chain absent a national system 

because for 25 years the industry has fought such state and federal efforts and delayed 

implementation of a proposed solution. 

The Institute of Medicine's report, "Countering the Problem of Falsified and Substandard 

Drugs," notes that "crime and corruption drive the business of falsified medicines." The report 

further documents that "medicines can change hands many times in myriad countries before they 

reach patients." One of the primary recommendations of the 10M report is critical to the 

considerations before this Committee and bears noting this morning: 

"The 10M committee calls for strengthening the drug distribution system in order to improve the 

quality of medicine and protect consumers. Top among its priorities is restricting the U.S. 

wholesale market to finns vetted by the National Association of Boards of Pharmacy. This 

action would tighten the American drug distribution chain and build momentum for better 

controls on drug wholesalers in developing countries." 
87 


82188A.044

Recommendations 

1. Support the existing and successful public-private partnership system, V A WD that 

NABP established with the states and is endorsed by the Institute of Medicine. NABP 

asks the Committee to consider the priority recommendation of the 10M and support the 

effective public private partnership that currently exists between NABP and state and 

federal regulators, protecting the integrity of the drug supply chain at no cost to the 

American taxpayers. 

2. No further delays. NABP believes that the time has long passed for any continued delay 

in addressing and resolving the challenges confronting our nation's prescription drug 

supply chain. The timeline for federal action in the proposed legislation extends the wait 

of consumers and patients for a protected supply chain to 35 years! California's 

requirements can be operational over the next three years and help to build the uniform 

and national standards that all stakeholders support. In comparison over the past 30 years 

the following notable advances occurred: 

a. Internet, broadband, www (browser and html) 

b. PC/laptop computers 

c. Mobile phones 

d. E-mail 

e. DNA testing and sequencingihuman genome mapping 

f. Magnetic Resonance Imaging (MRI) 

g. Microprocessors 

h. Fiber optics 

i. Office software (spreadsheets, word processors) 

j. Non-invasive laser/robotic surgery (Iaparoscopy) 

k. Open-source software and services (e.g., Linux, Wikipedia) 

I. Light -em itting diodes 

m. Liquid crystal display (LCD) 

n. GPS systems 

o. Online shoppingle-commerce/auctions (e.g., eBay) 

p. Media file compression (jpeg, mpeg, mp3) 

q. Microfinance 

r. Photovoltaic solar energy 

s. Large- scale wind turbines 

1. Social networking via the Internet 

u. Graphic user interface (GUI) 

v. Digital photography/videography 

w. RFID and applications (e.g., EZ Pass) 

x. Genetically modified plants 

y. Bio fuels 

z. Bar codes and scanners 

aa.ATMs 

bb. Stents 

cc. SRAM flash memory 

dd. Anti-retroviral treatment for AIDS 

4 
88 


82188A.045

3. All participants in the supply chain must be accountable. Exemptions should not be 

granted to pharmacies. 

4. The tracking and traceability of products should be to the package level and operational 

in 2015 and 2016 in order not to retreat on the advances made by California and the 

timelines already committed to by a growing number of the industry. 

5. Pharmacies and wholesale distributors must append and pass pedigrees or other 

equivalent transaction documents within the next two to four years. 

6. Establish a process for the routine and regular verification of product serial numbers. 

7. Provide the Food and Drug Administration (FDA) with the full scope of authority and 

resources needed to implement and enforce a national system. 

Conclusion 

NABP thanks the Committee for the opportunity to appear today and present information and 

concerns from the state boards of pharmacy. The Association and its member state agencies 

support a comprehensive national solution to the challenges facing the integrity of our 

prescription drug supply chain. However, that supply chain must place public safety first and not 

undo the significant advances made by the states and FDA to ensure that American citizens 

across the country receive safe and effective medications. 

Thank you. 

5 
89 

Mr. PITTS. The Chair thanks the gentleman. Mr. Berghahn, you 

are recognized for 5 minutes for an opening statement. 

STATEMENT OF WALTER BERGHAHN 

Mr. BERGHAHN. Thank you, and good afternoon. Chairman Pitts, 

Ranking Member Pallone, and members of the committee, I appreciate the opportunity to be here and share my perspective on this 

matter. My name is Walter Berghahn. I am the Executive Director 

of the Healthcare Compliance Packaging Council, a trade association dedicated to improving medication adherence and patient safety through broad adoption of innovative packaging. The HCPC represents packaging material and machinery suppliers as well as contract packagers. The members serve as pharmaceutical manufacturers and pharmacy both institutional and retail. The HCPC supports California’s SB 1307 and the work of this committee, recognizing that we share the common goal of a secure supply chain. 

The U.S. pharmaceutical supply chain is primarily safe. Drugs 

are produced, packaged and shipped according to FDA guidelines. 

They travel through a complex supply chain and arrive at the appropriate pharmacy, hospital and nursing home mostly without incident. That sounds wonderful, but that is not why we are here 

today. We are here because there are many groups intent on selling 

counterfeit or gray market drugs into the U.S. supply chain despite 

a tremendous effort over the last 10 years to secure the supply 

chain. Counterfeits are still appearing. The FDA has opened more 

investigations in recent years than ever before, more than 70 incidents in 2010 alone. 

Some suggest that the cost to fix it is too high and the supply 

chain is safe enough. I am betting that those people have never 

had a family member ingest or inject a counterfeit medication and 

suffer the health consequences. 

It has been suggested that serialization and barcoding technology 

is not mature or scalable enough for this task, and yet barcoding 

has been used since the 1970s. It is found in every store and pharmacy in America. Two-dimensional barcoding required for serialization is newer but well established. The Department of Defense 

issued a paper in 2005 outlining their use and implementation of 

2D barcoding for tracking valuable items in both forward and reverse logistics. Every day, tens of millions of packages are tracked 

by FedEx and UPS utilizing serialized barcodes. Every day, 11⁄2

million U.S. air travelers board planes using 2D serialized 

barcodes. I am not suggesting the process will be easy for pharmaceuticals but the technologies employed are proven and they are 

widespread. 

California led the way on serialization with SB 1307 with initial 

targets in 2007 and subsequent delays allowing industry time to 

comply. I am sure you are familiar with the timeline. Pharmacy 

would be the last to comply in July of 2017, a full 4 years from 

today. The HCPC hopes that the federal legislation will support SB 

1307 and not undermine its progress. 

The packaging machinery industry is prepared to help meet 

these deadlines. Systems ranging from manual to fully automated 

exist which apply, verify and aggregate 2D barcoded containers to 

cases. Companies such as Systech, Optel, Seidenader, Omega and 

90 

numerous others are delivering these systems to branded and generic pharmaceutical manufacturers today. Dozens of systems have 

been installed in the United States in anticipation of California’s 

deadlines. Hundreds more are being planned, ordered and constructed now. A larger number of systems have already been deployed globally to meet international requirements for serialization 

in countries like China, Brazil, Turkey, India and a large portion 

of the EU. 

All this work does wonders for securing the normal supply chain 

but we would be remiss if we didn’t consider the many documented 

problems occurring outside normal channels. So how do we detect 

those instances? In my opinion, the best way would be to provide 

prescriptions the way most of the world does: in the manufacturer’s 

original container. This would accomplish two things. It thwarts 

the introduction of counterfeit products in pharmacy as well as dispensing of outdated and returned product, all unfortunately well 

documented. Secondly, it would allow the insurance industry to 

mandate the use of a serial ID for reimbursement, not simply the 

NDC number. This practice would greatly reduce prescription 

fraud. The government via CMS and the Veterans Administration 

is the largest payer in the United States and would see the largest 

benefit from this practice. 

This is relevant because even the physicians cited in the recent 

Avastin counterfeit case in California need to submit for reimbursement. Today, all they need is a valid NDC number. In the future, 

requiring a serial number for reimbursement could block illegally 

purchased items from being distributed. California has documented 

cases where pharmacists have illegally purchased product over the 

Internet and dispensed them in pharmacies, submitting for reimbursement with a legitimate NDC. Could lot-level tracking have 

stopped this? 

In conclusion, I would like to address one of the major differences 

between the proposed methodologies being considered. The debate 

is item-level tracking versus lot-level tracking. To be sure, lot-level 

tracking is less cumbersome on industry players but one must 

question its effectiveness. Lot-level tracking will provide tools for 

evaluating what happened, why a counterfeit drug got in the supply chain. Item-level track-and-trace will prevent it. The difference 

is staggering: prevention versus detection after the fact. I would 

hope that in considering which path to pursue, members will look 

at past instances of counterfeiting and ask a simple question: 

would lot-level tracking have prevented this product from entering 

the supply chain? 

Thank you for the chance to contribute to this. 

[The prepared statement of Mr. Berghahn follows:] 

91 


82188A.046

1 United States House Energy and Commerce Committee 

2 Subcommittee on Health 

3 Hearing on "Securing Our Nation's Prescription Drug Supply Chain" 

4 Testimony of Walter Berghahn, Executive Director 

5 The Healthcare Compliance Packaging Council 

6 

7 April 25, 2013 

8 

9 Chairman Pitts, Ranking Member Pallone and Members of the Committee: 

10 Thank you for providing me the opportunity to share my views and perspective on this matter as 

11 someone who has worked in and around the pharmaceutical supply chain for the last 17 years. My 

12 name is Walter Berghahn and I am the Executive Director of the Healthcare Compliance Packaging 

13 Council, a trade association dedicated to improving medication adherence and patient safety in the US 

14 pharmaceutical supply chain through broad adoption of innovative packaging technology. 

15 The HCPC represents packaging material and machinery manufacturers as well as contract packagers 

16 who provide materials and packaging services to pharmaceutical manufacturers as well as downstream 

17 customers in both institutional and retail pharmacy. This pending legislation and that already 

18 established in California SB 1307 directly affects the membership and their customer base. That being 

19 said, the membership of HCPC has been supportive of the legislation in California, recognizing that it's 

20 goal is consistent with HCPC's, that of furthering pharmaceutical supply chain and patient safety. 

21 For the most part, the US pharmaceutical supply chain is safe. Manufacturers, distributors and 

22 pharmacies do their job day in and day out with patient safety in mind. Drugs are produced, packaged 

23 and shipped according to FDA guidelines, they make their way through a complex supply chain and 

24 arrive in the appropriate pharmacy, hospital or nursing home without incident. 

25 Sounds wonderful but that's not why we're here today. We're here because there are individuals and 

26 groups out there intent on selling counterfeit or gray market drugs into the US supply chain. There has 

27 been a tremendous amount of effort expended in the last 10 years to tighten up and secure the supply 

28 chain. Those efforts certainly have dosed many of the cracks and yet counterfeits still 

29 appear and the FDA has opened more investigations in the last few years than ever before, more than 

30 70 incidents in 2010 alone. The companies and organizations testifying before you today are not the 
92 


82188A.047

31 problem. It is the exceptions, the unscrupulous players who knowingly subvert the system to introduce 

32 counterfeit, gray market or substandard drugs into the supply chain for economic profit that must be 

33 stopped. Some here would suggest that the cost is too high to stop the exceptions and that the supply 

34 chain is safe enough. 

35 I'm betting that those people have never had a family member or friend ingest or inject a counterfeit 

36 medication and suffer health setbacks or worse as a result. It's easy to say it is too complicated and too 

37 expensive when it hasn't hit you personally. 

38 It's been suggested by many that serialization and bar coding technology is not robust, not mature 

39 enough for this task and yet bar coding has been in use since the 70's. You cannot go into a store 

40 including pharmacies in the US without encountering bar code readers. They are used for inventory 

41 management throughout our retail marketplace. 2 dimensional bar coding which will be required for 

42 serialization is not as old but is still well established. The Department of Defense issued a paper in 2005 

43 outlining their use and implementation of 2D bar coding for tracking valuable items in both forward and 

44 reverse logistics. 

45 Everyday 10's of millions of packages are tracked by Fed Ex and UPS utilizing serialized barcodes to 

46 provide item level visibility in transit. Everyday approximately 1.5 million air travelers in the US board 

47 planes with 2D bar codes verifying who they are and that they are on the right flight. I'm not suggesting 

48 by any means t~at this process will be easy for pharmaceuticals but the technologies employed are 

49 proven and are actively used all around us on a daily basis. 

50 On pharmaceuticals California led the way in the US requiring serialization on pharmaceutical containers 

51 taking one step further than Florida's paper pedigree implementation in 2005 that did not track items. 

52 California's SB 1307 has been more than generous with time for implementation with initial targets in 

53 2007 and subsequent delays to allow industry time to comply. Currently the pharmaceutical 

54 manufacturers would have to serialize 50% of their products by 2015. The rest of the supply chain sees 

55 staggered implementation ending with pharmacy and pharmacy warehouses in July of 2017 more than 4 

56 years from today. We would hope that any Federal Legislation would be supportive of California SB 1307 

57 and build on their progress. The industry is actively preparing to meet the deadlines. 

58 The supporting packaging machinery industry is well prepared. Various levels of systems ranging from 

59 manual to fully automated exist which can apply, verify, and aggregate 2d bar coded containers in the 

60 packaging process. Complete cases exit the packaging process in a pharmaceutical manufacturer or 

61 contract packaging plant ready for entry into the supply chain. Companies such as Systech, Optel, 

62 Seidenader, Omega, Antares, Laetus, PCE, Visiotec and numerous others are actively engaged in 

63 delivering these systems to both branded and generic pharmaceutical manufacturers. Dozens of 

64 systems have already been installed in the US in preparation for California and hundreds are in the 

65 process of being planned, ordered and constructed. A much larger number have already been 

66 deployed globally to meet international requirements for serialization in countries like China, Brazil, 

67 Turkey, India and large portions of the EU. 
93 


82188A.048

68 All this work does wonders for securing the supply chain but we would be remiss if we didn't consider 

69 that these controls work well within the normal supply chain. Many of the documented problems occur 

70 outside normal channels. So how to protect or detect those instances? In my opinion the best way 

71 would be to provide prescriptions the way most of the world does, in the manufacturers original 

72 container. This would accomplish two things. 

73 lJ it would thwart the introduction of counterfeit products in pharmacy which sadly has been 

74 documented, as well it would thwart dispensing of outdated and returned product, also well 

75 documented. 

76 2J it would allow the insurance industry to require use of the seriallD for reimbursement, not simply the 

77 NDC. This practice would greatly reduce the opportunity for prescription insurance fraud. Since the 

78 government via CMS is the largest payer in the US reduction in prescription fraud would seem to be of 

79 interest. 

80 Why would this be relevant? Because even the physicians sited in the recent Avastin counterfeit case in 

81 California will submit for reimbursement on these medications. In today's system all they need is a valid 

82 NDC number which they can get easily. In the future if they are required to provide a serial number for 

83 a dispensed unit then they will not be able to submit illegally purchased items from the internet that did 

84 not travel through our secure supply chain. California has noted similar cases where pharmacists have 

85 illegally purchased product over the internet and dispensed them in pharmacy but submit for 

86 reimbursement with a legitimate NDC number. One has to question whether lot level tracking could 

87 stop such activity. 

88 This same type of safety could even be extended to patients. It is not hard to imagine a system to allow 

89 patients to scan a 2d barcode using a smartphone to verify that the container they received is valid in 

90 fact companies like HP have already launched platforms with this capability for detecting counterfeits in 

91 other industries. 

92 In conclusion I would like to address one major difference in the two proposed methodologies being 

93 considered. There has been a great deal of discussion about the benefits of item level tracking vs. Lot 

94 level tracking. To be sure, lot level tracking is less cumbersome on various industry players but one has 

95 to question its effectiveness. Lot level tracking will provide wonderful tools for evaluating what 

96 happened, why a counterfeit or diverted drug got into the supply chain. Item level track and trace is 

97 aimed at preventing counterfeit packages from entering the supply chain. The difference is staggering. 

98 Prevention vs detection after the fact. I would hope that in conSidering which path to pursue members 

99 would look at past instances of counterfeiting and ask the simple question: Would lot level have 

100 prevented this product from entering the supply chain. 

101 

102 Thank you for allowing me to provide input to this process. 
94 

Mr. PITTS. The Chair thanks the gentleman. That concludes the 

opening statements of our second panel. At this time I would like 

to request unanimous consent to place a statement from the National Association of Chain Drugstores into the record. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. You have a UC request? 

Mr. PALLONE. Mr. Chairman, I would ask unanimous consent to 

enter into the record a letter from EMD Serono. 

Mr. PITTS. Without objection, so ordered. 

[The information appears at the conclusion of the hearing.] 

Mr. PITTS. All right. I will begin the questioning and recognize 

myself 5 minutes for that purpose. 

I will start with Ms. Gallenagh. Talk a little bit about the California model. Would the California model work on a national level? 

Would you describe some of the consequences for patients and industry and others? We will go down the line and start with you, 

Ms. Gallenagh. 

Ms. GALLENAGH. Sure. Based on what we know right now, a lot 

depends on the time frames that would be set forth on a national 

level. The California dates currently, in my opinion, would not be 

practical for a National model. Additionally, there is a piece of the 

California law that is providing to be particularly difficult in piloting, and that is the electronic pedigree portion of the law that also 

goes along with full track and trace of product electronically 

throughout the supply chain. And these are right now, based on 

what we are learning through experimenting with the processes 

and the technology very difficult for industry. 

Mr. PITTS. Ms. Simmon? 

Ms. SIMMON. Thank you. Yes, we would echo that. You know, 

some of the necessary technology, speaking from a manufacturer’s 

point of view, just isn’t really there yet. Aggregation of units to 

cases and pallets is not ready to be deployed with a high level of 

accuracy for the data that would be required, and some of the 

interoperability standards for the data are not yet solved. With the 

compliance dates only 2 years ago, you know, we feel that is moving too quickly to avoid some unintended consequences. 

Mr. PITTS. Mr. Rose, would you comment on the consequences for 

industry and patients? 

Mr. ROSE. Consequences on patients? 

Mr. PITTS. Both industry and patients. 

Mr. ROSE. OK. For industry, we brought a sample of our product 

where we have applied the 2D data matrix code with a serial number on it. 

Mr. PITTS. And would you point out what you said in the testimony? 

Mr. ROSE. Right here we have the 2D data matrix code, and then 

here we have human readable format where we have put the serial 

number in there as well as the product code and expiration date 

and lot, and you can read it human readable or via machinery. 

This took a lot of work to get going. The next phase we are working 

on right now is exchanging data with our trading partners. Those 

standards don’t exist. We don’t have guidance from California on 

those data standards, and we are missing those. That is very imVerDate Nov 24 2008 15:25 Mar 04, 2014 Jkt 037690 PO 00000 Frm 00100 Fmt 6633 Sfmt 6633 F:\MY DOCS\HEARINGS 113\113-35 CHRIS
95 

portant to have for us to be fully compliant with the California law. 

So to achieve this date, we need those standards to be put in place 

but then also we have to put those systems in place to be able to 

exchange that data with our trading partners. 

Mr. PITTS. Dr. Davis, would you care to comment? 

Mr. DAVIS. I think that from a community pharmacist’s perspective that it would be relatively difficult for us to comply nationwide 

because of a couple of reasons. One would be the ability to absorb 

and to maintain the costs associated with the system, and two, to 

access and be able to implement the technologies surrounding it. 

This is something external to all of our current processes in the 

field of pharmacy, and we don’t want to necessarily lose the relationships and patient care experiences that we have currently in 

place in lieu of trying to comply by another national standard. 

Mr. PITTS. Now, I posed several of these questions to FDA earlier 

today, and I would like to get the opinion of actors on the ground 

working to manufacture and distribute and dispense our Nation’s 

drug supply, so if you will please respond. Will national uniformity 

increase the security of the supply chain and improve patient safety, Ms. Gallenagh? 

Ms. GALLENAGH. Yes. 

Mr. PITTS. Ms. Simmon? 

Ms. SIMMON. Yes, it would. 

Mr. PITTS. Mr. Rose? 

Mr. ROSE. Yes, it would. 

Mr. PITTS. Dr. Davis? 

Mr. DAVIS. Yes. 

Mr. PITTS. What about—is it important to preserve the States’ 

ability to license and enforce National standards? 

Ms. GALLENAGH. I would say yes, it is important so that they 

have a role to partner with FDA. 

Mr. PITTS. Ms. Simmon? 

Ms. SIMMON. Yes, we would agree as well. 

Mr. ROSE. Yes, we would agree as well. 

Mr. DAVIS. Yes. 

Mr. PITTS. Will product serialization increase the security of the 

supply chain and improve patient safety? 

Ms. GALLENAGH. Yes, absolutely. 

Ms. SIMMON. Yes, we definitely favor product serialization. 

Mr. ROSE. We agree with product standardization. 

Mr. DAVIS. And we agree with it as well in a phased-in approach 

so that we can build our systems and our capabilities without compromising patient care as it stands today. 

Mr. PITTS. All right. Will data exchange and systems between actors in the supply chain increase the security of our drug supply 

and improve patient safety? 

Ms. GALLENAGH. Yes. 

Ms. SIMMON. Yes, it would. 

Mr. ROSE. Yes, it would. 

Mr. DAVIS. Yes, it would. 

Mr. PITTS. And finally, would a National track-and-trace standard increase the efficacy of product recalls? 

Ms. GALLENAGH. Yes, it would. 

Ms. SIMMON. Yes, we believe it would. 

96 

Mr. ROSE. Yes. 

Mr. DAVIS. Yes, it would, sir. 

Mr. PITTS. Thank you. I have gone over time. The chair recognizes the ranking member, Mr. Pallone, 5 minutes for questions. 

Mr. PALLONE. I just wanted to follow up on Mr. Pitts’ question 

going down the line, a yes or no because I have other questions. 

So OK, 2 years you are saying isn’t workable but what about 10 

years? Can the issues that we referenced here, track and trace, 

unit level, can they be worked out by then over 10 years? Yes or 

no, Ms. Gallenagh? 

Ms. GALLENAGH. I think that it is possible to get to a next step. 

I think that—— 

Mr. PALLONE. I am trying to get a yes or no, though, because otherwise I am going to run out of time. Or if you don’t want to say 

yes or no, you can say maybe. 

Ms. GALLENAGH. I would say maybe. 

Mr. PALLONE. All right. Ms. Simmon? 

Ms. SIMMON. I would say maybe if it is a stepwise approach. 

Mr. PALLONE. All right. Mr. Rose? 

Mr. ROSE. Yes, it would. 

Mr. PALLONE. Dr. Davis? 

Mr. DAVIS. And I agree with the phased-in approach as well. 

Mr. PALLONE. Mr. Coukell? 

Mr. COUKELL. Can I make a very brief response, Mr. Pallone? 

Mr. PALLONE. Please. 

Mr. COUKELL. The question was asked earlier, would serialization—— 

Mr. PALLONE. Yes, no or maybe. I am sorry. 

Mr. COUKELL. Yes. 

Mr. PALLONE. OK. Dr. Catizone? 

Mr. CATIZONE. Two answers. Based upon existing technology, 

yes. Based upon the history of the industry in this regard, 25 years 

has not been enough time so they will probably say 10 won’t work 

either. 

Mr. PALLONE. All right. Mr. Berghahn? 

Mr. BERGHAHN. Yes, I think it is possible. 

Mr. PALLONE. OK. I mentioned in my statement, I have a lot of 

concerns with the Republican bill. We spent many months engaged 

with members on a bipartisan, bicameral basis discussing and 

learning about the problems associated with the security of our 

drug distribution system, but to put it simply, the draft just doesn’t 

reflect where we landed at the end of those discussions or anything 

close, in my opinion, and the House Republicans, as I said, didn’t 

consult with us before putting the draft out so I am disappointed, 

to say the least. But I would like to hear from some of you—I can’t 

do everybody—on what you think is lacking in the bill. So let me 

start with you, Mr. Rose. What important aspects of a track-andtrace system is lacking or need improvement in the House draft? 

Mr. ROSE. What we really need at this point in time is where are 

making our investments is a clear end game. We need to know 

where the goalpost is fixed. If we are making investments to put 

serialized numbers on our product and then also to exchange data, 

we want to make sure that the other parties in the supply chain 

are also using those numbers and using that information to verify 

97 

the product and the accuracy and the veracity of that product and 

then also the transactions associated with the product. 

Mr. PALLONE. All right. Same for you, Ms. Gallenagh. 

Ms. GALLENAGH. Yes, I think that is correct. In our opinion, once 

we have serialization, there are many things that are possible with 

this but the one thing that differs between the past drafts is to not 

get to a clearly defined place or year date certain for traceability. 

We do think, though, that the bill draft does lay out the foundation 

to get there. The core elements again, as we have mentioned, and 

beginning with serialization and lot traceability, we do think that 

those are important steps that have to be taken before you get to 

that end phase. 

Mr. PALLONE. OK. Mr. Coukell? 

Mr. COUKELL. The current House draft immediately bans all 

State pedigree laws and doesn’t replace them with anything for a 

period of many years, and it never gets to the second phase that 

we need to get to. It is like building a set of steps to your front 

door, building the first step now and having a plan to come back 

and put the second step on some time later. 

Mr. PALLONE. Dr. Catizone? 

Mr. CATIZONE. All the points that were previously made except 

it should not preempt State laws at this point because if it does so, 

there is no protection for the consumer. Two, I am confused by the 

argument about clear standards. They are needed. In 1998, NABP 

offered to develop national standards. Some people sitting at the 

table said the industry would do that. It is 25 years later. We still 

don’t have those standards so I am not sure the standards are the 

barrier. The standards can be built and done so I believe clear direction, no delays, an implementation timeline and standards 

should be developed as quickly as possible. 

Mr. PALLONE. Thank you. And finally, Mr. Berghahn? 

Mr. BERGHAHN. Yes, I think one of the main concerns is the lack 

of the unit-level trace and the lack of requirements for people in 

the supply chain to use it. Without that, you really lose visibility 

on the product and you decrease safety. 

Mr. PALLONE. Well, thank you. I am sorry I couldn’t get to all 

of you but my time is limited. 

I just wanted to reiterate that I am disappointed in the bill. The 

Senate released a draft last week that was an obvious attempt to 

address the views of Members on both sides of the aisle. It represents a compromise, and I regret that the House Republicans felt 

the need to sway so far from the good work that so many Members 

have put into this issue throughout the last year. So hopefully we 

can still come up with a good product. I yield back, Mr. Chairman. 

Mr. PITTS. The Chair thanks the gentleman and recognizes the 

gentleman from Virginia, Mr. Griffith, 5 minutes for questions. 

Mr. GRIFFITH. Thank you, Mr. Chairman. 

Dr. Davis, as you may have heard earlier, I represent a rural 

area with a lot of community pharmacists, and I want to focus your 

questions in regard to the e-pedigree program in California. How 

familiar are you with that program? 

Mr. DAVIS. I have a cursory understanding of the specifics of it 

but again, I understand the concerns of my colleagues in that State 

as well through discussions. 

98 

Mr. GRIFFITH. Well, let us talk about that. Do you know how the 

small pharmacies, the small-town pharmacies in California are 

dealing with that? 

Mr. DAVIS. We are still a few years away from pharmacies having to assume responsibility for their component of the program. 

But that being said, there are concerns surrounding the ability to 

absorb the costs and the labor associated with such a system. 

Mr. GRIFFITH. Now, I understand you are not facing that, but 

have your colleagues in California given you some idea of what 

those costs would be for a small-town pharmacy? 

Mr. DAVIS. Well, they range. Our problem is, our margins continually shrink at this point, and we have less and less to work with 

and still maintain our practices as our communities expect them to 

be maintained. That being the case, the estimates from colleagues 

range anywhere from thousands of dollars to having to remove employees from their work staff to replace them with this process. So 

the clear projections aren’t intact at this point but there is a significant impact that is going to either impact the profitability and 

the ability for that business to support its community, or the profitability of the business being able to support its current employee 

structure. 

Mr. GRIFFITH. And as a part of those concerns, are there concerns that some of the small-town pharmacies won’t be able to survive with this cost? 

Mr. DAVIS. Well, and that is always a question. I would say 99 

percent of our technology costs over the past decade have been to 

comply with regulations and maintain technology and processes to 

comply by State and Federal regulations. That being said, we are 

worried that sooner or later our spending, our technology spending 

and our process spending, is going to outpace our ability to absorb 

it, and there will be doors that close unfortunately. 

Mr. GRIFFITH. OK. So there is some concern that some of the 

pharmacies won’t make it, and if that pharmacy happens to be in 

a small town and the next town over is on the other side of a 

mountain and 40 miles away, I am going to ask a question that I 

already know the answer to, but how does that impact the patient? 

Mr. DAVIS. I come from a region very much like that, and what 

happens is, we see that patients are always trying to seek out the 

best care that they can at any given moment. That limits the patient’s access to care and access to the best care that they can possibly get in their locations. 

Mr. GRIFFITH. And in many cases, it is not just getting, you 

know, the prescription filled, it is that trust that has been built up. 

Sometimes you have—in fact, my pharmacist is the son of the 

pharmacist that we used when I was a child, and that trust has 

built up and so a lot of times there is a certain element of—am I 

doing the right thing heading down this direction, or they will come 

in and they will just chitchat about what is going on in their health 

care, and particularly for senior citizens, they may be getting different prescriptions from different folks and sometimes having that 

resource is very valuable, is it not? 

Mr. DAVIS. I agree, and most of my patients held me as a baby, 

so when I look them in the eye and I dispense medications or prescriptions to them, that is why this topic is so very valuable to me. 

99 

I need to know that I am taking care of their families much like 

they took care of mine through patronage and loyalty. So making 

sure that we provide safe, secure, and efficient medications for 

them on a regular basis is paramount. My dad always said always 

make the best decision for your patient and you have made the 

best decision for your company, and we are trying to do that in this 

day and age with this particular topic as well. 

Mr. GRIFFITH. Yes, and I can’t remember what the specifics were 

but I do know that in regard to one of my children, we went to get 

the prescription and the doctor looked at it and he said but isn’t 

he also taking this, let me call your doc, and called the doc and 

they changed the prescription, and I think that is very valuable, 

and in rural areas, if you eliminate that community pharmacist, 

you have eliminated a valuable part of that tool. And so that is 

why I think it is proper that we move forward with a plan but also 

that we do it in a way that the community pharmacists don’t get 

left out of the formula. 

Mr. DAVIS. Thank you, sir. 

Mr. GRIFFITH. I appreciate it, and yield back my time. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentlelady from California, Ms. Capps, 5 minutes for questions. 

Mrs. CAPPS. Thank you, Mr. Chairman. 

Dr. Catizone, I would like to ask you about the role wholesale 

distributors play in the integrity of the drug distribution supply 

chain. I know that FDA has stated in its reports on counterfeit 

drugs that counterfeit drugs are most likely to be introduced as a 

part of a supply chain that involves multiple wholesalers. That is 

correct, right? 

Mr. CATIZONE. Yes. 

Mrs. CAPPS. Because of widespread abuses in the early 2000s, 

many States have tightened their licensure requirements. I believe 

Florida and California have especially strong licensure requirements, which they adopted to address specific problems that they 

had identified. However, there is, as you know, a wide variation in 

the rigor of different State requirements leaving many 

vulnerabilities in the system nationwide. My question is whether 

you agree that there is wide variation in State requirements for 

wholesale licensing and what has been the public health effect of 

these varying State requirements? 

Mr. CATIZONE. There is variation but not as wide as I think people have reported. As an explanation, the primary wholesaler since 

the PDMA have done an outstanding job of cleaning up the industry and making sure the supply chain has its integrity and validity. 

We have seen problems with secondary wholesalers and pharmacies entering the picture. The patchwork among the States is 

being equalized through the accreditation program that we have, 

which has become a de facto national standard, and for States 

waiting to see what happens with California. If California moves 

forward, other States would follow suit and that would become a 

national standard across the board. 

Mrs. CAPPS. OK. Given these differences, you say they are not as 

wide as we have been led to expect. Do you see any role for the 

FDA in setting federal standards for wholesale? 

100 

Mr. CATIZONE. Yes. What we talked about earlier, the need for 

standards, the FDA’s role is critical to this process because the 

States have tried to put together a patchwork and we need that 

overseeing nationally. 

Mrs. CAPPS. I get you. So thank you. And now I would like to 

get your views on the wholesale distributor licensing provisions of 

the House bill. It does require FDA to set licensure standards for 

all wholesale distributors. It also requires wholesale distributors to 

report annually to the FDA their name, address, dates in which 

they are licensed and any disciplinary actions that have been taken 

against them. The FDA would be required to publicly post the 

names of all wholesale distributors and the States in which they 

are licensed on their web page. However, the public would not be 

able to see the disciplinary actions that have been taken against 

any wholesalers that are on this site. In other words, that is not 

required in the bill. States would also be prohibited from having 

any licensure requirement except those established by FDA. Essentially, the new FDA standards could be seen as both a floor and 

a ceiling. Coming from a State like California with strong licensure 

standards, naturally I am concerned about that. So my question to 

you is whether you believe it is appropriate or necessary for the bill 

to prevent States from establishing or maintaining stricter standards or additional requirements to address local problems a particular State may have experienced. In other words, is this going 

to prevent individual States from addressing their own situations? 

Is there any public health benefit to the kind of system being described? 

Mr. CATIZONE. The answer is yes, it will prevent, and we are 

sympathetic to the industry establishing some sort of uniform process, so we would support that, but the States need the discretion 

to act where there is a significant occurrence within their State, 

and we believe the bill would address that and even allow the 

States to be included in discussion. That would be critical. 

In regard to the posting of information in response to the 

compounding issue, we will soon provide a listing of all the pharmacies in the United States, where they are licensed, what disciplinary action has been taken and whether or not they have been inspected. We can put that same system in place for wholesalers that 

we have accredited as well at no charge for the public. 

Mrs. CAPPS. Thank you very much. I just have a few seconds, but 

Mr. Coukell, could you give us your opinion on these provisions in 

the House bill? I know it is going to be brief. 

Mr. COUKELL. In the interest of time, I will second what Dr. 

Catizone said. We think national standards are very desirable. 

There is an important role for FDA to play there but we don’t want 

to tie the hands of States at being able to respond to local conditions. 

Mrs. CAPPS. I see a couple of heads nodding. Is this shared by 

anybody else on the panel? Could you indicate? 

Mr. DAVIS. We agree as well. National standards, I think, would 

make it easier for pharmacists to be able to access and purchase 

and manage prescription products throughout the United States 

with some conformity. 

Mrs. CAPPS. Thank you. Mr. Chairman, I yield back. 

101 

Mr. PITTS. The Chair thanks the gentlelady and now recognizes 

the gentleman from New Jersey, Mr. Lance, 5 minutes for questions. 

Mr. LANCE. Thank you very much, Mr. Chairman. 

To Mr. Rose from J&J, I think New York recently proposed supply chain security legislation similar to standards in California. 

New York is obviously our neighboring State in New Jersey, and 

in fact, many pharmaceutical companies in the district I serve have 

employees from New York. If the California law were fully enacted 

and if New York follows suit we will have two highly populated 

States on opposite sides of the country requiring a varying degree 

of standard by which the entire industry from the manufacturer all 

the way to pharmacists must comply. You cite in your testimony 

a patchwork quilt of regulations, and I am interested in knowing 

how exactly would establishing a uniform tracking system ensure 

patient safety. 

Mr. ROSE. Thank you for that question. What it would do is, it 

would give us security through the whole Nation. These labels that 

we are putting on our product, this product is sold throughout the 

State, or throughout the country, and we are talking about interstate commerce here. When we manufacture it, we don’t manufacture for New York or California or Florida. 

Mr. LANCE. You do it for the entire Nation. 

Mr. ROSE. The entire Nation, and so as a result, we have this 

system in place. The entire Nation would benefit from this. All the 

citizens throughout the Nation would benefit from this system. It 

would provide a veil and umbrella over top of the supply chain, ensuring that we would keep counterfeit products out of the supply 

chain. It would give us another level of mechanism, another layer 

which we could prevent counterfeits from getting in the supply 

chain throughout the Nation. 

Mr. LANCE. Thank you. Your testimony reflects a strong commitment to patient safety. How often are products compromised? 

Under the current system if a product is compromised, how is the 

manufacturer, J&J or others, alerted to an issue, and how do you 

address the problem? 

Mr. ROSE. We are alerted to it in many ways. We may have received a call from a patient. We may hear from a doctor or a pharmacist. We have mechanisms in which we handle those calls, and 

we receive it and then we do an investigation of whether or not 

that is a counterfeit product or not. So we have mechanisms which 

we put in place to verify the authenticity of that product and then 

determine what the next steps might be. 

Mr. LANCE. Thank you. Would anyone else on the panel like to 

comment on my questions? Yes, sir. 

Mr. COUKELL. Just briefly. I don’t think we know how common 

it is. There was a story in the newspaper this week. It was a tiny 

story—I think it maybe only ran in Chicago—about a pharmacist 

who had bought counterfeit drugs from China, I believe it was, and 

was dispensing them to patients and had been caught doing that. 

We don’t know how common that is, and that is not to tarnish the 

industry. You know, 99.99 percent of them are good guys and the 

supply is generally safe but how common are these problems? I 

don’t think we know. 

102 

Mr. LANCE. Would anyone else like to comment? Dr. Davis? 

Mr. DAVIS. I think that again, the pharmaceutical industry, specifically, independent community pharmacists, rely on the rapport 

that we create with our patients, and it is very important for us 

to maintain that position. That being said, we take counterfeit 

medications, diverted medications and how we access and purchase 

medications in the industry very, very seriously. So that inherently 

adds a level of security that exists today. 

Mr. LANCE. Thank you. Dr. Davis, let me say that I come from 

a small town and from a small family law practice, and we rely on 

a family pharmacy in a small town, and I know that there are 

many across America who rely on the good work of family pharmacies across this great country. 

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

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Utah, Mr. Matheson, 5 minutes for questions. 

Mr. MATHESON. Thanks, Mr. Chairman, and I do want to thank 

all the stakeholders, more than just for being here today but there 

has been a lot of stakeholder involvement for a long time on this 

issue. I appreciate everyone spending the time to try to come up 

with a solution. 

I have said it in my earlier comments: I think we need a uniform 

standard in place, a national standard, and it is really for two 

things. It is to ensure integrity of the drug supply chain at a national level and also alleviate operational burdens. It also is to prevent counterfeit or diverted product from reaching consumers. 

So my first question is to Ms. Gallenagh. I was wondering if you 

could—you mentioned both the concern about operational burdens 

for stakeholders and the problem with counterfeit product hitting 

the market. Can you describe for me the operational challenges 

that your member companies would face in delivering product to 

their downstream partners across the country in a situation with 

no national standard and as different State laws go into effect? 

Ms. GALLENAGH. Absolutely. As you already know, HDMA members are primary wholesalers, so they purchase directly from the 

manufacturer in most cases and provide their products directly to 

the pharmacy and providers. The challenge with a 50–State approach, particularly when we start talking about not just pedigree 

but when we start talking about serialization and traceability really is the great unknown. If we are working on systems to be developed for California, for instance, that is one thing, but we operate 

national companies, much like the manufacturers. While we are 

not manufacturing product and we are not actually serializing that 

product, we will have to have the systems in place to be able to 

move it within our distribution networks, not just for the State of 

California but across the country. If we have a different standard 

for California than, for instance, in New York, which is also looking 

at this in their state legislature, then we have to segregate product 

according to region, and it makes it very difficult to know what 

types of systems we need to develop. 

Mr. MATHESON. Do you have thoughts or can you elaborate on 

how a bad actor might circumvent more stringent State laws to introduce an adulterated product into a supply chain that doesn’t 

have the national standard? 

103 

Ms. GALLENAGH. Sure. I think one of the problems with variation 

in State licensure was is one, the requirements. For example, some 

States don’t choose to inspect wholesaler facilities when they are 

actually issuing licenses, and so then you end up with sort of flyby-night actors or maybe substandard companies applying for and 

receiving licenses, and this has been shown to be a problem in 

States like Florida where when they did raise their licensure 

standards, they eliminated hundreds of bad actors and really not 

legitimate companies. I think that the other part of this, though, 

is also not just the variation in requirements but the variation in 

actually having to meet a standard bar. One kind of uniform set 

of requirements so that a bad actor can’t move to the next State 

and get a license there, for instance. 

Mr. MATHESON. Mr. Rose, in your testimony you described your 

company’s experience with serialization of its products. You know, 

this is something that has been included in this discussion draft. 

Can you discuss the role that serialization plays in strengthening 

the integrity of the drug supply chain both in the near-term impact 

it could have as well as the role it would play in the longer term? 

Mr. ROSE. Sure. In the near term, I think what it gives us is a 

capability that would be available in our product if we just looked 

at the discussion draft in its current form. You would have a serialized number on there that could then be verified, and that becomes 

important. I think what we would like to see as an end game is 

where every party in the supply chain is accountable for using that 

serial number and then also the information that is passed along 

with it. So we really believe that simple act of scanning that 

barcode becomes very, very important to help verify that package 

and ensure that it is the genuine package and then also the transactions that are associated with that package that can verify those 

transactions as well. 

Mr. MATHESON. Thanks. Mr. Chairman, I will yield back. 

Mr. PITTS. The chair thanks the gentleman and now recognizes 

the gentleman from Texas, Mr. Green, 5 minutes for questions. 

Mr. GREEN. Thank you, Mr. Chairman. I got back just in time. 

Mr. Coukell, I have some questions about the time frames set up 

in the House bill. As you know, it doesn’t require much until about 

5 years after the enactment. At that point it would only require 

manufacturers to serialize their product and to begin tracing their 

products by lot number, not unit level. I understand that actually 

getting a unit-level interoperable electronic system up and running, 

particularly on the federal level, will take some time and has many 

complications, but I am concerned the House bill doesn’t start us 

on that path soon enough. In fact, it actually prohibits FDA from 

going forward with a unit-level electronic system in absence of new 

federal legislation. My question is, can you comment on this? And 

I am sure we can all agree that we want to ensure that industry 

has a reasonable amount of time to comply with whatever federal 

system we put in place but do we really need to wait until 2018 

to even start on a lot-level non-electronic system? 

Mr. COUKELL. Thank you for that question, sir. We absolutely 

share that concern as well as the view that the appropriate approach is to phase this in in a reasonable time frame that is something between California and what is proposed in the House draft, 

104 

and I think one of the big impediments to this whole area moving 

forward has been the lack of regulatory certainty. So leaving 10 

years and still not having that certainty is likely to delay the field 

a very long time. 

Mr. GREEN. Mr. Berghahn, do you have any thoughts on that 

too? 

Mr. BERGHAHN. Well, I think that what would be important to 

consider is that many of the pharma manufacturers and the industry are already preparing today and putting systems in place to serialize an aggregate as we speak, and certainly allowing that to 

continue would be in the best interests of everyone. It doesn’t mean 

that we are going to get to a National standard in anything resembling the timelines put in place in California but it certainly means 

that the basis is there. I mean, California is more than 10 percent 

of the population of the United States, so we could say if we allowed it to continue as scheduled that by 2017 10 percent of the 

product in the U.S. supply chain would be serialized. 

Mr. GREEN. Mr. Catizone, how about you on that question? I am 

sure we all agree but do you really need to wait until 2018 even 

to get started on a lot-level non-electronic system? 

Mr. CATIZONE. No, I think that is too long of a delay. I agree 

with the prior comments but also the caution, if this law preempts 

all existing State laws, there will be no oversight of the distribution 

system and the problems that we are seeing now will increase significantly so the medications you receive and I receive and others 

receive will not be safe if the State laws are all preempted. 

Mr. GREEN. Well, I hope that we can work together to ensure we 

don’t have unnecessary delays in implementing a federal system. 

Although I know that California may have 10 percent, but for a fellow with my Texas accent, we might want to have our own. But 

I do think we need across State lines regulation as quick as possible. And again, like any other regulation, if you know it is going 

to happen, you can capitalize it and prepare for it over a period of 

years and it looks like the bill may not be as aggressive as some 

of us would like. It sounds like some of the witnesses share it. 

Thank you, Mr. Chairman. I will yield back my time. 

Mr. PITTS. The Chair thanks the gentleman and now recognizes 

the gentleman from Ohio, Mr. Latta, 5 minutes for questions. 

Mr. LATTA. Well, thank you very much, Mr. Chairman. Again, 

thank you very much for allowing me to participate in the hearing 

today. I really appreciate your willingness. And again, I want to 

thank the witnesses that are here today for their testimony today 

because we have to have input from everyone, which we have been 

doing for quite a while now, meeting with the stakeholders. 

If I could start with Dr. Davis, and again, what we are looking 

at here, what we want is safety for the patients out there. We want 

to make sure that the supply chain is protected, that nothing is 

adulterated out there, and that when someone receives a medication, they know it is safe for them to take. And I think the chairman was talking about it a little bit earlier but if I could just ask 

you again, what is your view of having this phased in over time 

instead of something happening overnight? And I know that Mr. 

Griffith and Mr. Lance also kind of alluded to that in their questioning, but if I could ask you? 

105 

Mr. DAVIS. Again, I think our concern is of the level of complexity that occurs at the patient-to-practitioner level. We have a 

lot of very specific business rule questions surrounding lot-level 

versus unit-level serialization and tracking. What would happen if 

a patient had a prescription that we prepared for them, they decided that it was too expensive and we had already removed it from 

the packaging and the ability for it to be traced any further? How 

do we get that back into our drug supply? How do we take processes such as that to make sure that our businesses remain profitable and don’t waste dollars on unused inventory, unreturnable inventory? How do we access the information and utilize the information, and how do we insert those processes in our current practices? 

We are dependent. We are absolutely dependent on our technology vendors to provide us with the capabilities, and while we 

are wholeheartedly in to continue working with our partners to create a system in the United States and to maintain the system, we 

want to make sure that it is built in an efficient, affordable manner 

for us to implement in our communities. 

Mr. LATTA. Thank you. 

Mr. Rose, in your testimony, you state that this legislation incorporates many of PDSA’s proposed provisions including a uniform 

national standard with a phased implementation. I am just kind of 

following up on that. How important is that phased implementation? 

Mr. ROSE. We believe the phased implementation is important. 

The California law in many regards goes from zero to 60 very 

quickly so you go from serialization to this interoperable system. 

We really believe what is important here is to make sure that we 

have an approach that allows parties in the supply chain to prepare properly, to adopt these systems. As Dr. Davis mentioned, the 

pharmacies have some work to do, so do the wholesalers and the 

manufacturers. We still have a lot of work to do, as I indicated in 

my testimony. We have to give people some time to put those systems in place and make sure, to work out the interdependencies between the different stakeholders in the supply chain. That is where 

the real phased-in approach is really required is, how do we exchange data with the customers that we work with. It is very, very 

critical to do this, and it is not just the forward supply chain but 

it is also the reverse supply chain as well. 

Mr. LATTA. Let me follow up with that. In your estimation, has 

California given you and the industry the guidance it needs for 

that operational clarity on how that law is going to work? 

Mr. ROSE. We still are awaiting guidance on the interoperable 

system. Also, I think as I recall, and I will have to get back to you 

on this, but they have issued some guidance around grandfathering 

and I think they issued some guidance recently around inference, 

but we really do need to have much more guidance from them 

about their interoperable system, how that is going to work. That 

is a key piece right now. 

Mr. LATTA. And I could turn real briefly, and I do mean briefly, 

Ms. Gallenagh, I believe we all share the same goal of improving 

the safety and the efficiency of the drug supply chain, as I mentioned earlier, that we want to make sure that everyone is safe out 

there. However, the argument has been made that what has been 

106 

proposed to date doesn’t go far enough to satisfy all the elements 

of a comprehensive system that some had envisioned. Could you in 

practical terms talk about how the elements of this proposal would 

create a platform upon which to build future technologies? 

Ms. GALLENAGH. Absolutely. I think the intent of the bill, first 

of all, starts with what we traditionally call an interim pedigree 

step, essentially a direct purchase option and a full pedigree option 

across the board so that would be uniform across the country. It 

sets higher licensure standards to close those gaps across the 

States, and I think what we are all forgetting here when we talk 

about looking for the perfect solution is that this draft requires serialization for all products at the unit level regardless of where 

they are in the United States. I think that that alone sets a great 

foundation for what the industry can do with the product and with 

the systems once they are built. The lot traceability as a phase-in 

I think absolutely also lets us know how to work with that product 

and the serial numbers in a measured, responsible way and in a 

way that is practical for all of the supply chain partners. 

Mr. LATTA. Thank you very much, Mr. Chairman, and my time 

is expired and I yield back. 

Mr. PITTS. The Chair thanks the gentleman. That concludes the 

questions of our members. I am sure they will have additional follow-up questions and we will send them to you. We ask that you 

please respond promptly. 

I would like to thank all of the witnesses for appearing today, 

two excellent panels, a lot of good information, a very important 

issue as we move forward, and I remind members that they have 

10 business days to submit questions for the record. The members 

should submit their questions by the close of business on Thursday, 

May 9th. 

Without objection, the subcommittee is adjourned. 

[Whereupon, at 12:49 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 

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82188A.049

"Securing our Nation's Prescription Drug Supply Chain" 

Statement for the Record 

House Subcommittee on Health 

Neil S. Alpert 

President, LaserLock Technologies 

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Chainnan Pitts, Ranking Member Pallone, Jr. and members of the House of 

Representatives Committee on Energy and Commerce, Health Subcommittee, 

thank you for the opportunity to submit testimony to you for the record 

regarding the April 25, 2013 hearing entitled, "Securing Our Nation's 

Prescription Drug Supply Chain." 

Like so many of history's great companies, LaserLock has evolved over time. 

Founded in 1999, we have been leading the development of cutting-edge 

authentication and anti-counterfeiting technologies. And, as this hearing 

indicates, the timing for such technologies couldn't be any more important. 

In an age of global chaos, a major source of funding for terrorist groups and 

organized crime is counterfeiting. Every day, consumers unknowingly 

purchase counterfeit products from legitimate vendors, and perpetuate a global 

system of thievery and deception. And when these groups turn to the 

counterfeiting ofphannaceuticals and the American drug supply, they are not 

just eating away at someone's bottom line. More so, they are holding hostage 

the national security and public health of people in the United States and 

around the world. 

Our shared mission is simple - to protect patients, health care providers and 

the companies that support them from the dangers of the global counterfeiting 

trade. By offering cost-effective solutions that authenticate products, 

phannaceuticals, documents, and the supply chain more effectively than ever 

before, LaserLock continues to be a global thought leader in the fight to 

protect America against the proliferation of counterfeit goods, including 

phannaceuticals. 

LaserLock strives to create an environment where everyone has the ability to 

both veritY the authenticity and provenance of any material. We believe that, 

counterfeiting and identity theft have become global problems affecting 

everyone. We don't want people to die from counterfeit medicines, foods or 

beverages. We don't want governments and or citizens held hostage by 

terrorists and organized crime. We don't want the woman who saved for five 

years to buy her first designer handbag to discover she has spent her savings 

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on a worthless counterfeit. 

LaserLock is considered to be a leader in the anti-counterfeiting and 

authentication of products and packaging and has been for over a decade. We 

imagine a world where there are authentication solutions available to every 

American. We want everyone to be able to trust in the integrity and reliability 

of the products they purchase and use. We believe this will be a better world 

for all of us, and we commit ourselves to realizing this vision. We believe the 

best way to predict the future ... is to invent it. 

Problems in the Pharmaceutical Supply Chain 

The World Health Organization estimates that 1 % of all drugs in the United 

States are counterfeit. With the Kaiser Family Foundation estimating the 

number of prescriptions filled each year in the United States at around 3.7 

billion, this translates to roughly 37.6 million prescriptions filled annually 

with counterfeit pharmaceuticals. This places nearly every American 

consumer of prescription drugs risk of consuming either an ineffective or 

harmful medication. This needs to be stopped and can be done so with three 

easy steps utilizing existing solutions: authentication technology, mobile 

devices and authentication databases. Consumers should be confident that 

when they purchase pharmaceuticals that their medication works as 

advertised. 

Counterfeit drugs are dangerous by their very nature: they are not produced 

under safe manufacturing conditions and they are not subject the same 

regulatory scrutiny as legitimate medications. Fake pills can look identical to 

their genuine counterparts but may contain an incorrect amount of the active 

ingredients or no active ingredient whatsoever. Additionally, noxious 

ingredients have also been found in counterfeit drugs with fatal consequences. 

For example, in October 2012 counterfeit ingredients found in steroids from a 

compounding pharmacy near Boston killed 11 people with fungal meningitis 

and sickened more than 100. While the U.S. pharmaceutical distribution 

system is among the safest in the world, the incidents of counterfeiting 

continue to increase annually. One of the reasons is that as technology 

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improves, counterfeiting becomes easier. Unfortunately, counterfeiters only 

have to reproduce an authentic looking package; what's inside doesn't matter 

to them. 

Counterfeit pharmaceuticals not only affect the consumer, but have also 

produced a wide range of negative effects on the pharmaceutical industry 

itself. These typically manifest as lost revenue, decline in brand value, lower 

incentives to invest in research and development, and higher protection and 

auditing costs. The lack of data available to researchers of this problem 

prevents any strong quantifiable insights at the industry or company level. 

Nonetheless, what data is available does suggest that the problem threatens the 

financial health and competitiveness of the U.S. pharmaceutical industry. 

The U.S. Customs and Border Protection Agency (CBP) has reported that 

between fiscal years 2004 and 2009, the domestic value and seizures of 

pharmaceuticals increased overall. According to Pfizer, the factors that 

contribute to the rise of pharmaceutical counterfeiting are unregulated 

wholesales and re-packagers in the supply chain, the growth of Internet 

pharmacies, advances in technology that make counterfeiting easier and the 

increased importation of prescription drugs from abroad. 

In the past, counterfeits were confined to illegal or unauthorized channels of 

distribution. More recently, legitimate channels of distribution in the U.S. and 

other countries with advanced economies have been increasingly infiltrated by 

counterfeits. 

As has been exhaustively covered in this hearing, the phannaceutical supply 

chain lacks a reporting structure capable of comprehensively documenting the 

movement of a product from the producer to the end consumer. This lack of 

documentation along the supply chain creates a blind spot each time the 

product changes hands. These blind spots are precisely what counterfeiters 

look to exploit. Introducing an industry-wide system that holds all 

participants accountable within the distribution network is needed to deter and 

end unnecessary public health problems and economic losses. 

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Counterfeiting is widely acknowledged as an attractive funding ploy for 

sophisticated criminal organizations and global terrorism. Pharmaceuticals are 

easy to transport and carry much lighter criminal penalties in the event they 

are detected. 

At a time when counterfeit pharmaceuticals are flooding the global market, 

the pharmaceutical industry, public health advocates, and security 

professionals are trying to educate the public about the need for caution when 

purchasing their medicines and the importance of closing our borders to these 

potentially dangerous products. We agree with the subcommittee that a 

uniform code of standards needs to be applied and industry alone cannot 

dictate how to deliver it, yet serialization, or the concept of uniquely 

identifYing medicines at the unit level (vs. batch or lot), while required for 

resilient track and trace capabilities, is not sufficient to significantly reduce 

counterfeiting. When serialization is implemented through the use of overt 

markings, such as visible barcodes, Datamatrix or QR codes, we are simply 

providing the counterfeiter with precisely the information they need to 

perpetrate their deception. 

We are convinced that by combining covert and overt anti-counterfeiting 

techniques it is possible to implement a comprehensive system that: 

• Is dynamic, flexible and adaptable - new anti-counterfeiting 

characteristics can continuously be added and updated 

• Incorporates overt characteristics that provide the 'visible' information 

required by broad numbers of stakeholders, patients, etc. 

• Incorporates covert characteristics that allow 'restricted knowledge' to 

be compartmentalized and made available exclusively on a "need to 

know" basis 

• Incorporates covert characteristics which can be linked to the overt 

characteristics, but would rely on 'restricted knowledge' for 

authentication, thereby creating significant barriers to compromise by 

attackers. 

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We believe the only way to implement a comprehensive solution for securing 

our nation's prescription drug supply chain is through the innovative use of 

both overt and covert anti-counterfeiting techniques. 

Designing a More Secure Supply Chain 

It is our conviction that securing the supply chain requires several key 

technological elements and multiple layers of authentication. As the United 

States moves toward a uniform national policy of tracing pharmaceuticals 

through the distribution system, such a system should incorporate the most 

recent developments in authentication technology and advances in cloud 

computing. 

As a system, a secure, modem, prescription drug supply chain should utilize 

available technologies to solve the entire problem of counterfeit 

pharmaceuticals, of which we assert that serialization is just one piece. In 

order to be effective it must protect both the health and safety of the American 

people while at the same time not place any unnecessary financial or logistical 

burden on manufacturers, wholesale distributors, pharmacies and repackagers. Counterfeiting is easy to do; the solution to prevent it should be 

just as easy. 

The prescription supply chain must contain elements that protect the 

serialization markings themselves from being counterfeited. If something can 

be seen, it can be copied. It is also critical that the system allows consumers 

to walk into any of the 60,000 pharmacies in the United States and verifY that 

the drugs they are buying are authentic. This is fully achievable with existing 

technology designed specifically to secure supply chains. 

Integrating Technologies 

We believe there are three technological components to designing the ideal 

tracing system: 

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• Authentication Technology 

• Mobile Devices 

• Authentication Databases 

In combination, these technologies will work with each other to create a 

simple, cost-effective and easy to integrate solution to securing the 

prescription drug supply chain. 

Authentication Technology 

Innovative anti-counterfeiting and authentication technologies will be critical 

to designing a secure system. Packages must be marked with both overt and 

covert solutions to create multiple layers of security. We believe utilizing 

both solutions provides the best way to mitigate the risks of counterfeiting. 

Security inks that can be seamlessly integrated into the printing process are 

the best approach to doing this. A single ink that contains multiple security 

characteristics would be the best way to thwart and confuse counterfeiters. 

As this legislation proposes, the key to tracking pharmaceuticals across the 

entire supply chain is to serialize each lot with a standard numerical identifier, 

which can be represented in a variety of markings including barcodes and QR 

codes. It is critical that these serialization markings are protected against 

counterfeiting, since they become the front line of defense in identifYing real 

or counterfeit prescription drugs. Ideally, these markings must be printed 

covertly on the package, invisible to the human eye but able to be read by the 

proper optical equipment. 

To serialize each package as a solution is insufficient. If a counterfeiter were 

able to infiltrate the serialization data, it would in theory be able to pass off 

counterfeit drugs as authentic as long as they were entered into the supply 

chain first. However, if the serialization markings are printed with a secure 

covert ink that could be read only by high-tech optics built into everyday 

smartphones, then it would be impossible for an organization without access 

to such technology to counterfeit the serialization, even if they were to come 

7 
114 


82188A.056

into possession of the necessary data. By utilizing invisible technology, you 

take that ability away from the counterfeiter, creating a barrier to the data. 

Mobile Devices 

While it is generally recognized that the hologram has lost its status as the 

premier anti-counterfeiting technology, its value as a technology was that it 

required no external device to activate it. It is difficult to use security inks 

described above without external devices to activate or read them in the same 

way. Thus, a device would be needed. Such a device should be handheld, 

possess image gathering capabilities, communication and data transmission 

capabilities. While there are a number of devices that fit this category, 

smartphones have penetrated the U.S and global markets to the point of 

ubiquity and utilizing them would eliminate the need to buy and bring costly 

equipment into the supply chain. The optics capability to read the covert 

markings described above would be integrated with permission levels on any 

smartphone and the simplicity of such a system would be astounding. 

Authentication Database 

To create a resilient solution that delivers complete and accurate 

authentication information requires communication. There are 2 primary 

drivers behind this conclusion: 

1. Restricted Knowledge the specific information about what covert 

characteristics are being used, how they are being used and what 

information they contain - can be securely stored in the cloud and 

released on a strictly "need to know basis" and only to other 

authenticated systems (for instance systems printing the marks and 

system inspecting the marks. 

2. During authentication of the pharmaceutical, the information that is 

returned to the user can be determined based on who the user is. A 

patient, for instance might be told the name of the medicine, the 

manufacturer and the expiration date. A distributor, could additionally 

be provided batch #, lot #, data of manufacture, etc. 

Another key to improving the resiliency of the system and specifically for 

guarding against replay attacks, where a criminal makes a exact copy of the 

product packaging, including serialization information is to maintain 

8 
115 


82188A.057

infonnation about the state of a product (manufacture, distribution, 

dispensing, consumption). A centralized secure cloud can insure real-time 

access to infonnation that can be correlated with other data, such as date/time, 

location and individuals perfonning authentication. Analytics can be easily 

applied to detect anomalies or discrepancies associated with individual items. 

The cloud service can also facilitate compartmentalization of infonnation. 

Product infonnation can remain with the manufacturer, distribution 

infonnation with the distributor, etc. The cloud service focuses on the 

authentication and management of the unique identifiers themselves, not the 

underlying product specific infonnation. 

Minimizing Disruption 

The key to designing a secure, modem, prescription supply chain system that 

can be implemented in the real world is minimizing the disruption it would 

cause to the existing phannaceutical supply chain. An ideal system should be 

able to be seamlessly integrated into the current phannaceutical packaging and 

manufacturing process. This would leverage existing production equipment 

and processes and minimize implementation costs. 

Both security inks and mobile devices playa crucial role in minimizing such 

disruption. Inks can be integrated directly into the printing process and would 

require no additional steps, minimizing costs other than the cost of the ink and 

the services of a third party logistics provider to provide the fonn of the 

markings. Nothing would need to be attached separately to the packaging and 

so there would be virtually no disruption in the current packaging production 

process. 

Similarly, if the system were to run on a smartphone, a secure application 

could be developed with differing levels of access across the supply chain that 

would prevent the need for manufacturers, wholesale distributors, phannacies 

and re-packagers from having to make massive purchases of equipment. 

9 
116 


82188A.058

Universal Availability 

The final key component of an ideal track and trace system is its accessibility 

to both the supply chain and the consumer. We believe it is paramount that 

consumers have the ability to authenticate their prescription. Again, the 

Ubiquity of smartphones plays a crucial role in allowing the same technology 

used to track and trace a pharmaceutical product through the supply chain to 

also be used by the consumer to verifY that their prescription is authentic. By 

utilizing smartphones, you provide every consumer with the ability to easily 

authenticate their medicine at the point of purchase, increasing their own 

degree of confidence in the drugs that they buy. By utilizing smartphones in 

the battle against counterfeiters, for the first time this gives the consumer the 

advantage. 

A mobile application would be downloaded to any given smartphone. One 

version of the application would be for those in the supply chain, allowing 

them to read covert markings and transmit the tracking infonnation to the 

secure cloud at each step along the chain. The second version would be widely 

available to the public, and would read the same marking, but would simply 

alert the consumer of the product's authenticity. We see this as a fundamental 

right of all consumers to be able to verifY the authenticity of their 

pharmaceuticals. 

10 
117 


82188A.059

NATIONAL ASSOCIATION OF 

CHAI N DRUG STORES 

Statement 

Of 

The National Association of Chain Drug Stores 

For 

U.S. House of Representatives 

Committee on Energy and Commerce 

Subcommittee on Health 

Hearing on: 

"Securing Our Nation's Prescription Drug 

Supply Chain" 

April 25, 2013 

10:00 a.m. 

2322 Rayburn House Office Building 

National Association of Chain Drug Stores (NACDS) 

1776 Wilson Blvd Suite 200 

Arlington, V A 22209 

703-549-300 I 

www.nacds.org 
118 


82188A.060

NACDS Comments to the House Energy and Commerce Health Subcommittee 

Hearing Held on April 25, 2013 

Page 2 0/4 

The National Association of Chain Drug Stores (NACDS) thanks Chairman Pitts, Ranking 

Member Pallone, and Members of the Subcommittee on Health for consideration of our 

statement for the hearing "Securing Our Nation's Prescription Drug Supply Chain." We look 

forward to our continued work with you on issues related to the security and integrity of the 

U.S. prescription drug supply chain. 

NACDS commends the Committee for their efforts. This statement addresses the following 

matters: 

• The necessity of enacting a national approach to securing the Nation's drug distribution 

supply chain now. 

• The chain pharmacy industry support for the work of the Pharmaceutical Distribution 

Security Alliance (PDSA). 

• Chain pharmacy policies for the security of the U.S. drug distribution supply chain. 

• Chain pharmacy comments on the recent discussion draft released by the Committee. 

U.S. DRUG DISTRIBUTION SUPPLY CHAIN IS SAFE 

The United States prescription drug distribution system is recognized as one ofthe safest and 

most secure in the world, if not the safest. The Food & Drug Administration (FDA) has stated 

that drug counterfeiting is rare in the U.S. drug distribution system due in large measure to the 

extensive scheme of federal and state regulatory oversight, and steps already taken by 

pharmacies, drug manufacturers, and wholesale distributors to prevent counterfeit drugs from 

entering the U.S. drug supply.] 

NACDS and the chain pharmacy industry are committed to partnering with policymakers and 

supply chain stakeholders on viable, effective strategies to further enhance the safety and 

security of the U.S. prescription drug distribution supply chain. Our members have invested 

significant resources and efforts towards this goal, including changes in purchasing practices 

1 See htlp:llwww.fda.<!ov/downloads/Drugs/DrugSafetv/DruglntegrityandSupplvChainSecuritv/UCM2721 50.pdf; 

FDA Preliminary Report: Review ofCounleifeit and Diversion Criminal Case I'1formation, September 2011. 

G:GAPP/GovFed13rrestimony and Statements 
119 


82188A.061

NACDS Comments to the House Energy and Commerce Health Subcommittee 

Hearing Held on April 25. 2013 

Page 3 0/4 

and actively supporting legislation enacted in a number of states that strengthened the U.S. 

supply chain integrity. We have also supported increased fines and penalties for violations of 

these state laws. Our members have seen marked improvements in the security of the drug 

distribution supply chain since the adoption of these initiatives and state laws. Nothing is more 

important to our industry than the health and safety of our patients. 

We urge policymakers to consider approaches to enhance supply chain integrity that are feasible 

and workable for the supply chain, and that recognize the importance of allowing a stepwise 

approach that uses feasible and tested approaches for adding enhancement to supply chain 

integrity. We do not support approaches that mandate the use of untested, costly requirements 

that would disrupt, rather than enhance, supply chain security. These proposals would add 

billions in additional costs to the healthcare system and take time and resources away from 

pharmacies' ability to provide care to their patients. 

NACDS' POLICIES 

We believe that the security of the U.S. prescription drug distribution supply chain requires the 

commitment of all supply chain stakeholders working together to ensure the security and 

integrity of the supply chain; any measures must be tested, implementable, feasible and 

achievable. To that end, NACDS is a member of the Pharmaceutical Distribution Security 

Alliance (PDSA), a coalition of supply chain stakeholders including drug manufacturers, 

wholesale drug distributors, third party logistics providers, their national associations, as well as 

pharmacies and their national associations. NACDS is pleased to be a member ofPDSA and to 

work with other supply chain stakeholders on efforts to enhance supply chain integrity. 

NACDS supports measures that include providing uniform federal requirements for wholesaler 

drug distributor licensure that is implemented by the states, evaluation and pilot projects to 

inform and phase in any changes to supply chain security, and federal preemption to establish a 

uniform national solution for supply chain security. These policies will lead to a national 

uniform supply chain integrity platform rather than the current patchwork of state laws. A 

patchwork of state requirements is unworkable and has the potential to hinder the timely and 

G:GAPP/GovFed13lTcstimony and Statements 
120 


82188A.062

NACDS Comments to the House Energy and Commerce Health Subcommittee 

Hearing Held on April 25, 2013 

Page 4 0/4 

efficient distribution of drugs across the nation. Moreover, a national approach provides the 

benefits of blocking unscrupulous entities from "gaming" the system by moving across state 

lines in search of less stringent laws. 

COMMENTS ON DISCUSSION DRAFT 

We applaud Representatives Latta and Matheson, as well as the full Committee, for the 

comprehensive discussion draft legislation. In particular, we support one national standard as 

promoted by PDSA and recognized by Congressmen Latta and Matheson. A comprehensive, 

practical approach would enhance safety and efficiency, and minimize inconsistencies among 

the states. 

Along with PDSA, we support enhancing the licensing standards of wholesale distributors. To 

ensure that bad actors are not allowed to enter the prescription drug supply chain by becoming 

licensed in the state with the least stringent requirements, we agree with the Committee draft 

with the establishment of a national floor for rigorous state wholesale licensure requirements. 

As a member of PDSA, we support their proposal for lot-level identification of prescription 

drug packages. We are pleased that you have included all of these elements in the Committee's 

discussion draft. 

As proposed by the discussion draft, the next phase of supply chain security would be best 

informed by pilot projects, routine public meetings, and well-designed studies. Without the 

critical information that would be gleaned from these projects, meetings, and studies, there 

would be a great risk of mandating systems and technologies that are not feasible, mature, or 

scalable. We must ensure patient access to critical lifesaving medications without imposing 

unnecessary or unworkable burdens on the mechanisms that deliver those medications to 

patients. 

CONCLUSION 

NACDS thanks the Subcommittee for consideration of our comments. We look forward to 

working with policy makers and stakeholders on these important issues. 

G:GAPP/GovFed 13ITestimony and Statements 
121 


82188A.063

November 7, 2012 

Re: Comments on October 24, 2012 Draft Lan!,'Uage (Supply Chain Safety) 

To Whom It May Concern: 

Thank you lor the opportunity to comment on the most recent legislative proposal to 

implement a nationwide supply chain safety system for pharmaceuticals and biologicals. EMD 

Serono is plea~ed to see a signilicant level of compromise, particularly related to Phase Two of 

the process, rel1ected in the current draft and appreciates the commitment and efforts of the 

working group and interested stakeholders in this discussion. We limIly believe that a strong 

supply chain safety standard is critical to help protect patients from the impact of counterfeiting 

and diversion, and we have seen the benefits of a robust track and trace mechanism firsthand. 

EMD Serono is the U.s. affiliate of an international biopharmaceuticals company with 

products to combat the effects of complex conditions like multiple sclerosis, mv and infertility. 

The products are highly specialized and, as such, are subject to counterfeiting and diversion by 

illegitimate parties in the U.S. and around the world. for this reason, we have been active on the 

issue of supply chain safety Jor over a decade and developed a comprehensive track and trace 

model that allows us to follow certain products from the manufacturing line to the pharmacy. 

Our experience has taught us that having the ability to track our products to the end 

dispenser by enabling unit-level traceability is imperative to the effectiveness of this system. 

Like many involved in the prescription drug sector, we believe that a nationwide supply chain 

safety standard is optimal for enhancing the integrity of products consumed by American 

patients. We also believe that to reduce risk of counterfeit or adulterated prescription drugs from 

entering the U.S. supply chain, the pathway for unit-level tracking and aggregation to support 

operational needs must be timely and must include all ofthe stakeholders in the product 

distribution chain. While the current proposal does include some improvements in this regard, 

there are additional changes that must be made 10 support patient safety. 

In 2002, EMD Serono implemented a sccured distribution mode! including a track and 

trace program for one of its products and in 20 I 0 incorporated a second. Shipments of these 

products are restricted to contracted phannacies that participate in this program. Each unit is 

uniquely serialized and can be tracked to the pharmacy level. 

Senmo Inc-. 

Om' Ttdmology PlatT 

Rockland. ~v!A 023"/0 

800,,183.8083 

\\';v\-v.emdsemno ... :m:l 
122 


82188A.064

Comments from EMD Serono 

November 7,2012 

Since the California Board ofPharrnacy proposed the electronic pedigree and 

serialization legislation in 2004, EMD Serono has been diligently working on implementing an 

interopemble system for all products using the GS I standards and initiating pilot programs with 

wholesalers. Given 1"e ongoing stakeholder investment in compliance with the California model 

and the quickly approaching effective date for the related requirements. it is critically importan! 

that action at the federal level consider that momentum and investment. At a minimum, a federal 

approaeh to supply chain safety should maintain the standards that exist in the California law 

and, where possible, incorporate the work already being done in California into a nationvdde 

fhl.mework. Failure to do so would result in a step backwards on public health and put 

significant industry efforts to improve supply ehain safety in a precarious position. 

While we appreciate the inclusion ofa more definite timeframe and process for unit-level 

tracking in Phase Two, we also remain concerned that the timeframc contemplated by the draft is 

unnecessarily long and deviates signif:cantly from the traditional rulemaking process included in 

the Administrative Procedure Act. In fact, if Congress chose to enact the longer time options 

bracketed in the draft, it would he over 15 years before unit-level tracking is incorporated in the 

U.S. supply chain safety requirements. Given the existing technology and standards available. 

and the work currently underway to comply with the CA state-mandated supply chain 

requirements coming online in the next few years, the inclusion of such an extended timeline is 

simply \vrong for patients. Even where those state requirements may be pre-empted by tede:al 

law, the movement towards unit-level tracking aroWl.d the globe means that the technologies and 

standards needed to implement the system contemplated in Phase Two of the draft are readily 

available, a~d many stakeholders arc using those technologies today to distribute 

phamlaceutieals abroad. As such. it seems as though the extended timeline options offered in the 

draft document prevent implementation of a system that can reasonably be started loday. 

Specifically, we would recommend a Phase Two timeline that provides federal standards jor 

unit-level tracking that would be effective in 2021. This can be acbieved by modifying a number 

of elements included in the current proposal draft, as illustrated in this letter. Examples of these 

modifications include the following: 

.. Ailowing FDA to run the specified pilot programs concurrently with the ctIective 

date of the legislation beginning in 2014. There is no need for a two-year delay in 

starting these pilots, especially given that there arc a number of manufacturers, 

wholesalers, 3PLs and dispensers who are already actively engaged in unit-level 

tracking and could offer th;ir expertise and existing operations in a pilot format 

immediately. 

2 
123 


82188A.065

Comments from EMD Serono 

November 7, 2012 

• Elimination of annual public meetings as required in the current draft. These 

meetings are not necessary given thc ample opportunity that stakeholders will be 

a!1orded in the rulemaking proeess and elsewhere. It is not clear that these meeting 

wi!! generate any additional insight that could not be offered using existing channels 

of communication, and thcy are likely to create additional hurdles and delay in the 

development ofa unit-level traeking standard. Likewise, movement forward with a 

unit-level tracking standard should not be conditioned upon premature study 

rcquirements given the wide array ofinformation that will be available through pHot 

projects and global supply chain efforts underway by industry stakeholders. 

" Reduction of the extended timcframc for development and enactment of regulations 

related to Phase Two, including the two year delay between issuance of final 

regulations and effective dates of tina! regulations (or application of default 

provisions). The lederal rulemaking process that currently exists under the 

Administrative Procedure Act includes ample time for notice and comment by 

stakeholders, and it is commonly used for implementation of new federal requirement 

that exceed the scope of the changes included in Phase Two. There is no need nor is 

there justification for creating a new rulemaking process for implementation of unitlevel tracking. 

In the absence of a federal law including pre-emption of state supply ehain requirements, the 

pending system being implemented in California v,'ilJ be em~ctive for all participants in the 

distribution channel by 2017. The extended Phase Two timelinc option included the draft will 

put federal rules into cffeet as late as 2028 and make them applicable to a more limited subset of 

distribution channel participants. Enacting a lederal framework that requires federal regulations 

to take effect no later than 202l presents a reasonable compromise between these two options 

and provides the limc needed to ensure that impacted sta.i<eholders have sufficient time to prepare 

lor and develop the systems necessary to comply with those federal regulations. 

In addition to our recommendations on the (imeline tor Phase Two, we also encourage 

Congress to ensure that the proposed supply chain safety system is applicable to all relevant 

parties in the phannaccutical distribution process. While the draft docs include significant 

requirements for ma.'lufacturers, wholesalers and 3PLs, we arc concemed that it does not contain 

adequate requirements for the parties dispensing products to patien1S, such as pharnlacies. 

Pharnlacists must be part of the verification process for unit-level tracking to be successful- they 

are the end link to patients and the direct distribution point for a major portion of the U.S. 

pharmaceutical supply. ~ost importantly, we believe thcre are basic standards that pharmacists 

can achieve with reasonable eflort and little monetary investment, making compliance in the near 

term more than feasiblc. 

3 
124 


82188A.066

Comments from EMD Serono 

November 7, 2012 

Similarly, we strongly believe that Congress should exercise cautiun in the creation of 

waivers and exceptions targeted towards arguments of economic hardship. While an 

stakeholders recognize that an adequate supply chain safety system will require additional 

investment, it is important to undef>"tand that all points in the distribution cha!1!1el must 

participate in that system in order for it work effectively, As a company that developed an 

evolving unit-level tracking system over the past decade, we have learned that it is possible to 

deploy effective technologies that require relatively modest investment. Moreover, our 

experience taught us that aside from the public health benefits of these efforts, there is business 

value for stakeholders, . 

As noted previously, EMD is pleased to see the inclusion of a eoncrete pathway forward for 

unit-level tracking, and we especially appreciate the inclusion of a default standard should the 

speeificd ru1emaking process fail to produee tinal Phase Two regulations by the required 

deadline, However, we recor!1!11end that the proposed default provisions be strengthened and 

clarified to ensure that the outcome ufthe Phase Two process does not result in a step backwards 

from where the supply chain safety effort would have been in the absence of the attempt to enact 

a federal standard. 

As such, the language rclated to the default provisions must clearly require, at a minimum, 

the following: 

• Unit-level tracking lor all downstream, change of ownership transactions involving 

eligible products 

e Appropriate and comprehensive grandfathering protections to ensure fairness (similar 

to those protections developed by the State of California) 

.. Aggregation of product infom1ation as necessary to reduce operational burden lor 

unit-level reading on dovmstrcam partners. 

.. Inclusion of an adequate "pedigrce," including a comprehensive transaction history, 

as appropriate with the transfer of ownership of a product 

In addition to the general comments outlined above, we would also like to offer more 

detailed suggestions on specific provisions of the draft legislation, For ease of use, these 

suggestions are detailed on a scction-by-section basis in Attachment Two to this letter. 

EMD Serono strongly favors the creation of a naliomvidc standard lor supply chain 

Establishment of one uniforn1 system not only allows for more efficient eompiiance from the 

business perspective but also enables the highest level of safety lor patients by potenliaHy 

creating an interoperable system rather than relying on a patchwork ofslandards, However, a 

uniform standard must n,m be achieved at the expense ofthe strength of a track and trace system. 

Moreover, we cannot support establishment of a nationwide standard that would lessen the 

requirements existing in current state law, Although we understand the desire to pre-empt states 

like California lrom moving forward with state requirements when a national standard is 

preferable, pre-emption is not acceptable unless the basic standards in states like California are 

maintained, or ideally, improved, 

4 
125 


82188A.067

Comments from EMD Serono 

November 7, 2012 

We urge you to continue workiIlg on this proposal to accelerate the unit level tracking alld 

include all ofthe elements necessary 10 the process of securing the U.S. drug supply. We also 

urge you to terrain from pre-empting states like California irom moving forward unless the 

prevailing policy is as strong, or stronger, than those state laws. 

Thank you for your lime and efforts in this process, and we remain willing to offer technical 

advice to the committees about all facets our program, including implementation of a unit level 

verification system. If you have any questions, please do nat hesitate to contact either David 

Nichols at (202) 626-2594 CllilylQl::!h:;\lols@emdserono.com) or myself at (202) 626-2598 

Sincerely, 

~~ Vice President, Government Affairs 

cc; Chainnan Tom Harkin 

Ranking Member ?'vlike Enzi 

Chainnan Fred Upton 

Ranking Member Henry Waxman 

Senator Lamar Alexander 

Senator Michael Bennet 

Senator Richard Burr 

Senator Charles Grassley 

Senator Diane Feinstein 

Senator Sheldon Whitehouse 

Representative Brain Bilbmy 

Representative John DingeH 

Representative Jim Matheson 

Representative Frank Pallone 

5 
126 


82188A.068

Comments from EMD Serono 

November 7,2012 

ATTACHMENT: Additional Specific Comments 

Section 2 

Section 581 (Definitions): 

.. A number of the relevant tenus are similar or identical to tenus being used in the context 

Oflhc California state supply chain requirements, and the stakeholder community has 

been active in achieving a consensus around a number of those tenus. As such, we 

recommend that Congress consider adopting the definitions used for similar terms under 

California law where they are available and appropriate. For example, the tenus 

"manufacturer," ''repackager,'' and ''third party logistics provider" are all defined in 

California statute in a comprehensive fashion, and those definitions could be 

appropriately used in the federal context as well. 

.. The definitions of "illegitimate product" and "suspect product" should incorporate 

language similar to that found :n CA starute, which specifics that, " If a manufacturer, 

wholesaler, Of phanuaey has reasonablc cause to belicye that a dangerous drug in, or 

having been in, its possession is counterfeit or the subject of a fraudulent transaction, the 

manufacturer, wholesaler, or pharmacy shallnolify the board within 72 hours of 

obtaining that knowledge. 

.. The exemption from the definition of "transaction" specified in subparagraph (xii) should 

be deleted because this type of transaction is indeed a change of product ownership and 

should not be considered exempt. 

.. The "transaction infonualion" definition should also include product identifier 

infonuation as a requirement in Phase Two. 

a The ''transaction statement" should be defined as a certified document (such as a signed 

transaction statement), The definition should also specify that the signature is a 

eenification under penalty of perjury from a responsible party of the source of the 

product that the infonnation contained in the pedigree is true and accuratc. 

.. Section 582 (Requirements) 

.. 111e bracketed language included in section a(I) should be retained. 

.. 111e two years spccified for publication of standards under section a(2) is too long. Such 

standards currently exist and are widely used and, therefore, there is no need to wait to two 

years before publishing the standard. 

" The availability of a waiver for 'lL'ldue economic hardship" found at section a(3)(A)(i) 

should be removed because it is not needed nor is it sufficiently dcfined. If removal is not 

possible, the term "undue economic hardship" should be qualiiied and defined to provide 

more clarity on the standard for a waiver. 

.. The language at a(3)(A)(ii) should be amended to include more clarity around the process 

that the Secretary may use to detcmlinc exceptions. 

6 
127 


82188A.069

Comments from EMD Serono 

November 7, 2012 

.. Section a(5) should be significantly revised (0 reflect an appropriate grand fathering 

mechanism, and the Secretary should be required to develop regulations within one year. We 

recommend this language incorporate the standard that is refleeted in California statute, 

which provides the following: 

0) A manufacturer, wholesaler, or pharmacy lawfully possessing or owning dangerous 

drugs manufactured or distributcd prior to the operative date of the pedigree 

requirements, specified in SectIons 4034 and 4163, may designate these dangerous drugs 

as not subject to the pedigree requirements by preparing a written declaration made (mdcr 

penalty of perjury that lists those dangerous drugs. 

(2) The written declaration shaH include the National Drug Code Directory lot number 

for each dangerous drug designated. The viiritten declaration shall be submitted to and 

received by the board no Iatcr than 30 days after the operative datc of the pedigree 

requirements. The entity or person submitting the written declaration shall also retain for 

a period of three years and make available for inspection by the board a copy of each 

,,,,ritten declaration submitted. 

(3) The board may, by regulation, further speclfy the requirements and procedures for the 

creation and submission of these vvritten declarations. Information contained in these 

declarations shall be considcred trade secrets and kept confidential by the board. 

" Any dangerous drugs designated on a written declaration timely created and submitted tc the 

board may be purchased, sold, acquired, returned, or otherwise transferred without meeting 

the pedigree requirements, if the transier complies with the other requirements of this 

chapter. 

.. The timeframe fer the manufacturer requirements found at (b)(1 )(A) should be revised from 

one year to six months. 

.. The bracketed language at (b){l )(A)(ii) should read "upon each transaction" 

.. The language at (b)(l)(A)(iii) should be revised to require information be maintained for not 

less than 7 years. 

" The language at (b){I)(A)(iv) shOt:ld read 18 months. 

.. The manufacturer requirement found at (b)( 1 )(A)(iv) should be amended to include 

aggregation in addition to the package fmd homogenous case requirement. 

.. The timcframc included in (b)(2) should be 3 months. 

.. The time/rame included in (b)(3)(A) should be 18 months. 

.. The timcframc included in (b)(3)(A)(ii) should allow 72 hours after receiving the verification 

request rather than 24 hours to account for requests that occur over a weekend, ctc. in (he 

alternative, the statute could reference business days rather than hours. 

" The language found at (b )(3)(D) should be revised to accurately reflect manufacturer 

practices. Typically, manufacturers do not redistribute product that has been returned, 

although wholesalers do frequently redistribute product that has been returned \0 them. 

.. The timcframe included in (b)(4)(A) should read 6 months. 

.. The timeframe included in (b)( 4)( C) should read 7 years ratherthan 2 years or i 0 years. 

" The timeframe included in Cb)( 4)(D) should read 72 hours rather than 24 hours. 

.. The timeframe included in (b)(5)(A) should be 6 months. 

7 
128 


82188A.070

Comments from fMD Serono 

November 7, 2.012 

& The language at (b)(5)(A)(ii} should be clarified to provide more explanation of what 

constitutes "reasonable steps." 

" The timcframcs included in (b)(6) should read 72 hours rather than 24 hours. 

e Thetimefnl.mc included in (c)(I)(A) should read 6 months. 

• The language at (c)(l)(A)(ii) should read "upon each transaction." 

" The timcframc induded at (c)(l )A(iii) should read 7 years rather than 2 or 10 years. 

.. The timeframe included at (c)(1)(A)(iv) should read 30 months. 

" We recommend the use of Option language under the saleable returns standard found at 

(c)(l)B)(i). 

" The language at (c)(l )(B)(ii) should be amended to specify that all transaction history shQuld 

be included with retums. 

" The timeframe induded at (e)(2) should read 3 months. 

.. The timeframe included at (c)(3) should read 30 months. 

@ The timeframe included at (c)(4)(A) should read 6 months. 

" The timeframe included at (c)(4)(C) should read 7 years. 

" The timeframe included at (0)(4)(D) should read 72 hours. 

" 111e timcfranle induded at (c)(5) should read 6 months. 

" The timctrame included at (c)(5)(C) should read 7 years. 

" rne timeframc included at (c)(6) should read 6 months. 

o The timeframe included at (e)(6)(C) should rcad 72 hours 

.. The timcfranle included at (d)(l )(A) should read 6 months. 

" The language at (d)(I)(A){ii) should read "upon each transaction." 

" The timeframc included at (d)(l )(.'\)(iii) should read 7 years. 

.. The timeframc included at (d}(l)(A)(iv) should rcad 3 yelh"S. 

.. The language regarding saleable transactions at (d)(l)(C)(i) should be amended to require 

that the information under subparagraph (B) be included. 

" 'The language regarding nonsaleablc transactions at (d)(l)(C)(ii) should be amended to 

require that the lnfom1ation under subparagraph (A)O) be included. 

" The timcframe included at (d)(2) should read 3 months. 

.. The limcframe included at (d)(3) should read 3 years. 

o The veriJication language at (d)(3l(B)(ii) should be amended to delete the 10% vcrification 

n."quirement and require every produ<.:t to bc verified at the unit level that is sm;pect. 

e The timeframe included at (d)(4)(A) should read I year. 

.. The timcirame included at (d)(4)(C) should read 7 years. 

.. 111e timcframe included at (d)(5) should read 1 year. 

" The timeframe included at (d)(5)(C) should read 7 years. 

.. The timcfran1e included at (d)(6) should rcad 1 year. 

.. The timeframe induded at (d)(6)(C) should read 72 hours. 

" The timeframe requirements for Third Party Logistics Providers (3PLs) found in section 0) 

should be aligncd with the timethmcs for manufacturers. Generally, we recommend 

selecting the shortest timeframe included in the bracketed options. 

Please note: OUf conm1ents on the provisions of Section 3 arc included in the body of our 

comment letter. 

8 
129 


82188A.071

DEPARTMENT Of HEALTH &. HUMAN SERVlCES 

The Honorable Joseph R Pitts 

Chainnan 

Subcommittee on Health 

Committee on Energy and Commerce 

House of Representatives 

Washington, D,C, 20515-6115 

Dear Mr, Chainnan: 

JUN 1 92013 

Thank you for providing the opportunity for the Food and Drug Administration (FDA or 

the Agency) to testify at the April 25, 2013, hearing before the Subcommittee on Health, 

Committee on Energy and Commerce, entitled "Securing Our Nation's Prescription 

Drug Supply Chain," This letter provides responses for the record to questions posed by 

one of the Committee Members, Congresswoman Ellmers, which we received on May 

24,20]3, 

If you have further questions, please let us know, 

cc: The Honorable Frank Pallone, Jr. 

Ranking member 

Sincerely, 

/\-;4- +/ 

Michele Mital 

Acting Associate Commissioner 

for Legislation 
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82188A.072

We have restated the Member's questions below in bold, followed by our responses. 

The Honorable Renee Ellmers 

1. Dr. Woodcock, you mention that a breach in any point of the supply chain could 

lead to dangerous outcomes for patients. How critical is identifying and 

licensing all entities that manufacture, store, transport and distribute drugs in 

realizing visibility and security in the supply chain? And can you elaborate 

why? 

It is essential that there is transparency and accountability in the drug supply chain. 

An important element ofthis is knowing the legitimate players in the supply chain 

that manufacture, store, transport, and distribute drugs and ensuring that they are 

licensed or otherwise accountable to Federal and state officials. This allows FDA to 

take swift action against those who are not legitimate and who may be bad actors. It 

is also important for other supply chain stakeholders to know who are the legitimate 

players and only do business with those entities. This creates a closed drug supply 

chain that further ensures the security of drug products and minimizes the chances of 

patients receiving an unsafe or ineffective drug. 

2. We all know that the most important goal of pharmaceutical supply chain track 

and trace legislation is to ensure that medicines are safely delivered to patients in 

North Carolina and the rest ofthe country. In the wake of recent high profile 

prescription drug cOUnterfeiting cases in the U.S., can you share with us a 

summary ofthe discussions that you have had with patient groups regarding the 

importance of supply chain safety to combat these types of cases from occurring 

in the future? 

Because recent incidents have involved injectable drugs purchased directly by 

medical practices from foreign or unlicensed suppliers, we have been focusing on 

educating the health care community about the risk of receiving drugs that may be 

counterfeit, contaminated, improperly stored and transported, ineffective, andlor 

unsafe. Medical practices that purchase and administer illegal and unapproved 

medications from foreign sources are placing patients at risk and potentially depriving 

them of proper treatment. 

To date we have not met with specific patient groups; however, we have issued public 

alerts and notices through FDA's MedWatch system about these incidents and the 

risks involved. Many patient organizations subscribe to Medwatch and further 

distribute these alerts and notices to their members. 
131 


82188A.073

June 17, 2013 

The Honorable Joseph Pitts 

Chairman 

House Energy and Commerce Subcommittee on Health 

2125 Rayburn House Office Building 

Washington, DC 20515 

Dear Chairman Pitts: 

Thank you for the opportunity to testify before the House Energy and Commerce Subcommittee 

on Health on April 25, 2013 at the hearing entitled "Securing Our Nation's Prescription Drug 

Supply Chain." I have attached my response to the Questions for the Record. 

HDMA supports H.R. 1919, the Safeguarding America's Pharmaceuticals Act and believes that a 

national approach to pedigree and traceability is the right approach to further strengthen our 

pharmaceutical supply chain, help ensure safe, efficient delivery of medicines and protect patients 

from the threats associated with counterfeit and diverted products. This legislation contains the 

core elements necessary to establish a comprehensive, practical framework that increases safety, 

continues to promote efficiencies and minimizes inconsistencies among competing state 

requirements. 

Thank you for your leadership on this important issue and we look forward to continuing to work 

with you and your staff as this issue moves through the legislature. 

Sincerely, 

L 

Elizabeth Gallenagh 

Vice President, Government Affairs and General Counsel 
132 


82188A.074

The Honorable John D. Dingell 

1} Do you agree that a traceability system would help to better secure our drug supply 

chain from counterfeits, theft, and intentional adulteration? If no, please explain why. 

Yes. The approach captured in H.R.1919 requires members of the supply chain to verify suspect 

and illegitimate product and provides for greater assurances than under current law that the 

product is not counterfeit, stolen, or adulterated. 

2) Do you agree that a traceability system would help to identify and detect illegitimate 

pharmaceuticals? If no, please explain why. 

Yes. H.R. 1919 requires manufacturers to include a product identifier on each package, which 

will assist supply chain partners in verifying if a product is legitimate. 

31 Do you agree that a traceability system would help to ensure the safety of 

pharmaceuticals for patients and consumers? If no, please explain why. 

Yes. The application of product identifiers and a national approach to pharmaceutical 

traceability allows supply chain stakeholders to provide greater assurances to patients and 

consumers that prescription medicines are safe. 

4) Do you agree that a traceability system would improve the efficiency and effectiveness 

of recalls or returns? If no, please explain why. 

Yes. A national approach to pedigree and traceability will help facilitate more efficient 

identification of recalled product and faster removal from the supply chain. Additionally, 

unique identification of products will add more security and certainty to the returns 

process. Under the current legislation, wholesale distributors will be verifying all returns to 

ensure legitimacy. 

5) Do you agree that a traceability system should be based on uniform, national standards? 

If no, please explain why. 

Yes. The current patchwork of varying state laws not only creates operational challenges, 

but also leaves openings for bad actors to shop around for more lenient state rules -

openings that could mean the difference between a fake or diverted medicine being 

dispensed or administered to an innocent patient in need of treatment. Because of this 

state-by-state variation, we believe that pedigree and traceability should be under the 

purview of Congress and the FDA and based on uniform, national standards. 
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82188A.075

6) 00 you agree that a traceability system should include participation from everyone in the 

supply chain? Please explain why. 

Yes. HOMA believes that all stakeholders - including manufacturers, distributors, and 

dispensers - should have a role in any traceability system. HDMA has been a leader in 

industry task forces and working groups that bring together manufacturers, distributors 

and pharmacies dedicated to identifying the operational and technical requirements for 

traceability implementation. HDMA is also an active member of POSA, the Pharmaceutical 

Distribution Security Alliance, which has included members of the entire supply chain in 

the formulation, development and implementation of a traceability proposal. 

7) 00 you agree that a traceability system should take a phased-in approach? If no, please 

explain why. 

Yes. Once product is serialized, it is believed that product traceability initially can be 

achieved at the lot level, with potential for traceability at a more discrete level as systems 

mature. A system that works for all supply chain partners across all SO states cannot be 

achieved with the flip of a switch. The industry believes in working to achieve this goal but 

it needs to be accomplished in a measured, practical way, over time. 

8) 00 you agree that a traceability system with a phased-in approach should include clear 

requirements and a clear timeframe for a second phase? If no, please explain why. 

Yes. HOMA supports a migration toward traceability at unit level that includes deliberate, 

careful evaluation and assessment by FDA and stakeholders at each step. As a result, 

exchange of transaction data will be possible and can be leveraged to provide additional 

efficiency and safety benefits within the supply chain. 

9) 00 you believe that a unit level traceability system is feasible at this time for all members 

of your industry? Please explain why. 

No. It is critical that federal legislation be enacted to provide the appropriate targets and 

parameters for longer-term electronic solutions that HDMA members can then work to 

implement over the period of several years. Without a uniform, national pedigree and 

traceability law for all supply chain participants, it would not be feasible to implement a 

unit level traceability system. 
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82188A.076

10) Do you believe that a lot level traceability system is feasible at this time for all members 

of your industry? Please explain why. 

No. Currently lot numbers on pharmaceutical products are not applied uniformly. Because 

of the complexities of a national supply chain, without federal standards, it would not be 

feasible for pharmaceutical distributors to implement a lot level traceability system. 

11) Do you agree that the goal of any federal traceability system should be unit level tracing? 

If no, please explain why. 

Yes. Currently, there is no mechanism to identify a unique bottle of medicine or distinguish 

one from another. H.R. 1919 will require manufacturers to apply a unique identifier to 

prescription drugs at the unit and case levels. This will facilitate improved ability to identify 

non-legitimate items and help protect the supply chain from counterfeit, adulterated or 

substandard products. Prescription drugs will be identified and traced at the unit and case 

level using a serial number (SNI), lot number and expiration date. 

12) Do you believe that it is imperative that traceability legislation be passed this year? If 

no, please explain why. 

Yes. It is critical that Congress act now due to the uncertainties faced by the industry, the 

need for uniformity across the supply chain and to ensure patient access to safe medicines 

in the U.S. 
135 


82188A.077

Generic Pharmaceutical Association 

The Honorable Joseph R. Pitts 

Chainnan 

Subcommittee on Health 

420 Cannon House Office Building 

Washington, DC 20515 

June 14,2013 

Dear Chainnan Pitts and Ranking Member Pallone, 

The Honorable Frank Pallone, Jr. 

Ranking Member 

Subcommittee on Health 

237 Cannon House Office Building 

Washin!,rton, DC 20515 

GPhA would like to submit the following in response to your recent additional questions for the 

record for the hearing before the Subcommittee on Health on Thursday, April 25, 2013, entitled 

"Securing Our Nation's Prescription Drug Supply Chain." 

The Honorable John D. Dingell 

I. Do you agree that a traceability system would help to better secure our drug 

supply chain from connterfeits, theft, and intentional adulteration? If no, please 

explain why. 

Yes 

2. Do you agree that a traceability system would help to identifY and 

detect illegitimate pharmaceuticals? If no, please explain why. 

Yes 

3. Do you agree that a traceability system would help to ensure the safety of 

pharmaceuticals for patients and consumers? If no, please explain why. 

Yes 

4. Do you agree that a traceability system would improve the efficiency and 

effectiveness of recalls or returns? If no, please explain why. 

Yes 

5. Do you agree that a federal traceability system should be based on uniform, 

national standards? If no, please explain why. 

Yes 

6. Do you agree that a federal traceability system should include participation 
136 


82188A.078

from everyone in tbe supply cbain? Please explain wby. 

Yes. In order to, prevent the introduction of counterfeit or adulterated products into the 

supply chain and ensure patient safety, it is vital that a federal traceability system is 

practical, focused, and uniform across the country and includes participation from 

everyone in the supply chain. It is for this reason that GPhA is a member of the 

Pharmaceutical Distribution Security Alliance, a multi-stakeholder initiative whose 

membership spans the entire spectrum of the U.S. pharmaceutical distribution system, 

including manufacturers, wholesale distributors, third-party logistics providers, and 

pharmacies. 

7. Do you agree tbat a federal traceability system sbould take a phased-in 

approach? 1£ no, please explain why. 

Yes 

8. Do you agree that a federal traceability system witb a phased-in approacb 

should include clear requirements and a clear timeframe for a second pbase? 

If no, please explain wby. 

Yes 

9. Do yon believe that a unit level traceability system is feasible at tbis time for 

all members of your industry? Please explain wby. 

No. At the present time, the technology to support a unit-level traceability system is 

unreliable and underdeveloped, and the costs associated with such a model would be 

billions of dollars. An attempt to implement such a system hastily and before the 

technology is developed would lead to confusion in the supply chain, aggravate product 

shortages, and dramatically increase costs for all prescriptions, particularly generic 

medicines. 

10. Do you believe that a lot level traceability system is feasible at tbis time for 

all members of your industry? Please explain why. 

Yes. A lot-level traceability system is feasible and achievable for our industry in the 

near-term. Generic manufacturers have committed to identifYing individual saleable units 

of medicine with labels, and maintaining and managing data in their systems that would 

associate the identifiers on individual bottles of medicine with the lot numbers of products. 

Such a building-block approach would ensure orderly implementation and avoid unintended 

consequences, while allowing the industry to apply the knowledge and experience gained 

over time to refine the system as public health threats, interoperability standards, and 

technologies evolve. 

II. Do you agree tbat the goal of any federal traceability system should be unit 

7105 WW\V,Q[,h8\,nW1A org 
137 


82188A.079

level tracing? If no, please explain why. 

Yes 

12. Do yon believe that it is imperative that traceability legislation be passed 

this year? If no, please explain why. 

Yes 

Thank you again for the opportunity to testifY before the Subcommittee. 

Sincerely, 

Christine Simmon 

Senior Vice President, Policy and Strategic Alliances 

cc: The Honorable John D. Dingell 
138 


82188A.080

June 10,2013 

The Honorable Joseph R. Pitts 

Chairman, Subcommittee on Health 

2125 Rayburn House Office Building 

Washington, DC 20515-6115 

Dear Representative Joseph Pitts, 

First, let me thank you for your follow up questions regarding my testimony to the Subcommittee on 

Health on April 25, 2013 at the hearing entitled "Securing Our Nation's Prescription Drug Supply Chain." 

If Congress fails to act and the California law goes into effect, there will remain "numerous holes" and 

opportunities for bad actors to introduce "counterfeit or fraudulent product" into the nation-wide 

pharmaceutical supply chain. Prescription pharmaceutical products that are approved by the FDA for 

sale in the United States are manufactured and packaged to be sold anywhere in our nation through our 

authorized distributors of record (ADR's) and entities licensed by the state. Specifically, prescription 

pharmaceutical products are not manufactured or labeled for one specific state. 

When a manufacturer sells a product to a wholesaler, pharmacy, hospital, or clinic for distribution and 

ultimately dispensing to the patient, the ownership, title and control of the product moves from the 

manufacturer to the commercial entity who purchased the product from the manufacturer. This 

commercial entity can distribute the product anywhere across the United States to other entities 

licensed by the state. Counterfeit product is introduced into the US supply chain through these entities, 

all of whom are beyond the manufacturer's control. 

It is important that all entities engaged in the manufacturing, distributing, repackaging, and dispensing 

of prescription pharmaceutical products across the entire country be held accountable to ensure that all 

patients receive genuine product 

If Congress fails to act and only the·California law goes into effect, we will code our products accordingly 

and sell them in all states. Outside of California, if the downstream supply chain entities do not 

participate in the in system, the product identifiers will have little effect or benefit in protecting the 

public. Within California, patients will still be at risi< due to the national scope of the drug supply. For 

example, the counterfeit AV3stin situation could still occur again with counterfeit product being 

distributed into the state of California from another state, thereby, placing all patients at risk - including 

patients in California. 

A single uniform, national standard for serialization and traceability will help protect the US prescription 

pharmaceutical supply chain. A patchwork of inconsistent state regulations is an ineffective means to 

protect the citizens of all states - including patients in California - from counterfeit product. 

Serialization and traceability will provide an additional deterrent against bad actors from trying to 

introduce counterfeit or fraudulent product into our nation's drug supply. 
139 


82188A.081

I hope the above detail has satisfactorily answered your questions. If not, I would be glad to provide 

further information. 

Again, thank you for your personal interest in this matter. We look forward to Congress' action on this 

vital issue of patient safety. 

Mike Rose 

VP Supply Chain Visibility 

Johnson & Johnson 
140 


82188A.082

June 11,2013 

The Honorable John D. Dingell 

Energy and COJl1merce Committee 

2328 Rayburn House Office Bnilding 

Washington, DC 20515-6115 

Dear Representative Dingell, 

1. Do you agree that a traceability system would help to better secure our drug supply chain from 

counterfeits, theft, and intentional adulteration? If no, please explain why. YES 

2. Do you agree that a traceability system would help to identify and detect illegitimate pharmaceuticals? 

If no, please explain why. YES 

3. Do you agree that a traceability system would help to ensure the safety of pharmaceuticals for patients 

ilnd consumers? If no, please explain why. YES 

4. Do yon agree that it traceability system would improve the efficiency and effectiveness of recalls or 

returns? If no, please explain why. YES 

5. Do you agree that a federal traceability system should be ba,ed on uniform, national standards? If no, 

please explain why. YES 

6. Do you agree that a federal traceability system should include participation from everyone in tbe 

supply chain? Please explain why. YES 

7. Do yon agree that a fedemllraceability system should take a phased-ilJ approach? If no. please explain 

why. YES 

8. Do you agree that a federal traceability system with a phased-in approach should include clear 

requirements and a clear timeframe for a second phase? If no, please explain why. YES 

9. Do you believe that a unit level traceability system is feasible at this time for all members of yonI' 

industry? Please explain why. YES 

The necessary standards, technologies and know how have advanced sufficient to make a unit 

level traceability system feasible. However, all supply chain stakeholders will need to make 

signihcant investments to implement unit level traceability. 
141 


82188A.083

10. Do you believe that a lot level traceability system is feasibJe at this time for all members of your 

industry? Please explain why. YES 

Manufacturers control their production and product inventory by lot today. Lot control is an 

accepted and well understood practice by the FDA. Manufacturers include product lot 

information on the shipping documentation lhm accompanies every shipment made by a 

manufacturer to their customer. When a problcl1l(s) is identified with a product. the specific Jots 

affected by the problem are identified. If the problcm{s) is significant enough to warrant a recall. 

then only these specific lots would be withdrawn or recalled from tile market. However. it is 

important to note that, currently, wholesalers and pharmacies do not control their inventories by 

lot. Therefore, wholesalers and pharmacies would have to make significant investments to 

implement lot level traceability. 

II. Do you agree tilat the goal of any federal tmceability system should be unit level tr"cjog? If no, please 

explain why. YES 

12. Do you believe that it is imperative that traceability legislation be passed this y(,ar? If no, please 

explain why. YES 

Best regards, 

Mike Rose 

VP Supply Chain Visihility 

Johnsol1 & Johnson 
142 


82188A.084

Responses to the Questions for the Record letter by Mr. Tim Davis 

The Honorable John D. Dingell 

1. Do you agree that a traceability system would help to better secure our drug supply chain 

from counterfeits, theft, and intentional adulteration? Ifno, please explain why. 

Yes. 

2. Do you agree that a traceability system would help to identify and detect illegitimate 

pharmaceuticals? Ifno, please explain why. 

Yes. 

3. Do you agree that a traceability system would help to ensure the safety of 

pharmaceuticals for patients and consumers? Ifno, please explain why. 

Yes. 

4. Do you agree that a traceability system would improve the efficiency and effectiveness of 

recalls or returns? If no, please explain why. 

Yes 

5. Do you agree that a federal traceability system should be based on uniform, national 

standards? Ifno, please explain why. 

Yes. 

6. Do you agree that a federal traceability system should include participation from 

everyone in the supply chain? Please explain why. 

Yes. 

7. Do you agree that a federal traceability system should take a phased-in approach? If no, 

please explain why. 

Yes, I very strongly agree that a federal traceability system should take a phased-in 

approach. 

8. Do you agree that a federal traceability system with a phased-in approach should include 

clear requirements and a clear timeframe for a second phase? If no, please explain why. 

Yes. 

9. Do you believe that a unit level traceability system is feasible at this time for all members 

of your industry? Please explain why. 

No, I do not believe that a unit level traceability system is feasible at this time for 

most of our members. While the overall hardware and software components exist in 
143 

Æ 


82188A.085

distinctly separate resources, there has not been an aggregated solution specific to 

the practice of pharmacy comprised of these distinct components found in the 

marketplace today. To compile the required resources, adjust workflow, integrate 

solutions, and account for all pharmacy level exceptions to optimal processing 

scenarios will take time and experience. A requirement of unit level traceability at 

this point in time will compromise patient care and safety by creating turmoil and 

confusion through the use on an incomplete solution. FinaIly, while we hope that 

the technology develops quickly enough so it can exist in the market long enough to 

be inexpensive for our small business owners - it is not there yet so that remains an 

unknown. 

10. Do you agree that the goal of any federal traceability system should be unit level tracing? 

Ifno, please explain why. 

Yes, I agree that the ultimate goal of any federal traceability system should be unit 

level tracing. 

11. Do you believe that it is imperative that traceability legislation be passed this year? Ifno, 

please explain why. 

Yes.