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SECURING THE PHARMACEUTICAL SUPPLY CHAIN 

HEARING 

OF THE

COMMITTEE ON HEALTH, EDUCATION, 

LABOR, AND PENSIONS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON

EXAMINING SECURING THE PHARMACEUTICAL SUPPLY CHAIN, FOCUSING ON HOW THE FOOD AND DRUG ADMINISTRATION FACES CHALLENGES OVERSEEING THE FOREIGN DRUG MANUFACTURING SUPPLY 

CHAIN 

SEPTEMBER 14, 2011 

Printed for the use of the Committee on Health, Education, Labor, and Pensions 

( 

Available via the World Wide Web: http://www.gpo.gov/fdsys/ 
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS 

TOM HARKIN, Iowa, Chairman 

BARBARA A. MIKULSKI, Maryland 

JEFF BINGAMAN, New Mexico 

PATTY MURRAY, Washington 

BERNARD SANDERS (I), Vermont 

ROBERT P. CASEY, JR., Pennsylvania 

KAY R. HAGAN, North Carolina 

JEFF MERKLEY, Oregon 

AL FRANKEN, Minnesota 

MICHAEL F. BENNET, Colorado 

SHELDON WHITEHOUSE, Rhode Island 

RICHARD BLUMENTHAL, Connecticut 

MICHAEL B. ENZI, Wyoming 

LAMAR ALEXANDER, Tennessee 

RICHARD BURR, North Carolina 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

ORRIN G. HATCH, Utah 

JOHN MCCAIN, Arizona 

PAT ROBERTS, Kansas 

LISA MURKOWSKI, Alaska 

MARK KIRK, Illinois 

DANIEL E. SMITH, Staff Director 

PAMELA SMITH, Deputy Staff Director 

FRANK MACCHIAROLA, Republican Staff Director and Chief Counsel 

(II) 
C O N T E N T S 

STATEMENTS 

WEDNESDAY, SEPTEMBER 14, 2011 

Page 

COMMITTEE MEMBERS

Harkin, Hon. Tom, Chairman, Committee on Health, Education, Labor, and 

Pensions, opening statement ............................................................................... 1 

Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming .................... 2 

Bennet, Hon. Michael F., a U.S. Senator from the State of Colorado ................. 14 

Prepared statement .......................................................................................... 16 

Roberts, Hon. Pat, a U.S. Senator from the State of Kansas .............................. 18 

Franken, Hon. Al, a U.S. Senator from the State of Minnesota .......................... 20 

Mikulski, Hon. Barbara A., a U.S. Senator from the State of Maryland ............ 22 

Whitehouse, Hon. Sheldon, a U.S. Senator from the State of Rhode Island ...... 24 

Blumenthal, Hon. Richard, a U.S. Senator from the State of Connecticut ........ 25 

WITNESS—PANEL I 

Autor, Deborah M., J.D., Esq., Deputy Commissioner for Global Regulatory 

Operations and Policy, FDA, Silver Spring, MD ............................................... 4 

Prepared statement .......................................................................................... 7 

WITNESSES—PANEL II 

Crosse, Marcia, Ph.D., Director, Health Care, Government Accountability Office, Washington, DC ........................................................................................... 29 

Prepared statement .......................................................................................... 30 

Martello, Kendra A., J.D., Assistant General Counsel, PhRMA, Washington, 

DC .......................................................................................................................... 38

Prepared statement .......................................................................................... 40 

Johnston, Gordon, Senior Advisor for Regulatory Sciences, GPhA, Washington, DC ............................................................................................................. 43 

Prepared statement .......................................................................................... 45 

VanTrieste, Martin, R.Ph., Past Chair, Rx-360, Thousand Oaks, CA ................. 50 

Prepared statement .......................................................................................... 52 

Coukell, Allan, BScPharm, Director of Medical Programs, Pew Health Group, 

Washington, DC ................................................................................................... 57 

Prepared statement .......................................................................................... 59 

ADDITIONAL MATERIAL 

Statements, articles, publications, letters, etc.: 

Heather Bresch, President, Mylan Inc. .......................................................... 74 

Dale Carter, Chair, International Pharmaceutical Excipients Council— 

Americas (IPEC—Americas) ........................................................................ 76 

Keith Nalepka, Vice President, Business Development, Hi-G-Tek, Inc. ...... 77 

American Society of Health-System Pharmacists .......................................... 78 

National Community Pharmacists Association (NCPA) ................................ 82 

Response of the Food and Drug Administration to questions of: 

Senator Bennet .......................................................................................... 84 

Senator Roberts ......................................................................................... 87 

Senator Kirk .............................................................................................. 89 

(III) 

(1) 

SECURING THE PHARMACEUTICAL SUPPLY 

CHAIN 

WEDNESDAY, SEPTEMBER 14, 2011 

U.S. SENATE, 

COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS, 

Washington, DC. 

The committee met, pursuant to notice, at 10:02 a.m., in Room 

SD–430, Dirksen Senate Office Building, Hon. Tom Harkin, chairman of the committee, presiding. 

Present: Senators Harkin, Mikulski, Franken, Bennet, Whitehouse, Blumenthal, Enzi, and Roberts. 

OPENING STATEMENT OF SENATOR HARKIN

The CHAIRMAN. Good morning. The Senate Committee on Health, 

Education, Labor, and Pensions will come to order. 

As part of our ongoing process to reauthorize the FDA user fee 

legislation in this Congress, we’ve convened this hearing to examine the safety and integrity of our pharmaceutical supply chain. 

Few issues are more important to the health and safety of Americans than the integrity of our drug supply. 

In today’s increasingly global economy, most of the key ingredients used in the drugs prescribed by American doctors and consumed by American families are produced overseas. According to a 

GAO study, about 80 percent of the active ingredients found in 

U.S. pharmaceutical products come from abroad, and about 40 percent of the finished drugs come from abroad. 

This trend is projected to continue to increase with more and 

more of our medicine cabinets being stocked with products from 

countries like India and China who have less robust regulatory systems than our own. Our challenge is to embrace the promise of this 

increasingly global economy while still making sure we protect 

American patients. 

The profound interests at stake are highlighted for us by tragic 

examples of American patients who have taken adulterated drug 

products, such as the 150 U.S. patients who died in 2007 after taking the contaminated Heparin. Weaknesses in our pharmaceutical 

supply chain not only affect the health of American patients but 

also the health of American businesses. By holding foreign actors 

to the same standards as those in the United States we guarantee 

a level playing field. U.S. companies that source and manufacture 

drugs in this country should not be placed at a competitive disadvantage by foreign firms that operate with less oversight and sell 

substandard ingredients into this country at reduced prices. 
2 

When FDA’s authorities were first designed and enacted, our 

production methods were based here at home. FDA’s primary authorities to ensure the quality of our drugs—which was strict oversight of domestic manufacturers coupled with the ability to interdict illegal drugs at the border—were well-suited to the manufacturing practices of that time in the late 1930s. But, again, that was 

nearly 100 years ago. We don’t live in the same world as we did 

then, and our drug safety controls have failed to keep up with the 

changes in our economy and our society. 

FDA and Customs have tried to increase their vigilance to keep 

pace with the increasingly global nature of our supply chain. But 

FDA does not have the authority and flexibility it needs to make 

sure that foreign facilities adhere to the same quality standards as 

U.S. facilities. Some domestic companies have tried to fill that gap 

by adopting robust quality control practices that include inspecting 

their overseas suppliers. Some have done it. Others have not. So 

the result is a supply chain rife with gaps. 

Last year, this committee took an important bipartisan step to 

modernize our food safety system, giving FDA the tools necessary 

to hold foreign food importers and producers to the same safety 

standards as those in the United States. Now we have to bring our 

drug supply system also into the 21st Century. 

This morning, we’ll explore systemic concerns associated with the 

drugs and drug ingredients imported into the United States from 

abroad. We’ll learn about the new challenges that both the FDA 

and the American pharmaceutical companies face in navigating the 

global economy. As we begin the critical discussion on how to modernize our drug supply system, we’ll hear from several expert witnesses who approach this important issue through a variety of perspectives. 

I thank all of you for being here and look forward to your testimonies. I look forward to continued bipartisan cooperation with my 

colleague, Ranking Member Enzi, who has worked closely with me 

on scheduling this hearing and who, himself, has devoted considerable energy to examining this issue. 

And now I would recognize Senator Enzi. 

STATEMENT OF SENATOR ENZI

Senator ENZI. Thank you, Mr. Chairman. 

In 2007 and 2008, dozens of patients died after receiving Heparin, a widely-used blood thinner that had been contaminated during manufacture in China. The number of drug products made outside of the United States doubled from 2001 to 2008. This trend 

will accelerate, creating potential risks to patients from substandard and otherwise adulterated drugs. 

Today’s hearing will examine our increasingly global supply 

chain and assess how effective agencies like the FDA have been in 

protecting American consumers. The Government Accountability 

Office has found that the FDA does not police the drug supply 

chain effectively and recommended that the agency make several 

specific policy changes to address these problems. Unfortunately, 

FDA has failed to adequately respond to these recommendations. 

Some of these GAO recommendations have been outstanding 

since the late 1990s. FDA has still not implemented them. In part 
3 

due to these failures and the corresponding risk to public health, 

GAO has placed FDA on its high-risk watch list of government programs. GAO has not called for sweeping legislation to solve these 

problems. Instead, GAO calls for FDA to administer its programs 

and manage its responsibilities more effectively. 

Following the HELP Committee’s July hearing with Commissioner Hamburg, I asked FDA a question for the record concerning 

the progress it has made on the GAO’s recommendations. I still 

have not received a reply. 

We all want to make sure FDA has the tools it needs to make 

sure drugs are safe and effective. To do that, we need to obtain the 

facts. It’ll be hard for us to devise solutions if FDA is not more 

forthcoming about the facts and more responsive to Congress. 

Having said that, I understand that legislation to improve supply 

chain integrity is a top priority for Chairman Harkin and Commissioner Hamburg. I look forward to working with them. And let me 

suggest four principles to guide our work together. 

Our first principle should be that we are as specific as possible 

in identifying the problem we’re trying to solve. One good example 

of a specific problem is, under current law, FDA must inspect domestic drug establishments every 2 years. But the law is silent 

about how often FDA must inspect foreign drug establishments. 

This means risky foreign establishments can avoid FDA inspections, and American companies bear more regulatory burden. 

Heather Bresch, the CEO of Mylan, has championed a change in 

law to level the playing field. I agree. FDA should be able to target 

inspections globally based on risk. 

Second principle—before making a new law, we should ask if 

FDA is using its existing authorities effectively. For instance, FDA 

promulgates current good manufacturing practices, or GMPs, to tell 

companies how to manufacture drugs. Despite all the obvious risks 

of globalization, FDA has not updated its GMPs on point. 

The Active Pharmaceutical Ingredient Guide was last published 

in 1998, and the Quality Systems Approach Guidance was last published in 2006. FDA published a GMP Questions and Answers 

Guidance earlier this year, but it does not address the globalization 

challenges we’re discussing today. We need to know why FDA 

hasn’t updated its know-your-suppliers GMPs. 

Third principle—we should develop solutions that actually solve 

the problem. Some ideas sound good in speeches, are politically 

dramatic, and make us feel like we’re, ‘‘doing something.’’ But they 

won’t necessarily make a dent in the real-world problem. 

For instance, some stakeholders advocate giving FDA mandatory 

recall authority for drugs. We can discuss that, but I’m skeptical 

it will make a real difference. FDA already has mandatory recall 

authority for medical devices and several other types of products. 

But according to GAO and the Institute of Medicine, FDA has only 

used its mandatory recall authority for devices three times. 

Examining the data, GAO found the average time it took FDA 

to effectuate a Class I medical device recall—those posing the 

greatest risk to consumers—was 516 days. Also, these recalls were 

not always effective. There were situations where devices that 

should have been recalled were implanted in patients, causing sev-
4 

eral deaths and serious injuries. And, remember, this is when the 

FDA already had mandatory recall authority. 

Fourth principle—as we legislate, we should not over-reach. For 

example, some stakeholders advocate for a complete pedigree or 

track-and-trace system for the distribution of drugs. A 2008 

Accenture study pegged the cost of a full track-and-trace system at 

up to $110,000 for an individual pharmacy. 

Small, independent pharmacists in Wyoming are already under 

intense pressure from cuts in Medicare Part D and Medicaid reimbursement. They are small businesses and can’t afford this additional cost. Moreover, most counterfeit and substandard drugs 

reach consumers through Internet sales, not retail pharmacies. 

Track-and-trace could impose tremendous costs on pharmacies but 

produce only a marginal effect. 

Again, I look forward to working with Chairman Harkin on all 

these issues. I have been a strong supporter of giving FDA the 

tools it needs. For example, Senator Kennedy and I co-sponsored a 

drug safety bill in 2007. The New England Journal of Medicine 

said it was the most significant drug safety bill in a half century. 

I also helped with the FDA new food safety and tobacco authorities. But right now, my concern is FDA over-regulating, not underregulating. 

In closing, I want to acknowledge that FDA’s witness today, Deb 

Autor, only recently assumed her new position as deputy commissioner. She inherited many challenges. 

Deputy Commissioner, you deserve credit for taking on a tough 

job, and I look forward to your testimony. 

The CHAIRMAN. Thank you very much, Senator Enzi. 

We have, basically, two panels. Our first panel will be Deborah 

Autor. Ms. Autor is the Deputy Commissioner for Global Regulatory Operations and Policy at the FDA. In this capacity, she leads 

the FDA in ensuring the integrity of our pharmaceutical supply 

chain and is responsible for imports, inspections, and enforcement 

policy for all FDA-regulated products. Ms. Autor also worked to secure our supply chain in her previous position as the Director of 

the Office of Compliance at FDA’s Center for Drugs. 

So welcome to the committee. Thank you for joining us today, 

Ms. Autor. Your statement will be made a part of the record in its 

entirety. If you could sum it up in 5 or 7 minutes, we’d certainly 

appreciate it so we can get into a discussion. So please proceed. 

STATEMENT OF DEBORAH M. AUTOR, J.D., ESQ., DEPUTY COMMISSIONER FOR GLOBAL REGULATORY OPERATIONS AND 

POLICY, FDA, SILVER SPRING, MD 

Ms. AUTOR. Thank you. Good morning, Chairman Harkin and 

members of the committee. I’m Deborah Autor, FDA’s Deputy Commissioner for Global Regulatory Operations and Policy. Thank you 

for the opportunity to testify before you today about drug safety 

and globalization. 

Globalization has fundamentally altered drug manufacturing and 

supply, greatly increasing the risks to American consumers. And it 

demands a major change in the way FDA fulfills its mission to promote and protect the health of the American people. 
5 

Based on almost 20 years of professional experience, I have witnessed the expanding gap between the globalization of pharmaceutical manufacturing and FDA’s antiquated domestically focused 

statute. This gap presents an immediate and ever-growing risk to 

the safety of the American drug supply. It provides an opportunity 

for criminals to introduce dangerous, adulterated, counterfeit, and 

stolen product into the supply chain, at great risk to patients and 

at great cost to pharmaceutical companies. 

The facts show that threats to our supply chain are real. Recent 

incidents of adulteration, counterfeiting, and cargo theft could pose 

serious threats to public health. The consequences throughout the 

world have been tragic. 

In recent years, glycerin in fever medicine, cough syrup, and 

teething products was adulterated with a highly toxic solvent, 

diethylene glycol, resulting in the death of hundreds of adults and 

children in Haiti, Panama, and Nigeria. And members of this committee are well aware of the 2008 Heparin contamination crisis. 

Heparin is a blood thinner used in every hospital in this country. 

But a cheap Heparin imposter was substituted for the real drug, 

leading to tragic deaths and illnesses in the United States. 

Similar to contaminated drugs, counterfeit drugs present real 

risks. A counterfeit drug could be made up of a substance that is 

toxic to patients or have little or no active ingredient, harming patients who take it, thinking that they are taking a life-saving or 

life-sustaining medication. 

In 2003, over $20 million in counterfeit and illegally imported 

Lipitor, a popular cholesterol lowering drug, was dispensed to patients at pharmacies throughout the United States. Even more 

frightening, the criminals mixed illegal Lipitor with real Lipitor, 

presumably to avoid detection. Although the counterfeit reached all 

parts of the country, fortunately, we believe patient harm was 

minimal. Eventually, we will not be so lucky. 

Just last year, a counterfeit version of the approved OTC weight 

loss drug, Alli, was sold over the Internet to U.S. consumers. Instead of the approved active ingredient, it contained high levels of 

a dangerous controlled substance, placing consumers at great jeopardy. 

Cargo thefts of prescription drugs also pose a significant public 

health risk. In 2009 alone, at least 46 drug cargo thefts occurred 

valued at a total of $184 million, a great expense to pharmaceutical 

companies. 

In March 2010, thieves broke into a warehouse and stole $75 

million worth of prescription drug products, including chemotherapy drugs, anti-depressants, and blood thinners. These products have not yet been recovered, and we fear that they could be 

distributed to U.S. consumers in spite of public warnings. 

In 2009, stolen insulin vials were reintroduced into the drug supply and caused adverse events in patients. The stolen insulin, 

which required refrigeration, lost its potency and did not provide 

the needed glucose control for diabetics. 

These are just some examples that illustrate the enormous challenges that globalization presents to FDA, pharmaceutical manufacturers, and the American public. 
6 

The drug supply chain is a complex path that medical products 

travel from raw source materials to finished products for consumers. At every stage in this process, opportunities arise for the 

product to be contaminated, diverted, counterfeited, or otherwise 

adulterated. The Internet presents an additional layer of complexity by introducing more players into the system and more opportunities for criminals to harm patients. 

FDA’s role in addressing these threats is critical. FDA has undertaken a wide range of activities to harmonize international 

standards, to share scientific and technical expertise with our fellow regulators, to provide training around the world in crucial regulatory disciplines, and to design innovative risk modeling systems. 

The agency took aggressive action in the wake of the Heparin crisis 

to address the vulnerabilities that the incident exposed, including 

inspecting Heparin facilities and updating testing standards for the 

drugs. 

We acknowledge that there is room for improvement, and we are 

doing all we can to address GAO’s recommendations by stepping up 

our efforts to address globalization. In June, FDA published a special report, ‘‘Pathway to Global Product Safety and Quality,’’ which 

lays out our global strategy and action plan. 

The agency is developing a new operating model that relies on 

strengthened collaboration, improved information sharing and 

gathering, data-driven risk analytics, and the smart allocation of 

resources, leveraging the combined efforts of government, industry, 

and public and private sector third parties. Toward this goal, Commissioner Hamburg created a directorate focused on grappling with 

these challenges and appointed me to head that directorate. 

Congress can help. Congress has the ability to align FDA statutory framework with the shift in the global paradigm. When President Franklin Delano Roosevelt established the modern FDA in 

1938, the percentage of medical products imported into the United 

States was minimal. 

Today the landscape is reversed. Nearly 40 percent of the drugs 

Americans take are imported and nearly 80 percent of the active 

pharmaceutical ingredients in those drugs are imported from more 

than 150 countries, many with less sophisticated manufacturing 

regulatory systems than our own. Only about one-third of the drug 

manufacturing facilities that FDA wants to inspect are in this 

country. The rest are spread around the globe. 

New statutory authorities, which I detail more fully in my written testimony, can help to level the playing field between domestic 

manufacturers and their foreign counterparts, increase drug safety, 

and provide FDA with the information it needs to most effectively 

and efficiently oversee the global supply chain. 

I appreciate your interest in this critical issue. I apologize for 

running over. But I look forward to working with you to address 

the challenges we face in protecting our Nation’s health in this 

globalized world. 

[The prepared statement of Ms. Autor follows:] 
7 

PREPARED STATEMENT OF DEBORAH M. AUTOR, J.D., ESQ. 

INTRODUCTION

Good morning, Chairman Harkin and members of the committee. I am Deborah 

Autor, Deputy Commissioner for Global Regulatory Operations and Policy at the 

Food and Drug Administration (FDA or the Agency) in the Department of Health 

and Human Services (HHS). Thank you for the opportunity to discuss the safety of 

the American drug supply. 

When President Franklin Delano Roosevelt established the modern FDA in 1938, 

the percentage of medical products imported into the United States was minimal. 

Today the landscape is reversed. Nearly 40 percent of the drugs Americans take are 

made elsewhere, and about 80 percent of active pharmaceutical ingredients (APIs) 

used in drugs manufactured in the United States come from outside our borders— 

from more than 150 countries, many with less sophisticated manufacturing and regulatory systems than our own. In addition to the sheer volume of imports and foreign facilities, there has been an increase in the variety of sources, shippers, methods of transportation and supply chain complexity of imported products, and our 

current authorities have not kept pace with the challenges of the current global 

marketplace. Combined, these factors create great challenges to FDA and industry 

in ensuring that all drugs are high quality and travel safely throughout their complex supply chains. These factors also provide opportunities for criminals to adulterate drugs for economic or other malevolent reasons. 

When we refer to the drug supply chain, we are talking about the increasingly 

complex path that medical products travel, from raw source materials to finished 

products for consumers. At every stage in this process, opportunities arise for the 

product to be contaminated, diverted, counterfeited, or otherwise adulterated. The 

Internet presents an additional layer of complexity by introducing more players into 

the system and more opportunities for criminals to reach consumers. Our efforts to 

secure the supply chain both in the United States and abroad include minimizing 

risks that arise anywhere along the supply chain continuum, from sourcing a product’s raw material, ingredients, and components through the 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 consumers. Supply chain safety 

threats also impact manufacturers’ bottom lines due to costs associated with both 

recalls and decreased public confidence. 

As members of this committee well know, this threat is not purely hypothetical. 

Recent incidents of adulteration, counterfeiting, and cargo theft have posed serious 

threats to public health. The consequences, throughout the world, have been tragic. 

In recent years, glycerin in fever medicine, cough syrup, and teething products was 

adulterated with the highly toxic solvent, diethylene glycol (DEG), resulting in the 

deaths of adults and children in Panama, and children in Haiti and Nigeria. Over 

the last 20 years, drug products containing glycerin contaminated with DEG have 

caused an estimated 570 deaths worldwide. Also in 2007, pet food adulterated with 

the industrial chemical melamine and cyanuric acid sickened several thousand pets 

in our country. The same contaminant was added to infant formula in China, fatally 

poisoning six babies and making 300,000 others gravely ill. Members of this committee are well aware of the 2008 heparin contamination crisis that resulted in several deaths and cases of serious illness. 

Counterfeit drugs raise significant public health concerns, because their safety 

and effectiveness is unknown. A counterfeited drug could be made up of a substance 

that is toxic to patients. But even a non-toxic counterfeit drug with a substitute or 

no active ingredient could prove harmful to patients who take it, thinking that they 

are taking a lifesaving or life-sustaining medication. In 2003, over $20 million in 

illegally imported and counterfeit Lipitor, a popular cholesterol-lowering drug, was 

distributed throughout the United States. The source and manufacturing methods 

of the product were unknown and had the potential to endanger patients. 

Cargo thefts of prescription drugs also pose a significant public health risk. In 

2009 alone, an estimated 46 drug cargo thefts occurred, valued at a total of $184 

million. These incidents are concerning to companies and consumers alike. Cargo 

thefts can cost drug manufacturers millions of dollars. They can also put consumers 

at risk because the stolen drugs may not have been stored or handled properly or 

may have been tampered with while outside of the legitimate supply chain. In 

March 2010, thieves broke into a warehouse and stole $75 million worth of prescription drug products, including chemotherapy, antidepressants, and blood-thinners. 

These products have not yet been recovered, and we fear they could be distributed, 

in spite of public warning. In 2009, stolen insulin was reintroduced into the drug 
8 

supply and caused adverse events in patients. The stolen insulin, which requires refrigeration, lost its potency and did not provide the needed glucose control. 

In our increasingly complex and globalized world, additional authorities could be 

important tools to help support FDA’s efforts to protect the safety of imports and 

the health of our citizens. New regulatory authorities may also help ensure that industry takes principal responsibility for the security and integrity of their supply 

chains and the quality control systems they use to produce medical products for the 

American people. FDA’s efforts are also critical to ensuring product integrity. As 

such, we intend to further transform FDA over the next decade from a predominantly domestically focused Agency, operating in a globalized world, to an Agency 

fully prepared for a regulatory environment in which product safety and quality 

know no borders. 

In June, FDA published a special report, ‘‘Pathway to Global Product Safety and 

Quality,’’ our global strategy and action plan that will allow us to more effectively 

oversee the quality, safety, and efficacy of all products that reach U.S. consumers 

in the future. The Agency is developing a new, more global operating model that 

relies on strengthened collaboration, improved information sharing and gathering, 

data-driven risk analytics, and the smart allocation of resources, leveraging the 

combined efforts of government, industry, and public- and private-sector third parties. Toward this goal, FDA Commissioner Margaret Hamburg created a directorate 

focused on grappling with the truly global nature of today’s world—food and medical 

product production and supply, as well as the science that undergirds the products 

we regulate—so that FDA can move from being a regulator of domestic products to 

one overseeing worldwide enterprises. She appointed me as Deputy Commissioner 

for Global Regulatory Operations and Policy to provide broad direction and support 

to FDA’s Office of Regulatory Affairs and Office of International Programs, with a 

responsibility to address the challenges of globalization and import safety a top priority in the years to come and to ensure that we fully integrate our domestic and 

international programs to best promote and protect the health of the public. I appreciate the opportunity to testify before you in my new role and look forward to working together to address the challenges we face in protecting our Nation’s health in 

this increasingly globalized world. 

STEPS TO SECURE OUR NATION’S DRUG SUPPLY CHAIN

FDA has undertaken a wide range of activities aimed at addressing the challenges 

and opportunities of globalization, including efforts to harmonize scientifically rigorous standards internationally, to share scientific and technical expertise with our 

fellow regulators, to provide training around the world in crucial regulatory disciplines, to strengthen detection, surveillance and assessment systems, and to design innovative risk-modeling systems. 

We now have permanent FDA overseas posts in Beijing, Shanghai, and 

Guangzhou, China; New Delhi and Mumbai, India; San Jose, Costa Rica; Mexico 

City, Mexico; Santiago, Chile; Brussels, Belgium; London, England; and Parma, 

Italy. This year, we have opened posts in Amman, Jordan and Pretoria, South Africa. These offices enable us to have a regional presence around the world and serve 

as important hubs for improved coordination with regulatory authorities and industry in other nations. They also conduct and facilitate inspections and other on-theground activities in foreign sites. We have more than 30 agreements with foreign 

counterpart agencies to share inspection reports and other non-public information 

that can help us make better decisions about the quality and safety of foreign products. 

When governments collaborate to strengthen safety standards, the results are 

safer, higher-quality products and enhanced economic development through a productive industry and a strong, reliable export market. The arrangement is mutually 

beneficial. To a large extent, our success or failure in this effort will be contingent 

on the relationships we establish with our foreign partners. That is why we are 

working closely with our sister regulatory authorities, international and national organizations, and industry to leverage resources to accomplish FDA’s mission. Especially in the area of good manufacturing practices for drugs, we already have agreed 

with major foreign counterparts on some harmonized international standards. By 

using the results of their inspections to assure us that their manufacturing plants 

are adhering to our agreed standard, we free up our inspectional resources to help 

ensure that such manufacturing practices are being followed in other, higher risk 

parts of the world. This also lessens the regulatory burden on industry, by allowing 

companies to manufacture to a common standard and to undergo fewer inspections 

by multiple authorities. 
9 

AFTER HEPARIN

The 2008 heparin contamination crisis is a case study in the vulnerabilities of the 

global supply chain. Heparin is a widely used injectable anticoagulant, derived from 

the mucosal tissue of pigs. In early 2008, contaminated heparin from China was associated with an increase in deaths in the United States. Whatever was contaminating this imported heparin could not be identified by the tests used at the time. 

After launching a far-ranging investigation, FDA scientists, working closely with 

academia and industry, developed a test methodology that identified a previously 

unknown contaminant in Chinese-manufactured heparin. The contaminated heparin 

contained over-sulfated chondroitin sulfate (OSCS), an intentionally added 

adulterant. An outbreak of blue ear pig disease had killed off a large portion of China’s pig population, creating an incentive for criminals to seek an alternative that 

mimicked the chemical makeup of heparin but, tragically, proved dangerous to consumers. FDA publicly referred to the heparin contamination crisis as a ‘‘wake-up call.’’ It 

was an alert not only for FDA, but also for U.S. citizens, industry, and lawmakers 

about our dependence on a globalized drug supply and the key vulnerabilities in our 

drug supply chain. FDA has taken a number of significant steps to safeguard the 

U.S. supply of this medically necessary drug. The Agency invested considerable resources to inspect heparin manufacturing and testing facilities related to the supply 

of heparin in the United States. Additionally, the United States Pharmacopoeia, a 

standards-setting organization upon which FDA relies, now calls for the testing of 

heparin to detect the presence of OSCS, the contaminant that sickened patients in 

2008. FDA has also implemented heparin-specific import surveillance including an 

import alert and multiple warning letters to ensure that adulterated heparin does 

not enter our borders. 

But our efforts have not stopped there. The heparin crisis was a crime of opportunity, and we need to minimize these opportunities. We are committed to putting 

preventive measures in place that will protect American consumers from adulteration of all imported drugs. We combine risk-based approaches with sound scientific 

evidence to protect the public from adulterated and unsafe drugs. The Agency takes 

several factors into account in determining whether a particular drug ingredient 

may be at risk for adulteration. For example, when a drug ingredient depends on 

raw materials that are particularly expensive, criminals may have extra incentive 

to find a cheaper alternative to the expensive ingredient. If the cheaper alternative 

can mimic the chemical activity of the product and thereby go undetected by standard testing, as was the case in the heparin and melamine incidents, the risk of adulteration is higher. To date, FDA has systematically ranked more than 1,000 APIs 

in order of their respective risk of adulteration, based on a multi-factorial, riskbased model we developed. A subset of these higher-risk ingredients is targeted for 

additional sampling and special testing at the border. In addition, FDA is working 

to reduce the risk that counterfeit or adulterated drug products reach consumers in 

the U.S. market by developing standards for a track-and-trace system that would 

enable the identification of these products and facilitate efforts to recall them. 

Through the creation of my position and other activities at the Agency, we have 

made addressing the challenges of globalization a top priority. To support this effort, 

FDA can benefit from new legislative authorities that are, at a minimum, commensurate with those of its major global counterparts. 

DRUG SAFETY AUTHORITIES

In general, new regulatory authorities may help ensure that industry takes principal responsibility for the security and integrity of its supply chains and the quality 

control systems it uses to produce drugs for the American people. In an era of 

globalization, new authorities can help to level the playing field between domestic 

and foreign manufacturers, ensure product safety and provide FDA with the information it needs to protect consumers. Those authorities may include: 

Leveling the Playing Field 

• Refusal of product admission to the United States if inspection of the manufacturing facility is delayed, limited, or denied—this authority is critical to providing 

a strong incentive for foreign facilities to allow FDA to perform inspections and to 

permit FDA to exclude from domestic commerce products whose foreign manufacturers or facilities try to avoid subjecting themselves to the same requirements as domestic manufacturers and facilities. This authority is not currently explicit in FDA’s 

law for any product other than foods. 

• Require information upon importation—the Agency can refuse entry of an import that appears from examination of samples or otherwise to be adulterated or 
10 

misbranded, but FDA lacks authority to require certification or other assurance of 

compliance with applicable standards or requirements as a condition of importation, 

consistent with FDA’s standards and requirements for the domestic drug supply. 

This is the opposite of the approach taken by many other countries, which place the 

burden on the importer or product owner to prove that its drug is compliant with 

country requirements. 

• Quality management systems—FDA currently works with industry to ensure 

that individual companies have effective quality management systems in place; however, additional statutory authority could place greater responsibility on manufacturers to account for the quality and provenance of the materials that go into their 

products. This would level the playing field between the companies that work diligently on their quality management systems to provide high quality products, and 

those that do not. 

• While FDA does not seek to interfere with regulatory authorities outside the 

United States, having express authority to address threats to U.S. consumers, 

whenever and wherever they may arise, is critical. 

Increasing Drug Safety 

• Mandatory recall authority—while in most instances firms eventually agree to 

voluntarily recall drugs that FDA believes pose a risk, FDA lacks the authority to 

compel such recalls and critical time can be lost in negotiations between FDA and 

a firm, leaving the public exposed to potentially serious health risks. The Agency 

currently has mandatory recall authority for medical devices, infant formula, and 

now many other foods, but not for drugs. 

• Administrative destruction at the border—absent this streamlined authority, 

FDA is often forced to return violative products to their senders because the current 

process for destruction requires a hearing, which is time-consuming and costly. Foreign drugs can then find their way back to U.S. ports of entry several times, posing 

a potential threat to consumers and wasting critical resources that could be better 

spent identifying new threats. This authority would level the playing field for those 

who produce compliant products, whether located in the United States or abroad. 

• Administrative detention—while FDA has the authority to administratively detain illegal foods and medical devices in U.S. commerce, it does not have a similar 

authority for drugs. Currently, we cannot immediately detain dangerous drug products when we find them. Absent this immediate tool, consumers can be exposed to 

unnecessary risks. 

• Enhanced criminal and civil penalties for foreign and domestic suppliers—statutory changes could help to deter would-be criminals from targeting drug products, 

and bring FDA’s penalties in line with those for other serious Federal health and 

safety violations. 

Increasing Information 

• Modernization of drug registration and listing—revising these statutory provisions may improve the timeliness, completeness, and accuracy of FDA’s current registration and listing information, making sure FDA has accurate and up-to-date information about foreign and domestic parties involved in medical product manufacture. 

• Notification to FDA—this authority would permit FDA to require foreign and 

domestic companies to provide complete information on threats such as counterfeiting, theft, non-compliance with regulatory standards, mislabeling or misbranding, or other threats to the security of the drug supply chain. Among other 

things, this would allow FDA to better spot emerging risks and trends across companies and then inform industry or take other proactive, preventive steps. 

• Unique facility identifier—the absence of a system of unique drug facility identifiers, such as a D-U-N-S number, submitted to FDA both as a condition of registration and import, makes it difficult for FDA to properly follow threats up the supply 

chain and makes it more difficult to get different systems, including at different 

agencies, to properly cross-reference. 

• Authority to share certain non-public information with other regulatory agencies and foreign governments—this authority would allow FDA to share certain information that could lead to timely identification, prevention, and resolution of 

emerging threats. Our ability to form global coalitions of regulators will be hampered if we cannot share critical information with our trusted partners. 

• Track and trace—requiring a cost-effective 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 manufacturing and distribution, whether the product is manufactured domestically or internationally. 
11 

In our increasingly complex and globalized world, these additional authorities represent important tools to help support efforts to protect the safety of imports and 

the health of our citizens. 

CONCLUSION

Given the challenges and threats posed by an increasingly globalized marketplace, 

we must modernize our approach to drug safety. We appreciate the comments of 

Chairman Harkin and Ranking Member Enzi in July in support of including legislation in the reauthorization of the Prescription Drug User Fee Act (PDUFA) to address the challenges of globalization. We look forward to continuing to work together 

to achieve our shared goal of protecting American consumers. I would be happy to 

answer any questions. 

The CHAIRMAN. Thank you very much, Ms. Autor. We’ll start 

with rounds of 5-minute questions. 

From your testimony, Ms. Autor, it sounds like one significant 

gap in our supply chain is FDA’s limited ability to inspect foreign 

producers. What can be done to inspect these foreign facilities more 

frequently, given your limited resources? 

Now, one of the things you mentioned in your written testimony—that I think you’re asking Congress for—is the authority for 

the refusal of product admission to the United States if inspection 

of the manufacturing facility is delayed, limited, or denied. Is that 

one of the critical aspects of this? 

Let’s be honest about things. I believe FDA needs more personnel. I think FDA needs more money. But in the climate around 

here, I doubt that that’s going to happen. 

So on the one hand, we want more safety. We want to level the 

playing field. So you have offices right now—FDA has offices in 

China and India and places like that. I don’t know how well they’re 

staffed. I know the offices are there. 

But speak to this—about inspections being delayed, about preannouncement of inspections—what good is it to do an inspection 

if you have to announce it 2 or 3 weeks in advance—and the ability 

of your offices overseas to conduct onsite inspections unannounced. 

Is that the kind of authority that you need from Congress? 

Ms. AUTOR. Senator Harkin, you mentioned one authority in particular that would be very useful, which is the ability of FDA to 

refuse for import products from foreign facilities that have refused 

to let FDA in to inspect or delayed or denied an FDA inspection. 

It seems common sensical that if a company is not a good enough 

player to actually let the agency in to see how it’s operating, those 

are not the products we want to come to the American consumers. 

But at the moment, the law is not clear on our authority to do 

that. So that is very important. 

With respect to being able to reach facilities overseas more, 

that’s obviously very important. And we recognize, in this economy, 

our resources are going to continue to be an issue. 

Our offices overseas are helpful. We have at this point 13 posts 

around the world, and they do some inspections. They do also a lot 

of work to collaborate and to work with our foreign counterparts, 

so that is part of the answer. And they are more likely than our 

U.S. inspectors to be able to make an unannounced inspection. 

But in foreign countries, in particular, in China, there’s a rule 

that we need to have a letter of invitation from the company before 

we can enter the country to inspect. So it’s very difficult to do an 

unannounced inspection. And what that means is that the playing 
12 

field really is not level between the foreign manufacturers and the 

domestic manufacturers. 

With the domestic manufacturers, we can show up at their door 

any day. They will usually let us in. If they don’t, we can go and 

get a warrant and get in. On the foreign side, it’s very hard to get 

there. When we get there, they may or may not let us in. If they 

do not let us in, we do not have the explicit authority to prevent 

the drugs from coming to U.S. consumers. 

The CHAIRMAN. So taking China as an example, then, you have 

to have a letter of invitation from the company in order to be able 

to inspect. Is that right? 

Ms. AUTOR. In order to get the visa to come to China to inspect. 

That’s as I understand it. 

The CHAIRMAN. I thought you have an office in China. 

Ms. AUTOR. We do, and they do some inspections. They do some. 

The CHAIRMAN. But do they have to have a letter of invitation? 

Ms. AUTOR. I believe they do not. But I think it’s not realistic to 

think that FDA will ultimately have enough personnel spread 

around the globe that we can see their facilities at all times when 

we want to. What it means is that we need to think creatively 

about how to assess the foreign—— 

The CHAIRMAN. So it’s very clear that companies in China that 

manufacture ingredients or the finished drugs can thwart inspections, actually deny inspections, and still ship their product to the 

United States. 

Ms. AUTOR. They can. And another interesting thing about our 

law is that it puts the burden on FDA to keep products out of the 

country. So if a manufacturer offers something for import, we have 

to show that something appears to be wrong with it in order to 

keep it out of this country. 

Now, in every other grown-up country that we know of, the regulator has the authority to say, ‘‘If you want your product to come 

in, you must show us that your product is good.’’ For us, we must 

show that it’s bad. And when you think about that in the context 

of a globalized world where there are so many manufacturers we 

do not see, it’s simply not a reasonable burden. 

We simply think that manufacturers should be required to show 

some minimal standards that their product is approved, that it 

complies with good manufacturing practices in order to be able to 

access U.S. markets. And that will also level the playing field between the manufacturers who want to do it right and the manufacturers who don’t. 

The CHAIRMAN. I have one followup question. My time has expired. So I’ll recognize Senator Enzi. 

Senator ENZI. Thank you, Mr. Chairman. 

The FDA still hasn’t responded to my sole question for the record 

from our July hearing with the commissioner. I asked for a status 

report on the implementation of the GAO supply chain recommendations. I’ll have several questions today that I’m sure I 

won’t have time to ask. 

Will you commit today to work with the committee in a more 

timely and responsive manner? 

Ms. AUTOR. Absolutely, Senator Enzi. I do understand that you 

have questions for the record pending related to our GAO rec-
13 

ommendations, that those questions came in in August, and we are 

working very hard to respond to them. We want to make sure we 

get the technical facts right before we send them to you. And when 

we respond, you will see that we have continued to make serious 

progress against the challenges and the issues that GAO has pointed out. 

Senator ENZI. Good. FDA promulgates current and good manufacturing practices, or GMPs, to tell companies how to manufacture 

drugs. Given the risks of globalization, why hasn’t the FDA updated its know-your-suppliers GMPs? 

Ms. AUTOR. There are some opportunities we have to update our 

standards under current law. And we will try to do so if Congress 

does not update the law. But updating the requirements through 

regulation is a lengthy, uncertain, expensive process for the taxpayers, essentially litigious, with an unclear outcome. 

So the GAO, I think, has said that it’s urgent for these issues 

to be resolved. I think if Congress believes these issues are also urgent, then Congress can help to resolve them quickly through legislation. 

Senator ENZI. Even if we do legislation, won’t you still have to 

go through the regulatory process with it? 

Ms. AUTOR. I think that depends on what the legislation says. I 

think there are some things which you may be able to do immediately through legislation, which would change the paradigm, 

which would bring manufacturers up to a higher level or level the 

playing field between the good players and the bad players, between the domestic ones and the international ones. There’s some 

things where we would have to do regulations afterwards. 

But to get our statute up to a modern, globalized world—I think 

that’s something that Congress could be able to do quickly. 

Senator ENZI. Since we should be working on that quickly, I hope 

you would get the specific things to us so that we can do that and 

perhaps avoid the regulation route, although I think there’s a big 

hesitancy to do anything too specific by a group of people that don’t 

work on it on a daily basis. 

So GAO found that 83 percent of the time, FDA does not target 

foreign drug inspections on the basis of risk. FDA’s ‘‘Pathway to 

Global Product Safety and Quality’’ reported earlier this year said 

the agency is building intelligence, surveillance, and risk assessment programs to fix this problem. To what extent have you implemented these programs? 

Ms. AUTOR. Well, the ‘‘Pathway to Global Product Safety and 

Quality’’ report was issued in June, and part of implementing that 

report is my new position in the new directorate, and I assumed 

my job on July 31. So I haven’t had a tremendous amount of time 

to establish global coalitions and global data systems yet, but we 

are thinking very hard about how we can do that. 

As you pointed out, the ‘‘Pathway’’ report talks about global data 

systems, advanced risk analytics, as well as global coalitions of regulators and reliance on public and private third parties. And we believe that this is the way for FDA to do the best it can within today’s current challenges. 

We have some history in collaborating with our foreign regulators, for example, on drug inspections with Europe and on active 
14 

pharmaceutical ingredients with Australia and Europe. So there 

are steps we’ve taken in the past which lead us to this path, and 

we are serious about implementing it right now. And I’m doing my 

best to get it started, and I haven’t done so over the past 6 weeks. 

Senator ENZI. I appreciate your efforts on that. The GAO says 

that FDA does not have adequate information systems to detect 

overseas supply chain risks. In 2009, FDA started migrating out of 

a paper-based system called DRLS into an electronic system called 

E-LIST. 

According to GAO, FDA says it can’t tell whether the system 

change has helped solve the problem or made it worse. What is the 

status of that system migration? 

Ms. AUTOR. We have implemented an electronic registration and 

listing system, and I think it’s been very helpful. It has eliminated 

some of the possibility for human error when we literally had people typing in what they received on forms in the mail. So that’s a 

major improvement bringing us into this century, I believe. And it 

has helped us to establish consistency in our records, because we 

don’t have that error. 

We are also doing other things which we think can help with our 

data systems. For example, we are working with Dun and Bradstreet on a unique facility identifier. And one thing that you could 

think about legislatively is requiring facilities to have a unique 

identifier, such as the D-U-N-S number, because having a unique 

facility identifier for drug manufacturers greatly helps FDA’s ability to have a clear inventory. We don’t have the possibility of typographical errors in addresses. 

We have Dun and Bradstreet’s database of millions of corporate 

entities to verify our information. We can work together with our 

foreign counterparts, because we can use the same consistent numbering system and compare our records. There’s a great deal we 

have done in implementing the electronic system, and there’s a 

great deal we can do to improve that, especially with some help 

from Congress. 

Senator ENZI. I’d raise a few more questions, but my time has 

expired. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Enzi. 

Now, in order of arrival, Senator Bennet, then Senator Roberts, 

then Senator Franken. 

Senator Bennet. 

STATEMENT OF SENATOR BENNET

Senator BENNET. Thank you, Mr. Chairman, and the Ranking 

Member for holding this very important hearing. 

As I travel around the State, I hear a lot about regulation. People are asking all the time about regulation. Sometimes people say, 

‘‘We should get rid of all that,’’ and sometimes people have a different point of view. 

If there was ever a case that screamed out for a bipartisan approach to get us into, as Ms. Autor was just talking about, the 21st 

Century, it is this case, because there are twin objectives, I think, 

that we need to accomplish somehow as we go forward here. One 

is to recognize that 80 percent, as you said, of our active ingredi-
15 

ents are now produced overseas and are largely unregulated, and 

we don’t know what’s going on there, which is a shock to Coloradans when they hear that, just as it’s a shock when they hear 

that the GPS in their car is more advanced than the ones in our 

airplanes because of our inability to deal with the FAA bill. 

The other piece is that we have got to figure out, as we’re doing 

this, how to create a competitive biosciences industry here in the 

United States, one that we can rely on in the 21st Century to create jobs in places like Colorado. And I appreciate very much that 

Commissioner Hamburg came out to Colorado to have a conversation with our bioscience community and to work collaboratively 

with them. 

I’m interested to hear a little bit, generally, about how you see 

the globalization of our drug supply fitting into the overall effort 

to remove regulatory barriers and to inspire innovation right here 

in the United States. 

Ms. AUTOR. Sure. Thank you, Senator Bennet. I would say right 

now that the incentives are not really there for innovation in quality. And what we hope that Congress will look at is quality management systems which will improve innovation and quality, foster 

innovation and quality. Right now, because the playing field is 

unlevel, it does not reward companies who want to do it right, who 

want to find innovative ways to do it right. 

And I should point out, by the way, that doing it right does not 

necessarily cost more. We have one company, for example, who 

committed to their quality side of the house, to making sure their 

manufacturing was right. And so they spent $100 million less than 

they had intended to spend on quality. 

Conversely, companies who don’t do it right or companies that 

run into problems can lose an awful lot of money. In the Heparin 

crisis, Baxter lost $30 million in sales and $4.7 billion in market 

capitalization. Recently, we had recalls of injectable products because there was glass shearing off inside the vials. So there were 

glass lamellae in the vials, which obviously can’t be injected into 

patients. Industry spent probably $250 million recalling those products. 

So that’s money that they’re spending on cleaning up quality 

issues rather than investing in new products and being innovative. 

So we think actually that leveling the playing field and putting in 

place a modern system can help a great deal in innovation and 

competitiveness. 

Senator BENNET. And one of the things I hear all the time from 

the folks in our State that are in this field is that other countries 

also are having to grapple with this question as well and are modernizing their regulatory agencies to deal with it, being more responsive than they’ve historically been. And I wonder if you could 

talk in that context a little bit about something else you mentioned 

in your testimony, which was the harmonization of the international regime. 

Are there ways that we can rely on others to help us do this 

work, and others rely on us to help us do this work? How do we 

make sure that we’ve got a global regulatory system that can actually manage this problem? 
16 

Ms. AUTOR. By all means. And the ‘‘Pathway to Global Product 

Safety and Quality’’ report, I think, makes crystal clear FDA’s recognition that we simply can’t do it alone and that we need to work 

together with our counterparts, that we need to form global coalitions of regulators. To some extent, that means harmonizing standards. To some extent, it means simply being able to rely on each 

other. 

And this has great benefits for industry as well. It leads to fewer 

inspections, streamlined requirements, and if we’re able to reach 

more companies around the world, it effectively minimizes what we 

have now, which is a competitive advantage of noncompliance. 

Companies who choose to skirt the law can do so beyond regulators’ reach and thereby make more money by doing it poorly. 

Working together with our counterparts, harmonizing and collaborating, is a way that we can level that playing field and we can 

improve quality overall. 

Senator BENNET. And that, I think, is one of the reasons why the 

good actors in this world want these statutes updated and want 

this regulatory regime updated, because if there’s a bad actor, it 

hurts everybody in the entire industry and our patients as well. 

Thank you for your testimony. 

[The prepared statement of Senator Bennet follows.] 

PREPARED STATEMENT OF SENATOR BENNET

Mr. Chairman, it’s been more than 70 years since the laws governing the Nation’s pharmaceutical industry were updated. The 

year was 1938. Franklin D. Roosevelt was president, gas cost 10 

cents a gallon, and the average price for a new home was $3,900. 

A lot has changed. Unfortunately, the country’s drug safety laws 

haven’t. Many regulations are woefully, and dangerously, outmoded, in the face of an increasingly globalized and opaque supply 

chain that is vulnerable to theft and criminal activity. 

So buyer beware. 

The blood thinner heparin, for example, used in your local hospital, may originate from pig intestines stored on the floor of a 

grimy factory in a remote region of China. Diabetes patients may 

be oblivious to the fact that their insulin—which requires refrigeration—may have been stolen by a street gang, left out in the heat, 

then sold back into the market. 

In 1938, drug manufacturers were easily checked for quality and 

safety. The lines of commerce consisted mostly of the 48 contiguous 

States. Regulators were able to inspect drug manufacturers every 

2 years or show up unannounced to verify ingredients with relative 

ease. 

Today, up to 80 percent of all drug ingredients are manufactured 

in countries like China or India. In some cases, drug makers buy 

ingredients from foreign suppliers without actually knowing who 

those suppliers are. As a result, products show up on our shelves 

that do not meet basic U.S. safety standards—and put American 

families at risk. 

Three years ago, for example, contaminated heparin led to hundreds of illnesses and several deaths. The contaminant was traced 

to a filthy, uninspected and infested factory in China. 
17 

We should consider as an issue of national security the path 

pharmaceuticals take before and once they enter our country. Hundreds of different hands distribute and repackage drugs before they 

appear on our pharmacy shelves and in our hospitals. Our system’s 

lack of transparency makes it almost impossible to know who is actually handling our medicine. 

You can get more data from a barcode on a gallon of milk than 

you can from a bottle of aspirin two aisles over. We need a system 

to ensure that drugs can be tracked like a FedEx package—to help 

us more easily spot counterfeits or detect stolen or recalled products. 

Accountability must stretch across the entire supply chain—all 

the way to distribution. 

Right now, each State has different laws for tracking drugs. 

Compare that to airport security. If every major U.S. airport had 

different airport security processes, with some easier to flout, imagine which one a terrorist would prefer. 

A comprehensive, practical approach will increase safety, help efficient interstate commerce and minimize inconsistencies among 

the current patchwork of State requirements. 

I introduced the Drug Safety and Accountability Act last year, to 

increase both industry and regulatory controls to ensure drug safety and protect patients. It would require more accountability of 

drug company ingredients across the entire supply chain. It also requires that the Food and Drug Administration fix its inadequate 

monitoring systems on manufacturing sites here and abroad, while 

giving the agency authority to order a drug recall—a power that 94 

percent of Americans want the agency to have. 

The FDA needs resources to improve accountability and quality. 

To its credit, industry has been willing to consider user fees— 

whether domestic or international—so that the agency can do the 

number and scope of inspections that we need. 

Equally important, we need to increase penalties for those who 

game the system. Right now, you get higher penalties for illegally 

copying a DVD than for counterfeiting drugs. Criminals who once 

specialized in dealing illegal narcotics are now gravitating toward 

counterfeiting pharmaceutical drugs—because penalties are so 

much weaker. 

As Congress begins to consider FDA reauthorization, it must 

work across party lines to address these supply-chain shortcomings. 

A strong drug supply and distribution chain that protects U.S. 

consumers should not be a partisan issue. It is a matter of competitiveness, national security and consumer safety. 

Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much, Senator Bennet. 

And I want to note again for the record that Senator Bennet has 

introduced legislation on this last year. 

I was reading it over in preparing for this hearing today, and I 

thought you made one point in your remarks on introducing the 

bill that we get more information from the barcode on a gallon of 

milk than we do on—— 

Senator BENNET. Right. 
18 

The CHAIRMAN [continuing]. Anything we get from the drugs that 

we get. I thought that really kind of capsulized it. 

Senator Roberts. 

STATEMENT OF SENATOR ROBERTS

Senator ROBERTS. Well, thank you, Mr. Chairman. And I echo 

the comments of my colleague and friend from Colorado. 

I’m still somewhat confused, which is a state that I walk around 

in a lot, and I don’t know exactly what you want in terms of new 

authority. Could you clarify that for me? Does the FDA really need 

new authorities to inspect the foreign facilities, or are you simply 

asking for more funds, or both? I mean, there’s a difference between a need and a want, and in the climate we’re in, it’s extremely difficult in regards to funding. But authority may be the 

answer. And Senator Enzi really posed that question, so my question is just a repeat of his. 

Ms. AUTOR. Sure. Well, just to clarify, we’re not talking about 

new authorities to allow us to inspect foreign facilities, per se. 

What we’re talking about is new authorities in light of the fact that 

our pharmaceutical supply chain has globalized. So, for example, as 

I said, right now, if a foreign facility refuses to let us inspect—and 

we need to let their products in. Globalization has greatly increased—or it may need to—the law is unclear as to whether we 

can keep their products out simply because they refused inspection. 

Globalization has greatly increased the challenges for the agency, 

greatly increased the opportunities for counterfeiting, contamination, drug diversion—— 

Senator ROBERTS. Yes, ma’am. I understand that. But do you 

want new authority or not? 

Ms. AUTOR. Yes, sir. 

Senator ROBERTS. You do want authority? 

Ms. AUTOR. Yes, sir, and I’m talking about—— 

Senator ROBERTS. And you will respond to Senator Enzi and the 

Chairman’s specific questions. OK. We got that down. Thank you. 

I didn’t mean to interrupt you, and I apologize. 

Can you really provide the committee with a full and complete 

list of all the foreign drug establishments that are involved in the 

U.S. drug supply chain? Is that possible? 

Ms. AUTOR. If you want the long list, we could try to do that. I 

think that we do have lists of the facilities who offer products for 

import to the United States. 

Senator ROBERTS. Right. 

Ms. AUTOR. And lists of the foreign facilities that register with 

us, which is a requirement. 

Senator ROBERTS. Well, that would really help, I think, in understanding the breadth of the current problem. You’ve outlined a serious situation. 

Last year, stolen insulin managed to make its way back onto the 

pharmacy shelves and reached patients. As you know, this is a 

heat sensitive product that will not work if improperly stored. I 

don’t know how this deception was possible. There is no comprehensive national system, apparently, to track and authenticate 

packages of drugs as they travel from the manufacturer to the 

wholesaler to the pharmacy. 
19 

What steps can the FDA take to help the transparency of the 

drug distribution? And do you need any authority or an additional 

mandate to do that? 

Ms. AUTOR. Yes, sir. As you pointed out, products are able to infiltrate the legitimate supply chain at this time, including products 

like the stolen Levemir insulin. 

Senator ROBERTS. Right. 

Ms. AUTOR. What we would need to rectify that would be a requirement for a track-and-trace system, a system which allowed 

manufacturers and pharmacies to know who had touched the drug 

between the time it was manufactured and the time it reached the 

pharmacy. Right now, under the law, we are required to come up 

with a national standard, but the law does not say that that standard is enforceable, or that it’s a violation of the law not to comply 

with the standard, or that that law will pre-empt the requirements 

of the States. 

And the risk is right now, in fact, that what will happen is the 

50 States will each put in separate requirements leading to a 

patchwork which will be very difficult for industry—— 

Senator ROBERTS. Yes, that would be a hodge-podge for sure. But 

you do have a plan for the transparency, in fact, if you had the authority and you had the funds to do it. Where are you with that? 

Ms. AUTOR. We are working on a track-and-trace standard. We 

don’t have the authority to make it enforceable. We do have the 

standard to put it out there and to hope that people follow it. 

Senator ROBERTS. I see. OK. I’m going to touch on what the Senator from Colorado said. Like the Senator from Colorado and like 

the Chairman and like Senator Enzi, everywhere I go, people say, 

‘‘What on earth are you doing passing regulations that are crazy 

and are about to put me out of business? What are you guys 

doing? ’’ I always reply and say, ‘‘I’m an us guy, not a you guy.’’ 

And then I try to trace the regulation back that doesn’t make much 

sense. 

When it finally reaches downstream—we were talking about upstream, but now this is downstream—and it’s in every conceivable 

business that is essential to the committee. Let’s talk about the 

pharmacists. 

The pharmacists today in my State do not serve Medicare patients because of all of the regulations with PPACA and the new 

healthcare law, and also competitive bidding, and they can’t sell 

durable medical equipment, and they can’t do this or that. And 

some of them are going out of business because of the regulatory 

overkill. 

I want to know about the potential cost to the individual pharmacist, especially in rural and small town America, if we implement a full track-and-trace program. Somebody’s got to pay for 

this, and the consumer usually does, and then it—well, until it gets 

to the consumer—it goes to the pharmacist. So I’m worried about 

the small town pharmacy. You won’t have a problem with any kind 

of drug if you don’t have a pharmacist to distribute it in a local 

town, because they won’t get any. 

Ms. AUTOR. Yes. Sir, we fully understand that, and we understand the concerns about pharmacies, about the economic impact of 

a track-and-trace system. And we are committed to trying to come 
20 

up with the best system we can, balancing the need to protect public health with the need to be able to allow businesses to remain 

economically viable. We are trying to do that. 

We held a public meeting. We had the docket open so we could 

collect comments. We are considering those comments and trying 

to come up with the best model that allows us to have the maximum impact with a minimum burden. 

I would point out in 2009, we had $184 million in drug cargo 

thefts. So that is an economic loss to the industry and to the pharmaceutical community, which ultimately gets passed on to consumers and probably the pharmacies as well as a cost. So we need 

to come up with a system that works best, balancing all of those 

interests. 

Senator ROBERTS. So you do have a cost-benefit yardstick in your 

closet. I appreciate it. Thank you. 

I’m over time, Mr. Chairman. Pardon me. 

The CHAIRMAN. Thank you, Senator. 

Senator Franken. 

STATEMENT OF SENATOR FRANKEN

Senator FRANKEN. Thank you, Mr. Chairman, and thank you and 

the Ranking Member for this very important hearing. 

Let me ask about the Heparin. That came from China and Baxter was the—distributed it here in this country? Is that right? 

Ms. AUTOR. Virtually all Heparin in this country comes from 

China because it takes one pig to make one vial of Heparin. And, 

frankly, there are a lot of pigs in China to be able to make the 

Heparin, so most of the Heparin in this country comes from China. 

In that case, we traced the contaminated Heparin back to China, 

and then it was distributed through Baxter and other companies 

in the United States. 

Senator FRANKEN. Can you comment on whether FDA has considered requiring manufacturers, as opposed to the FDA, to hold 

sub-suppliers and others further down the chain accountable? That 

would, I think, put the responsibility on the Baxters of this world 

to say, ‘‘Look, you know, I’ve got to check the drugs I’m distributing.’’ 

Ms. AUTOR. Yes, by all means. And, in fact, when we’ve talked 

about quality systems and something that Congress might want to 

look at, one of the things we talked about is the manufacturer 

should have adequate control over their suppliers and over their 

supply chain. And right now, a lot of good companies do that. But 

the problem is that there are companies that do not, and what we 

need to do is raise the floor so that we have consistent quality 

throughout. 

But, by all means, the idea is that manufacturers are best placed 

to be able to ensure the quality of their products. They know what 

the risks are associated with those products. They can make sure 

that they’ve thought about the vulnerabilities. They can make sure 

that they have audited the suppliers. By all means, I think it’s not 

something that the agency could even realistically do. It’s for manufacturers to do. But it’s something that needs to be clear in the 

law that they need to do that. 
21 

Senator FRANKEN. Can the FDA inform the public of which companies are doing it and which ones aren’t? 

Ms. AUTOR. One thing that the FDA does now, which we started 

doing recently, is we post our inspectional outcomes for manufacturers. So we think that’s one thing that helps to bring a little bit 

of transparency to who’s doing it right and who isn’t. I think that’s 

the most helpful kind of thing we can do. 

But, again, to have a system which, in light of globalization, requires all manufacturers to do it right in the first place is very 

helpful, because consumers often don’t get a choice about which 

drug they take. They go to the pharmacy and they give them what 

they get. So the importance is to make sure that when the drugs 

get there, they are the adequate quality for consumers. 

Senator FRANKEN. Yes, but, I mean, the pharmacist would be the 

one, I would think, that would be looking at what manufacturers 

are doing, the inspection of the subcontractors, and then the pharmacist would be more inclined to take the product of the companies 

that are acting in good faith. 

Ms. AUTOR. Perhaps, if they have that flexibility, they would do 

that. But more important, I think, is to make sure that the manufacturers do it right in the first place. 

Senator FRANKEN. How do you do that? 

Ms. AUTOR. I think you make sure to put in place a statutory 

scheme which levels the playing field between the good guys and 

the bad guys, puts enough requirements in place to do that. Also, 

the other things that Congress could think about are things that 

would enhance product safety, like a mandatory recall system, like 

increased criminal penalties relating to adulterating drugs, and 

also things that increase information. 

So FDA’s best role in the circumstance, I think, is to be able to 

look across industry to see emerging risks. But right now, for example, if a company has a counterfeiting incident or a cargo theft 

or contamination, in most cases they’re not required to tell us. So 

we may not only be able to immediately jump in on that issue to 

protect the public health and investigate, but if it’s something 

which other parts of the industry know about, we cannot tell them 

if we’re not alerted. 

There are situations where companies have voluntarily told us, 

‘‘We have a problem. There’s a contamination of our inactive ingredients,’’ and we’ve said to other companies, ‘‘You need to be on the 

lookout with respect to this inactive ingredient so that you can protect yourselves.’’ But absent a statutory scheme, we can’t consistently play that role, which I think is the best role for us. 

Senator FRANKEN. Let me ask about your ability to inspect foreign subcontractors. Is there anything in our trade laws, in our 

trade policies, where we can enforce that? In other words, if you’re 

going to be selling your drugs and your ingredients of drugs here 

in the United States, we insist that we be able to inspect your factories. Can that be in part of our trade policy and the World Trade 

Organization’s policies? 

Ms. AUTOR. As far as I know, that’s not something that’s likely 

to happen. I’m not a trade expert, but the challenge, I think, is that 

imposing barriers to trade is very difficult through those kinds of 

organizations. 
22 

But what we’re talking about differently is the ability to, under 

the Federal Food, Drug, and Cosmetic Act, under FDA’s act, say, 

‘‘If you have refused, delayed, or denied inspection, then your product won’t come in.’’ And that, by the way, is an authority the Congress put in place recently for food safety. So it’s something that 

can be easily done through our act. The same thing, saying to companies, ‘‘You need to show something that’s good about your product if you want to come into the United States’’ rather than making 

FDA show there’s something bad about it, is a way to very quickly 

change the paradigm to keep up with globalization in a way that 

is really imperative. 

Senator FRANKEN. OK. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thanks, Senator. 

Senator Mikulski. 

STATEMENT OF SENATOR MIKULSKI

Senator MIKULSKI. Thank you, Mr. Chairman. 

Ms. Autor, I’m so glad to see you. Know that being here at this 

hearing, I’ve got several hats, one of which, of course, is a Senator 

from Maryland in which FDA is headquartered. And we’re so proud 

of the work you do under the difficult circumstances, funding, and 

contradictory requirements that you’re given. 

But I’m also here as a member of the Intelligence Committee, 

and I’m also here as the appropriator for the Commerce Justice Department, meaning Justice work, because I believe that adulterated 

drugs coming into this country is criminal. I think it’s a form of 

murder. You cannot rely on blood thinners the way members of my 

own family have, be a diabetic and rely on prescription drugs, and 

not know that which you are ingesting in your body could be the 

very thing that kills you rather than the very thing that saves you 

from a stroke, a heart attack, or a diabetic coma. 

So we’ve got to get real. We’ve got to get serious, and we have 

to have a sense of urgency. That’s not laying it on FDA. That’s laying it on us. We throw zillions at DOD to protect the homeland, 

to fight them over there so they don’t kill us here. We’ve got to 

have that same attitude toward those that are adulterating drugs 

over there, quite frankly, so they don’t kill us here. 

Now, your background is terrific. You’re a trial lawyer. You 

worked at the Justice Department. You have an incredible background in working with Federal law enforcement. 

My question to you is, what are we going to do to create this 

sense of alarm, alarm, a red alert, going to the edge of our chair, 

DEFCON 3, because this is a growing problem. This is not exaggerated hyperbole for CNN for me. This is a compelling need when we 

look at the number of people who take prescription drugs, in which 

we are now so vulnerable and which are usual and customary 

drugs, particularly the issue of blood thinner. 

Now, I don’t know about those Chinese pigs. OK? I don’t know 

if they’re communist pigs. I don’t know if they’re capitalist pigs, 

and I don’t know if they’re clean pigs in order to do this. But what 

I do know is that right now, all over the United States of America, 

there are a million—over a million people taking some form of 

blood thinner, that depends on Heparin and then to Warfarin. 
23 

So my question to you is are we moving with that sense of urgency? Has this been escalated to a homeland security issue? Is 

this the top of anyone’s agenda? Because this is as important as 

protecting our borders as we do from anything else illegal or 

threatening coming into our country. 

Ms. AUTOR. Thank you for that question. I really appreciate it. 

And I really do share your sense of urgency. I worry about products 

like this, which, frankly, cross our border every day. This is counterfeit Tamiflu and counterfeit Lipitor, and you’re welcome to look 

at it if you’d like. They look very, very similar, and they come into 

this country. 

And one important thing that your question gets to, Senator Mikulski, is the fact that the risk to the pharmaceutical supply chain 

is not simply from people who are out to make a buck. There is a 

risk from people who have much more malevolent motivations, and 

I think we need to be aware of that. 

And so I do everything I can to reach global facilities, to change 

what we’re doing at the agency, to be more proactive, to be more 

creative, to collaborate. But there are things which are not currently in the law, like requiring manufacturers—clearly requiring 

manufacturers to update their test standards to look for 

vulnerabilities. 

Senator MIKULSKI. Especially making criminal charges, exactly. 

Ms. AUTOR. Yes. 

Senator MIKULSKI. I mean, really, we’ve got to do some out-ofthe-box thinking here. It’s not are you for regs or against regs, you 

know. We are for smart regulation. 

Ms. AUTOR. I completely agree. And with respect to another crisis like Heparin or something worse, it’s not a matter of if. It’s a 

matter of when. 

Senator MIKULSKI. Now, let’s talk about FDA, Justice, and the 

Department of Homeland Security. Do they feel that this has this 

heightened urgency? And has this been moved up the chain of command while we’re looking at the supply chain of drugs and counterfeit drugs? 

Ms. AUTOR. That’s a very interesting question. I can’t speak for 

them. I’m not sure I could answer that question sitting here today. 

But I’d be happy to answer that for you. 

Senator MIKULSKI. Well, you know what? I just wanted our committee to know this. Senator Whitehouse is on the Intel Committee. 

So is Senator Roberts. We see the growing nexus between organized crime, international organized crime, and the corruption of 

public officials, overlooking any other kinds of collaborative enforcement. So I don’t want to do complicated foreign policy here, but I 

think we need to look at it. 

I know my time is up. I had a chance to talk with Interpol this 

summer and do extensive conversations about their digital databases and what they see as a growing problem. This is an international problem, so it is not only for us. Whatever we feel about 

harmonization or not and the EU and all of that, the fact is that 

for any of us who value safety and efficacy, this is, I think—has 

to be elevated to a national security, homeland security, and criminal level. I look forward to talking with my colleagues so that we 
24 

approach it that way, so that the American people know that if 

they take it, it will be OK. 

Thank you. 

The CHAIRMAN. Senator Mikulski, thank you very much. I just 

want to follow up. Our witness from the Pew Charitable Trust will 

be testifying later—Mr. Coukell. And his testimony I read last 

night said that this incident—he’s talking about the Heparin incident, Senator Mikulski—said that the Heparin incident resulted in 

150 deaths. But to this day, no one in any country has yet been 

held accountable. 

Is that a fact, Ms. Autor? Can you verify that or not? I’m just 

reading from what someone’s going to testify here shortly that said 

that no one has yet been held accountable in any country. 

Ms. AUTOR. With respect to Heparin, we did conduct a criminal 

investigation in China but, ultimately, were not able to bring that 

to fruition at this point with a—finding a culpable individual. One 

thing I would say about Heparin, though, is it’s a crime of opportunity. It was a crime of opportunity. So even catching the person 

who did that wouldn’t solve the problem. What we need to do is 

work to minimize the opportunities for something like that to happen again. 

The CHAIRMAN. Thank you very much. 

Senator Whitehouse. 

STATEMENT OF SENATOR WHITEHOUSE

Senator WHITEHOUSE. Thank you, Chairman. 

Ms. Autor, you said about inspecting overseas facilities that manufacture product for American consumers that you—I think you 

used the phrase, may not be able to prevent the importation of a 

drug manufactured in a facility that refused inspection. What are 

the dimensions of that question, that you may not be able to? Why 

is that an uncertain proposition, and what are the—sort of, from 

a lawyer’s point of view—what are the weasel words around that 

proposition that define it a little bit more clearly? 

Ms. AUTOR. Sure. The way the law works right now is we have 

to show that the product appears to be adulterated, misbranded, or 

unapproved in order to keep it out of the country. Again, the burden is on us, and that is our standard. 

So the argument we have to make is that because they refused 

inspection or delayed or limited our inspection, that means that 

their products appear to be adulterated or misbranded or unapproved. That’s an argument we can make. It’s not as clear in the 

law as it could be, especially if Congress wants to clearly say, ‘‘We 

recognize that there are a lot of global facilities out there, and we 

want to level the playing field and make sure that we assure the 

quality of the products being imported.’’ 

Senator WHITEHOUSE. So it’s a largely fact-based determination, 

case by case—— 

Ms. AUTOR. Right. 

Senator WHITEHOUSE [continuing]. With you evaluating whether 

you’ll be able to succeed and—— 

Ms. AUTOR. Exactly. We have to—in every situation, at a minimum, we would have to say, ‘‘Here are the facts. This is the facility. Here’s where we tried to contact them. Here’s what we did’’— 
25 

as opposed to simply saying, ‘‘They didn’t let us in.’’ Clearly, if they 

didn’t let us in, we shouldn’t let them in. 

Senator WHITEHOUSE. You indicated that you thought that the 

smartest and simplest way to go about this would be to allow the 

American companies to police this themselves with adequate supply chain assurance policies. You said that most of the bigger companies had adequate, good supply chain assurance policies, but 

there were some players that did not. 

What is your authority to regulate the supply chain assurance 

policies as a target that is, in effect, a proxy for your ultimate determination, which is whether or not the drug is safe? Can you actually say to American industries, ‘‘We want to review your supply 

chain assurance policy. If you don’t have one that we think is up 

to snuff, then you’re in violation,’’ and force behavior that way? Do 

you have that regulatory authority? 

Ms. AUTOR. That authority is not as clear as it could be under 

the law. That is something that Congress could clarify. At this 

point, we can look to putting out regulations on that, but that’s a 

lengthy, uncertain, potentially litigious, and very costly process for 

the American people. 

Senator WHITEHOUSE. How close have you come in the past? Can 

you think of any examples of regulations that you have done that 

oversee an internal process questioning the company as a means of 

determining whether the ultimate product is safe? Or would this 

be venturing into completely new territory? 

Ms. AUTOR. We have good manufacturing practice regulations in 

place which do some of that. But those were written in 1978 before 

the real explosion of global manufacturing. So they don’t get to that 

as clearly as they could. And so it’s not new territory, but it’s something that Congress, I think, could deal with much more quickly 

if you share our urgency about this problem. 

Senator WHITEHOUSE. OK. Thank you very much. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Blumenthal. 

STATEMENT OF SENATOR BLUMENTHAL

Senator BLUMENTHAL. Thank you, Mr. Chairman, and thank you 

for holding this hearing on this very important topic. 

Thank you for being here today and for your good work. You referred just a few minutes ago to a crime of opportunity in Heparin. 

And I want to talk about what creates opportunities for crime, in 

fact, exponentially increasing crime in theft or illegal importation. 

And in my view, one of the main contributors—one of the main circumstances that creates that opportunity is the acute shortages of 

certain drugs in this country arising from a variety of circumstances and problems, one of them being termination of the legitimate supply, but also others being the gray market. 

The gray markets that have been documented in this country for 

certain drugs literally are threatening our health. The gray markets are playing Russian roulette with patients lives, and shortages 

of drugs around the country mean that hospitals are unable to 

meet the demand for workhorse medicines. 

I’m using that phrase because it’s been used to me by hospital 

administrators, doctors, emergency room physicians—workhorse 
26 

medicines that provide basic anesthesia, cancer treatment—these 

are not exotic or unusual drugs. Often they are generics where the 

profit motive has dissipated or disappeared, and so shortages occur, 

or the result of hoarding. 

And as you are aware, I’m sure, in April 2011 Premier 

Healthcare Alliance asked its pharmacy support team to review the 

incidence of gray market offers, and they found overall 1,745 examples of gray market offers recorded in 42 acute care hospitals with 

an average markup of 650 percent. So the impacts are not only on 

health. They are on safety and on cost. Healthcare delivery is increasingly costly because of the gray markets and shortages that 

are the result of defects in the current supply chain. 

So all of that said, I wonder if you could address what steps can 

be taken. And there is a group of Senators, myself included, working to combat the acute shortages of certain drugs. What can FDA 

do under its existing authority? 

Ms. AUTOR. Sure. Thank you for the question. That’s a lot of different issues. Let me speak to one thing first, which is what creates the opportunities for things like the Heparin crisis. And that’s 

really more players involved in the drug supply chain, greater volume of products imported, greater number of firms involved, greater complexity of supply chain, greater complexity of the products, 

further and further foreign manufacturers. So that’s with respect 

to Heparin. 

With respect to shortages, that is really a complex economic 

problem, I believe, primarily. There are fewer manufacturers who 

have consolidated their drug manufacturing to fewer facilities, 

fewer lines, for products for which the economics are not great because they’re not very highly priced products anymore. They have 

not fully invested in the quality of those products. 

The agency takes the problem very seriously. We are doing what 

we can to prevent it. Last year, for example, when we were notified 

of shortages early, we were able to prevent 38 different shortages 

because we were told early. We could work with the manufacturers 

to see if the products were good enough to go to patients, to work 

with creative solutions, like, for example, if a product had metal 

shavings in injectable products, at one point, we worked with the 

company to send a filter so that the product could still be used in 

patients. 

We are also working toward having a public meeting with stakeholders to talk about this. But it really is a multifaceted problem 

that requires a multifaceted solution and all of the stakeholders to 

step up to the plate. 

With respect to gray market, that’s a real concern. Shortages create an incentive and an opportunity for people to, at best, charge 

an awful lot for these products, at worse, introduce counterfeit or 

contaminated products. One of the things that would really help 

with that, frankly, is a track-and-trace system, because the pharmacies and hospitals would be able to know if this product being 

offered to them from these new sources at high prices was, in fact, 

legitimate product, because they would know everybody who had 

touched it throughout the supply chain. 

Senator BLUMENTHAL. My time has expired. I would welcome an 

opportunity to follow up with you and your staff on this issue, par-
27 

ticularly as to those 38 instances that you mentioned and what we 

can learn from them and maybe the others where there was no action and what we can learn from them as well. 

Does the FDA need additional authority for track-and-trace? 

Ms. AUTOR. Yes. We would need additional authority to make it 

clear that we can promulgate enforceable standards for track-andtrace, also to require manufacturers to notify us of shortages. Right 

now, the authority on that is limited. So if we know about shortages, we can try to prevent them. It’s not—we can’t always do it, 

but at least knowing about them in advance helps us to deal with 

the problem. 

Senator BLUMENTHAL. Track-and-trace wouldn’t be a solution to 

shortages. 

Ms. AUTOR. It would not be a solution to shortages, but it would 

be something to address some of the public health risks associated 

with shortages. 

Senator BLUMENTHAL. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

We have to get on to our second panel, but I just briefly wanted 

to ask one question, Ms. Autor, and that is, most of the testimony 

and most of the discussion today has to do with prescription drugs. 

Could you just briefly address yourself to the over-the-counter drug 

supply? Do the same problems accrue there? And also to the use 

of excipients—that’s a word that I didn’t know about until I got 

into this area—the inactive ingredients, which, going clear back to 

the 1930s, ethylene glycol, was one of those. Can you address the 

risks both to the over-the-counter drug supply and also to the inactive ingredients that go into drugs and the problem that you may 

see in both those areas? 

Ms. AUTOR. Yes, by all means. One of the ways I tend to look 

at the pharmaceutical supply—because I’ve been working in this 

area for so long—is to think about sort of the innovative products, 

the generic products, the over-the-counter products, and the components. All of them present similar but different challenges. 

For example, I would say the generics industry, by talking to us 

about a user fee package, I think, has recognized some of the challenges inherent with generic drugs and with respect to our ability 

to police the supply chain in general. Over-the-counter drugs 

present a challenge because most of them are done through a 

monograph system, essentially a cook book system for a price, that 

don’t require in those cases affirmative FDA approval. 

If they follow our rules for what has to be in there and how 

they’re labeled, etc, then they can come on the market. That means 

that there’s a greater opportunity for firms to introduce products 

without us knowing. And those products could go straight from, 

frankly, a facility in China we’ve never seen to a pharmacy in any 

State. 

So that is a real challenge, and that’s why we talk about really 

needing to understand the global supply chain and really needing 

to put in, in particular, authorities at the border to stop those products and say, ‘‘Show us there’s something right about your products 

before they come in.’’ 
28 

Excipients also present a real challenge. Those are inactive ingredients, essentially. And as you pointed out, diethylene glycol is 

one that’s led to 570 deaths worldwide in the last 20 years and 100 

deaths in this country in 1937, leading to passage of FDA’s law. So 

there’s a huge number of excipients out there, and they’re used in 

a lot of different products. The same thing used in drugs might also 

be used in foods. 

So that’s why we talk about the need for manufacturers to be responsible for policing their supply chain, because it will never be 

the case, frankly, that FDA can go to all those facilities and assure 

they’re doing everything right. It has to be incumbent upon a manufacturer who’s selling pharmaceuticals that people rely on to save 

their lives to go and make sure that their components are satisfactory. 

The CHAIRMAN. Thank you very much, Ms. Autor. We have Senators that want to submit some questions in writing to you. 

Thank you very much for being here and thanks for your testimony. 

Ms. AUTOR. Thank you. 

The CHAIRMAN. Now we’ll call our second panel up. I’ll introduce 

them as they take their places at the table. First, starting from my 

left, we have Dr. Marcia Crosse, Director of Health Care for the 

GAO, Government Accountability Office. She’s been at GAO since 

1983, so she comes to us today with significant experience in evaluating public health issues. Her work focuses, in particular, on evaluating areas such as biomedical research, product safety, and pharmaceutical regulations. 

Next we have Ms. Kendra Martello, the assistant general counsel 

for the Pharmaceutical Research and Manufacturers of America, 

otherwise we know as PhRMA. 

And we appreciate your being here. 

Next is Mr. Gordon Johnston, senior advisor for Regulatory 

Sciences at the Generic Pharmaceutical Association. He has worked 

in the pharmaceutical industry for the past 25 years, and was formerly the Deputy Director of the FDA’s Office of Generic Drugs. 

We thank you for being here. 

Mr. Martin VanTrieste—I hope I pronounced that correctly—senior vice president of Quality at Amgen and past chair of the Rx360, a pharmaceutical supply chain consortium. As a past chair of 

Rx-360, Mr. VanTrieste led industry members in creating objectives to better share information regarding counterfeit and adulterated materials in the pharmaceutical supply chain. 

We thank you for being here. 

And last is Allan Coukell. Did I pronounce that right? 

Mr. COUKELL. Coukell, sir. Thank you. 

The CHAIRMAN. Allan Coukell, the director of medical programs 

at the Pew Health Group. He oversees Pew’s initiatives related to 

pharmaceutical supply chain safety. In July, the Pew released an 

interesting report that shed new light on the weaknesses and gaps 

in our pharmaceutical supply chain. 

And we thank you for being here. 

All of your testimonies will be made a part of the record in their 

entirety. And I’ll go from left to right and ask if you can sum up 

in 5 to 7 minutes. I appreciate it. 
29 

We’ll start with you, Dr. Crosse. 

STATEMENT OF MARCIA CROSSE, Ph.D., DIRECTOR, HEALTH 

CARE, GOVERNMENT ACCOUNTABILITY OFFICE, WASHINGTON, DC 

Ms. CROSSE. Thank you, Mr. Chairman, Ranking Member Enzi, 

and members of the committee. I’m pleased to be here today to discuss FDA’s oversight of the drug supply chain. 

Over the past several years, GAO has issued a number of reports 

on the challenges we identified in FDA’s oversight of drugs that are 

manufactured in other countries for the U.S. market. While FDA 

is making progress, we have concerns about the agency’s use of information and the pace at which it is implementing changes. 

Globalization has placed new demands on FDA as the pharmaceutical industry has increasingly relied on global supply chains in 

which each manufacturing step may be outsourced to foreign establishments. In examining these issues, we have particularly focused 

on the challenges for FDA in inspecting these facilities, the limitations on FDA’s knowledge and information about these facilities, 

and the steps FDA is taking to improve its oversight of the supply 

chain. 

Inspections of foreign drug manufacturers are an important element of oversight. As we’ve heard, FDA is far from achieving foreign inspection rates comparable to domestic inspection rates 

where the agency is required to conduct inspections every 2 years. 

To frame this with some numbers, in 2008, we reported that it 

would take FDA about 13 years to inspect the foreign establishments that were then on its inventory. Since that time, FDA has 

been increasing the number of foreign inspections it performs, reducing the estimated time to inspect all establishments to about 9 

years. However, while the agency is trying to catch up, it’s facing 

a continually growing number of foreign facilities. 

In addition, although FDA has been working to develop risk information to help it prioritize its foreign inspections, the risks of 

the products being manufactured have not been the real drivers of 

which facilities are inspected. Rather, foreign establishments have 

generally only been inspected when they have been named on an 

application for a new drug. 

Conducting inspections abroad also continues to pose unique 

challenges for the agency. For example, FDA cannot require foreign 

manufacturers to allow it to inspect their facilities, and logistical 

issues preclude FDA from conducting unannounced inspections as 

it does for domestic establishments. 

In addition to the challenges of conducting inspections, we previously reported that FDA lacked complete and accurate information about these facilities, information critical to understanding the 

supply chain. FDA databases contain incorrect information, and 

the agency still does not have an accurate list of the foreign establishments manufacturing drugs for the U.S. market. This hampers 

FDA’s ability to make inspection decisions and adequately oversee 

shipments arriving at our ports. 

The contaminated Heparin crisis provides a useful case study of 

some of the problems FDA is facing, including facilities that had 

never been inspected, mix-ups in FDA’s databases, outdated testing 
30 

standards, questions about manufacturers’ validation of their supply chains, delays in gaining entry because of visa requirements, 

FDA’s inability to require cooperation by foreign facilities, difficulties tracing contaminated supplies to end products including medical devices, and difficulties in recalling products thought to be contaminated. 

Given the difficulties that FDA has faced in overseeing the supply chain and recognizing that more inspections alone are not sufficient to meet the challenges posed by globalization, the agency has 

begun to implement other initiatives to improve its oversight. As 

we’ve heard today, FDA established new offices overseas and has 

taken other positive steps, such as collaborating and exchanging information with foreign governments and developing systems that 

would assist its oversight of products at the border. 

FDA should be credited for its recent actions which represent important initial steps toward addressing these challenges. However, 

as the agency has acknowledged, there are additional steps that it 

still needs to take. 

We have previously made recommendations to address some 

challenges such as poor information and planning, and the agency 

has identified additional authorities that could provide it with necessary enforcement tools. In light of the growing dependence upon 

drugs manufactured abroad and the potential for harm, FDA needs 

to act quickly to implement changes across a range of activities in 

order to better assure the safety and availability of drugs for the 

U.S. market. 

Mr. Chairman, Ranking Member Enzi, this concludes my prepared remarks. I’d be happy to answer any questions that you or 

other members of the committee may have. 

[The prepared statement of Dr. Crosse follows:] 

PREPARED STATEMENT OF MARCIA CROSSE, PH.D. 

SUMMARY

HIGHLIGHTS—WHY GAO DID THIS STUDY

Globalization has placed increasing demands on the Food and Drug Administration (FDA) in ensuring the safety and effectiveness of drugs marketed in the United 

States. The pharmaceutical industry has increasingly relied on global supply chains 

in which each manufacturing step may be outsourced to foreign establishments. As 

part of its efforts, FDA may conduct inspections of foreign drug manufacturing establishments, but there are concerns that the complexity of the drug manufacturing 

supply chain and the volume of imported drugs has created regulatory challenges 

for FDA. FDA has begun taking steps to address some of these concerns, such as 

the establishment of overseas offices. 

This statement discusses (1) FDA’s inspection of foreign drug manufacturing establishments, (2) the information FDA has on these establishments, and (3) recent 

FDA initiatives to improve its oversight of the supply chain. The statement presents 

findings based primarily on GAO reports since 2008 related to FDA’s oversight of 

the supply chain. These reports include Food and Drug Administration: Overseas 

Offices Have Taken Steps to Help Ensure Import Safety, but More Long-Term Planning Is Needed (GAO–10–960, Sept. 30, 2010) and Drug Safety: FDA Has Conducted 

More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed (GAO–10–961, Sept. 30, 2010). GAO supplemented this prior work with updated information obtained from FDA in August and 

September 2011. 
31 

1Drugs are defined to include, among other things, articles intended for use in the diagnosis, 

cure, mitigation, treatment, or prevention of disease, and include components of those articles. 

21 U.S.C. § 321(g)(1)(B), (D). 2FDA regulations define manufacturing to include the manufacture, preparation, propagation, 

compounding, or processing of a drug. 21 CFR § 207.3(a)(8) (2011). In addition, FDA regulations 

define an establishment as a place of business under one management at one general physical 

location. 21 CFR § 207.3(a)(7) (2011). Drug manufacturers may have more than one establishment. 

DRUG SAFETY—FDA FACES CHALLENGES OVERSEEING THE FOREIGN DRUG

MANUFACTURING SUPPLY CHAIN

WHAT GAO FOUND

Inspections of foreign drug manufacturers are an important element of FDA’s 

oversight of the supply chain, but GAO’s prior work showed that FDA conducts relatively few such inspections. In 2008, GAO reported that in fiscal year 2007 FDA 

inspected 8 percent of foreign establishments subject to inspection and estimated 

that, at that rate, it would take FDA about 13 years to inspect all such establishments. GAO recommended that FDA increase the number of foreign inspections it 

conducts at a frequency comparable to domestic establishments with similar characteristics. FDA subsequently increased the number of foreign establishment inspections. FDA’s inspection efforts in fiscal year 2009 represent a 27 percent increase 

in the number of inspections it conducted, when compared to fiscal year 2007—424 

and 333 inspections, respectively. However, FDA officials acknowledged that FDA 

is far from achieving foreign drug inspection rates comparable to domestic inspection rates—the agency inspected 1,015 domestic establishments in fiscal year 2009. 

Also, the types of inspections FDA conducts generally do not include all parts of the 

drug supply chain. Conducting inspections abroad also continues to pose unique 

challenges for the agency. For example, FDA faces limits on its ability to require 

foreign establishments to allow it to inspect their facilities. Furthermore, logistical 

issues preclude FDA from conducting unannounced inspections, as it does for domestic establishments. 

GAO previously reported that FDA lacked complete and accurate information on 

foreign drug manufacturing establishments—information critical to understanding 

the supply chain. In 2008, GAO reported that FDA databases contained incorrect 

information about foreign establishments and did not contain an accurate count of 

foreign establishments manufacturing drugs for the U.S. market. FDA’s lack of information hampers its ability to inspect foreign establishments. GAO recommended 

that FDA address these deficiencies. FDA has taken steps to do so, but has not yet 

fully addressed GAO’s concerns. 

Given the difficulties that FDA has faced in inspecting and obtaining information 

on foreign drug manufacturers, and recognizing that more inspections alone are not 

sufficient to meet the challenges posed by globalization, the agency has begun to implement other initiatives to improve its oversight of the drug supply chain. FDA’s 

overseas offices have engaged in a variety of activities to help ensure the safety of 

imported products, such as training foreign stakeholders to help enhance their understanding of FDA regulations. GAO recommended that FDA enhance its strategic 

and workforce planning, which FDA agreed it would do. FDA has also taken other 

positive steps, such as developing initiatives that would assist its oversight of products at the border, although these are not yet fully implemented. Finally, FDA officials identified statutory changes that FDA believes it needs to help improve its 

oversight of drugs manufactured in foreign establishments. For example, in place 

of the current requirement that FDA inspect domestic establishments every 2 years, 

officials indicated the agency would benefit from a risk-based inspection process 

with flexibility to determine the frequency with which both foreign and domestic establishments are inspected. In light of the growing dependence upon drugs manufactured abroad and the potential for harm, FDA needs to act quickly to implement 

changes across a range of activities in order to better assure the safety and availability of drugs for the U.S. market. 

Chairman Harkin, Ranking Member Enzi, and members of the committee, I am 

pleased to be here today to discuss the Food and Drug Administration’s (FDA) oversight of the Nation’s drug supply chain.1 Globalization has placed increasing demands on FDA, which is responsible for the oversight of drugs marketed in the 

United States, regardless of whether they are manufactured in foreign or domestic 

establishments.2 While Americans once used drugs that were mostly manufactured 
32 

3 An API includes any component of a drug that is intended to provide pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease. 

See 21 CFR § 210.3(b)(7) (2011). In this statement, we refer both to drug products—drugs in 

their finished dosage form—and to APIs as ‘‘drugs.’’ 4The heparin supply chain starts with a raw source material, primarily derived from the intestines of pigs, that is processed into crude heparin. Thousands of small pig farms in Chinese 

villages extract and process pig intestines in small workshops called casing facilities. 

Consolidators collect different batches of heparin from various workshops and sell these batches 

to manufacturers, who further refine the crude heparin into heparin API, the active ingredient 

used in heparin drug products and heparin containing devices. More than half of the finished 

heparin products in the United States and globally are made from Chinese-sourced materials. 5See the Related GAO Products page at the end of this statement. 6GAO, High-Risk Series: An Update, GAO–11–278 (Washington, DC: February 2011). We first 

added FDA’s oversight of medical products to our High-Risk Series in January 2009. 7 In late 2008 and early 2009, FDA established overseas offices comprised of staff covering 

particular countries or regions. FDA has staff located overseas in Beijing, Shanghai, and 

Guangzhou, China; New Delhi and Mumbai, India; San Jose, Costa Rica; Mexico City, Mexico; 

and Santiago, Chile. In June 2011, FDA also located staff in Amman, Jordan and Pretoria, 

South Africa. 8GAO, Drug Safety: Better Data Management and More Inspections Are Needed to Strengthen 

FDA’s Foreign Drug Inspection Program, GAO–08–970 (Washington, DC: Sept. 22, 2008); GAO, 

Food and Drug Administration: Overseas Offices Have Taken Steps to Help Ensure Import Safety, but More Long-Term Planning Is Needed, GAO–10–960 (Washington, DC: Sept. 30, 2010); 

GAO, Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed, GAO–10–961 (Washington, 

DC: Sept. 30, 2010); and GAO, Food and Drug Administration: Response to Heparin Contamination Helped Protect Public Health; Controls That Were Needed for Working With External Entities Were Recently Added, GAO–11–95 (Washington, DC: Oct. 29, 2010). 

domestically, this is no longer the case. According to FDA, the number of drug products manufactured at foreign establishments has more than doubled since 2002, 

with China and India accounting for the greatest shares of this growth. In addition, 

the pharmaceutical industry has increasingly relied on global supply chains in 

which each manufacturing step may be outsourced to foreign establishments. The 

complexity of the drug supply chain, the volume of imported drugs, and the number 

of foreign establishments producing these drugs have created regulatory challenges 

for FDA. The danger associated with an insecure supply chain was highlighted in 

January 2008, when FDA responded to a crisis involving the contamination of the 

active pharmaceutical ingredient (API) used to manufacture heparin,3 a medication 

used to prevent and treat blood clots. The contaminated heparin, which was associated with numerous adverse events—including deaths—came from a facility in 

China. During its investigation, FDA determined that some manufacturers were not 

adequately safeguarding their heparin supply chains.4

In recent years we have reported on several aspects of FDA’s ability to protect 

Americans from unsafe and ineffective drugs entering our supply chain.5 Amidst 

growing concerns with the increasing demands placed on the agency, including its 

ability to ensure the quality of drugs manufactured overseas, we added FDA’s oversight of medical products to our High-Risk Series.6 FDA has acknowledged that 

globalization has fundamentally changed the environment for regulating pharmaceutical products and the agency has begun taking steps to address some of these 

concerns, such as the establishment of overseas offices.7

My remarks today will focus primarily on information collected for several reports 

we issued since 2008 that specifically cite concerns we identified related to FDA’s 

oversight of the manufacturing side of the supply chain for drugs produced by overseas establishments for marketing in the United States.8 Specifically, I will discuss 

(1) FDA’s inspections of foreign drug manufacturing establishments, which are intended to assure that the safety and quality of drugs are not jeopardized by poor 

manufacturing practices; (2) the information FDA has on these establishments; and 

(3) recent FDA initiatives to improve its oversight of the supply chain. 

For our work reviewing FDA’s inspections of foreign drug manufacturing establishments, we obtained and analyzed FDA data on foreign and domestic drug manufacturing establishment inspections conducted from fiscal years 2007 to 2009. We 

also examined methods used by FDA to select establishments for inspection. For our 

work examining how FDA responded to the heparin crisis, we reviewed actions FDA 

took during the crisis period, which FDA defined as January 2008 through May 

2008. We also interviewed FDA officials and drug manufacturers and reviewed FDA 

documents, such as inspection reports and internally produced summaries (e.g., a 

time line of events related to the crisis). 

For our work reviewing the information FDA has on foreign drug manufacturing 

establishments, we obtained data from FDA’s registration database on the number 
33 

9Domestic and foreign establishments that manufacture drugs for the U.S. market are required to register annually with FDA. 21 U.S.C. § 360(b), (i)(1). 10FDA’s import database contains information on drugs and other FDA-regulated products offered for entry into the United States, including information on the establishment that manufactured the drug. 11GMPs provide a framework for a manufacturer to follow to produce safe, pure, and highquality drugs. See 21 CFR pts. 210, 211 (2011). See also International Conference on 

Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use, 

ICH Harmonised Tripartite Guideline: Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients Q7 (Geneva, Switzerland: Nov. 10, 2000). 12See 21 U.S.C. § 360(h), (i)(3). 13See 21 U.S.C. § 381(a). 

of establishments registered to market their drugs in the United States.9 We also 

obtained data from FDA’s import database on the number of establishments that 

have manufactured drugs that were shipped to the United States.10 We reviewed 

FDA’s initiatives for improving the accuracy of the agency’s data on foreign establishments contained in these databases, which are both used to manage the foreign 

drug inspection program. 

For our work reviewing recent FDA initiatives intended to improve the agency’s 

oversight of foreign drug manufacturing establishments, we reviewed documentation 

and interviewed FDA officials from each of FDA’s five overseas offices to learn about 

their activities, challenges, accomplishments, and strategic and workforce planning. 

For three of the overseas offices—China, India, and Latin America—we interviewed 

office staff and others, such as officials from FDA’s foreign regulatory counterparts, 

during on-site visits in February and March 2010. We also reviewed documents related to the agency’s efforts to augment its existing information on foreign drug establishments, such as information obtained from foreign regulatory authorities. We 

supplemented that prior work with updated information that we received from FDA 

in August and September 2011. 

We conducted the work for the performance audits on which this statement is 

based from September 2007 to September 2008, June 2009 to September 2010, and 

from August to September 2011 for selected updates. Our work was conducted in 

accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and conclusions based on our 

audit objectives. We believe that the evidence obtained provides a reasonable basis 

for our findings and conclusions based on our audit objectives. 

BACKGROUND

As part of its efforts to ensure the safety and quality of imported drugs, FDA may 

conduct inspections of foreign establishments manufacturing drugs, including APIs, 

that are imported into the United States. FDA relies on these establishment inspections to determine compliance with current good manufacturing practice regulations 

(GMP).11 The purpose of these inspections is to ensure that foreign establishments 

meet the same requirements as domestic establishments to ensure the quality, purity, potency, safety, and efficacy of drugs marketed in the United States. 

Requirements governing FDA’s inspection of foreign and domestic establishments 

differ. Specifically, FDA is required to inspect every 2 years those domestic establishments that manufacture drugs in the United States, but there is no comparable 

requirement for inspecting foreign establishments that market their drugs in the 

United States.12 However, drugs manufactured by foreign establishments that are 

offered for import may be refused entry to the United States if FDA determines— 

through the inspection of an establishment, a physical examination of drugs when 

they are offered for import at a point of entry, or otherwise—that there is sufficient 

evidence of a violation of applicable laws or regulations.13

FDA conducts two primary types of drug manufacturing establishment inspections. Preapproval inspections of domestic and foreign establishments may be conducted before FDA will approve a new drug to be marketed in the United States. 

In addition, FDA conducts GMP inspections at establishments manufacturing drugs 

already marketed in the United States to determine ongoing compliance with laws 

and regulations. 

FDA CONDUCTS RELATIVELY FEW INSPECTIONS OF FOREIGN DRUG ESTABLISHMENTS

Although inspections of foreign drug manufacturing establishments—which are 

intended to assure that the safety and quality of drugs are not jeopardized by poor 

manufacturing practices—are an important element of FDA’s oversight of the supply 

chain, our previous work has shown that FDA conducts relatively few inspections 
34 

14FDA attributes this increase in fiscal year 2009 foreign drug inspections to staffing 

changes—the creation of a drug inspection cadre and the placement of investigators overseas— 

and increased resources dedicated to these types of inspections. 15See GAO–08–970. 16We noted in our September 2010 report that, in response to our inquiries and those of congressional staff, FDA had undertaken a review to determine the appropriate inspection frequency for foreign and domestic drug establishments. However, as of September 2011, this review had not been completed. 17For example, in the case of the heparin supply chain, the source material is primarily derived from the intestines of pigs, which is processed into the crude heparin that is refined into 

heparin API. 18See GAO–08–970. 

of the establishments that it considers subject to inspection. Specifically, in our 2008 

report, we estimated that FDA inspected 8 percent of such foreign drug establishments in fiscal year 2007. At this rate, we estimated that it would take FDA about 

13 years to inspect all foreign establishments the agency considers subject to inspection. In 2010, we reported that FDA had increased its inspection efforts in fiscal 

year 2009. We estimated that FDA inspected 11 percent of foreign establishments 

subject to inspection and it would take FDA about 9 years to inspect all such establishments at this rate. FDA’s inspection efforts in fiscal year 2009 represent a 27 

percent increase in the number of inspections the agency conducted when compared 

to fiscal year 2007—424 and 333 inspections, respectively 14 In contrast, FDA conducts more inspections of domestic establishments and the agency inspects these establishments more frequently. For example, in fiscal year 2009, FDA conducted 

1,015 domestic inspections, inspecting approximately 40 percent of domestic establishments. We estimated that at this rate FDA inspects domestic establishments approximately once every 2.5 years. To address these discrepancies, we recommended 

that FDA conduct more inspections to ensure that foreign establishments manufacturing drugs currently marketed in the United States are inspected at a frequency 

comparable to domestic establishments with similar characteristics.15 FDA agreed 

that the agency should be conducting more foreign inspections, but FDA officials 

have since acknowledged that the agency is far from achieving foreign drug inspection rates comparable to domestic inspection rates and, without significant increases 

to its inspectional capacity, the agency’s ability to close this gap is highly unlikely.16

In addition to conducting few foreign drug manufacturing inspections, the types 

of inspections FDA conducts generally do not include all parts of the drug supply 

chain. For example, FDA officials told us during our review of the contaminated 

heparin crisis that the agency typically does not inspect manufacturers of source 

material 17—which are not required to be listed on applications to market drugs in 

the United States—and generally limits its inspections to manufacturers of the finished product and APIs. Furthermore, once FDA conducts an inspection of a foreign 

drug manufacturer, it is unlikely that the agency will inspect it again, as the majority of the foreign inspections FDA conducts are to inform decisions about the approval of new drugs before they are marketed for sale in the United States. 

Despite increases in foreign drug establishment inspections in recent years, FDA 

continues to face unique challenges conducting inspections abroad. Specifically, as 

we identified in our 2008 report on FDA’s foreign drug inspections, FDA continues 

to experience challenges related to limits on the agency’s ability to require foreign 

establishments to allow the agency to inspect their facilities.18 For example, while 

inspecting establishments in China during the heparin crisis, Chinese crude heparin 

consolidators refused to provide FDA full access during inspections—in particular, 

one consolidator refused to let FDA inspectors walk through its laboratory and refused FDA access to its records. As a result, FDA officials said they focused on the 

manufacturers’ responsibilities to ensure that these establishments could trace their 

crude heparin back to qualified suppliers that produce an uncontaminated product 

and requested that manufacturers conduct their own investigations of any heparin 

products for which they received complaints or that did not meet specifications. Furthermore, FDA faces other challenges conducting foreign inspections, such as 

logistical issues that necessitate the agency notifying the manufacturer of the agency’s intention to inspect the establishment in advance. In contrast to domestic inspections which are conducted without prior notice, FDA contacts foreign manufacturers prior to inspection to ensure that the appropriate personnel are present and 

that the establishment is manufacturing its product during the time of the inspection. In some cases, FDA must obtain permission from the foreign government of 

the country in which an establishment is located in order to conduct an inspection. 

FDA officials report that inspections may be conducted several months after an establishment has been notified of FDA’s intent to conduct an inspection due to the 

need to obtain visas and other delays. As a result of such advance notice, FDA staff 
35 

19See GAO–08–970. 20 In our 2010 report, we indicated that, in fiscal year 2009, FDA’s import database contained 

information for about 7,000 foreign establishments, compared with the approximately 3,200 foreign drug establishments that were registered with FDA in that year. See GAO–10–961. 21Such establishments may have gone out of business, but not informed FDA, or the establishments may not actually ship drugs to the United States. Some foreign establishments may 

register with FDA, but never ship drugs to the United States. FDA officials told us that such 

foreign establishments may register because, in foreign markets, registration may erroneously 

convey an ‘‘approval’’ or endorsement by FDA. 22 As we reported in 2010, the algorithm used by customs brokers to assign the manufacturer 

identification number does not provide for a number that is reliably reproduced or inherently 

unique. Consequently, according to FDA officials, multiple records may be created for a single 

establishment, resulting in an inflated count of the number of establishments. See GAO–10–961. 23The D-U-N-S® Number is a unique nine-digit sequence recognized as the Federal Government’s universal standard for identifying and keeping track of business entities. Submitting the 

site-specific number for an entity would provide, by reference to the number, certain business 

information for that entity that is otherwise required for drug establishment registration. 24 Additionally, FDA, in conjunction with 20 of the nearly 50 Federal agencies involved in the 

oversight of products imported into the United States, supports efforts for Customs and Border 

Protection—which control the implementation of this proposal—to adopt unique establishment 

identifiers for all establishments whose products, including drugs, are imported into the United 

States. 

conducting inspections may not observe an accurate picture of the manufacturer’s 

day-to-day operations. 

FDA LACKS COMPLETE INFORMATION ON FOREIGN DRUG ESTABLISHMENTS

Our previous reports indicated that FDA has experienced challenges maintaining 

complete information on foreign drug manufacturing establishments. This lack of information, which is critical to understanding the supply chain, hampers the agency’s 

ability to inspect foreign establishments. In 2008, we reported that FDA did not 

maintain a list of foreign drug establishments subject to inspection, but rather the 

agency relied on information from their drug establishment registration and import 

databases to help select establishments for inspection.19 However, we found that 

these databases contained incorrect information about foreign establishments and 

did not contain an accurate count of foreign establishments manufacturing drugs for 

the U.S. market. For example, in our 2008 report, we identified that for fiscal year 

2007, FDA’s registration database contained information on approximately 3,000 

foreign drug establishments that registered with FDA to market drugs in the 

United States, while the import database contained information on about 6,800 foreign establishments that offered drugs for import into the United States.20 Some of 

the inaccuracies in the registration database reflected the fact that, despite being 

registered, some foreign establishments did not actually manufacture drugs for the 

U.S. market.21 Additionally, the inaccurate count of establishments in the import 

database was the result of unreliable manufacturer identification numbers generated by customs brokers when a drug is offered for import.22 As a result of these 

inaccuracies, FDA did not know how many foreign establishments were subject to 

inspection. To address these inaccuracies, we recommended that FDA enforce the 

requirement that establishments manufacturing drugs for the U.S. market update 

their registration annually and establish mechanisms for verifying information provided by the establishment at the time of registration. 

Since then, FDA has taken steps to address these deficiencies and improve the 

information it receives from both the registration and import databases, though 

these efforts have not yet fully addressed the concerns we raised in 2008. For example, in June 2009, FDA began requiring all drug establishments marketing their 

products in the United States to submit their annual registration and listing information electronically, rather than submitting the information on paper forms to be 

entered into the registration database. FDA indicated that, as of September 2011, 

the implementation of this requirement has eliminated the human error that has 

been associated with the transcription of information from paper forms to electronic 

files. As part of electronic registration, FDA has also requested that each establishment provide a unique identification number—a Dun and Bradstreet Data Universal Numbering System (D-U-N-S®) Number 23—as a way to help avoid duplications and errors in FDA’s data systems.24 In addition, in September 2011, FDA officials reported that the agency had begun to take steps to enforce its annual registration requirement. They indicated that FDA will now conduct outreach to establishments that have not submitted an annual registration to confirm that they are 

no longer producing drugs for the U.S. market or to ensure they register, as required, if they are continuing to manufacture drugs for the U.S. market. They said 

that if an establishment does not respond to FDA’s outreach, it is to be removed 
36 

25We also reported that FDA overseas officials had started to provide training, responses to 

queries, and other assistance to foreign stakeholders to help them improve their regulatory systems and better understand FDA regulations. 26 According to FDA officials, the Foreign Registration Verification Program covers establishments manufacturing all FDA-regulated products. 27To select establishments for the Foreign Registration Verification Program, FDA uses information from its import database to determine the products that establishments are shipping to 

the United States and to identify establishments that are importing a variety of products. 28 According to FDA, the agency has engaged contractors to conduct at least 125 more such 

visits of foreign drug manufacturing establishments during the coming year. 

from the registration database. To further address concerns with the import database, FDA has an initiative underway to eliminate duplicate information by taking 

steps to identify and remove all duplicate drug establishment records from existing 

import data over the next few years. 

RECENT FDA INITIATIVES TO IMPROVE OVERSIGHT OF THE SUPPLY CHAIN

Given the difficulties that FDA has faced in inspecting and obtaining information 

on foreign drug manufacturers, and recognizing that more inspections alone are not 

sufficient to meet the challenges posed by globalization, the agency has begun to explore other initiatives to improve its oversight of the drug supply chain. We reported 

that FDA’s overseas offices had engaged in a variety of activities to help ensure the 

safety of imported products. These included establishing relationships with foreign 

regulators, industry, and U.S. agencies overseas; gathering information about regulated products to assist with decisionmaking; and, in China and India, conducting 

inspections of foreign establishments.25 Although we noted that the impact of the 

offices on the safety of imported products was not yet clear, FDA staff, foreign regulators, and others pointed to several immediate benefits, such as building relationships. However, they also described challenges related to some of their collaborations with domestic FDA offices and the potential for increasing demands that could 

lead to an unmanageable workload. We reported that FDA was in the process of 

long-term strategic planning for the overseas offices, but had not developed a longterm workforce plan to help ensure that it is prepared to address potential overseas 

office staffing challenges, such as recruiting and retaining skilled staff. We recommended that FDA enhance its strategic planning and develop a workforce plan 

to help recruit and retain overseas staff and FDA concurred with our recommendations. In September 2011, FDA indicated that it had developed a 2011 to 2015 strategic plan and was in the process of updating it, and it had initiated a workforce 

planning process. 

FDA has also implemented collaborative efforts with foreign regulatory authorities to exchange information about planned inspections as well as the results of 

completed inspections. In December 2008, FDA, along with its counterpart regulatory authorities of the European Union and Australia, initiated a pilot program 

under which the three regulators share their preliminary plans for and results of 

inspections of API manufacturing establishments in other countries. For example, 

FDA could receive the results of inspections conducted by these regulatory bodies 

and then determine if regulatory action or a followup inspection is necessary. FDA 

contends that prospectively sharing this information could allow these regulatory 

bodies to more efficiently use their resources by minimizing the overlap in their inspection plans. According to agency officials, the agency had used inspection reports 

from the other regulators to improve its knowledge of a small number of API manufacturing establishments, most of which had not been inspected in the last 3 years, 

but that it was interested in inspecting due to a pending drug application. 

FDA has also taken other steps to improve the information that the agency maintains on foreign establishments shipping drugs to the United States. In August 

2008, FDA contracted with two external organizations to implement the Foreign 

Registration Verification Program. Through this program, contractors conduct site 

visits to verify the existence of foreign establishments that are registered with FDA 

and confirm that they manufacture the products that are recorded in U.S. import 

records.26 According to FDA officials, establishments that are new to the U.S. market or are importing products not typically manufactured at the same establishment 

are considered candidates for the verification program.27 For example, FDA officials 

told us about an establishment that was selected for the program because, according 

to agency records, it was offering for import into the United States pickles and an 

API—two products not normally manufactured at the same establishment. As of 

September 2011, the contractors had visited 142 foreign drug establishments located 

in Asia, Australia, Africa, Canada, and Europe, 27 of which did not appear to exist 

at the address provided by the establishments at the time of registration.28 Accord-
37 

29 In our 2010 report, we noted that FDA had taken action against two of the establishments 

that appeared not to exist by deactivating their registration and alerting FDA import staff so 

that they could detain any products offered for import by these establishments, thus preventing 

these products from being imported into the United States. 

ing to FDA, the agency uses the information obtained from the contractors as 

screening criteria to target drug products from those establishments for review at 

the border.29

FDA is also developing initiatives that would assist its oversight of products at 

the border. For example, FDA is in the process of establishing its Predictive Riskbased Evaluation for Dynamic Import Compliance Targeting (PREDICT) import 

screening system. The system is intended to automatically score each entry based 

on a range of risk factors and identify high-risk items for review. FDA piloted this 

system on seafood products in the summer of 2007. FDA determined that the system expedited the entry of lower-risk products, while identifying a higher rate of 

violations among products that were tested when they were offered for import. The 

agency planned to have the system implemented in all locations and for all FDAregulated products by June 2011, although its deployment has been delayed. According to FDA, full deployment of PREDICT is currently slated for December 2011. 

FDA also identified statutory changes that would help improve its oversight of 

drugs manufactured in foreign establishments. These include authority to (1) suspend or cancel drug establishment registrations to address concerns, including inaccurate or out-of-date information; (2) require drug establishments to use a unique 

establishment identifier; and (3) implement a risk-based inspection process, with 

flexibility to determine the frequency with which both foreign and domestic establishments are inspected, in place of the current requirement that FDA inspect domestic establishments every 2 years. 

CONCLUDING OBSERVATIONS

Globalization has fundamentally altered the drug supply chain and created regulatory challenges for FDA. In our prior reports we identified several concerns that 

demonstrate the regulatory difficulties that FDA faces conducting inspections of, 

and maintaining accurate information about, foreign drug establishments. While inspections provide FDA with critical information, we recognize that inspections alone 

are not sufficient to meet all the challenges of globalization. FDA should be credited 

for recent actions, such as collaborating with and exchanging information on drug 

establishments with foreign governments, that represent important initial steps toward addressing these challenges. However, as the agency has acknowledged, there 

are additional steps that it still needs to take. We have previously made recommendations to address some challenges, such as poor information and planning, 

and the agency has identified additional authorities that could provide it with necessary enforcement tools. In light of the growing dependence upon drugs manufactured abroad and the potential for harm, FDA needs to act quickly to implement 

changes across a range of activities in order to better assure the safety and availability of drugs for the U.S. market. 

Chairman Harkin, Ranking Member Enzi, and members of the committee, this 

concludes my prepared statement. I would be pleased to respond to any questions 

you may have at this time. 

RELATED GAO PRODUCTS

High-Risk Series: An Update. GAO–11–278. Washington, DC: February 2011. 

Food and Drug Administration: Response to Heparin Contamination Helped Protect Public Health; Controls That Were Needed for Working With External Entities 

Were Recently Added. GAO–11–95. Washington, DC: October 29, 2010. 

Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve 

Its Information on Foreign Establishments, but More Progress Is Needed. GAO–10– 

961. Washington, DC: September 30, 2010. 

Food and Drug Administration: Overseas Offices Have Taken Steps to Help Ensure 

Import Safety, but More Long-term Planning Is Needed. GAO–10–960. Washington, 

DC: September 30, 2010. 

Food and Drug Administration: FDA Faces Challenges Meeting Its Growing Medical Product Responsibilities and Should Develop Complete Estimates of Its Resource 

Needs. GAO–09–581. Washington, DC: June 19, 2009. 

High-Risk Series: An Update. GAO–09–271. Washington, DC: January 2009. 

Drug Safety: Better Data Management and More Inspections Are Needed to 

Strengthen FDA’s Foreign Drug Inspection Program. GAO–08–970. Washington, DC: 

September 22, 2008. 
38 

Medical Devices: FDA Faces Challenges in Conducting Inspections of Foreign Manufacturing Establishments. GAO–08–780T. Washington, DC: May 14, 2008. 

Drug Safety: Preliminary Findings Suggest Recent FDA Initiatives Have Potential, 

but Do Not Fully Address Weaknesses in Its Foreign Drug Inspection Program. 

GAO–08–701T. Washington, DC: April 22, 2008. 

Medical Devices: Challenges for FDA in Conducting Manufacturer Inspections. 

GAO–08–428T. Washington, DC: January 29, 2008. 

Drug Safety: Preliminary Findings Suggest Weaknesses in FDA’s Program for Inspecting Foreign Drug Manufacturers. GAO–08–224T. Washington, DC: November 1, 

2007. 

Food and Drug Administration: Improvements Needed in the Foreign Drug Inspection Program. GAO/HEHS–98–21. Washington, DC: March 17, 1998. 

The CHAIRMAN. Thank you very much, Dr. Crosse. 

Dr. Martello, welcome and please proceed. 

STATEMENT OF KENDRA A. MARTELLO, J.D., ASSISTANT 

GENERAL COUNSEL, PhRMA, WASHINGTON, DC 

Ms. MARTELLO. Thank you very much. Mr. Chair, Ranking Member, and members of the committee, my name is Kendra Martello, 

Assistant General Counsel at the Pharmaceutical Research and 

Manufacturers of America, or PhRMA. Our members represent 

America’s leading biopharmaceutical research companies. 

Last year, industry-wide research investment was greater than 

$67 billion, a record. Our companies invest on average more than 

a billion dollars over 10 to 15 years to research and develop a new 

medicine. Additionally, our companies provide, directly and indirectly, millions of stable, high-paying jobs for American workers, 

jobs that can help fuel our Nation’s economic recovery. 

I’m pleased to offer this testimony today on securing the pharmaceutical supply chain. We appreciate the committee’s longstanding 

interest in this issue and want to acknowledge, in particular, the 

commitment of the Chairman, Ranking Member, and Senator Bennet to considering solutions to these important issues. 

My remarks today will focus on four key points. First, patient 

safety is of primary importance. Patients trust that the medicines 

they take meet high standards set by the Food and Drug Administration, no matter where they’re made. And PhRMA member companies are committed to improving the lives of patients and to producing high-quality, safe, and effective drug products. 

Second, the U.S. drug review, approval, and oversight system is 

the gold standard worldwide. It’s this comprehensive regulatory 

system coupled with our closed distribution system—closed by Congress in the mid-1980s—that helps provide the high level of product quality, safety, and integrity that we enjoy today. No one aspect of the system in isolation is responsible for protecting our secure supply chain. 

In addition to the requirement to obtain approval of a new drug 

application before a new drug can be sold, manufacturers must also 

follow current good manufacturing practices. These regulations recognize that testing and inspections alone cannot ensure the quality 

of a product. These NDA and GMP requirements apply to all new 

drugs sold in the United States, no matter where they’re made, and 

GMPs apply to all components of the finished drug, including active pharmaceutical ingredients, no matter where they’re sourced. 

Third, supply chain security is a shared responsibility. Even with 

our comprehensive regulatory system, the globalization of pharma-
39 

ceutical supply chains presents new challenges that require us to 

be adaptive and flexible. Everybody has a role to play. Every manufacturer, whether brand or generic, OTC, or component—recognizing that nearly 80 percent of the drugs dispensed in the United 

States are for generic medicines—and every importer and distributor has a role to play in the safety and the security of the drug 

supply chain. 

We all must work together, and PhRMA and its member companies are committed to doing our part. To the extent that an entity, 

whether a finished product or a bulk ingredient manufacturer or 

another entity in the supply chain, circumvents established requirements, they place patients at risk and disadvantage those who 

strive to comply. 

Fourth, as we consider challenges presented by globalization, we 

believe any new authorities must be grounded in sound science and 

driven by risk. Risk-based approaches to regulation are not new 

and, in fact, are widely accepted by both industry and FDA. For example, we support giving FDA the flexibility to prioritize inspections based on risk. Reliance on certain risk factors such as compliance history and time since last inspection will enable the agency 

to efficiently and effectively target its resources to the benefit of patients. 

We also encourage giving FDA the discretion to rely on satisfactory inspection results from foreign countries with comparable drug 

regulatory systems or to use accredited third parties to conduct 

some inspections. This would in no way take the place of FDA inspections. Rather, it would allow the agency the flexibility to leverage the work of other competent authorities and maximize its own 

resources, all without limiting in any way its ability to inspect a 

particular facility. 

We also believe that those who produce components and products 

destined for sale in the United States should register with FDA. 

This will help provide transparency to those who supply products 

and components sold here and will help FDA develop a risk-based 

inspection approach. 

In conclusion, our comprehensive regulatory and closed distribution system helps provide assurances in the safety, quality, and integrity of the new drug products sold here in the United States. Patients rely on this system to safeguard the medicines they need to 

improve their health and sustain their lives. 

The challenges of globalization present new opportunities to discuss how best to strengthen our existing supply chain. But they 

also remind us how critically important it is to maintain this existing closed distribution system. PhRMA member companies are 

committed to doing our part and to working with the committee, 

Members of Congress, and other stakeholders on this important 

issue. 

Thank you. 

[The prepared statement of Dr. Martello follows:] 
40 

PREPARED STATEMENT OF KENDRA A. MARTELLO, J.D. 

SUMMARY

PhRMA represents the country’s leading research-based pharmaceutical and biotechnology companies that are devoted to inventing new, life-saving medicines that 

help patients live longer, healthier, and more productive lives. 

The regulatory system that governs the development, approval, marketing, and 

surveillance of new drugs and biologics in the United States is the most complex 

and comprehensive in the world. In addition to the requirement to obtain FDA approval of a New Drug Application (NDA) before a new drug may be sold in the 

United States, manufacturers of pharmaceuticals sold legally in the United States 

must also comply with the ‘‘gold standard’’ of quality manufacturing—FDA’s current 

Good Manufacturing Practice (cGMP) regulations. These regulations apply to all 

new prescription drugs approved for sale in the United States, wherever they are 

made and extend to all components of a finished drug product, including active 

pharmaceutical ingredients (APIs), without regard to where those ingredients are 

sourced. In addition, America’s prescription drug distribution system is a closed system. Coupled with the comprehensive regulatory requirements and oversight of the 

FDA, our closed distribution system provides assurance regarding the quality, safety 

and integrity of the products lawfully sold in the United States, and helps minimize 

the possibility of a consumer receiving a counterfeit drug. 

As the committee considers the issue of securing the pharmaceutical supply chain, 

we are pleased to provide the following preliminary comments, and look forward to 

an ongoing dialogue on these important issues. 

PhRMA believes that all foreign establishments manufacturing prescription drug 

products or components destined for import into the United States must register 

with FDA and list their products, to the extent they are not already required to do 

so under current law. 

PhRMA supports granting FDA discretion to set routine inspection intervals for 

foreign and domestic facilities according to risk. This will enhance the FDA’s ability 

to target its inspection resources efficiently and effectively. 

Congress should consider allowing FDA to rely on the inspection results of other 

foreign regulatory bodies with similarly robust drug regulatory oversight systems or 

to use accredited third parties to conduct some foreign inspections (such as inspections of facilities considered moderate to low risk, based on appropriate criteria). 

This will provide FDA with the flexibility to leverage the work of foreign regulatory 

bodies and maximize its resources, all without foreclosing its ability to inspect any 

facility. 

As we consider whether new authorities are needed to help strengthen our existing prescription drug supply chain, we must also consider the appropriateness of including new burdens on the import of materials for use in preclinical and clinical 

investigations. 

Mr. Chairman, Ranking Member and distinguished members of the committee, I 

am pleased to testify today on the issue of ‘‘Securing the Pharmaceutical Supply 

Chain.’’ My name is Kendra Martello, Assistant General Counsel at the Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA represents the 

country’s leading research-based pharmaceutical and biotechnology companies that 

are devoted to inventing new, life-saving medicines that help patients live longer, 

healthier, and more productive lives. In 2010, America’s biopharmaceutical research 

companies invested more than $67 billion in the research and development of new 

medicines. 

Biopharmaceutical research and development is a complex, risky and uncertain 

undertaking. On average, the time to develop a new medicine is 10–15 years, at a 

cost of over $1.2 billion. Moreover, our companies provide—directly and indirectly— 

millions of stable, high-paying jobs for American workers. These jobs can help fuel 

our Nation’s economic recovery. Accordingly, FDA’s regulation of new medicines 

should not stifle innovation in the biopharmaceutical sector. 

I. FDA OVERSIGHT OF PRESCRIPTION DRUG MANUFACTURING

America’s patients trust that the medicines they take meet the high standards set 

by the Food and Drug Administration (FDA) for safety and efficacy and are not substandard or counterfeit, and they rely on our comprehensive drug regulatory system 

to help ensure that is the case. America’s research-based biopharmaceutical companies also depend on a safe, secure prescription drug supply chain. 
41 

1See Statement of Margaret A. Hamburg, M.D., Commissioner of Food and Drugs, Before the 

Subcommittee on Oversight & Investigations, Committee on Energy & Commerce, ‘‘Import Safety: Status of FDA’s Screening Efforts at the Border,’’ April 13, 2011. 2 Under current law, a drug is adulterated if the methods used in, or the facilities or controls 

used for, manufacturing a drug product do not conform to cGMPs, and FDA regulations and 

guidance provide additional clarification regarding the expectations of cGMPs in drug product 

manufacturing. 21 U.S.C. § 351(a)(2)(B). 3 61 Fed. Reg. 20104, 20105 (May 3, 1996). 

4See generally 21 CFR Parts 210 and 211. 

5 21 CFR § 211.84(d)(2). 

6 21 CFR § 211.84(e). 

The regulatory system that governs the development, approval, marketing, and 

surveillance of new drugs and biologics in the United States is the most complex 

and comprehensive in the world. FDA regulates virtually every stage in the life of 

a prescription medicine sold in the United States, from pre-clinical testing of investigational compounds in animals and human clinical trials before a medicine is sold, 

to manufacturing, labeling, packaging, and advertising, to monitoring actual experience with the drug after its approval. Further, FDA receives information about shipments of imported goods into the United States, and has developed a risk-based information system to help facilitate the targeting of certain shipments for further examination at U.S. ports of entry.1

In addition to the requirement to obtain FDA approval of a New Drug Application 

(NDA) or a Biologics License Application (BLA) before a new drug may be sold in 

the United States, manufacturers of pharmaceuticals sold legally in the United 

States must also comply with the ‘‘gold standard’’ of quality manufacturing—FDA’s 

current Good Manufacturing Practice (cGMP) regulations.2 These regulations apply 

to all new prescription drugs approved for sale in the United States, wherever they 

are made, and extend to all components of a finished drug product, including active 

pharmaceutical ingredients (APIs), without regard to where those ingredients are 

sourced. FDA’s cGMP regulations are based on the fundamental quality assurance 

principle that quality, safety and effectiveness ‘‘cannot be inspected or tested into 

a finished product,’’ but instead must be designed and built into a product.3 It is 

well-established that inspections alone cannot be relied upon to ensure product quality and integrity, but that quality systems are also vital to ensuring the product 

meets established specifications and requirements.4 The quality systems approach 

to manufacturing drug products is embodied in the cGMP regulations. 

Thus, while FDA inspections are an important part of FDA’s regulatory authority 

and oversight, and PhRMA member companies are routinely inspected, the cGMPs 

represent a comprehensive, systems-based approach requiring a company to build 

quality directly into the entire manufacturing operation, in order to ensure that the 

process itself is under control and therefore will consistently produce a drug product 

that meets designated specifications. Further, the word ‘‘current’’ in front of the 

phrase ‘‘good manufacturing practice’’ in the FDCA recognizes and appreciates that 

these manufacturing standards are and must be flexible and adaptive to accommodate different types of products and advances in science and manufacturing technologies. 

Currently, in addition to the requirement that API must be manufactured in accordance with cGMPs, manufacturers are also required to ensure that representative samples of each shipment of each lot of a drug component are tested or examined ‘‘for conformity with all appropriate written specifications for purity, strength, 

and quality.’’ 5 Any lot that does not meet such specifications must be rejected by 

the manufacturer and may not be used.6

Finally, the Prescription Drug Marketing Act of 1987 (PDMA) is a critical piece 

of consumer legislation passed as a result of congressional investigations into the 

integrity of the drug distribution system that existed at the time. The PDMA created the closed prescription drug distribution system in place today, meaning that 

products that have circulated overseas may not lawfully be sold in the United 

States, unless they have remained under the control of the original manufacturer. 

Coupled with the comprehensive regulatory requirements and oversight of the FDA, 

our closed distribution system provides assurance regarding the quality, safety and 

integrity of the products lawfully sold in the United States, and helps minimize the 

possibility of a consumer receiving a counterfeit drug. 

II. PRELIMINARY IDEAS TO STRENGTHEN SUPPLY CHAIN INTEGRITY

Even with FDA’s comprehensive regulatory system, increasing globalization of 

pharmaceutical supply chains presents challenges that require biopharmaceutical 
42 

7See Statement of Margaret A. Hamburg, M.D., Commissioner of Food and Drugs, Before the 

Subcommittee on Oversight & Investigations, Committee on Energy & Commerce, ‘‘Import Safety: Status of FDA’s Screening Efforts at the Border,’’ April 13, 2011. 8See e.g., ‘‘FDA Guidance: Risk-Based Method for Prioritizing GMP Inspections of Pharmaceutical Manufacturing Sites—A Pilot Risk Ranking Model,’’ (Sept. 2004). 

companies and the FDA to be more adaptive and flexible in the review and oversight of entities located around the world. 

FDA should use its powerful existing enforcement authorities to take action 

against violative products and to promote accountability among regulated entities— 

enforcement authority that the FDA under the current Administration has made a 

priority to exercise when warranted. In short, supply chain security is the responsibility of all parties involved in the distribution of medicines to American patients. 

We appreciate the committee’s long-standing commitment to these issues. As the 

committee considers the issue of securing the pharmaceutical supply chain, we are 

pleased to provide the following preliminary comments, and look forward to an ongoing dialogue on these important issues. 

A. Registration of Foreign Facilities 

PhRMA believes that all foreign establishments manufacturing prescription drug 

products or components destined for import into the United States must register 

with FDA and list their products, to the extent they are not already required to do 

so under current law. By requiring such facilities to register, the FDA will be able 

to establish a single database that will contain information on all facilities that 

manufacture products or components of products that are sold in the U.S. Prior Congressional testimony and Government Accountability Office reports suggest that 

such information appears in several different formats and databases managed by 

FDA, and, therefore, it is not easily accessible or usable by Agency personnel. A single, standardized database would, among other things, allow the FDA to help ensure 

that all facilities subject to inspection are identified, that FDA inspections can be 

prioritized, and that routine inspections occur at appropriate intervals. FDA Commissioner Hamburg has also expressed support for modernizing the Agency’s registration and listing function.7

B. Enhancements to FDA’s Inspection Regime 

i. Risk-Based Inspection Intervals 

PhRMA supports granting FDA discretion to set routine inspection intervals for 

foreign and domestic facilities according to risk. The use of risk-based approaches 

to regulation, and in particular, to cGMP inspections is not a new concept.8 We support providing FDA with the flexibility to prioritize inspections of foreign establishments based on the risks they present, and believe relying on set criteria such as 

compliance history, time since last inspection, and volume and type of products produced, will enhance the FDA’s ability to target its inspection resources efficiently 

and effectively. 

ii. Increase Foreign cGMP Inspections 

We also recognize that while FDA has broad authority to conduct inspections of 

domestic and foreign facilities, it currently conducts limited numbers of cGMP inspections of foreign facilities, including API manufacturers. Therefore, we recommend that FDA generally increase its cGMP inspections of foreign facilities, including API manufacturers, to help ensure that cGMPs are being followed. The targeting of these increased foreign inspections should be accomplished by utilizing the 

risk-based approach described above. 

iii. Foreign Inspection Reports/Accredited Third Parties 

In recognition of the fact that the Agency does not have unlimited resources and 

in order to help ensure that foreign inspections occur on a more regular basis, Congress should consider allowing FDA to rely on the inspection results of other foreign 

regulatory bodies with similarly robust drug regulatory oversight systems or to use 

accredited third parties to conduct some foreign inspections (such as inspections of 

facilities considered moderate to low risk, based on appropriate criteria). These inspections would not take the place of FDA inspections, which are a necessary and 

important part of the Agency’s mandate; however, they would provide FDA with the 

flexibility to leverage the work of foreign regulatory bodies and maximize its resources, all without foreclosing its ability to inspect any facility. FDA recently acknowledged and embraced the concept of relying on ‘‘public and private third parties 
43 

9 ‘‘Pathway to Global Product Safety and Quality: Special Report,’’ Food and Drug Administration, (July 7, 2011), at 31, available at: <http://www.fda.gov/AboutFDA/CentersOffices/OC/ 

GlobalProductPathway/default.htm>. 10 Id. 11See e.g. FDA Home Page: ‘‘Importing Prescription Drugs,’’ <http://www.fda.gov/Drugs/ 

DrugSafety/ucm170594.htm.>. 

to conduct audits and other oversight activities on behalf of FDA.’’ 9 FDA intends 

to quickly ‘‘establish the framework and approach for capturing this opportunity.’’ 10

iv. Exemption for Materials Intended for Research Use 

As we consider whether new authorities are needed to help strengthen our existing prescription drug supply chain, we must also consider the appropriateness of including new burdens on the import of materials for use in preclinical and clinical 

investigations. The continued, uninterrupted access to clinical trial materials, including APIs, is essential to ensure that vital research into innovative, life-saving 

and life-enhancing new treatments is not hindered in any way. Materials and articles used in pre-clinical research and development activities are never consumed by 

humans, but instead are used in laboratory testing as scientists try to understand 

how the test article works and its safety profile. The FDA requires reports of nonclinical laboratory testing and the submission of detailed information in a range of 

areas in order to justify the study of a candidate drug in humans, and materials 

used in the pre-clinical research and development process are not studied in humans. Further, investigational drugs and drug components imported for use under 

an Investigational New Drug (IND) application are subject to strict FDA regulation 

and oversight at all times and must be manufactured according to cGMPs, including 

appropriate standards for testing and quality control. 

Thus, we strongly encourage the inclusion of an exemption for drugs, API, and 

other materials intended for use in clinical trials that comply with other FDA requirements relating to the proper use of investigational material, including labeling 

and import of investigational products and materials for use in U.S.-based clinical 

trials under an IND application filed with the FDA into any new provisions related 

to securing our pharmaceutical supply chain. Including these investigational products and materials in any new provisions could potentially be duplicative of existing 

requirements. Additionally, exempting investigational materials, drugs, and drug 

components used for pre-clinical and clinical research from any new provision could 

help ensure that the development of new medicines is not delayed or hindered and 

that clinical trials and research and development continue to occur in the United 

States—thus helping ensure that related jobs stay in the United States as well. 

III. CONCLUSION

We commend the committee for its focus on and commitment to the issue of securing the pharmaceutical supply chain. We recognize the importance of ensuring that 

the regulatory system in place today for prescription drugs continues to remain the 

best and the safest in the world. We cannot underemphasize the potential that exists for unsafe and potentially dangerous counterfeit drugs to enter the United 

States should Congress act to open our borders to more expansive prescription drug 

importation proposals. These proposals would allow non-U.S.-approved drug products to be sold on U.S. pharmacy shelves next to FDA-approved drug products that 

have undergone our rigorous testing, review and approval process and put American 

patients at risk, and the FDA agrees.11

Our system of prescription drug supply chain security today is very, very good, 

but even good systems can be improved upon. We look forward to continuing to 

work with the committee, FDA, and other stakeholders on these important issues. 

Thank you for the opportunity to testify today and I welcome any questions you may 

have. 

The CHAIRMAN. Thank you very much, Dr. Martello. 

And now we’ll turn to Mr. Gordon Johnston with the Generic 

Pharmaceutical Association. 

Welcome and please proceed, Mr. Johnston. 

STATEMENT OF GORDON JOHNSTON, SENIOR ADVISOR FOR 

REGULATORY SCIENCES, GPhA, WASHINGTON, DC 

Mr. JOHNSTON. Good morning, Chairman Harkin, Ranking Member Enzi, and members of the committee. Thank you for asking me 
44 

to participate in this timely and important hearing. I am Gordon 

Johnston, senior advisor for regulatory sciences at the Generic 

Pharmaceutical Association, or GPhA. 

GPhA represents the manufacturers and distributors of generic 

pharmaceuticals and active ingredients. Generic pharmaceuticals 

now fill 78 percent of all prescriptions dispensed in the United 

States but consume just 25 percent of the Nation’s total drug expenditure. 

Prior to joining GPhA, I served in the U.S. Public Health Service 

and in 1987 was assigned to the Food and Drug Administration 

and became the Deputy Director of the Office of Generic Drugs in 

1994. 

Securing the Nation’s pharmaceutical supply chain is of vital importance to GPhA and our member companies. We also have a keen 

interest in a level, competitive, and accountable playing field 

among all participants in the U.S. pharmaceutical supply chain. 

We commend the committee for your focus on ensuring the safety 

of America’s pharmaceutical supply, brand and generic. 

GPhA is committed to doing everything possible to work with 

Congress and the FDA to promote a vigorous and rigorous oversight of the Nation’s drug supply. As the committee begins to take 

a closer look at this important issue, it’s critical to understand the 

fundamental underpinnings of the current system and acknowledge 

the global dynamics of our pharmaceutical supply here in the 

United States. 

First, as my colleague at PhRMA mentioned, I certainly want to 

make it clear that the U.S. drug supply is the safest in the world. 

However, we recognize that globalization has added new and complex challenges to continue to assure this safety. 

The pharmaceutical marketplace that FDA oversees in today’s 

global age, however, looks drastically different than it did in 1938 

when Congress passed the statute, and that’s the Federal Food, 

Drug, and Cosmetic Act. As mentioned previously, today, nearly 40 

percent of all prescription drugs dispensed in the United States are 

manufactured outside of the country, and nearly 80 percent of the 

ingredients used in these drugs are manufactured abroad. 

According to FDA estimates, the number of drug products made 

outside of the United States doubled between 2001 and 2008. Unfortunately, this growth has outpaced the law’s reach as well as the 

funds needed to allow FDA to hold all participants to the same 

high-quality standards. 

The act of 1938 requires American drug manufacturers to undergo surveillance inspections at least every 2 years to confirm that 

these facilities are complying with good manufacturing standards. 

However, the act does not impose the same biennial GMP inspection requirement on foreign facilities. 

Further, this disparity in the degree of oversight experienced by 

domestic versus foreign facilities reduces American competitiveness 

by creating an uneven playing field while at the same time creates 

opportunity for threats to the U.S. drug supply. Also, delays in foreign inspections slow the approval of products that serve unmet 

medical needs such as those facing drug shortages. 

To paraphrase the recent statements by HHS Secretary Kathleen 

Sebelius and FDA, HHS and FDA are looking to Congress to mod-
45 

ernize its antiquated authorities so that FDA’s legal tools can keep 

pace with globalization. GPhA is in agreement with the Secretary 

and FDA that it’s essential to modernize the laws governing the 

U.S. supply chain. 

As noted in my opening remarks, the responsibility of ensuring 

safety is a shared one that rests with all of us in industry and not 

just FDA. As my colleagues at Pew noted in their recent report, it’s 

also critical that manufacturers continue to go beyond GMPs and 

assure that their supplier qualification tools are used, using riskbased assessment to assure the quality and integrity of suppliers 

abroad. Such practices which are intended to prevent potential contamination and adulteration should also be supplemented by a Federal pedigree tracking system with uniform standards across all 

States as opposed to a patchwork of random State-enforced regulations. 

Even with these significant efforts in place, however, the generic 

industry has realized that more needs to be done. That’s why the 

industry stepped up to the plate and is now finalizing a generic 

drug user fee program with FDA. One of the main goals of this 

user fee program is to hold all generic players, foreign and domestic, to the same GMP inspection standards and enhance FDA’s ability to identify, track, and register all contributors involved in the 

generic drugs in the United States. 

In conclusion, Mr. Chairman, GPhA stands ready to support Congress and FDA in strengthening its oversight, updating the law, 

and investing more resources to ensure that the United States continues to be a leader in the world when it comes to safety and also 

maintaining the American industry’s competitiveness. 

I thank you for this time and would be happy to address any 

questions from the committee as we move forward. 

[The prepared statement of Mr. Johnston follows:] 

PREPARED STATEMENT OF GORDON JOHNSTON

SUMMARY

I am Gordon Johnston, Senior Advisor for Regulatory Sciences at the Generic 

Pharmaceutical Association, which represents the manufacturers and distributors of 

finished dose generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals and suppliers of other goods and services to the generic industry. Given that more than 78 percent of all prescription drugs dispensed in this 

country are generic drugs, GPhA has a keen interest in making sure the supply 

chain is safe for consumers. We also have a keen interest in a level, competitive and 

accountable playing field among all participants in the U.S. supply chain. 

Today, nearly 40 percent of all prescription drugs dispensed in the United States 

are manufactured outside of the country and nearly 80 percent of the ingredients 

in our drugs are manufactured abroad. With a mission to protect and promote the 

public health, the Food and Drug Administration is charged with ensuring the safety of all medicine sold in the United States no matter where these products are 

made. According to FDA estimates, the number of drug products made outside of 

the United States doubled from 2001 to 2008. 

One of the most critical ways FDA ensures continued compliance with the high 

quality standards required of prescription drugs sold in the United States is by conducting on-site inspections of facilities where drugs are manufactured. FDA’s guiding statute, the Federal Food, Drug and Cosmetic Act of 1938 (‘‘FDCA’’), requires 

American manufacturers to undergo a surveillance inspection every 2 years to ensure that these facilities are complying with these high quality standards known as 

good manufacturing practices (‘‘GMP’’). However, the FDCA does not impose the 

same surveillance inspection requirement on foreign facilities. According to FDA, 

foreign facilities have grown by 185 percent, while at the same time FDA inspection 

rates have decreased by nearly 57 percent. Meanwhile, according to the Government 
46 

Accountability Office, the FDA inspected just 11 percent of the 3,765 foreign establishments in its database in 2009. 

Unfortunately, this global growth has outpaced the reach of the FDCA, which was 

written nearly seven decades ago when the U.S. drug supply was domestic and not 

the global one that it is today. In the recent words of the FDA, the agency is ‘‘looking to Congress to modernize its antiquated authorities so that FDA’s legal tools 

keep pace with globalization.’’ 

Even though these global challenges impact the entire pharmaceutical industry, 

brand or generic, the generic drug industry has stepped up to help provide FDA 

with additional resources to address the challenges caused by the global drug supply 

and the increase in FDA workload. The industry has been working closely with FDA 

to finalize negotiations on a generic drug user fee program to help the FDA obtain 

additional resources to ensure all participants in the U.S. generic drug system, 

whether U.S.-based or foreign, comply with U.S.-strict quality standards and make 

certain Americans get more timely access to low-cost, high-quality generic drugs. 

The generic drug user fee program being finalized now recognizes that while providing earlier access to effective medicines is critical (the key aim of all other existing user fee programs), an equally important pillar of FDA’s mission is ensuring 

drug safety. In addition, it is also critical that we as manufacturers continue to go 

beyond current GMP standards in our own facilities to ensure appropriate supplier 

qualification, through risk-based assessments, quality agreements and physical audits, where appropriate. By working together as an industry to share the results of 

these audits, as well as new technologies, we can further develop harmonized standards and best practices to ensure that all stakeholders in the pharmaceutical supply 

chain are utilizing the most current and effective methods for providing patients 

with safe and effective medications. 

While these efforts provide an excellent framework for industry to help support 

the growing global needs of FDA and to level the playing field between foreign and 

domestic facilities through inspection parity, they do not completely solve the problem. To globalize FDA’s authority, eliminate the inspection disparity and better ensure the safety of the global supply chain, it is paramount that a bill is introduced 

to expand FDA’s authorities to achieve its mission in this global age. 

The safety of our Nation’s pharmaceutical supply is only as good as our weakest 

link, and the responsibility rests on all of us. GPhA encourages Congress and our 

counterparts throughout the pharmaceutical industry to work together to ensure 

FDA is equipped to keep our consumers safe in a 21st century global drug supply 

environment. 

Good morning Chairman Harkin, Ranking Member Enzi and members of the Senate Committee on Health, Education, Labor, and Pensions. Thank you for asking 

me to participate in this very timely and important hearing. 

I am Gordon Johnston, Senior Advisor for Regulatory Sciences at the Generic 

Pharmaceutical Association. GPhA represents the manufacturers and distributors of 

finished dose generic pharmaceuticals, manufacturers and distributors of bulk pharmaceutical chemicals and suppliers of other goods and services to the generic industry. Generic pharmaceuticals now fill 78 percent of all prescriptions dispensed in the 

United States, but consume just 25 percent of the total drug spending. 

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 saved U.S. consumers, patients and the health care system more than 

$824 billion over the past decade—$137 billion in 2009 alone—which equates to $1 

billion in savings every 3 days. 

Prior to joining GPhA, I was with the U.S. Public Health Service, where I served 

in a number of pharmacist and health care management positions. In 1987, I was 

assigned to the Food and Drug Administration and, in 1994, became the Deputy Director of the FDA’s Office of Generic Drugs (OGD). While at the FDA, my duties 

required that I interfaced with a number of foreign governments on drug safety and 

regulatory standards. 

INTRODUCTION

I would like to make two brief points in my testimony today, before providing 

comments on securing the pharmaceutical supply chain. 

First, we commend the committee for your focus on ensuring the safety of America’s pharmaceutical supply—brand and generic. For nearly a quarter of a century 

America’s generic drug industry has been developing, manufacturing and marketing 

generic versions of brand-name prescription drugs. Last year, approximately 78 per-
47 

cent of the more than 3 billion new and renewal prescriptions dispensed in the 

United States were filled with generics, saving patients and consumers billions of 

dollars. We are committed to doing everything possible to work with Congress and 

the FDA to ensure that adequate oversight of the Nation’s drug supply is in place 

to ensure its safety. 

Second, the generic pharmaceutical industry is among the most highly regulated 

in the world, with strict rules governing the development, manufacture, approval, 

packaging, marketing and post-marketing surveillance of prescription drugs by the 

FDA. These stringent regulations apply equally to all pharmaceutical products— 

brand or generic, approved by the FDA. 

Securing the Nation’s pharmaceutical supply chain is of vital importance to the 

Generic Pharmaceutical Association and to our member companies. Given that more 

than 78 percent of all prescription drugs dispensed in this country are generic 

drugs, we have a keen interest in making sure the supply chain is safe for American 

consumers who rely on our medicines. We also have a keen interest in a level, competitive and accountable playing field among all participants in the U.S. pharmaceutical supply chain. 

CURRENT LANDSCAPE

As the committee begins to look closer at this important issue, it is critical to understand the fundamental underpinnings of the current system that ensures drug 

safety in our country and acknowledge the global dynamics of our current branded 

and generic pharmaceutical supply here in the United States. 

While much of the responsibility of ensuring safe drugs rests with industry, the 

FDA plays a critical role in making sure all players participating in the pharmaceutical supply chain meet FDA’s rigorous standards, including compliance with current Good Manufacturing Practices (‘‘GMP’’). With a mission to protect and promote 

the public health, the FDA is charged by Congress to ensure the safety, efficacy and 

security of the U.S. drug supply and to address threats to public health. 

BACKGROUND ON FDA’S AUTHORITY

FDA’s authority to carry out this responsibility originated some seven decades ago 

when President Franklin Roosevelt signed into law the Federal Food, Drug and Cosmetic Act of 1938 following the death of more than 100 people as a result of ingesting Elixir Sulfanilamide, which contained the deadly poison diethylene glycol. In an 

effort to avoid future tragedies, this landmark legislation of 1938 became the foundation on which the FDA oversees our Nation’s pharmaceutical supply today. 

Among other authorities, this law authorized FDA to demand evidence of safety and 

conduct facility inspections, two critical authorities of the world’s most robust drug 

authority. 

THE PROBLEM

The pharmaceutical marketplace FDA oversees in today’s global age, however, 

looks drastically different than it did in 1938 when FDA’s guiding statute was enacted. And several unfortunate tragedies in the pharmaceutical world since 1938 

have prompted further enhancements to FDA’s authority under the FDCA to ensure 

the agency is equipped to carry out its mission of protecting the public health. A 

few pivotal events have led to an enhancement of FDA’s original 1938 authority 

since the law’s original passage. This included the thalidomide tragedy in Europe, 

which strengthened the rules for drug safety and required manufacturers to prove 

their drugs’ effectiveness in the United States in 1962. In 1976, additional amendments were made to apply safety and effectiveness safeguards to new devices following a U.S. Senate finding that faulty medical devices had caused 10,000 injuries, 

including 731 fatalities. 

Unfortunately, as this committee is aware, the United States experienced another 

tragedy recently when tainted brand Heparin was distributed in the United States, 

leading to 81 deaths and shedding additional light on some notable shortcomings 

of the 1938 law, which makes it more difficult for FDA to carry out its mission in 

the now very globalized U.S. pharmaceutical supply chain. FDA traced the adulteration of the Heparin product to a manufacturing facility in China, which the agency 

had never inspected. As globalization of drug supply increases, so do concerns about 

drug safety and demands to preserve the stringent quality standards Americans deserve, regardless of where their medicines are produced. 

Today, nearly 40 percent of all prescription drugs dispensed in the United States 

are manufactured outside of the country, and nearly 80 percent of the ingredients 

in our drugs are manufactured abroad. The Food and Drug Administration is 

charged with ensuring the safety of all medicine sold in the United States no matter 
48 

where these products are made. According to FDA estimates, the number of drug 

products made outside of the United States doubled from 2001 to 2008. The growth 

in the number of facilities requiring FDA oversight has grown substantially, particularly in foreign facilities that supply the U.S. marketplace. In 2010, nearly 20 

million shipments of food, drugs and cosmetics arrived at U.S. ports of entry. A decade earlier, that number was closer to 6 million and, a decade before, just a fraction 

of that figure. Unfortunately, this growth has outpaced the law’s reach as well as 

the funds needed to allow FDA to hold all participants in the pharmaceutical supply 

chain to the same high quality standards. 

MORE FOREIGN INSPECTIONS NEEDED

One of the most critical ways FDA ensures continued compliance with the high 

quality standards required of prescription drugs sold in the United States is conducting on-site inspections of facilities where drugs are manufactured. These important surveillance inspections ensure that facilities are continuing to meet their obligation of producing safe products in accordance with a rigorous set of standards 

known as Good Manufacturing Practices, or GMP, and serve as a critical tool of ensuring continued safety and GMP compliance—separate and distinct from other supply chain controls. 

The FDCA of 1938 requires American manufacturers associated with pharmaceutical production to undergo a surveillance inspection every 2 years to ensure that 

these facilities are complying with strict GMP standards. However, the FDCA does 

not impose the same biennial GMP inspection requirement on foreign facilities. According to FDA, foreign facilities have grown by 185 percent, while at the same time 

FDA inspection rates have decreased by nearly 57 percent. Meanwhile, the FDA inspected just 11 percent of the 3,765 foreign establishments in its database in 2009, 

according to the Government Accountability Office. 

This disparity in the degree of oversight experienced by domestic versus foreign 

facilities reduces American competitiveness by creating an uneven playing field, 

while at the same time threatening the safety of the U.S. drug supply. 

This disparity in inspections between foreign and domestic facilities is also causing notable delays in introducing new prescription drugs to consumers, including 

delays in approving products that serve an unmet medical need or offer a more affordable alternative in the case of generic drugs. This is because new product approvals, such as those facing drug shortages, require an inspection history of the 

relevant manufacturing facility and, given the number of facilities awaiting inspection, many of the facilities producing new drugs are waiting to be inspected. 

THE SOLUTION

FDA does indeed need, in the words of Health and Human Services Secretary 

Kathleen Sebelius, ‘‘additional tools from Congress to move its oversight capabilities 

into the 21st century.’’ And more recently, the agency noted that it is ‘‘looking to 

Congress to modernize its antiquated authorities so that FDA’s legal tools keep pace 

with globalization.’’ 

GPhA is in agreement with FDA on this matter. Without modernization of the law 

governing the U.S. drug supply and increased authority and resources to carry out 

FDA’s oversight of today’s complex and global drug supply, the significant challenges facing the U.S. pharmaceutical marketplace will continue and likely compound. Earlier this year, the President signed into law legislation intended to 

globalize FDA to help protect the Nation’s food supply and equip the agency to carry 

out its twin mission of ensuring food safety in an increasingly globalized food supply. When it comes to drugs, however, FDA still operates in accordance with the 

FDCA of 1938, the scope and provisions of which are largely domestic. This law 

needs to be globalized to ensure FDA is equipped for the global age and to ensure 

competitiveness. 

GPhA is pleased the committee is holding this hearing to begin efforts to equip 

FDA with the necessary legal authority and tools to carry out its critical public 

health mission in the globalized U.S. pharmaceutical marketplace. 

Ensuring that all contributors to the U.S. drug system, both foreign and domestic, 

are held to the same quality standard is a critical issue for the entire pharmaceutical industry—brand and generic alike. Amending the FDCA of 1938 and, in 

particular, ensuring foreign facilities are held to the same standards as U.S. facilities, will improve quality, consistency and availability within the drug supply chain 

and create a level playing field, allowing U.S. pharmaceutical manufacturers to be 

more competitive. These important updates to the law will not only result in a safer 

drug supply with consistent oversight for all players in the U.S. system, the changes 
49 

will also help reduce approval times of new drugs undergoing FDA review and help 

expedite the availability of new medicine. 

GPhA further supports a ‘‘risk-based’’ model for inspections that prioritizes inspections according to a company’s safety and compliance track record. This system 

would ensure that questionable or problematic facilities receive a comprehensive review and evaluation sooner, rather than later, or not at all as is the case under the 

current system. Facilities with strong records of compliance and positive inspections 

would be placed further down on the inspection schedule, allowing the agency to 

prioritize its immediate attention on companies that have never had an inspection 

or that have a history of compliance issues. 

GENERIC DRUG INDUSTRY STEPS UP TO HELP ADDRESS THIS INDUSTRY-WIDE ISSUE

As I noted in my opening remarks, the responsibility of ensuring safety is a 

shared one that rests with all of us in industry, though, not just the FDA. 

I am proud to say that the generic drug industry has been a leader in this area, 

developing supply-chain security measures independently and with the FDA to provide the necessary oversight to maintain the Nation’s drug supply. 

For example, one new initiative is the FDA’s border control policy, which is being 

developed in an attempt to cut the number of poor standard medicines that enter 

the supply chain from outside the United States. The new initiative, which is called 

PREDICT—Predictive Risk-based Evaluation for Dynamic Import Compliance Targeting—will be a border-based scheme that assesses drugs at the point of import. 

Barcodes on cases of medicines will be scanned at the U.S. borders and linked to 

a central database. The results will be able to tell the FDA agents at the border 

whether or not the producer has a license to ship and sell their drugs in the United 

States. If the products do not meet FDA compliance they will not be allowed into 

the country. 

The pharmaceutical industry also provides multiple layers of testing and oversight to build in quality and supply chain security from the ground up. Suppliers 

of inactive and active ingredients are carefully evaluated to assess their facilities, 

manufacturing capabilities and supply chain practices and controls. These initiatives provide the foundation of drug product quality, as well as taking all necessary 

steps to help eliminate potential contamination or adulteration in the shipment 

channels. Next, manufacturers test the incoming raw materials for quality, purity 

and potency in accordance with FDA-approved analytical methods. These testing 

methods are designed to assure that all raw materials meet their predetermined 

quality attributes. Finished dosage form manufacturers have sophisticated testing 

procedures during the manufacturing process and for the final product, which are 

all intended to assure that the product received by patients meets all standards for 

quality, purity and potency. 

As drug products are shipped to wholesalers, pharmacies or other intermediaries, 

the pharmaceutical industry utilizes multiple forms of controls within the supply 

chain to mitigate the potential risk of contamination or adulteration. Careful planning of drug shipments, along with strict supply chain custody and controls, are 

part of the advanced logistical operations that provide accountability and oversight 

of the products before they ever reach a patient’s hands. By following these standards, manufacturers are able to determine any deviation from a product’s predetermined shipment and custody program, and stop problems before they occur. 

As my colleagues at Pew noted in their recent report, it is also critical that we 

as manufacturers continue to go beyond current GMP standards in our own facilities to ensure appropriate supplier qualification, through risk-based assessments, 

quality agreements and physical audits, where appropriate. By working together as 

an industry to share the results of these audits, as well as new technologies, we can 

further develop harmonized standards and best practices to ensure that all stakeholders in the pharmaceutical supply chain are utilizing the most current and effective methods for providing patients with safe and effective medications. 

LANDMARK USER FEE PROGRAM WILL PROVIDE ADDITIONAL RESOURCES

Even with these significant efforts in place, however, the generic pharmaceutical 

industry has realized that more needs to be done. That is why the industry, which 

accounts for 78 percent of all prescription drugs dispensed in the United States, has 

stepped up to the plate to help provide FDA with resources to address the challenges caused by the global drug supply and the increase in the FDA’s workload. 

The industry has been working closely with FDA to negotiate a generic drug user 

fee program to help the agency obtain additional resources in this global age to ensure all participants in the U.S.-generic drug system, whether U.S.-based or foreign, 
50 

comply with all U.S.-strict quality standards and to make certain Americans get 

timely access to low-cost, high-quality generic drugs. 

The generic drug user fee program being finalized now with FDA recognizes that 

while providing earlier access to effective medicines is critical—and the key aim of 

all other existing user fee programs—an equally important pillar of FDA’s mission 

is ensuring drug safety. The overall goal is to hold all players, foreign or domestic, 

contributing to the U.S. generic drug system to the same GMP inspection standards, 

while expediting access to more affordable, high-quality generic drugs; and, enhancing FDA’s ability to identify, track and require the registration of all contributors 

involved in each generic drug product sold in the United States. Final recommendations are expected to be submitted to Congress in January 2012. 

While the generic drug user fee program provides an excellent framework for industry to help support the growing global needs of FDA and to level the playing 

field between foreign and domestic facilities through inspection parity, it does not 

completely solve the problem, nor does it have the reach of the entire pharmaceutical industry. To globalize FDA’s authority, eliminate the inspection disparity 

and better ensure the safety of the global supply chain, it is paramount that a bill 

is introduced to expand FDA’s authorities to achieve its mission in this global age. 

The safety of our Nation’s pharmaceutical supply is only as good as our weakest 

link, and the responsibility rests upon all of us. GPhA encourages Congress and our 

counterparts throughout the pharmaceutical industry to work together to ensure 

FDA is equipped to keep our consumers safe in a 21st century global drug supply 

environment. 

FEDERAL PEDIGREE STANDARD SHOULD REPLACE STATE-BY-STATE PATCHWORK

Finally, as we look at the broader issue, GPhA also recommends that Congress 

adopt a Federal pedigree system with uniform standards across all States, as opposed to a patchwork of more state-enforced regulations that are starting to arise 

in the absence of Federal leadership mandating one uniform standard. Given that 

products are distributed throughout interstate commerce and across all States lines, 

having what could potentially be a 50-state patchwork of different standards will 

be a mess without a Federal mandate setting a reasonable, uniform standard. The 

challenge to implementation will be to ensure that the technology is reasonable and 

feasible in light of numerous economic, technical and logistical factors so that the 

end product does not result in an increase to consumer and payer cost. 

CONCLUSION

In conclusion, Mr. Chairman, the Generic Pharmaceutical Association stands 

ready to support Congress and the FDA in strengthening its oversight, updating the 

law and investing more resources to ensure we continue to lead the world in safety 

while maintaining competitiveness. 

Thank you. I would be happy to address any questions of the committee. 

The CHAIRMAN. Thank you very much, Mr. Johnston. 

Now we’ll turn to Mr. VanTrieste. 

Welcome and please proceed, Mr. VanTrieste. 

STATEMENT OF MARTIN VAN TRIESTE, R.Ph., PAST CHAIR, 

RX-360, THOUSAND OAKS, CA 

Mr. VANTRIESTE. Chairman Harkin, Ranking Member Enzi, and 

members of the committee, thank you for the opportunity to testify 

today. My name is Martin VanTrieste, and I am the senior vice 

president of Quality at Amgen, a leading biotechnology company. 

In addition, I am the founder, past chair, and director of Rx-360, 

and it’s on behalf of Rx-360 that I testify here today. 

Rx-360 was founded in 2009 in direct response to the economically motivated adulteration of Heparin with the mission to enhance the security and quality of the pharmaceutical supply chain. 

Our membership has quickly grown to over 65 member companies, 

including most of the large pharmaceuticals, biotechnology, and generic drug manufacturers, along with our key suppliers. 

This industry is extensively regulated by the FDA in a variety 

of ways, including through compliance with good manufacturing 
51 

practices, or GMPs. However, economically motivated adulteration 

and counterfeiting are not GMP issues. GMPs keep honest people 

honest but do little to prevent unethical players or criminals to exploit the complexities of the supply chain. 

Let me give you an example where a lack of transparency in the 

supply chain was able to be exploited which is outlined in a chart 

I have submitted to the committee and is up here on the easel. 

Glycerin is an inactive ingredient used in many pharmaceuticals. 

In this case, the government of Panama unknowingly purchased 

adulterated glycerin to be used in cough syrup which resulted in 

at least 67 deaths. 

An investigation into this tragedy revealed several breakdowns 

in the supply chain which were hidden from the manufacturer purchasing the ingredient. As illustrated in Box 1, the problem began 

in China at the Taixing Glycerin Factory which produced a technical substitute for glycerin which was not pure glycerin at all but 

actually contained antifreeze which is three times cheaper than 

glycerin. 

This factory was never inspected by the Chinese FDI, and as 

Boxes 2, 3, and 4 describe, a series of brokers and traders moved 

the material through the supply chain, changing the name of the 

material, the manufacturing site, the expiration date of the product, and never performed any tests. This adulterated glycerin was 

then used to manufacture cough medicine, leading to fatal consequences. 

Learning from this example, if the manufacturer of the cough 

syrup knew that they were really purchasing antifreeze, these fatalities would have been prevented. And this is why transparency 

of the supply chain is so important. 

Rx-360 members recognize that we are responsible for our suppliers and the supply chains and must address the challenges associated with the global supply chain. In our short period of existence, we have implemented many solutions in four key areas. 

These include conducting and sharing of detailed audits of our suppliers, developing technologies to prevent and detect adulterations, 

implementing best practices for industry, and conducting active 

surveillance and issuing supply chain securities for our members. 

All these efforts are intended to be key pieces of a proactive attempt to eliminate security gaps in the supply chain. The FDA is 

full of good people doing a tough job, and we intend these activities 

to be complementary of their extensive work in this area. 

As policymakers look at ways to improve the integrity of the supply chain, it is important that any legislative or regulatory proposals are carefully considered, such as adding to the complexity of 

the supply chain, creating unintended drug shortages, and adding 

significant costs to the healthcare system. As you examine these 

issues, I have a few points for consideration. 

First, some issues are related to the fact that ingredient suppliers don’t always disclose the actual manufacturing site of those 

ingredients to drug manufacturers. This was the issue in the glycerin example I discussed earlier. By requiring a disclosure to the 

drug manufacturer, we can ensure enhanced oversight of our suppliers. 
52 

Second, there are many foreign suppliers who register with the 

FDA but have no intention of distributing product within the 

United States. They use this registration to convey some sense of 

FDA approval and undermining the integrity of the registration 

system. 

Other points that are worth considering include increased FDA 

inspections of foreign manufacturers, using investigators who are 

specifically trained in fraud detection, allowing the use of qualified 

third-party inspectors, and increased criminal penalties for knowingly engaging in economic adulteration and counterfeiting. 

In conclusion, on behalf of Rx-360, I thank the committee for its 

examination of this issue. I appreciate Senator Bennet’s work in 

this area and the interest of Chairman Harkin and Ranking Member Enzi in finding solutions to these complex issues. Rx-360 

stands ready to assist the committee as they continue to work on 

this important issue. 

Thank you. 

[The prepared statement of Mr. VanTrieste follows:] 

PREPARED STATEMENT OF MARTIN VANTRIESTE, R.PH. 

SUMMARY

Management of the biopharmaceutical supply chain has become one of the top 

public health concerns with respect to consumer safety. The globalization of distribution for drug raw materials, components and finished products has introduced 

many complications. This has resulted in unethical players along the supply chain 

introducing counterfeited, adulterated and contaminated materials, often with tragic 

consequences. 

The biopharmaceutical industry is extensively regulated by the FDA in a variety 

of ways, including through compliance with Good Manufacturing Practices (cGMP). 

However, economically motivated adulteration and counterfeiting are not a GMP 

compliance issue. GMP’s keep the honest people honest but do little to prevent unethical players or criminals from exploiting the supply chain. 

Given these challenges, leaders in quality from the biopharmaceutical industry 

came together to proactively find solutions. The result was the formation of a consortium called Rx-360 in June 2009. The purpose of Rx-360 is to enhance the security of the pharmaceutical supply chain by (1) Adopting standards and best practices; (2) Developing and implementing technology (3) Conducting surveillance; and 

(4) Sharing supplier audit information. 

Rx-360 has accomplished much in its short period of existence. It recently announced positive results from an audit pilot program which allowed audits of a supplier to be shared with the Rx-360 membership. In effect, this method reduces the 

number of audits that a supplier must host and that a biopharmaceutical firm must 

conduct themselves, all while providing more information on a particular supplier 

than previous audits have been able to. 

Additionally, the consortium is undertaking the following activities: (1) Rx-360 

has adopted, or is in the final stages of adopting, numerous standards and best 

practices to secure the supply chain which many firms have implemented; (2) Rx360 has developed an analytical technique that is used by our members to detect 

potentially economically motivated adulteration in response to raw material shortage; and (3) Rx-360 conducts active surveillance to regularly alert its membership 

regarding potential supply chain issues so that companies and suppliers can implement preventative corrective measures. 

Rx-360 appreciates that policymakers are examining ways to improve supply 

chain security, to compliment these initiatives already underway, and would like to 

be a resource as you examine these issues going forward. However, it is important 

that any legislative or regulatory proposals are carefully considered so as to ensure 

that there are no unintended consequences, such as adding complexity to an already 

complex system, unintentionally creating drug shortages, and adding significant cost 

to the health care system. 

As you examine these issues some points for consideration which could improve 

supply chain security include: (1) Requiring ingredient suppliers to disclose their actual manufacturing site to manufacturers; (2) FDA registration of only those foreign 
53 

ingredient manufacturing sites whose products are used in the United States and 

pay a nominal fee; (3) FDA inspection of foreign ingredient manufacturing sites 

using a risk-based approach where the cost of the inspection is paid for by the manufacturer; and (4) Increased criminal penalties for those involved in economically 

motivated adulteration or counterfeiting of pharmaceuticals. 

Rx-360 thanks the committee for examining these complex issues and we stand 

ready to assist you as we work towards our common goal of protecting patients. 

INTRODUCTION

Chairman Harkin, Ranking Member Enzi and members of the committee, thank 

you for the opportunity to testify today. My name is Martin VanTrieste and I am 

the senior vice-president of Quality at Amgen, one of the world’s leading health care 

biotechnology companies. We are headquartered in Thousand Oaks, CA and have 

a significant presence in Asia, Europe and North America, with research, manufacturing, distribution and sales facilities worldwide. Amgen has more than 17,000 employees. 

While I bring with me today my experience at Amgen ensuring supply chain security and quality, my testimony today is on behalf of Rx-360, a consortium developed 

by volunteers from the Pharmaceutical and Biotech industries which includes their 

suppliers. 

Management of the biopharmaceutical supply chain has become one of the top 

public health concerns with respect to consumer safety. The globalization of distribution for drug raw materials, components, and finished products has introduced 

many complications that to date have yet to be fully resolved. Unethical players and 

noncompliant companies along the supply chain can intentionally introduce counterfeited, adulterated and contaminated materials, often with tragic consequences. 

Some of these recent tragic events have been well publicized and include: 

1. Adulterated glycerin with diethylene glycol (antifreeze) used to manufacture 

cough syrup has led to 67 deaths in Panama and 103 deaths in Haiti (mostly children). 

2. Adulterated Heparin with hypersulfated chondroitin sulfate led to 81 deaths in 

the United States and Europe. 

3. Adulterated milk with melamine has led to contaminated infant formula causing kidney stones and deaths of infants in China. 

4. Adulterated glycerin with diethylene glycol used to manufacture teething gel 

has led to over 40 infant deaths in Nigeria. 

The biopharmaceutical industry is extensively regulated by the FDA in a variety 

of ways, including through compliance with Good Manufacturing Practices (cGMP). 

However, economically motivated adulteration, like that listed above, is not a Good 

Manufacturing Practice compliance issue. Good Manufacturing Practices keep the 

honest people honest but does little to prevent unethical players or criminals from 

exploiting complexities in the supply chain. 

We must realize that it’s not a matter of if economically motivated adulteration 

will happen again, but when and where it will happen. 

Given this challenge, leaders in quality from the biopharmaceutical industry came 

together to find solutions to this problem. We recognized that our standard Quality 

Systems and Good Manufacturing Practices would not be sufficient to detect such 

illicit activity. We also quickly recognized that no one company could adequately address this very complex global problem facing our industry, and therefore we needed 

to collaborate. It is a holistic approach coordinated between industry, regulators and 

policymakers that is the most effective and efficient manner to deal with this global 

complex problem. These discussions lead to the formation of a consortium called Rx360. 

RX-360 HISTORY AND MISSION

The formation of Rx-360 was a direct response to the heparin crisis and a call 

to action by Dr. Janet Woodcock, Director of the Food and Drug Administration’s 

Center for Drug Evaluation and Research, during her keynote address at the first 

Parenteral Drug Association—FDA Supply Chain Conference. During the fall and 

winter of 2008, a few quality thought leaders in the biopharmaceutical industry took 

up this call to action and met to discuss the events around the economically motivated adulteration of heparin. We quickly realized as a group that unethical players 

and criminals had entered into the biopharmaceutical supply chain in an unprecedented manner that had not previously been seen in the United States and Western 

Europe. 
54 

Our consortium was incorporated in June 2009 with six member biopharmaceutical companies as founding members. This membership has quickly grown to 

over 65 member organizations, including most of the large Pharmaceutical, Biotechnology and Generic drug manufacturers along with many key suppliers. Rx-360 

membership is open to branded and generic biopharmaceutical companies, their suppliers, professional organizations and regulatory agencies. 

The purpose of Rx-360 is to enhance the security of the biopharmaceutical supply 

chain and to assure the quality and authenticity of the products moving through 

that supply chain. The individuals developing this concept are working in the best 

interest of patients. We are a non-profit organization with the mission to create and 

monitor a global quality system that meets the expectations of industry and regulators and that assures patient safety by guaranteeing product quality and authenticity throughout the supply chain. 

Broadly speaking, Rx-360 focuses on four areas to secure the supply chain and 

to assure the quality of materials throughout the supply chain. These four areas 

are: 

1. Adopting standards and best practices; 

2. Technology development and implementation; 

3. Surveillance around events that could lead to supply chain threats; and 

4. Sharing supplier audits. 

Rx-360 members recognize that we are responsible for our suppliers and supply 

chains and have a responsibility to tackle head-on the challenges associated with 

a global supply chain. With that in mind, Rx-360 member companies have implemented company-specific and collaborative-based initiatives to help further assure 

a secure supply chain in the interest of product quality and ultimately, patient safety. 

PROBLEMS ASSOCIATED WITH A GLOBAL SUPPLY CHAIN

Globalization is impacting most industries and the biopharmaceutical industry is 

no exception. On the positive side, it has enabled our industry to enter markets all 

over the world and provide life-saving medicines to millions of patients. With the 

benefits of globalization, however, come significant challenges and responsibilities. 

One of those challenges is ensuring the authenticity and quality of materials moving 

through the supply chain. 

Several highly publicized events have highlighted a weakness in the biopharmaceutical supply chain. Significant harm to patients, including death, has been associated with these events. These incidents have led to a loud and swift reaction from 

the public, biopharmaceutical companies, health authorities and policymakers. 

These events have shown us how unethical players and criminals have entered into 

the supply chain, introducing counterfeited, adulterated and contaminated materials, often with tragic consequences. 

I have had the opportunity to present on supply chain security at many global 

conferences with other experts in the field, including representatives from foreign 

and domestic regulatory agencies. As I conduct my research for these presentations, 

it can become increasingly unsettling and overwhelming how complex the issues are 

and the potential problems that exist. 

I quickly realized that the challenges presented by a very complex, global supply 

chain, which spans numerous regions of the world and many regulatory jurisdictions, are too vast to take on at one time or with one solution. It was clear to me 

that there is no magic solution for these issues, but that working together, the industry, its suppliers, regulators and policymakers can improve the safety of the supply chain. 

WHAT RX-360 HAS ACCOMPLISHED TO DATE

These issues and their resolution are of extreme importance to Rx-360 and its 

members, and are the reason that the organization was founded by dedicated quality experts looking for solutions. Patient safety is not a competitive advantage, and 

the members of Rx-360 are looking at novel ways to improve the system and have 

already accomplished a great deal in our short time of existence. Examples of this 

include: 

• Shared Audits: Rx-360 is working to implement two shared audit programs; 

a joint audit program and a shared audit program, which will allow the collection 

and sharing of audit information of suppliers so that this information can be leveraged across all members of the consortium. 

The Board of Rx-360 recently announced positive results from its shared audit 

pilot program. In the pilot, the biopharmaceutical company which sponsors the audit 
55 

and the audited supplier agreed to share redacted audit reports which were 

uploaded into the Rx-360 database for all members to share. From this pilot program the following benefits were found: 

• Shared audits provide a broader, more thorough ‘‘picture’’ of quality culture 

and performance; • Existing reports can be used to identify and pre-screen new suppliers; and • Potential savings with evaluation of reports/responses to reduce supplier 

audit frequency/length, or audit scope. 

• Joint audits: Joint audits are designed to increase the effectiveness of each 

audit by collecting and analyzing more information while reducing the audit burden 

on suppliers and biopharmaceutical companies. Rx-360 uses qualified third-party 

auditors to conduct joint supplier audits on behalf of the consortium’s members. All 

auditors are provided the same high-quality training by Rx-360, which ensures that 

each audit is effective, efficient, and consistent throughout the supplier base. 

Once complete, the audit report is placed into an electronic database where Rx360 members are provided access to the report, in lieu of conducting an on-site audit 

themselves. This sharing reduces the number of audits that a supplier must host 

and that a biopharmaceutical firm must conduct itself. This will reduce the overall 

audit burden to suppliers and biopharmaceutical drug product manufacturers, and 

provides more information on a particular supplier than previous audits have been 

able to provide. One additional benefit is that any savings can be re-invested in 

process and quality system improvements. One of the Rx-360 supplier members estimates that it costs them $20,000 to host 

a customer audit, and they receive multiple customer audits a year to host. By having these joint audits, suppliers can save resources and money and apply these savings toward making improvements and not just hosting audits. Most suppliers 

would agree to allow Rx-360 auditors to spend more time auditing for a shared 

audit than they would allow an individual biopharmaceutical company. 

The joint audit scheme is in the pilot phase, which is planned to be completed 

by the end of November 2011. 

Rx-360 is moving forward towards formally implementing these audit programs 

and we expect this to be a significant step in improving the ability to ensure supplier quality in a global environment. 

• Adoption of Standards and Best Practices: Rx-360 has adopted, or is in the 

final stages of adopting, numerous standards and best practices designed to help secure the supply chain and the security of the materials throughout the supply chain. 

For example, Rx-360 recently published a points-to-consider document on how to improve security of biopharmaceutical shipments and prevent cargo theft. This information was presented to FDA at a workshop and will allow industry to utilize these 

techniques to help prevent cargo theft. Many firms have implemented, or are in the 

process of implementing, these best practices. 

• Development of Detection Techniques: Rx-360 has developed an analytical 

technique to detect potentially economically motivated adulteration in response to 

raw material shortage. We have learned that shortages provide an opportunity for 

criminals and unethical players in the supply chain to exploit. As an example, once 

Rx-360 became aware of an acetylnitrile shortage, a key raw material used in active 

ingredient manufacturing, we rapidly informed our members so they could secure 

inventory and then developed a method that was provided to everyone and anyone 

to detect if their raw materials were adulterated for economic gains. 

• Membership Alerts: Rx-360 regularly alerts its membership regarding potential supply chain issues so that companies and suppliers can implement preventative and corrective measures to quickly avoid issues which have been discovered. 

These alerts help put members on notice regarding potential problems and also 

serve to rapidly gather the appropriate experts to respond to known supply chain 

threats in order to protect patients. For example, in the midst of the Japanese tsunami and nuclear accident, Rx-360 assembled a panel of experts to evaluate the impact on the supply chain and recommend best practices to the biopharmaceutical industry in order to assure the safe distribution of drug products in Japan and how 

to assure that raw materials and drug product produced in Japan would not have 

adverse patient consequences. 

A STATEMENT OF SUPPORT FOR FDA

Rx-360 is supportive of the FDA’s efforts to address economically motivated adulteration, counterfeits, substandard medicines and the Agency’s efforts to help ensure 

the supply chain remains secure. We believe a strong, well-funded FDA is critical 

to the health and safety of the American public, both for the purposes of helping 

to assure the safety, effectiveness and availability of medicines and to help ensure 
56 

continued access to innovative new therapies for American patients. As such, Rx360 is supportive of efforts to provide adequate resources to the FDA so that the 

Agency can enhance its inspection efforts abroad and ensure a safe, secure supply 

chain. 

POINTS TO CONSIDER IN ANY LEGISLATIVE/REGULATORY EFFORT TO IMPROVE SUPPLY

CHAIN SECURITY

Rx-360 appreciates that policymakers are examining ways to improve supply 

chain security and would like to be a resource as you examine these issues going 

forward. As I mentioned earlier in my testimony, we think that we face a complex, 

global problem that needs a holistic solution requiring industry, regulatory authorities and policymakers working collaboratively to attack the problem. However, it is 

important that any legislative or regulatory proposals are carefully considered so as 

to ensure that there are no unintended consequences, such as adding complexity to 

an already complex system, unintentionally creating drug shortages, and adding significant cost to the health care system. 

The biopharmaceutical supply chain is a complex and global endeavor, and Rx360 is an example of what can be done when stakeholders work together to address 

solutions. As you examine these issues some points for consideration which could 

improve supply chain security include: 

• Ingredient suppliers should disclose the actual manufacturing site to 

the drug product manufacturer: There are many potential links in a global supply chain where a series of brokers and distributors could be involved. If we try to 

learn from the contaminated glycerin events in Panama we must recognize that one 

contributing factor is that the drug product manufacturer in Panama had no idea 

that the glycerin they were purchasing was sourced from China since at least three 

distributors or brokers did not disclose the location of the manufacturing site. As 

such the drug product manufacturer did not have the opportunity to audit the ingredient manufacturer and had to depend on the Quality Systems of several foreign 

intermediaries that did not act in an ethical manner. See attached chart of events 

leading up to contaminated glycerin. 

• Foreign ingredient manufacturing sites should be registered with the 

FDA and only those whose products are actually used in the United States 

and pay a nominal fee should be allowed to maintain registration: This will 

assure that the FDA has an accurate data set to be used for oversight. There are 

many suppliers who have no intention to distribute product within the United 

States but use an FDA registration to convey a sense of FDA approval to non-U.S.- 
57 

based manufacturers. This behavior only adds misleading data to any FDA database 

and makes it harder for FDA to achieve their objectives. • FDA should inspect foreign ingredient manufacturing sites using a 

risk-based approach and those foreign ingredient manufacturers should 

pay the cost of FDA inspections: The Food, Drug and Cosmetic Act requires the 

FDA to inspect domestic manufacturers every 2 years, but has no such mandate to 

inspect foreign manufacturers with such frequency. For over 40 years, overseas 

manufacturers have had unfettered access to the largest biopharmaceutical market 

in the world with very little regulatory oversight or inspections. This inspection gap 

between domestic and foreign inspections should be made up quickly, and funded 

by the sites external to the United States. According to the recent PEW report, at 

the current FDA inspection rate, it will take more than 13 years to inspect the sites 

outside the United States, and that more than 80 percent of the drugs consumed 

in the United States are now manufactured outside the United States. 

Today, U.S. manufacturers who are inspected by many foreign regulatory agencies 

pay for the cost of these inspections. By requiring foreign manufacturers to cover 

the cost of FDA inspections, this will assure that the FDA will have adequate funding for inspections and experienced investigators. It would also have adequate funding to assure that the appropriate numbers of investigators participate in a foreign 

inspection and that the length of the inspection is appropriate to provide adequate 

oversight. Inspection fees should also provide adequate funding so that FDA Investigators are not asked to bear unreasonable hardships when making travel and lodging arrangements. Also, given resource constraints, perhaps FDA and Congress 

could consider allowing qualified third-party inspectors to inspect these foreign facilities. 

• Increased criminal penalties for economically motivated adulteration 

and counterfeiting: Today, a criminal can make astronomical profits by knowingly 

engaging in economically motivated adulterating or counterfeiting a biopharmaceutical ingredient or drug product, with little chance of getting arrested and even 

if they are arrested the criminal penalties are small compared to the crime. FDA 

and other enforcement authorities should make this a focus for enforcement and 

criminal penalties should be increased to reflect the gravity of the crime and the 

life-threatening risks to patients, like those that have been proposed in recent legislative proposals. 

We also believe that during FDA overseas GMP inspections, particularly of biopharmaceutical ingredient manufacturers, that these inspections should also focus 

on good distribution practices and the authenticity of data submitted to the FDA. 

For example, there are unintended threats, such as improper handling of drugs and 

raw materials, especially if temperature-sensitive, that can compromise the efficacy 

and safety of drugs and pose just as serious of an implication to patient safety. 

Based on results from risk assessments or suspicious reports from the field, the 

FDA should also consider deploying specially trained forensic and criminal investigators that can detect fraud, the use of ‘‘show’’ and ‘‘shadow’’ factories, and the potential for economic adulteration, since these skills are vastly different from the 

skills needed for a routine cGMP inspection. 

FDA should also consider whether to monitor or provide special scrutiny to products or ingredients in short supply since these situations may provide additional incentives and opportunities for unethical players to engage in economically motivated 

adulteration of products. 

CONCLUSION

On behalf of Rx-360, I thank the committee for taking on these complex issues 

in order to protect patients. I am encouraged by the collaboration of all stakeholders 

working together to address this complex issue. Rx-360 members are dedicated to 

protecting patients by securing the biopharmaceutical supply chain. This dedication 

is demonstrated everyday by their and their employee’s contributions leading to the 

remarkable success of Rx-360 in a relatively short period of time. We stand ready 

to assist the committee as they continue their work on this important issue. 

The CHAIRMAN. Thank you very much, Mr. VanTrieste. 

And now, Mr. Coukell, if you’ll summarize, we appreciate it. 

STATEMENT OF ALLAN COUKELL, BScPharm, DIRECTOR OF 

MEDICAL PROGRAMS, PEW HEALTH GROUP, WASHINGTON, DC 

Mr. COUKELL. Thank you, Mr. Chairman, Ranking Member Enzi, 

and members of the committee. Thank you for the opportunity to 
58 

* The ‘‘After Heparin: Protecting Consumers from the Risks of Substandard and Counterfeit 

Drugs Report may be found at http://www.pewtrusts.org/uploadedfiles/www.pewtrustsorg/Reports/Health/PewlHeparinlFinallHR.pdf. 

testify. My name is Allan Coukell. I’m a pharmacist and director 

of medical programs in the Pew Health Group. 

We recently released a report called ‘‘After Heparin: Protecting 

Consumers from the Risks of Substandard and Counterfeit 

Drugs.’’ * Our chief findings are consistent with what you’ve heard 

from previous speakers. Pharmaceutical manufacturing is now 

globalized and increasingly outsourced, and to ensure safety, both 

the FDA and manufacturers must adjust. 

The Pew report is based on published studies and documents and 

dozens of interviews with experts as well as a 2-day conference 

that included regulators and a broad representation from industry. 

We outlined a series of case studies to illustrate the kind of rare 

but potentially very serious risks we face. We identified systemic 

problems and practical solutions. 

We called the report ‘‘After Heparin’’ both because Heparin was 

a wake-up call for industry and regulators and because it so clearly 

shows many of the failings of our current system. For example, the 

U.S. manufacturer in that case failed to perform a timely audit of 

its Chinese supplier. The FDA approved the supplier without an inspection, partly because an agency database confused two different 

facilities. The standard test for Heparin then in use was outdated 

and not designed to detect a contaminant. There were significant 

manufacturing quality issues. 

And even after the fact, neither the FDA nor the manufacturer 

was ever able to gain complete access to that upstream supply 

chain, hindered in part by lack of cooperation from Chinese authorities. Unless you think this is ancient history, I point out that 

just last month, the FDA issued a warning letter to yet another 

Heparin facility in China for failing to adequately evaluate suppliers or perform testing. 

Others today have stressed the need for increased foreign inspections. It’s an area where there’s a good deal of consensus, and I’d 

be happy to expand on what we see as key changes to ensure safety 

and a level playing field. Speakers have also mentioned the need 

for manufacturers themselves to ensure quality, and that’s crucial. 

One speaker at our conference last year was Philippe Andre, a 

China-based pharmaceutical auditor whose business involves visiting manufacturing facilities in Asia on behalf of United States 

and European companies. I’d like to show a photo that he shared 

with us. You can see here—this is a facility in China. And just by 

the rusted pipes and the broken windows, you know this is not 

using good manufacturing practices. 

Of course, there are very good facilities in China. This just 

wasn’t one of them. But it is the start of the supply chain for a 

western company. 

Sometimes substandard facilities sell to so-called show factories, 

high-quality facilities that sell products they didn’t actually make. 

And in Mr. Andre’s experience, American and European companies 

are misinformed about the identity of all or part of their supply 

chain more than a third of the time. 
59 

Our report examines a number of other case studies including 

where manufacturers falsified or concealed records. And we note 

the risk of U.S. patients receiving counterfeit or stolen products 

that penetrate our domestic distribution system. 

Mr. VanTrieste has just reiterated—let me reiterate the 

diethylene glycol poisoning, where the toxic material moved from 

a manufacturer in China to another broker in China, to a broker 

in Europe, to a broker in another part of the world. Each time the 

label is changed and replaced with a new, inaccurate label, and 

each time the history of the product is destroyed. 

Indeed, it was poisoning with this exact same substance that led 

Congress to pass the Food, Drug, and Cosmetic Act in 1938. The 

patients who died in the Panama example were largely children. 

And we must ensure that the FDCA reflects today’s reality. 

The necessary steps are practical, feasible, and crucial. Many 

have been included in previous bipartisan legislation before this 

committee and in Senator Bennet’s bill introduced last year. I’ve 

mentioned inspections and the need that manufacturers better assess their suppliers, and they’re accountable for doing so. 

We also need to ensure that testing standards are updated and 

that the FDA has the tools it needs. For example, many people are 

surprised to learn that the FDA can’t order the recall of a drug 

product if it’s adulterated. They can do it for medical devices and 

for food, and they should have that authority for drugs. If they 

have it, it’s less likely they’ll need to use it. Done well, a regulatory 

scheme will reward the good players and ensure that the bad actors don’t create a race to the bottom. 

In conclusion, let me say that Americans support these sorts of 

changes. Pew commissioned a poll last year which found that likely 

voters are concerned with drugs from developing countries. And 

across the political spectrum, they overwhelmingly favor many of 

the provisions I’ve outlined. As Congress did 70 years ago, we urge 

you today to act to ensure safety. We shouldn’t wait for another 

tragedy. 

Thank you. 

[The prepared statement of Mr. Coukell follows:] 

PREPARED STATEMENT OF ALLAN COUKELL, BSCPHARM

SUMMARY

A major focus of the Pew Health Group is identifying ways to address risks to 

the U.S. pharmaceutical supply chain. In March of this year, we hosted a 2-day conference that included representatives of brand and generic pharmaceutical manufacturers, active drug ingredient makers, major and secondary pharmaceutical wholesalers, chain and independent pharmacies, consumer and health professional organizations, the U.S. Food and Drug Administration (FDA) and State regulators, and 

independent supply chain experts. The convening was structured around a discussion draft of a white paper entitled ‘‘After Heparin: Protecting Consumers from the 

Risks of Substandard and Counterfeit Drugs,’’ which was shared with conference 

participants in advance. The final report was issued on July 12. 

The presenters at our meeting explained that while the vast majority of drugs in 

our pharmacies and medicine cabinets are not counterfeit or adulterated, pharmaceutical manufacturing has changed dramatically in recent years, becoming increasingly globalized and outsourced. This creates new risks which were dramatically illustrated not long ago with the intentional adulteration of the common bloodthinning drug, heparin. 

Despite globalization of manufacturing, FDA oversight is largely domestically focused. The Food, Drug and Cosmetic Act (FDCA) requires inspections of U.S. plants 
60 

every 2 years, but specifies no inspection frequency for foreign plants. The FDA 

lacks the resources to inspect foreign sites with any meaningful regularity. The Government Accountability Office (GAO) has also found that FDA foreign inspections 

are shorter than inspections of U.S. plants and, unlike inspections at U.S. facilities, 

are pre-announced, because of cost and resource considerations. 

Poor adherence to quality standards has been observed both in the United States 

and abroad, but the shift of manufacturing to low-cost environments with reduced 

oversight creates an increased risk. According to one estimate, ignoring Good Manufacturing Practices (GMPs) can save up to 25 percent of a factory’s operating costs. 

The expectation of inspections is an incentive for compliance with quality standards. 

Compliance failures may be the result of poor performance, or they may be deliberate. 

Additional legislative changes are now needed to give the FDA the tools it needs 

and to ensure that every manufacturer is held to the highest standard. Pew 

prioritizes the following reforms: 

1. Pharmaceutical companies must have comprehensive systems in place to assess 

risk and ensure the quality and safety of their manufacturing supply chains. 

2. Overseas inspections by FDA must be significantly increased. 

3. FDA authority and enforcement gaps must be addressed. 

4. Improve the information flow to FDA. 

Chairman Harkin, Ranking Member Enzi and members of the HELP Committee, 

thank you for the opportunity to testify about the essential steps Congress must 

take to protect Americans and ensure the integrity of our drug supply. 

The Pew Charitable Trusts is driven by the power of knowledge to solve today’s 

most challenging problems. Pew applies a rigorous, analytical approach to improve 

public policy, inform the public and stimulate civic life. Based on research and critical analysis, the Pew Health Group seeks to improve the health and well-being of 

all Americans. 

A major focus of the Pew Health Group is identifying ways to improve the safety 

of the U.S. pharmaceutical supply chain. In July of this year, we released a report 

entitled ‘‘After Heparin: Protecting Consumers from the Risks of Substandard and 

Counterfeit Drugs.’’ 1 The report, which underwent extensive external review, was 

based upon information from regulatory and public documents, peer-reviewed journal articles and interviews with dozens of supply chain experts from numerous perspectives. It was informed by a 2-day conference we hosted earlier this year that 

included representatives of brand and generic pharmaceutical manufacturers, active 

drug ingredient makers, major and secondary pharmaceutical wholesalers, chain 

and independent pharmacies, consumer and health professional organizations, the 

U.S. Food and Drug Administration (FDA), State regulators and independent supply 

chain experts. I am including the report as part of my testimony. 

The key message is that pharmaceutical manufacturing has changed dramatically 

over the past decade. While the vast majority of drugs in American pharmacies and 

medicine cabinets are not counterfeit or adulterated, increasing globalization and reliance on outsourced manufacturing creates new risks, including the risk of deliberate tampering or counterfeiting of ingredients as well as the risk of inadequate 

safety or quality controls in a manufacturing environment that is largely outside the 

scrutiny of the FDA. Along with some serious recent safety problems, we have recently seen shortages of important medicines, in part due to manufacturing quality 

problems. 

We are encouraged by ongoing Generic Drug User Fee discussions and press reports that generic drug companies and active ingredient makers have agreed to pay 

fees that will enable the FDA to conduct more inspections of overseas manufacturing facilities. Indeed, at our recent public meeting, these sectors emphasized the 

importance of stepping up to ensure stronger oversight of their products. There is 

no doubt that this step, if taken, would move us closer to a system that better protects the health of American patients. 

However, the problem of pharmaceutical supply chain safety is not confined to generic drugs. As FDA officials and other experts have emphasized, this is an issue 

for all drugs, brand and generic alike. It is essential that Congress ensure that we 

have a system that enables FDA, in conjunction with other regulators and third parties, to inspect all high-risk overseas facilities. Further, increasing FDA’s oversight 

capacity, while critical, is only one of several necessary steps that Congress must 

take to ensure safety. Our analysis of supply chain risks has identified the need to 

ensure stronger baseline quality management standards for industry, and the need 

to update FDA tools and authorities that will allow the Agency to operate effectively 

in the 21st Century environment. 
61 

HEPARIN

The contamination of the blood thinner heparin dramatically illustrates the risks 

we face. In late 2007, health authorities at the U.S. Centers for Disease Control and 

Prevention (CDC) and the FDA began receiving reports of unexpected allergic-type 

reactions in patients undergoing dialysis.2 The events were subsequently linked to 

heparin, a widely used blood thinner.3 Additional analysis led to the identification 

of an adulterant that standard tests were unable to detect.4 Heparin was made by 

an American company, but the heparin active ingredient had been sourced from a 

Chinese factory, which in turn relied upon a network of small suppliers. The FDA 

and others believe that persons in China added the cheaper adulterant to crude heparin to cut costs.5 6 The toxic material eventually reached at least 11 countries. 

Based on an estimated three tons of product, this substitution has been estimated 

to have yielded $1 million to $3 million in gains for the individual or company that 

sold it.7 The FDA received reports of deaths and serious injuries associated with use 

of heparin.8

While failure to detect the contaminant during manufacture was a key factor, the 

case also illustrated other systemic problems, including 9 10 11: 

• An absence of timely supplier audits and FDA inspections, • Limits and errors in the FDA database of manufacturing facilities, • The discovery of manufacturing quality issues, including poor control of incoming raw materials, and • The fact that—even in the period after the deaths—neither the manufacturer 

nor the FDA was able to gain complete access to the upstream supply chain. 

This incident represents a clear breach of the security of the U.S. pharmaceutical 

supply. To this day, no one in any country has yet been held accountable. Nor has 

Congress acted to update the statutes that govern drug manufacturing. Numerous 

experts have asserted that, absent changes to the system, another such event is inevitable. 

Indeed, as recently as last month, the FDA issued a warning letter to a Chinese 

manufacturer of heparin for failure to conduct adequate quality control, failure to 

evaluate raw ingredients, test each batch of incoming material and failure to adequately assess suppliers. Although the firm in question was supplying the U.S. market, it was not registered with the FDA, as required under law.12

GLOBALIZATION/OUTSOURCING

Heparin is far from the only pharmaceutical that is produced outside the United 

States for American consumers. The number of U.S. drugs and ingredients made at 

non-U.S. sites has doubled since 2001.13 An estimated 40 percent of all finished 

pharmaceuticals,14 and 80 percent of the active ingredients and bulk chemicals in 

U.S. drugs, are now sourced by industry from foreign countries,15 and up to half are 

purchased from plants in India and China.16 The United States is the No. 1 destination for Chinese pharmaceutical raw material exports.17

A recent survey of pharmaceutical industry executives determined that 70 percent 

had key suppliers in China and close to 60 percent in India. About half of those 

surveyed were from companies with annual revenues of $1 billion or more. Ninetyfour percent of those surveyed saw their greatest supply chain risk as raw materials 

sourced outside the United States. 

Despite globalization of manufacturing, FDA oversight is largely domestically focused. The Food, Drug and Cosmetic Act (FDCA) requires inspections of U.S. plants 

every 2 years, but specifies no inspection frequency for foreign plants.18 The FDA 

lacks the resources to inspect foreign sites with any meaningful regularity.19 The 

Government Accountability Office (GAO) has also found that FDA foreign inspections are shorter than inspections of U.S. plants and, unlike inspections at U.S. facilities, are pre-announced, because of cost and resource considerations.20

QUALITY/COMPLIANCE

In the case of heparin, it appears that criminals deliberately introduced a substandard active ingredient into the supply chain. At other times, consumers may be 

at risk because of failures by manufacturers to comply with quality standards. Poor 

adherence to quality standards has been observed both in the United States and 

abroad, but the shift of manufacturing to low-cost environments with reduced oversight creates an increased risk. According to one estimate, ignoring Good Manufacturing Practices (GMPs) can save up to 25 percent of a factory’s operating costs.21

The expectation of inspections is an incentive for compliance with quality standards. 

Compliance failures may be the result of poor performance, or they may be deliberate. One Chinese company was found to have exported heparin to the United 
62 

States that they claimed to have made at their own factory, but was in fact made 

entirely at two external plants.22 The FDA has said that some of this heparin may 

have contained the same contaminant associated with the deaths in 2007 and 

2008.23 Falsification of manufacturing location poses risks to patients, because regulators cannot ensure a product’s quality without knowing the conditions of its manufacture. 

In 2008, an Indian manufacturer was cited by the FDA for alleged falsification 

of stability testing records and use of active ingredients made at unapproved sites, 

according to a Department of Justice subpoena motion.24 25 In 2010, another Indian 

manufacturer was found to have falsified batch manufacturing records for an antiplatelet medicine. EU inspectors discovered at least 70 batch-manufacturing records 

in the plant’s waste yard. All of the records had been re-written, and in some cases 

original entries had been changed.26

In Panama in 2006, dozens of people died after taking a cough medicine that had 

been made with diethylene glycol,27 28 a sweet-tasting, but poisonous solvent.29 It 

had been wrongly labeled in China and passed through a series of Chinese and European brokers, who repeatedly re-labeled it, presumably without performing independent tests. The same problem has occurred with products in Africa, Haiti and 

India, and has been identified in consumer products in this country as recently as 

2007.30 Students of FDA history will know that diethylene glycol poisoning in the 

United States in 1937 was the disaster that lead directly to the enactment of the 

FDCA.31 It is now time to update that statute for 21st century manufacturing. 

GAPS AND SOLUTIONS

At the Pew convening in March, we heard clearly that real risks exist, and that 

the system can—and must—be improved. We heard that serious limitations to 

FDA’s oversight of foreign plants making drugs and ingredients for the United 

States must be remedied. Representatives from several drug manufacturing groups 

agreed to back new industry fees to cover additional foreign inspections. 

Experts also called for industry audits of every supplier and sub-supplier. Some 

companies already have best practices in place, but it is important that every company have robust systems to ensure the safety and quality of its upstream supply 

chain. 

Some steps can be taken now. The FDA has opened offices in India, China, and 

other countries, and is pursuing changes to standards to improve supply chain oversight. The agency is also implementing a new risk-based screening system for imports to speed the clearance of low-risk shipments and increase the predictive efficacy for identifying and targeting high-risk imports. In addition, FDA has entered 

into more than 30 agreements with regulatory bodies in different countries to share 

some inspectional and other non-public information.32 Finally, this June, the FDA 

released an important strategy paper outlining its intent to form a global consortium of regulators and to increase the agency’s reliance on third-party sources of 

information. 

Many individual companies have also taken steps, and as mentioned, the focus 

on increasing FDA oversight capacity in the current GDUFA negotiation process is 

an important move forward. Nevertheless, additional legislative changes are now 

needed to give the FDA the tools it needs and to ensure that every manufacturer, 

whether generic or brand, is held to the highest standard. Pew prioritizes the following reforms: 

1. Pharmaceutical companies must have comprehensive systems in place to assess 

risk and ensure the quality and safety of their manufacturing supply chains. Companies must audit suppliers on-site prior to engagement and institute supplier quality 

agreements. Company management must be held accountable for implementing 

these systems. 

While the FDA already has the authority to establish ‘‘current good manufacturing practices,’’ or cGMPs, these regulations do not extend to the assurance of 

quality at ingredient suppliers. The FDA has issued guidance explaining how a 

quality systems approach complements GMPs. Legislation should require companies 

to develop such quality systems, but must allow for companies and FDA to update 

standards and practices in keeping with advances over time. 

2. Overseas inspections by FDA must be significantly increased. Inspections do not 

guarantee quality, but the reasonable expectation of inspections is an incentive for 

compliance with quality standards. We can and should ensure that inspection frequencies domestically and internationally are meaningful for both generic and brand 

companies. The FDA has recently expressed its intention to increase its reliance on 

third-party sources of information, particularly inspections by other regulators, to 

supplement FDA’s own ability to conduct inspections. This is a necessary step to 
63 

preserve the integrity of the U.S. drug supply, but the agency also needs additional 

resources to conduct overseas inspections. As noted above, the proposed user fee 

agreement with the generic industry and active ingredient makers to help fund inspections will be extremely helpful. Congress should ensure that FDA is able to provide effective oversight on the basis of a risk-assessment, regardless of whether the 

facility is covered by a user fee agreement. 

3. FDA authority and enforcement gaps must be addressed: FDA authorities and 

enforcement tools are often inadequate to properly regulate the pharmaceutical industry, particularly overseas. FDA does not currently have the authority to mandate 

a drug recall, nor may it halt product distribution (it can do both for medical devices) and must instead go through the courts to request a seizure.33 In addition 

to mandatory recall authority for drugs, the FDA needs the authority to subpoena 

documents and witnesses, and an improved set of enforcement tools such as civil 

penalties for violations of the FDCA. Granting subpoena power to Federal agencies 

is not uncommon—at least 355 such authorities have been granted to other executive branch entities. 

4. Improve the information flow to FDA: Drug companies are not currently required to inform FDA of many types of quality or safety issues that could present 

risks to U.S. patients, such as suspected counterfeiting or theft. Industry whistleblowers wishing to bring information to FDA are not currently covered by specific 

whistleblower protections. FDA is also limited in its ability to share information protected under the trade secrets provision of the Freedom of Information Act (FOIA) 

with other government agencies, which can hamper international investigations, 

and should be given clear authority to do so. This reform would also facilitate the 

sharing of inspectional information between FDA and its counterpart agencies. 

PROTECT AMERICAN CONSUMERS

The public expects that FDA will ensure that the drugs they take every day are 

safe from contamination and, at the same time, there is increasing concern about 

the safety of imported drugs. A poll commissioned by The Pew Charitable Trusts 

found that Americans are concerned about the safety of drugs from developing countries.34 And Americans across the political spectrum overwhelmingly support giving 

FDA increased authority in order to protect the domestic drug supply. For example, 

86 percent of respondents supported inspecting foreign facilities every 2 years; 94 

percent supported mandatory recall authority for the FDA. We can avoid future 

tragedies by adopting policies that are supported by drug manufacturers, health 

professionals, and the vast number of Americans who take medicines such as prescription and over the counter drugs at their peril. Congress should act now. 

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batches of [multiple Clopidogrel products], a medicinal product for human use. 

http://ec.europa.eu/health/documents/community-register/2010/2010032978389/ 

anxl78389len.pdf. Accessed August 25, 2010. 
65 

27. Rentz ED, Lewis L, Mujica OJ, et al. Outbreak of acute renal failure in Panama in 2006: a case-control study. Bull World Health Organ 2008; 86:749–56. 

28. U.S. Food and Drug Administration News Release. ‘‘FDA Advises Manufacturers to Test Glycerin for Possible Contamination: Glycerin Contaminated with 

Diethylene Glycol (DEG) Remains a Potential Health Hazard to Consumers.’’ May 

4, 2007. http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/2007/ 

ucm108909.htm. Accessed September 27, 2010. 

29. MEGlobal. Diethylene Glycol Product Guide. 2005. 

30. U.S. Food and Drug Administration. Toothpaste imported from China may 

contain diethylene glycol. http://www.fda.gov/Safety/MedWatch/SafetyInformation 

/SafetyAlertsforHumanMedicalProducts/ucm153155.htm. Accessed September 1, 

2010. 

31. U.S. Food and Drug Administration. Sulfanilamide Disaster. http:// 

www.fda.gov/AboutFDA/WhatWeDo/History/ProductRegulation/Sulfanilamide 

Disaster/ucm2007257.htm. Accessed August 24, 2010. 

32. Hamburg, Margaret. Commissioner, U.S. Food and Drug Administration. Testimony before the House Committee on Energy and Commerce, Subcommittee on 

Oversight and Investigations. April 3, 2011. http://republicans.energycommerce 

.house.gov/Media/file/Hearings/Oversight/041311/Hamburg.pdf. Accessed April 

27, 2011. 

33. 21 CFR 7.40(c)30. 

34. Hart Research Associates and Public Opinion Strategies (commissioned by The 

Pew Charitable Trusts). National poll of 802 likely voters conducted March 29–Apr 

1, 2010. http://www.prescriptionproject.org/tools/initiativeslresources/files/DrugSafety-Poll-Findings-2.pdf. 

The CHAIRMAN. Thank you very much, Mr. Coukell, and we’ll 

begin a round of 5-minute questions. 

Starting with Dr. Crosse, in the past, you reported that FDA 

databases—and I heard this from others here too—had contained 

incorrect information about foreign drug establishments. What’s 

the reason for this, and is this still the case, that they contain incorrect information? 

Ms. CROSSE. It is still the case. There are several reasons. You 

heard Ms. Autor speak about a paper-based registration system 

that previously existed. Now, FDA has gone to an electronic system 

which has reduced certain errors of data entry, but they still don’t 

have in place a requirement for any sort of unique identifier for a 

facility. 

They ask companies now with this electronic registration that 

they submit a unique identifier, a Dun and Bradstreet D-U-N-S 

number, that they can enter into the system. They cannot require 

companies to submit that, and while many are complying, perhaps 

some of the ones you’d most want to have information about may 

not be complying with that. 

But, nevertheless, you continue to have other systems that are 

populating FDA databases with incorrect information. When shipments arrive at the border, the Customs and Border Protection has 

a data system that does not use a unique identifier, and that then 

sends incorrect information to FDA. 

The CHAIRMAN. So this is a question for all of you. Should we 

have a requirement that any finished drug, any ingredient or excipient that is manufactured in a foreign country that comes to this 

country have a bar code attached to it at all levels? Now, we know 

that they very seldom—they don’t go directly from a small plant 

like that to some pharmacy in the United States. They go through 

different brokers here, in Spain, as you pointed out, and Canada 

and other places like that. 

Should we require that every one of those three that I mentioned—that they have a bar code attached to it so that it can be 
66 

immediately traceable back to its origin, back to the very plant 

where it started? Is that possible to do, and should we do it? 

Dr. Crosse. 

Ms. CROSSE. I’m not sure about the feasibility of that. I think 

until you get data systems aligned between Customs and Border 

Protection and FDA, you may still have problems with inaccurate 

information showing up from one agency to another. 

The CHAIRMAN. Well, I’m just asking if that one plant has to put 

on—no matter what it is, they have to put on a bar code, and that 

has to follow that all the way through to the final purchaser. 

Dr. Martello, is that possible? 

Ms. MARTELLO. I can’t speak to electronic—to the feasibility of 

that. My sense is that would be a significant cost and complexity 

added to the distribution system that may be challenging for folks 

to comply with. I think we do have a strong—very strong system 

today, and we should look for opportunities to make that stronger. 

But I worry about the cost and complexity of such a system with 

so many independent actors in the supply chain. 

The CHAIRMAN. OK. I’m just asking for a simple bar code at 

every step of the way. 

Mr. Johnston, what do you think? Is that possible? 

Mr. JOHNSTON. Well, GPhA members looked at bar codes for 

track-and-trace purposes in the United States. 

The CHAIRMAN. Exactly. 

Mr. JOHNSTON. And doing it domestically, we’ve seen the feasibility, I think, as being probable, because you can utilize integrated 

technologies, and we can have manufacturers, pharmacists, wholesalers on the same page. Some of the challenges are, when you get 

into international regions, finding this harmonization so that the 

same bar code, the same readers, the same technologies all apply. 

So when it comes to the international scope, I think there’s 

issues there that would have to be looked at to make sure that the 

viability of a bar code applied in China would be read all the way 

through the system and that data would be available to the end 

user. So there’s challenges there. 

The CHAIRMAN. Mr. VanTrieste. 

Mr. VANTRIESTE. Well, I think the use of bar codes is definitely 

possible. We see it in supermarkets. I think the complexity comes 

in with the integration of this data from a worldwide perspective 

and how long that would take to be actually implemented. 

I think you can get to the end result you need by requiring everybody in that supply chain to tell the final person who’s going to use 

that raw material—the pharmaceutical manufacturer—who that 

original manufacturer was. The pharmaceutical manufacturer can 

then provide the oversight of the entire supply chain once they 

know it. If we don’t know it, then we know we’ve got a problem. 

So I think just requiring that transparency and disclosure will get 

to where you want to go much faster. 

The CHAIRMAN. Mr. Coukell. 

Mr. COUKELL. I agree. I think the underlying principle here is 

that manufacturers need to know their complete supply chain. 

They need to have confidence that the quality standards are in 

place and that the FDA has to be able to get access to that data 

if they need it. We need a way for everybody to be on the same 
67 

page about which facilities we’re talking about. Whether it’s a bar 

code or some other means, I think, matters less. 

The CHAIRMAN. Thank you all very much. 

Senator Enzi. 

Senator ENZI. Thank you, Mr. Chairman. 

Mr. VanTrieste, your testimony suggests that poorly designed 

supply chain reforms could exacerbate drug shortage problems. 

Could you elaborate a little bit? 

Mr. VANTRIESTE. Yes, of course. As we all talked earlier about, 

if we increase regulation, certain players who are in the business 

today may decide to get out of the business. They might be the only 

supplier of a key ingredient for a critical medicine to treat patients. 

So any legislation that we do, I think we have to give the secretary some latitude to prevent those suppliers from exiting the 

market and give them enforcement discretion on where to apply 

the regulations, because we don’t want to see people exit the market who are sole suppliers. 

Senator ENZI. Thank you. 

Dr. Crosse, what’s wrong with the FDA’s drug supply chain information systems, and what does the FDA need to do to fix them? 

Ms. CROSSE. Well, there are several problems. They have a long 

history of poor information technology systems, and they’re in a 

process now of trying to upgrade those systems across the board, 

across the entire agency. That’s taking several years, and it’s encountered many difficulties in trying to integrate what had been a 

number of different freestanding systems that weren’t compatible. 

I mentioned just a moment ago one of the problems is that some 

of the key information they get comes from another agency, from 

Customs and Border Protection, which is not providing accurate information in many instances because of the way certain identifiers 

are generated in that system. FDA has been taking some steps to 

try to verify information that they have. 

They’ve actually hired contractors to go now and look at certain 

suspect facilities to see if they’re actually located where they’ve told 

FDA that they are. And they’ve found a number of facilities that 

are not at the locations that they’ve reported. But it’s taking FDA 

a very long time to try to go through and make up time on these 

systems, and they still don’t all talk to one another. 

Senator ENZI. Thank you. 

Dr. Martello, can you give us an overview of your member companies’ quality control systems? Do they customarily audit or inspect their suppliers? 

Ms. MARTELLO. Thank you for that question. The quality systems 

approach is really embodied in the current good manufacturing 

practice regulations, and our companies take great steps to comply 

with those. The GMP regulations require that each facility have in 

place a quality control unit that’s responsible for all aspects of the 

manufacture of a drug product, for all control of all incoming ingredients, and periodic testing throughout the process. And taken with 

the new drug approval requirements, the cGMP requirements in 

our closed distribution system help provide assurances that the 

medicines that patients take are safe and have the identity and the 

quality that they are purported to represent. 

Senator ENZI. Thank you. 
68 

Mr. Coukell, Pew supports mandatory recall authority for drugs. 

How many times has a drug manufacturer refused FDA’s request 

to conduct a voluntary recall? 

Mr. COUKELL. Thank you for the question, Senator. I can give 

you an example, in 2008 when the FDA had to go to court to get 

some contaminated Heparin off the market. I think the bigger concern is not the refusal, but if public health is at risk, the time it 

would take if the FDA does have to go to court. It’s the kind of authority that, if they have it, I think it will bring everybody to a consensus much more quickly about whether a voluntary recall is necessary. 

Senator ENZI. If a manufacturer refuses to conduct a voluntary 

recall, how does making it mandatory help? 

Mr. COUKELL. I presume that there would be some sanction involved for refusing to do a mandatory recall. 

Senator ENZI. Mr. Johnston, the law requires FDA to inspect domestic drug establishments every 2 years. But the law is silent 

about how FDA must inspect foreign establishments. Can you 

elaborate on the need to level the playing field? 

Mr. JOHNSTON. Thank you, Senator Enzi. There’s two components, I think, to answering that question, the first being the parity, that foreign establishments should be inspected at the same 

level, intensity, and frequency as domestic facilities. There’s a substantial cost for inspections to drug companies. 

And I might use the example of companies sitting in Philadelphia or New Jersey. They have FDA visiting each month or every 

other month. And it takes resources, time, personnel to accommodate these inspections. 

The contrast is foreign inspections, when companies or facilities 

are visited on a 3-, 4-, or 5-year basis. There’s additional cost to the 

American industry and, more importantly, to the public health. By 

having equivalents in terms of inspections, FDA has the opportunity to evaluate these foreign facilities, determine if there are 

any GMP or quality problems, supply chain issues, and have those 

addressed in a timely basis. So bringing comparability into inspection requirements, we believe, is a very important component of 

supply chain security. 

Senator ENZI. Thank you, and my time has expired. I have questions I’ll submit. 

The CHAIRMAN. Thank you, Senator Enzi. 

Senator Franken. 

Senator FRANKEN. Thank you. I’ll try to be fast because I know 

Senator Bennet has to get out of here and I have to preside in a 

few minutes. 

Dr. Martello, as we heard from Mr. Johnston, the generic pharmaceutical companies are working with the FDA to do their fair 

share and provide the FDA with additional resources to increase 

foreign inspection and capacity. While I realize that the brand 

name companies don’t occupy as much of the market as the 

generics do, would your member companies be willing to contribute 

to securing the supply chain through increased user fees? 

Ms. MARTELLO. Thanks very much for that question. I think it’s 

important to recognize that since 1992, the PDUFA user fees—prescription drug user fees that we’re looking to reauthorize next year 
69 

actually have supported preapproval inspections since their inception in 1992. And as the GAO has reported, the majority of facility 

inspections that are conducted are both preapproval and GMP inspections combined. So our industry is really committed to this 

issue and has supported inspections in the form of the user fees as 

a portion of that since 1992. 

We also think and we recognize that, frankly, there will never be 

enough resources for the agency to get to all the places that they 

need to get. And so that’s why we believe that using a risk-based 

approach for FDA to target facilities for inspection and really focus 

on the areas of highest risk will help do a great deal. You could 

couple that with reliance on third parties, again, whether it be accredited third parties or foreign regulatory authorities with competent regulatory systems. 

Using those things together, we can expand the reach of the FDA 

and help them do their job by focusing on the areas of highest risk 

and really increasing the number of facilities that the FDA is visiting on a routine basis. 

Senator FRANKEN. I guess I didn’t totally understand your answer. 

Mr. Johnston, do the generics put more resources into the supply 

chain, helping FDA with the supply chain? 

Mr. JOHNSTON. Thank you. The user fee proposal that FDA is 

considering—and I think we’ve reached agreement on—doesn’t 

specify how many of the resources go into inspections. However, 

there are performance goals that will certainly drive the utilization 

of the resources toward inspections. And, as we heard, 80 percent 

of the incoming materials are foreign and 40 percent of the products. FDA will dedicate probably 40 or 50 percent of the user fee 

resources from the generic industry toward inspections and support 

for those inspections. 

Senator FRANKEN. And, I guess, Dr. Martello, I was asking are 

you willing to put in more toward that end? 

Ms. MARTELLO. User fees have gone to support preapproval inspections since their inception in 1992. The PDUFA—— 

Senator FRANKEN. Preapproval inspections—what do you—— 

Ms. MARTELLO. Preapproval—when a company files a new drug 

approval application, the FDA has the discretion to go and inspect—the preapproval inspection—— 

Senator FRANKEN. OK. I’m not talking about preapproval. I’m 

talking about supply chain, foreign supply chain. 

Ms. MARTELLO. Many times, as the GAO has found, a 

preapproval inspection is coupled with a good manufacturing practice inspection. So the facilities that are filing new drug approval 

applications with the agency are getting those inspections on a regular basis, and they are supported through the user fees in the 

Prescription Drug User Fee Act provision. 

Senator FRANKEN. OK. Would PhRMA be willing to put more in 

to do that, to secure the foreign supply chain? I think that’s what 

I’ve been asking you, and I don’t quite feel like I’m getting a real 

answer. I feel like I’m getting a circular kind of answer. 

Ms. MARTELLO. Across the board, the Prescription Drug User Fee 

Act and the agreement that was just released increases resources 
70 

for FDA to conduct the necessary reviews of new drug approval applications. 

Senator FRANKEN. Well, that’s new drug approval. 

Ms. MARTELLO. And with that, a portion of that is targeted for 

inspections. 

Senator FRANKEN. What about existing drugs? 

Ms. MARTELLO. Our companies do our fair share to try to—— 

Senator FRANKEN. Would you do more? 

Ms. MARTELLO. I think we’d be happy to engage in conversations 

around that. We think giving the FDA the opportunity to use risk 

to drive the intervals at which they inspect facilities will help expand their reach and help them maximize and use their resources 

efficiently, because we know that resources are not unlimited. 

Senator FRANKEN. Thank you. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you, Senator Franken. 

Senator Bennet. 

Senator BENNET. Thank you, Mr. Chairman. And, again, I really 

want to thank you for holding this hearing. This is an issue that 

I’ve been working on ever since I got here, and now I know why. 

The testimony, I think, has been excellent today, and I’m familiar 

with the work that everybody here has done. 

I find remarkable the degree of consensus around a lot of the 

issues that we face, and I think it reflects how big the gap is between a statute that was written in 1938 and the world as we’re 

living in it today—the changes that are accelerating because of the 

strengthened global economy that we face. And this lack of an update—or our lack of a regulatory regime that reflects reality is bad 

for our consumers and it’s bad for our business, and I think that’s 

why we need to be urgent in fixing it. 

It’s been remarkable to read some of the polling data around us, 

and then the mandatory recall suggestion, for example—first of all, 

everybody thinks the FDA already has that. They don’t. Ninetyfour percent of the American people support it, and they believe 

that when they walk into their grocery store or their pharmacy 

that their drug has been likely produced in the United States. 

That’s not true. 

And they believe that somebody has looked at it to make sure 

that it’s safe. That’s not true, either. In fact, what we’ve learned 

from the testimony today is that even if we discover that there’s 

a problem, it’s hard to track it down to the source in China. So 

there’s a lot of work to do here, and whatever I can do to help you 

with it, I want to do. 

I’d like to ask Mr. Coukell first and then let anybody else from 

the panel answer—I just have one question. Pew has done some 

great work on this ‘‘After Heparin’’ report that you talked about. 

I think it’s very important. And in that report, it made the observation that compliance with internal quality systems and regulations 

can represent up to 25 percent of a finished drug manufacturer’s 

operating costs. 

And at the same time, as we heard from Ms. Crosse at GAO, it 

would take FDA 9 years to inspect the foreign facilities. So you 

begin to add this stuff together and ask yourself about an American manufacturer here who’s following good manufacturing prac-
71 

tices and still can expect a surprise inspection every 2 years from 

the FDA—maybe more frequently than that—versus a foreign firm 

that will never be inspected or may never be inspected, doesn’t 

have to follow any of these practices, and on top of everything else, 

when they are inspected, as we heard in the testimony of the first 

panel, they’re given warning that the inspectors are coming. 

Mr. Coukell, what do you think the three or four most important 

things are that we can do to level this playing field and make sure 

that we are protecting both the safety of our citizens, which is the 

most important thing, and also the playing field for American business which is a vitally important part of our economy? 

Mr. COUKELL. Senator, thank you for the question and for your 

continued commitment to this issue and this area. I think you 

make a very important point. So the good actors, whether they be 

in the United States or outside the United States, are spending 

time and resources to make sure that their manufacturing is sterile, consistent, and predictable and high quality. 

And so if you have somebody out there who is tempted to cut corners and not do things to a high standard, and there’s no chance 

that anyone is going to show up and hold them to the high standard, then they can do that. And so that does create an uneven playing field. 

So we absolutely need a system where we take the existing inspection or resources and deploy them in a way that the highest 

risk facilities, wherever they are, are getting inspected and that 

we’re taking steps to make sure that finite resources are stretched 

so that we aren’t inspecting the same facilities that the Europeans 

are inspecting twice in a year, when someone out there is not getting inspected, where we’re relying on additional sources of information, and where the manufacturers themselves are providing 

better documentation when they’re taking all the right steps. 

And, again, if you’re an importer, and you have something coming into the country, it costs you money if it sits there in the Customs. Meanwhile, the FDA is dealing with—how do we screen all 

the stuff that’s coming in? So if we have a system where the FDA 

can say, ‘‘Yes, they’re showing us that this is good quality stuff. 

Let’s get it in the country’’—meanwhile, they can focus on the bad 

actors—that benefits everybody. 

Senator BENNET. I just have one second left. Does anybody feel 

compelled? 

Mr. VANTRIESTE. I think, Senator, the one other thing—you talk 

about leveling the playing field. When I’m inspected by a foreign 

entity, even the Europeans, I have to pay for that inspection. So 

why aren’t ingredient manufacturers in foreign countries who get 

FDA inspections required to pay for those inspections to help justify the resources needed to do that? 

Senator BENNET. Thank you. 

Thanks, Mr. Chairman. Well, I would say I’m sorry Senator Mikulski has left, because in the spirit of what she said, I couldn’t 

agree with her more. And I think it would be surprising—several 

of you talked about enforcement too, which I would add to the list. 

I mean, the idea that the penalty for counterfeiting drugs is lower 

than the penalty for counterfeiting a DVD, for example, Mr. Chair-
72 

man. It just doesn’t make any sense to anybody that’s living in Colorado and it shouldn’t. 

Those are the kinds of common sense things that I think we 

could fix if we get the chance to do it. So thank you for your leadership. 

The CHAIRMAN. And thank you also for your leadership, Senator 

Bennet. 

Thank you all for being here. I’ll just close by saying that this 

committee is committed, I think, on a bipartisan basis to move 

ahead in this area. I don’t know that we have crystallized exactly 

what it is that we want to do. We are seeking information from all 

of the players in the field out there, from the companies, pharma, 

generics, FDA, others, to come up with the best formula that we 

want to put in the PDUFA reauthorization next year. 

Again, I just simply need to know why it is that we can’t have 

a system that doesn’t cost a lot. It’ll cost something. I understand 

that. But I think indications are that consumers are willing to pay 

a little bit more for heightened security of the products they’re buying—in this case, drugs—to ensure that inspections are held and 

that companies are held to the highest standards of good manufacturing practices, that there’s a transparency to the system. 

Mr. VanTrieste, if your research staff could go back and find out 

where that Heparin came from, which you’ve done—and yet I hear 

from Mr. Coukell that no one has ever been held accountable. So, 

obviously, there’s a way of traceability. We need to know—everybody along that line needs to be held accountable. Everybody along 

the line needs to be held accountable. And the only way you can 

be held accountable is to know who you are at every step of the 

way. 

That’s my question on the bar codes or some other similar situation like that, that we can do that. An interesting point, I think, 

was raised—I forget who raised it—about coordination with other 

countries, Europe and others, so that, No. 1, we can assure that 

manufacturing facilities in supplier countries are inspected. We 

want to ensure that they’re inspected, but we don’t want to be duplicative. We don’t want one country that inspects it, then another 

country, then another country. We want to make sure that we have 

some coordination with other countries in that process. 

While I support mandatory recall, that’s sort of after the fact. It’s 

fine to have that, but it seems to me that we want to get in front 

of that so that if there’s any indication at all that we can go right 

back to the source and correct that at the source as soon as possible and to have penalties. 

It just boggles my mind that we have some data and information 

that companies that have supplied dangerous products in this 

country, they leave that building and they move across the street 

or they move to another community and they open up a facility, but 

we have no traceability whatsoever as to who they are. And yet 

they can continue to sell their products. 

So traceability, the enforcement of good manufacturing practices, 

more of a general agreement among countries on inspections, and 

making sure that—as you said, Mr. VanTrieste, if you’re inspected, 

you’ve got to pay for it because you’re shipping to other countries, 

European countries. Well, it seems to me this—again, if they want 
73 

to ship to this country, they should, No. 1, allow inspections, and 

as you’ve pointed out and I think Ms. Autor pointed out and Dr. 

Crosse, a lot of times these are delayed. They’re put off. They’re put 

off. They’re put off for year after year after year. 

And the third thing is that I’m very much leaning toward this 

idea of more of a risk assessment. In other words, there are companies that have good manufacturing practices. They’ve been in business for some time, and yet we, by law, say they’ve got to be inspected every 2 years. Maybe they don’t need it. Maybe we need 

to use that personnel to go after the plants that haven’t been good 

actors or new plants that haven’t been inspected at all. 

So these are all the things that this committee is going to be 

looking at. We appreciate all your testimonies, and we would appreciate any further input, advice, or consultation you have with us 

as we proceed on this. I’m committed to doing this sometime next 

year, because we have to reauthorize PDUFA. And we didn’t get 

into medical devices—but PDUFA, anyway—and the medical device user fee act. 

And keep in mind—is there a fee? Is there something that should 

be attached to a product, an ingredient, or a finished product, that 

would go for only one purpose and that is to FDA for inspections 

and enforcement? If you have thoughts on that, please submit them 

to the committee. 

Well, without further—thanks again. I appreciate you all being 

here. I thought it was a great hearing. And, believe me, we’ll be 

having more. So I request that the record be kept open for 10 days 

to allow Senators to submit statements and questions for the 

record. And with that, the committee will stand adjourned. 

Thank you very much. 

[Additional material follows.] 
74 

ADDITIONAL MATERIAL 

PREPARED STATEMENT OF HEATHER BRESCH, PRESIDENT, MYLAN INC. 

As the largest global generics company headquartered in the United States, 

Mylan Inc. (‘‘Mylan’’) appreciates the opportunity to submit comments to the Senate 

Health, Education, Labor, and Pensions Committee as part of the committee’s hearing entitled, Securing the Pharmaceutical Supply Chain on September 14, 2011. Ensuring the safety of our Nation’s pharmaceutical supply is of critical importance to 

all Americans and to Mylan, and we thank Chairman Harkin, Ranking Member 

Enzi and the committee for holding this hearing on such an important topic. 

Our company was founded 50 years ago in a small town in West Virginia, and 

since that time has established one of the industry’s broadest and highest quality 

pharmaceutical product portfolios and now serves as the largest global generics company in the world headquartered in the United States. Today, 1 out of every 11 prescriptions dispensed in the United States, brand or generic, is a Mylan product, and 

we are proud of the investments we make in all of our facilities around the world 

to deliver high quality products and more affordable access to patients. 

As president of the 3d largest global generics company in the world, I have a 

strong interest in making sure the competitive playing field in the United States 

is level and that all facilities supplying the U.S. pharmaceutical market are subject 

to the same high quality standards. As a mother of four, I want to know that no 

matter what medicine I give my children, each product, branded or generic, meets 

one high quality standard regardless of whether the medicine is made inside the 

United States or outside its borders. 

Over the last 4 years, Mylan has gone from a U.S.-based company to a global one, 

and we now deliver products to customers in more than 150 countries and territories around the world. In operating multiple facilities around the globe, we’ve discovered that FDA is governed by an outdated law written in 1938 that has not been 

updated to equip the FDA with the authority it needs to oversee the now globalized 

U.S. pharmaceutical supply chain. We’ve also realized that FDA resources have not 

kept pace with the significant increase in workload and the increase in the number 

of foreign facilities supplying the U.S. marketplace. The end result is an unlevel 

playing field and inconsistent application of quality standards for pharmaceutical 

products sold in the United States. For these reasons, Mylan urges Congress to introduce a bill to update the Federal Food, Drug and Cosmetic Act of 1938 (the 

‘‘FDCA’’) to equip the FDA in carrying out its mission in the globalized U.S. pharmaceutical marketplace. Further, we urge Congress to ensure a level playing field 

for all players participating in the U.S. pharmaceutical supply regardless of their 

location. 

As this committee heard from FDA and others during the September 14, 2011 

hearing, the FDCA, which is the key law that gives FDA authority to demand evidence of safety and conduct facility inspections, does not take into account the global 

nature of today’s U.S. pharmaceutical marketplace. FDCA is written as if all participants in the drug supply are domestic based. As the committee also learned, FDA 

estimates that up to 40 percent of finished drugs consumed by U.S. patients are 

manufactured abroad and 80 percent of the active ingredients and bulk chemicals 

used in drugs come from foreign countries. 

With a mission to protect and promote public health, FDA has a critical responsibility to ensure the safety, efficacy and security of the U.S. drug supply. Fulfilling 

this responsibility today is much more challenging than it was in 1938 when the 

FDCA was enacted. Back then, most of the pharmaceutical products consumed in 

the United States were produced in the United States. Now, a substantial proportion of those products come from abroad, yet FDA’s governing statute still presumes 

the domestic 1938 landscape. 

In particular, the FDCA requires American manufacturers associated with pharmaceutical production to undergo a surveillance inspection at least every 2 years to 

ensure that these facilities are complying with a rigorous set of standards known 

as Good Manufacturing Practices (GMP). These extensive on-site inspections conducted by FDA serve as an important mechanism for FDA to ensure facilities are 

continuing to meet GMP standards. However, the FDCA does not impose the same 

biennial GMP inspection requirement on foreign facilities. Instead, the law written 

in 1938 is silent when it comes to foreign manufacturers. Meantime, FDA estimates 

that foreign facilities supplying the U.S. pharmaceutical marketplace have grown by 

185 percent from 2001–8, while at the same time FDA facility inspection rates have 
75 

1Deborah M. Autor, Esq, Director, Office of Compliance, Center for Drug Evaluation and Research, FDA, Ensuring the Safety, Efficacy, and Quality of Drugs, Pew Roundtable on Ensuring 

the Safety of the U.S. Drug Supply, March 14–14, 2011. 2 U.S. Government Accountability Office. Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress 

Is Needed (Publication No. GAO–10–961). (September 2010) 3 After Heparin: Protecting Consumers from the Risk of Substandard and Counterfeit Drugs 

at 27. Pew Health Group Report (July 2011). According to the Pew Report, ‘‘Adherence to GMPs 

is critical, yet also costly. Compliance with internal quality systems and regulations can represent up to 25 percent of a finished drug manufacturer’s operating costs. To offer more competitive pricing and gain market share, some plants may be tempted to forgo expensive quality 

standards. Regulatory oversight provides an incentive to ensure rigorous adherence to standards.’’ 4These negotiations were scheduled by FDA to coincide with the upcoming 2012 congressional 

reauthorizations of the Prescription Drug User Fee Act and the Medical Device User Fee Act. 

decreased nearly 57 percent.1 According to a 2010 Government Accountability Office 

(GAO) report, FDA inspected just 11 percent of the 3,765 foreign establishments in 

its database in 2009.2 As a result, the average FDA ex-U.S. facility inspection occurs 

every 9 years compared to every 2 years for U.S.-based facilities, according to the 

2010 report by GAO. According to GAO, some FDA-registered facilities whose drugs 

are imported into the United States may have never had a GMP inspection. 

UNLEVEL PLAYING FIELD IMPACTS MANUFACTURER COMPETITIVENESS

The disparity in the degree of oversight experienced by domestic versus foreign 

facilities reduces American competitiveness by creating an unlevel playing field as 

compliance with quality systems and regulations are estimated to make up approximately 25 percent of a drug manufacturer’s operating costs.3 Mandating FDA riskbased biennial GMP inspections of all facilities, foreign and domestic, will improve 

quality and create a level playing field, allowing U.S. pharmaceutical manufacturers 

to be more competitive. Leveling the playing field through inspection parity will also 

benefit foreign facilities and first time entrants who are currently experiencing 

delays in gaining approval for new products due to a lack of inspection history and 

a significant gap in FDA resources to address the substantial growth in foreign facilities supporting the U.S. pharmaceutical supply. 

IMPERILED DRUG SAFETY

In addition to an unlevel playing field for manufacturers, the glaring disparity between FDA’s oversight of foreign facilities versus U.S.-based facilities places the Nation’s drug supply at risk. As the committee discussed during the September 14 

hearing, a telling example involved tainted Heparin distributed in the United States 

a few years ago. FDA traced the adulteration of the brand product to a manufacturing facility in China, which the agency had never inspected. 

While FDA inspections alone are not the only way FDA ensures safe products, 

FDA has indicated that routine GMP surveillance inspections are one of the most 

effective ways to detect noncompliance with GMP standards on the front end to prevent recalls, market disruptions, as well as risks to patient safety. 

SUPPLEMENTAL RESOURCES FOR FDA

As the Generic Pharmaceutical Association noted in its remarks before this committee, the generic drug industry, which accounts for 75 percent of all prescription 

drugs dispensed in the United States, has stepped up to help provide FDA with additional resources to address the challenges caused by the global drug supply and 

the increase in FDA workload. Even though the historical focus of user fees has primarily been on getting products approved in a timely fashion, given the global challenges of today, the generic industry took the opportunity during its generic user 

fees negotiations with FDA to incorporate the concepts necessary to help globalize 

the agency.4 Following the final review by the Department of Health and Human 

Services and the Office of Management and Budget, Congress should be receiving 

the detailed goals letter and legislative language (including fee structure) agreed 

upon by industry and FDA. 

CONCLUSION

In summary, Mylan commends the Chairman, the Ranking Member and this committee for its commitment to addressing this important issue. We are encouraged 

by the committee’s statements and urge you to move forward with introducing legislation to amend the FDCA in order to equip FDA with the authority and scope it 

needs to carry out its important public health mission of ensuring the safety of to-
76 

day’s globalized U.S. drug supply. These important changes to the FDCA will not 

only result in a safer drug supply with consistent oversight for all players in the 

U.S. drug system, foreign and domestic, the changes will also help reduce approval 

times of new drugs undergoing FDA review and expedite the availability of new 

medicine into the marketplace. This is a particularly important result given that 

drug shortages are increasingly occurring in the United States due in part to weak 

links in the supply chain. Also of significance to this committee and many others, 

these changes will level the playing field for manufacturers, increase competitiveness, and reverse the current incentive in place to move manufacturing abroad. 

PREPARED STATEMENT OF DALE CARTER, CHAIR, INTERNATIONAL PHARMACEUTICAL

EXCIPIENTS COUNCIL—AMERICAS (IPEC—AMERICAS) 

Chairman Tom Harkin, Ranking Member Michael Enzi, and members of the Senate Health, Education, Labor, and Pensions Committee, as the chair of the International Pharmaceutical Excipients Council—Americas (IPEC–Americas), I, on behalf of IPEC–Americas, appreciate this opportunity to submit written testimony and 

thank you for the leadership you have displayed in addressing the crucial need to 

secure the pharmaceutical supply chain. 

IPEC–Americas helped create a federation of four independent regional industry 

associations, with the others headquartered in Europe (IPEC Europe), Japan (JPEC) 

and China (IPEC China). Our goal is to ensure current Good Manufacturing Practices (cGMP) to meet high quality standards for excipients, more commonly known 

as the inactive pharmaceutical ingredients. IPEC Federation members include over 

300 national and multinational excipient makers and users, including chemical companies, pharmaceutical manufacturers, and food companies. These members include 

over 60 U.S. companies that belong to IPEC–Americas and other members of the 

Global IPEC Federation. 

Each regional association focuses its attention on the applicable law, regulations, 

science, and business practices of its region of the globe. The four associations work 

together on excipient safety and public health issues, in connection with international trade matters, and to achieve harmonization of regulatory standards and 

pharmacopoeial monographs. 

We are also the premier source for regulatory and guidance documents critical to 

the excipient industry; offer training and consulting services to ensure regulatory 

compliance worldwide; and provide awards to encourage research and education in 

excipients. Our guidance documents have been adopted and relied upon by various 

regulatory bodies and standard setting organizations, including the Food and Drug 

Administration (FDA) and the United States Pharmacopeia. 

While attention to the pharmaceutical supply chain has generally been focused on 

active pharmaceutical ingredients (APIs), we were pleased to note an interest in the 

supply chain of pharmaceutical excipients in your September 14, 2011 hearing. As 

was noted by Chairman Harkin and Deborah Autor, Deputy Commissioner for Global Regulatory Operations and Policy at the FDA, it was the death of 100 people from 

an adulterating excipient, diethylene glycol, that led to the enactment of the Federal 

Food, Drug and Cosmetics Act (FFDCA) in 1938. Yet, as was also noted, 570 people 

have died from the same substance in the past 20 years worldwide. As recently as 

2009, more than 80 infants died from adulterated teething syrup contaminated by 

diethylene glycol in Nigeria. These are no small threats to the United States as the 

pharmaceutical supply chain becomes more and more globalized. 

Commissioner Autor noted a number of safeguards with which IPEC agrees and 

which should apply to both APIs and excipients: enacting legislation that gives the 

FDA the authority to refuse the importation of drugs into the United States if a 

facility does not allow itself to be inspected; requiring proof that a product is ‘‘good’’ 

to enter the United States, rather than FDA having to find something wrong; leveling the playing field by providing requirements and incentives for all companies 

to follow the rules; and ensuring that manufacturers have adequate control over the 

supply chain. 

IPEC fully supports each and every one of these goals and has drafted legislation 

to do so. Our proposal would direct the FDA to recognize accredited third-party 

auditors to certify that manufacturers, distributors and importers of excipients meet 

safety standards that are in compliance with the FFDCA. The legislation would also 

call for the establishment of qualification standards for third-party auditors and certifiers who have the necessary expertise and training in auditing techniques. IPEC 

has been working with FDA to develop appropriate third-party audit requirements 

for excipients. This effort is integral to IPEC’s 20-year effort to develop and maintain high industry standards for excipient safety and quality. 
77 

To give real teeth to the FDA, IPEC’s proposal would mandate that individuals 

or companies not be allowed to import into the United States a drug or excipient 

used in the manufacture of a drug if the product or ingredient was manufactured 

or produced outside of the United States by an entity which has not been certified 

by the FDA or by an FDA-recognized third-party auditor. 

IPEC is a ‘‘coalition of the willing’’—member companies who want to ensure the 

safety and efficacy of excipients and have put mechanisms in place to do so. However, there are actors out there who are not as willing and present a serious threat 

to the security of the excipients supply chain. Our proposal would require that companies follow cGMP and therefore prove that the excipient products are ‘‘good.’’ This 

in turn would level the playing field, requiring that all companies be compliant, rewarding good products with entry into the United States and turning away those 

that are not. 

Third-party auditing and certification also addresses the need for manufacturers 

to have adequate control over their suppliers and the supply chain, which, as Commissioner Autor noted, is necessary because the FDA simply does not have the resources to monitor all manufacturers, users, and distributors of excipients. Thirdparty certification, which would be funded by companies wishing to import into the 

United States, would provide those resources in a mechanism that is revenueneutral to the Federal Government. 

In short, the proposal would provide the same powers to FDA that Congress recently provided the agency as it relates to contaminated food, but that it still lacks 

for drugs: the power to keep contaminated or adulterated products or ingredients 

from reaching the pharmaceutical production process. 

We ask that the committee and the full Congress adopt our proposal for a thirdparty auditing and certification process to ensure the safety of U.S. citizens. 

PREPARED STATEMENT OF KEITH NALEPKA, VICE PRESIDENT, 

BUSINESS DEVELOPMENT, HI-G-TEK, INC. 

THE NEED FOR AN ACTIVELY MONITORED AND SECURED PHARMACEUTICAL

SUPPLY CHAIN

Chairman Harkin, Ranking Member Enzi, and members of the committee, with 

a growing interest among thieves to target high value pharmaceuticals and biologics 

there needs to be a change in the way industry approaches supply chain security 

and monitoring. There continues to be a direct correlation between these thefts and 

counterfeit production as well as an increase in stolen product being shipped and 

sold in developing countries and also re-entering the U.S. supply chain. 

The pharma supply chain is incredibly complex, with products being sent through 

multiple touch points. The adoption of passive RF1D, bar coding of all types, e-pedigree and others does nothing to actively secure or monitor the supply chain. Thieves 

are long gone with the stolen goods and are becoming increasingly adept at reproducing all of these passive tags for re-entry into the supply chain or producing incredible look-alike products used internationally. They provide no data that can be 

used to repair a defective supply chain or increase security. 

The FDA is in the process of making swift changes in the pharma supply chain. 

The recent problems with the heparin and acetaminophen supply chain catastrophes 

have drawn attention to areas in the supply chain that arc vulnerable. Slow recalls 

can no longer be tolerated, and chain of custody documentation will become an absolute necessity. 

The solution can be found by monitoring shipments actively, in real time. The successful documentation of temperature, light exposure, humidity, open/close, tilt, and 

package tampering with sensors needs to become a best practice. Being able to intervene midstream with a package in transit that is experiencing a temperature excursion could save efficacy and patients in the long run. Being able to see in real 

time a potential theft by the tripping of a sensor could provide added security and 

visibility into the supply chain. Lastly, being able to collect these biometric data 

points and put them in document form that can show chain of custody down to the 

package level would he invaluable when an FDA audit occurs. Being able to initiate 

a recall in real time also provides added patient safety. Having this biometric data 

would provide the ability to fix areas in the supply chain that may be common avenues for temperature excursions, theft, etc. Without active data it’s much more difficult to take action. 
78 

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF HEALTH-SYSTEM PHARMACISTS

The American Society of Health-System Pharmacists (ASHP) respectfully submits 

the following statement for the record to the Senate Health, Education, Labor, and 

Pensions Committee hearing on Securing the Pharmaceutical Supply Chain. 

As the national professional association representing over 35,000 pharmacists who 

practice in hospitals and health systems, ASHP can offer unique and vital feedback 

on this important health care issue. Pharmacists in hospitals and health systems 

are experts in medication use who serve on interdisciplinary patient-care teams. 

They work with physicians, nurses, and other health care professionals to ensure 

that medicines are used safely, effectively, and in a cost-conscious manner. For more 

than 60 years, ASHP has helped pharmacists who practice in hospitals and health 

systems improve medication use and enhance patient outcomes. This includes working with patients to help them access the medications they need and to use them 

safely and effectively. 

Pharmacists are the frontline caregivers in our medication use system. Given the 

number and complexity of medications administered to patients today, it is critical 

that our pharmaceutical supply chain be secure and consistent. As manufacturing 

of pharmaceuticals becomes more global in scope, we must ensure that products and 

raw materials are pure and unadulterated. ASHP has adopted policies (attached) 

dealing with supply chain integrity and FDA’s authority on recalls. Furthermore, as 

demand increases for life saving medications and manufacturing processes become 

larger and more complex, we must ensure that capacity exists to provide adequate 

supplies of medications, especially those critical to patient care. For the last 10 

years, ASHP has been tracking shortages of prescription medications and a disturbing trend has emerged. Since 2006, the number of drug shortages has nearly 

tripled, with no end in sight. In 2010 alone, there were 211 drug shortages, and that 

trend is expected to continue in 2011 as the number has already reached 200 shortages and may well exceed the 2010 number. While the causes of drug shortages are 

multifactorial, the quality and integrity of foreign ingredients and manufacturing 

have been a contributing factor. The attached policy on drug shortages was adopted 

in June by ASHP’s House of Delegates. ASHP is committed to working with Congress, FDA and other supply chain members to address and hopefully reverse this 

alarming trend. 

DRUG SHORTAGES

Shortages of prescription drugs in the United States have gained increasing attention in recent years due to the scope and severity of the drugs in short supply. The 

majority of these shortages occur in drugs that are generic injectables, often administered in a hospital or clinic setting. The shortages have been occurring for anticancer drugs, anesthetics, pain, and nutritional drugs, all of which play crucial roles 

in the care of patients. The result of drug shortages is that caregivers must scramble to find the drug, or use an alternative if one is available. Many caregivers have 

expressed concern that even if a therapeutic alternative exists, it is likely an older 

drug which may have more severe side effects or negatively interact with other 

medications the patient is taking. Further, drug shortages have caused widespread 

fear among caregivers who are deeply concerned that care could be delayed, rationed, or is provided in a suboptimal manner to stretch doses and preserve scarce 

supplies. 

According to a study conducted in partnership between ASHP and the University 

of Michigan Health System, labor costs associated with managing drug shortages 

have an estimated annual impact of $216 million nationally, and more than 90 percent of respondents agreed that drug shortages were associated with an increased 

burden and increased costs today compared to 2 years ago. 

Causes of drug shortages are many and complex. Manufacturing issues that lead 

to drug shortages include product quality issues that result in production halts or 

recalls, product discontinuations, and unavailability of active pharmaceutical ingredients (APIs) or other raw materials. Secondary shortages—or shortages that occur 

based on shifts in market demand caused by an initial shortage of another drug— 

are also common. Other contributing causes to drug shortages include quality issues 

that arise from the ever-increasing reliance on foreign ingredient and manufacturing sources and a lack of FDA resources to expedite approval of supplemental 

new drug applications and conduct foreign inspections. While not a cause of drug 

shortages, just-in-time inventory practices by product distributors and practice sites 

have removed the buffer previously provided by larger inventories and resulted in 

an immediate impact of drug shortages on patient care. 

While information on the root cause of each drug shortage is not always publicly 

available, the cause of most shortages can be traced back to aspects of the manufac-
79 

turing process. These manufacturing issues are compounded by substantial industry 

consolidation over the last few years that has resulted in fewer manufacturers producing critical drugs. When one manufacturer experiences a production interruption, other companies must ramp up production of their product to meet market 

needs. This increased production is sometimes, but not always, possible. In the case 

of sole-source drugs, this situation almost instantly results in a shortage situation. 

ASHP continues to work with FDA, other health care provider groups and members of the supply chain to address the issue. However, we also believe Congress 

can help us as well. ASHP supports bipartisan legislation (S. 296, H.R. 2245) that 

would require drug manufacturers to notify the Agency when they experience an 

interruption in the production of a drug product potentially resulting in a shortage 

situation. According to FDA, in 2010 the Agency was able to avoid 38 drug shortages when they were made aware of production interruptions ahead of time. However, we believe other steps can be taken as well, for example, require confidential 

notification of the disruption in supply of single source active pharmaceutical ingredients (API), require manufacturers to develop continuity of supply plans, establish 

incentives for manufacturers to remain or re-enter the market, and urge FDA to develop expedited approval pathways for pre-1938 (unapproved) drugs. Finally, ASHP 

believes that FDA must have adequate resources devoted to alleviating and preventing drug shortages. 

NOTIFICATION SYSTEM

Under current law, manufacturers are not required to report to FDA when they 

experience an interruption in the production of their products, unless that drug is 

deemed medically necessary by the agency. The same holds true for manufacturer 

plans to discontinue a product. Even in cases where the drug is deemed medically 

necessary and reporting is required, FDA has no enforcement mechanism to penalize a drug maker for failing to report these problems. This information could be extremely useful to FDA in the case of drugs with multiple suppliers where the agency 

could urge alternate suppliers to step up production of a product to offset the decrease in supply due to the interruption or discontinuation of the initial product. In 

some instances, FDA is not told there is a problem, or the nature of the problem. 

This information could be useful in determining the duration and severity of the 

interruption and may allow the agency to implement countermeasures to help ensure supply. By FDA’s own account, in 2010 the agency was able to avoid 38 drug 

shortages when this type of notification was made available. 

The importance of notification is highlighted by quality concerns associated with 

the increased globalization of pharmaceutical manufacturing. A number of drug 

shortages can be traced back to quality concerns with foreign-produced APIs. An extreme example was the heparin contamination that occurred in 2007, which resulted 

in a recall, and subsequent product shortage that was immediate and continued for 

an extended duration of time. While FDA has increased foreign inspections, it still 

lacks the resources necessary to fully address this issue. Therefore, drug shortages 

precipitated by recalls caused by substandard APIs will continue and likely increase. 

Legislation (S. 296/H.R. 2245) in Congress would mandate that companies notify 

FDA of the interruption in production of any product 6 months in advance, or as 

soon as possible in the event of an unplanned stoppage. Manufacturers that fail to 

report this information would be subject to civil monetary penalties. This early 

warning system would allow the agency to communicate more effectively with manufacturers and others in the supply chain to plan for pending supply interruption. 

The early warning system should be the cornerstone of congressional action to address drug shortages. 

CONFIDENTIAL NOTIFICATION FOR SINGLE-SOURCE API

In addition, information that can make drugs vulnerable to shortages, such as a 

single API source, is also frequently unknown beyond the manufacturer. This information is, and should be considered proprietary, but this lack of transparency 

hinders the development of contingency plans for vulnerable drugs. A requirement 

that manufacturers notify FDA when there is a single source of API may help the 

Agency work with manufacturers to identify backup sources should supply issues 

arise. 

CONTINUITY OF SUPPLY PLANS

Related to the reporting or an early warning system, FDA could work with manufacturers to develop continuity of supply plans. The current lack of transparency 

acts as a significant barrier to this type of collaboration. With increased information 

exchange, contingency plans could be developed that include countermeasures such 
80 

as manufacturing redundancies or backup supplies; more effective communication 

among FDA, manufacturers and others in the supply chain; and finally, development of plans that utilize production capabilities of other manufacturers either here 

in the United States or abroad to ensure availability of a drug in short supply. 

In 2010, FDA worked with APP Pharmaceuticals to help alleviate a shortage of 

propofol, a widely used anesthetic preferred by anesthesiologists because of its excellent safety profile compared to other available drugs. By enabling the company to 

work with its German counterpart to import the drug, FDA was able to substantially improve product availability after the shortage occurred. Using this example, 

if an acceptable foreign alternative could be identified before a shortage occurs 

through establishment of continuity of supply plans for vulnerable drugs, then importation could be expedited and the negative impact of a specific shortage on patient care could be minimized or averted. Importation represents an extreme example of contingency planning. In its simplest form, manufacturing strategies that include collaborating with other manufacturers, establishing back-up suppliers of raw 

materials and APIs, and creating alternative production capabilities that can be 

used as countermeasures would be a significant step forward to combating drug 

shortages. Contingency planning by companies producing drugs critical to patient 

care must be a standard of practice. S. 296/H.R. 2245 support the development of 

contingency plans for drugs that are vulnerable to shortages. 

INCENTIVES

Further, shortages are occurring overwhelmingly among generic injectable drugs, 

where production processes tend to be more complex than their solid dosage counterparts. Low margins for these expired patent products coupled with complex manufacturing processes may lead some manufacturers to abandon production of these 

drugs altogether in favor of products with higher profit margins, thus reducing the 

number of potential suppliers of products critical to patient care. A way to offset 

this problem may be to explore incentives to encourage manufacturers to either stay 

in the market or enter the market with a new product line. There are several ways 

this could potentially be accomplished: (1) explore tax incentives for manufacturers 

to produce a drug in short supply or one deemed ‘‘vulnerable’’ to a shortage; (2) 

grant temporary exclusivity for a new product line of a drug in shortage or deemed 

‘‘vulnerable’’ to one; (3) if a generic user fee program is created within the next reauthorization of the Prescription Drug User Fee Act (PDUFA), FDA could explore reduced user fees for drugs in short supply or deemed ‘‘vulnerable.’’ 

REQUIRE DEVELOPMENT OF AN EXPEDITED APPROVAL PATHWAY FOR PRE-1938 DRUGS

FDA must find a way to abbreviate and prioritize approval processes for existing 

therapies that are unapproved, but widely used and essential for patient care. For 

these drugs, the agency should work with manufacturers to fast track their approval 

for the U.S. market, especially in cases where the potential exists for those drugs 

to fall in short supply. Barriers to manufacturing and marketing these drugs must 

be minimized in order to foster production and availability of these drugs. 

CONCLUSION

Unfortunately, there is no single solution that can prevent the occurrence of all 

drug shortages. The complexity of manufacturing processes, the requirement for safe 

and high-quality products, and globalization of the pharmaceutical supply chain all 

contribute to fluctuating product supplies that may never be entirely eliminated. 

However, there are critical steps that Congress, FDA and other stakeholders can implement to ensure that patient care remains available and safe. While the adjustments and compromises required from all stakeholders are difficult, the need for 

change is critical. First and foremost is the need for increased communication and 

transparency. 

ASHP, along with several other stakeholder groups has been working collaboratively with Congress and supply chain stakeholders to develop solutions to the 

drug shortage problem. As indicated before, there is legislation in both houses of 

Congress as well as broad bipartisan support in the Senate for action. Passage of 

legislation that provides additional authority to FDA is a step in the right direction. 

In the long term, FDA will require additional resources to best address this and 

other issues that impact the quality and safety of drugs. 
81 

Attachment 

ASHP POLICY POSITION 0907—PHARMACEUTICAL PRODUCT AND SUPPLY CHAIN

INTEGRITY

Source: Council on Public Policy 

To encourage the Food and Drug Administration (FDA) and relevant State authorities to take the steps necessary to ensure that (1) all drug products entering 

the supply chain are thoroughly inspected and tested to establish that they have 

not been adulterated or misbranded and (2) patients will not receive improperly labeled and packaged, deteriorated, outdated, counterfeit, adulterated, or unapproved 

drug products; further, 

To encourage FDA and relevant State authorities to develop and implement regulations to (1) restrict or prohibit licensed drug distributors (drug wholesalers, repackagers, and manufacturers) from purchasing legend drugs from unlicensed entities and (2) ensure accurate documentation at any point in the distribution chain 

of the original source of drug products and chain of custody from the manufacturer 

to the pharmacy; further, 

To advocate the establishment of meaningful penalties for companies that violate 

current good manufacturing practices (cGMPs) intended to ensure the quality, identity, strength, and purity of their marketed drug product(s) and raw materials; further, 

To urge Congress and State legislatures to provide adequate funding, or authority 

to impose user fees, to accomplish these objectives. 

This policy supersedes ASHP policy 0722. 

ASHP POLICY POSITION 1003—FDA AUTHORITY ON RECALLS

Source: Council on Public Policy 

To strongly encourage the Food and Drug Administration (FDA) to develop a 

standard recall notification process and format to be used by all manufacturers to 

facilitate the timely removal of recalled drugs; further, 

To advocate that such notification should (1) come from a single source, (2) clearly 

identify the recalled product, (3) explain why the product is being recalled, (4) provide a way to report having the recalled product, (5) give instructions on what to 

do with the recalled product, and (6) be provided concurrently to all entities in the 

supply chain; further, 

To advocate that the FDA be given the authority to order mandatory recalls of 

medications; further, 

To urge the FDA to require drug manufacturers and the computer software industry to provide bar codes and data fields for lot number, expiration date, and other 

necessary and appropriate information on all medication packaging, including unit 

dose, unit-of-use, and injectable drug packaging, in order to facilitate compliance 

with recalls or withdrawals and to prevent the administration of recalled products 

to patients; further, 

To urge the FDA to encourage postmarketing reporting of adverse events and 

product quality issues to enhance the recall system. 

ASHP POLICY POSITION 1118—DRUG PRODUCT SHORTAGES 

Source: Council on Public Policy 

To advocate that the Food and Drug Administration (FDA) have the authority to 

require manufacturers to report drug product shortages and the reason(s) for the 

shortage, and to make that information available to the public; further, 

To strongly encourage the FDA to consider, in its definition of ‘‘medically necessary’’ drug products, the patient safety risks created by use of alternate drug products during a shortage; further, 

To support government-sponsored incentives for manufacturers to maintain an 

adequate supply of medically necessary drug products; further, 

To advocate laws and regulations that would (1) require pharmaceutical manufacturers to notify the appropriate government body at least 12 months in advance of 

voluntarily discontinuing a drug product, (2) provide effective sanctions for manufacturers that do not comply with this mandate, and (3) require prompt public disclosure of a notification to voluntarily discontinue a drug product; further, 

To encourage the appropriate government body to seek the cooperation of manufacturers in maintaining the supply of a drug product after being informed of a voluntary decision to discontinue that product. 
82 

This policy supersedes ASHP policy 0319. 

PREPARED STATEMENT OF THE NATIONAL COMMUNITY PHARMACISTS ASSOCIATION

(NCPA) 

Dear Chairman Harkin, Ranking Member Enzi and members of the committee, 

NCPA welcomes this opportunity to provide input and suggestions to the committee 

regarding the pressing issue of securing the pharmaceutical supply chain. The National Community Pharmacists Association (NCPA) represents America’s community 

pharmacists, including the owners of more than 23,000 community pharmacies, 

pharmacy franchises and chains. Together, these small business entities employ 

over 300,000 full-time employees and dispense nearly half of the Nation’s retail prescription medicines. 

Although we believe that the pharmaceutical supply chain in the United States 

is largely safe and secure, there are a number of different approaches or tactics that 

could be employed to provide further confirmation of integrity. One approach would 

be increased oversight or security measures to deter pharmaceutical cargo theft. 

NCPA is encouraged to note that Federal legislation has been introduced by Senator 

Charles Schumer, S. 1002, the Safe Doses Act, that would expand the penalties for 

pharmaceutical cargo theft. Implementing a track-and-trace system for pharmaceuticals is also a concept that has been discussed. NCPA continues to feel that 

track-and-trace technologies still remain largely unproven and potentially economically infeasible for the independent community pharmacy industry at this time. 

Given our position in the pharmaceutical supply chain and as health care providers, 

we want to share with you our ideas to further secure the supply chain. 

NATIONAL, UNIFORM FEDERAL LICENSE STANDARDS FOR WHOLESALE DISTRIBUTORS

AND LOGISTICS PROVIDERS

As part of any track-and-trace system or perhaps as a stand-alone program, 

NCPA recommends that the U.S. Government set national, uniform Federal license 

standards for wholesale distributors and logistics providers (3PLs). At the present 

time, wholesale distributors are licensed at the State level, which has resulted in 

a patchwork of conflicting requirements of varying rigor. By setting a high bar for 

wholesale distributors nationwide, the Federal Government could further safeguard 

the supply chain by making sure that only appropriately credentialed and legitimate 

entities are able to participate in the drug distribution aspect of the pharmaceutical 

supply chain. This new Federal standard would pre-empt the existing State requirements although the individual States could still certify compliance with the Federal 

standards and could register Federal licenses for an appropriate fee. 

POSSIBLE RISK-BASED APPROACH/INITIAL IMPLEMENTATION ONLY DOWN

TO WHOLESALER LEVEL

NCPA recommends that if a track-and-trace system were to be required for the 

U.S. pharmaceutical supply chain, Federal policymakers may wish to consider utilizing a risk-based approach to determine the scope of products to be included in 

any track-and-trace system, at least at the outset of any program. Possible approaches that could be utilized could focus efforts on certain controlled substances 

or pharmaceuticals that are high dollar/high volume products. Also in this way, the 

system could be tested and further refined prior to the possible expansion to other 

products as well. Another incremental approach that would ease the burden on the 

entire supply chain would be to have any track-and-trace system initially applicable 

only down to the wholesaler level. Wholesalers would have the necessary product 

information and would be able to track what products were delivered to each pharmacy. There are only a few thousand wholesalers compared to over 60,000 retail 

pharmacies. 

INCENTIVIZE ADOPTION

In order to incentivize the voluntary adoption of track-and-trace technology, and 

if such a system were to be mandated for all participants, NCPA contends that Federal grants must be made available to smaller supply chain participants—like independent pharmacies—so that these small businesses are able to implement and 

maintain track-and-trace systems. In 2008, Accenture conducted a study that estimated the first year start up costs to implement a track-and-trace system would 

total approximately $110K per pharmacy. 

Some of the participants in the February 2011 FDA public workshop, Determining 

the System Attributes for the Tracking and Tracing of Prescription Drugs, cited the 

fact that a number of supply chain participants should be able to realize several 
83 

value-added features of a track-and-trace system in terms of financial and brand 

protection benefit or in terms of potential theft reduction and inventory optimization. It should be noted that any operational benefits from track-and-trace systems 

may not be evenly distributed among larger multi-unit corporations and small businesses. Larger corporate entities involved in the supply chain—namely manufacturers, wholesalers and chain pharmacies—would likely realize value-added benefits 

that a track-and-trace system could bring to their overall business practices. However, for the majority of independent pharmacy owners, the cost of implementing a 

track-and-trace system would likely exceed any possible ancillary benefits like inventory management or theft reduction. 

INTEROPERABILITY

Ensuring interoperability between the systems used by all participants in the supply chain is essential to the success of any track-and-trace program. Use of the 

standardized numerical identifier should avert some of the problems or inevitable 

snags that may occur when attempting to connect or ensure communication between 

varying manufacturers and distributors. Although the creation of a standardized numerical identifier should assist in paving the way for interoperability, much work 

remains to be done. 

NCPA has concerns that at the beginning or advent of any track-and-trace program, pharmacies may be forced to use more than one set of technologies (hardware/ 

software) in order to comply. This would inevitably add to the financial burden with 

which many independent pharmacies will be dealing. Some FDA workshop participants pointed out that in other industries, interoperability has only been realized 

when dealt with through government regulation—and NCPA feels that there may 

be some validity to considering this option in this instance. 

It has been noted or suggested that some of the smaller supply chain participants 

may be able to rely on the systems or track-and-trace solutions of the larger participants. The most-likely scenario may entail an independent pharmacy relying on the 

track-and-trace system and network capabilities of their wholesale distributor. It is 

important to note that the cost to the pharmacy could vary greatly based on such 

an arrangement. Questions related to ownership of a pharmacy’s data generated by 

the operation of the track-and-trace system would invariably arise. Additionally, 

this situation could become complicated in situations in which a pharmacy may 

need to switch their wholesaler for any reason. In order for this type of arrangement 

to be mutually beneficial to both wholesaler and pharmacy, more detailed discussions as to the roles and responsibilities of both parties would need to be discussed 

in greater detail. 

AUTHENTICATION

NCPA would like to point out that there must be consensus around the definition 

of authentication—and at which point in the supply chain such authentication 

should occur. In the past, many participants in the supply chain have raised the 

issue of the inherent distinction between track and trace. In order to track, supply 

chain participant would only need verification that the serialized number is indeed 

valid. In order to trace, a supply chain participant would need to be able to actually 

access and verify all of the prior transactions. 

If it were determined that all supply chain participants must do both—track and 

trace—pharmacies, which serve as the last stop in the supply chain, would have a 

potentially greater burden than other supply chain participants if they were required to actually authenticate or trace the entire distribution history of each product. Several workshop participants raised the point that perhaps only certain products or classes of products with the greatest risk of being counterfeited should be 

subject to tracing requirements. Also, other participants suggested that FDA or regulators would be the only entities that would have an actual need for a full distribution history. If access to the entire distribution history were limited to FDA or other 

regulators, this may also alleviate some of the concern expressed by a number of 

entities who are understandably concerned about supply chain partners having access to their proprietary data. 

Another issue that would need to be determined with regard to authentication 

would be standard operating procedures that would be employed in the event that 

a product could not be authenticated. NCPA questions which participant (sender, recipient or system) would have to ultimately bear the cost of the product in the event 

a product could not be authenticated and then subsequently sold. Pharmacies would 

need to know whether they could return such products back to upstream trading 

partners or if they would be forced to assume the cost of such unsalable items. Also, 

there needs to be clear protocol surrounding the reporting of such an event. 
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INFERENCE

Inference is one facet of the track-and-trace process that would greatly ease the 

time and labor costs for distributors and chain pharmacies but would not necessarily be available for independent pharmacies. Inference allows distributors to 

read a case or pallet of product and then infer that a certain set of serial numbers 

exists within that case or pallet. This same process could easily be employed by the 

chain pharmacy corporations that receive products from the manufacturer at a 

chain pharmacy warehouse. However, independent pharmacies typically do not receive products in case or pallet form from a dedicated warehouse and, therefore, 

could be forced to individually or manually scan each bottle or serial number as it 

arrives in the pharmacy. This would be extremely time consuming and would necessitate an increase in labor costs for independent pharmacy owners. NCPA recommends that as part of any discussions surrounding a proposed track-and-trace 

system, efforts to pilot inference at the tote level must be considered. 

NCPA strongly recommends pilot projects be pursued for any track-and-trace system in order to adequately identify and work through the complexities and substantial costs surrounding such a system, and that all supply chain participants be involved in any proposed pilot program. 

CONCLUSION

NCPA appreciates the opportunity to submit these comments as the committee 

discusses the issue of securing the pharmaceutical supply chain. The committee may 

wish to examine a variety of approaches to this multi-faceted issue including efforts 

to deter pharmaceutical cargo theft, implementing national uniform Federal licensure standards for wholesale distributors and potentially the use of some form of 

track and trace technology for pharmaceuticals. Thank you for your consideration. 

DEPARTMENT OF HEALTH & HUMAN SERVICES, 

FOOD AND DRUG ADMINISTRATION, 

SILVER SPRING, MD 20993, 

February 9, 2012. 

Hon. TOM HARKIN, Chairman, 

Committee on Health, Education, Labor, and Pensions, 

U.S. Senate, 

Washington, DC 20510. 

DEAR MR. CHAIRMAN: Thank you for providing the opportunity for the Food and 

Drug Administration (FDA or the Agency) to testify at the September 14, 2011, 

hearing before the Committee on Health, Education, Labor, and Pensions entitled 

‘‘Securing the Pharmaceutical Supply Chain.’’ This letter provides responses for the 

record to questions posed by certain members of the committee. 

If you have further questions, please let us know. 

Sincerely. 

MICHELE MITUL FOR JEANNE IRELAND, 

Assistant Commissioner for Legislation. 

RESPONSE OF THE FOOD AND DRUG ADMINISTRATION TO QUESTIONS OF SENATOR

BENNET, SENATOR ROBERTS, AND SENATOR KIRK

SENATOR BENNET

Question 1. The Institute for Safe Medication practices found in a survey of 1,800 

health care practitioners that 52 percent of hospitals and pharmacists in the survey 

reported using ‘‘gray market’’ suppliers in order to secure medicines during a time 

of drug shortage. Do you think that a system that enables FDA to know where 

drugs are in the distribution chain could be helpful in addressing this challenge? 

Answer 1. The gray market that emerges when drug shortages occur takes advantage of the vulnerability of health care institutions and pharmacies that are desperately seeking to fill the voids left by drug shortages. A robust track-and-trace 

system will help protect consumers from threats posed by illegal or substandard 

products, which may result from a drug shortage situation, in addition to providing 

accountability and transparency within the supply chain. A track-and-trace or uniform pedigree system will not solve the shortage, but it can help provide assurances 

that a drug being offered for sale is from the legitimate supply chain and is authentic. 
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Particularly helpful to ward against gray market products arising in drug shortage situations would be an expansion of existing law, which requires sole manufacturers to notify FDA of a discontinuance of certain drug products. The Administration has endorsed legislation that would require all manufacturers to provide notice 

to FDA of any issue that may lead to a disruption in supply of a drug product and 

that would provide explicit authority to enforce such reporting through civil money 

penalties. Expansion of the current notification provision would help FDA prevent 

drug shortages and be on the lookout for counterfeit products that arise in shortage 

situations. Moreover, the addition of enforcement authority and penalty provisions 

would enable FDA to ensure that it receives timely information related to potential 

drug shortages and would serve as a strong incentive for manufacturers to comply. 

Question 2. Does FDA receive information at the border when drugs come in 

through United States’ land or sea ports about whether a drug is FDA compliant? 

And if the drug appears tainted or physically damaged, what options does FDA have 

to destroy the product? How does this compare to the system that other countries 

have in place? 

Answer 2. Currently, FDA is only authorized to refuse admission of drugs that 

appear to be adulterated, misbranded, or unapproved. Unlike with foods, FDA is not 

currently authorized to require the submission of drug information as a condition 

of entry or refuse admission based solely on the failure of an importer to provide 

the required information. Clear authority to require information, and to refuse admission if such information is not provided, would improve FDA’s ability to monitor 

imported products for compliance with applicable laws. The success of FDA’s electronic review system is linked to the quality of data that importers and entry filers 

submit for the entry of their products. This information would not only enable FDA 

to better target higher-risk products, it would also minimize delays by allowing for 

increased use of electronic screening. 

Currently FDA only has the authority to issue a ‘‘notice of refusal of admission’’ 

for noncompliant, drug-related imports. Upon issuance of the ‘‘notice of refusal of 

admission,’’ FDA must turn over authority to the U.S. Customs and Border Protection (CBP), which may require either exportation or destruction of the non-compliant import under the Tariff Act, 19 U.S.C. 1595. Currently, FDA needs to seek Department of Justice (DOJ) support for seeking a seizure of packages of low or nodeclared value, and packages without return addresses, or packages that were returned and simply rerouted to the United States. FDA supports allowing CBP to 

destroy products in violation of FDA regulations that are valued at $2,000 or less 

or that pose a reasonable probability of causing a significant adverse health effect, 

with an opportunity for a hearing to be held after destruction in order to (1) avoid 

the re-introduction of violative products; (2) lessen the Agency’s burden and expenditure on low-value, highly unsafe products; (3) decrease the number of intentionally 

misdeclared low-value shipments avoiding commercial shipper oversight. Absent 

these authorities, FDA is often forced to store, or when there is a return address 

return, violative products to their senders because the current process for destruction requires a hearing, which is time-consuming and costly. Such violative drugs 

can find their way back to U.S. ports of entry several times, posing a potential 

threat to consumers and wasting critical resources that could be better spent identifying new threats. This ineffective process produces a revolving door for violative 

drugs. 

In January 2011, FDA collected information about various aspects of drug safety 

from regulatory authorities in Australia, Canada, India, Israel, Japan, New Zealand, 

the People’s Republic of China, South Africa, Switzerland, and the European Medicines Agency. In response to questions about whether the regulatory authorities require documentation for the admissibility of imported pharmaceuticals, and whether 

they have the ability to prohibit the importation of pharmaceuticals, the Agency received a variety of answers. Generally, all had requirements for documentation as 

a condition of entry, with the exception of the European Medicines Agency, because 

it is a review authority and regulatory compliance is left to the European Member 

States. For example, Australia requires that imported drugs have to be on the Australian Register of Therapeutic Goods. By contrast, Health Canada inspectors and 

Canadian Border Services officers can require persons who import a pharmaceutical 

product to provide sufficient evidence to show that the drugs are being imported in 

compliance with the Food and Drugs Act and its Regulations, and other relevant 

legislation, such as the Controlled Drugs and Substances Act. 

Question 3. GAO has been critical of FDA having some inaccurate and duplicate 

information in its databases. FDA has proposed having a unique identifier for all 

establishments that are importing drugs into the United States. It is my under-
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1These databases were not developed to be compatible with one another and, initially, had 

functions that were completely separate. After years in operation, it is now apparent that the 

ability of these databases to interface and share information with one another would be very 

useful. Unfortunately, it is nearly impossible to retrofit systems like these to make them compatible. The best way to make them interface is by establishing some shared data standards, 

like UFI. 

standing that Customs and Border Protection control the implementation of this 

unique identifier. Would giving FDA this authority to implement a unique identifier 

for establishments help FDA get rid of some of this inaccurate data? What will happen going forward if FDA continues not to have this authority? 

Answer 3. FDA strongly supports having a unique facility identifier (UFI), such 

as a Dun and Bradsheet D-U-N-S number, associated with each facility and supports a statutory requirement requiring submission of a UFI as a condition of registration and as a condition of import, for several reasons. First to be aware of entities in the global supply chain and to conduct appropriate inspections, FDA depends 

upon a number of electronic systems. Some of the databases upon which FDA relies 

include: Field Accomplishments and Compliance Tracking System or FACTS (inspection tracking database), Document Archiving, Reporting and Regulatory Tracking System or DARRTS (applications database), Establishment Evaluation System 

or EES (application inspection database), and Operational and Administrative System for Import Support or OASIS (imports database).1 Currently, establishments 

may be identified by different names and addresses in different systems. Requiring 

establishments to provide UFIs during the registration and importation processes 

will enable FDA to more easily cross-reference information about the establishments 

and their products in these various databases. In addition, if FDA is authorized to 

require submission of a UFI, and chooses to use an existing external identifier system such as D-U-N-S, it can leverage private data sources or data from other countries that already make use of these identifiers to help cross-check its data. 

Second, to be aware of entities in the global supply chain and conduct appropriate 

inspections, FDA also has to be able to distinguish between different facilities that 

are often easily confused. UFIs play an important role in FDA being able to do so 

in a timely manner. One typical scenario in which UFIs are critical to FDA is when 

the Agency identifies a facility in China that it believes requires inspection. Many 

Chinese facilities have names that are difficult to differentiate in FDA databases, 

in part because it is common in China for the name of the facility to begin with 

the name of the city in which the facility is located. Having UFIs associated with 

such establishments enables FDA to more easily distinguish among them. 

Third, existing Facility Establishment Identifiers (FEIs) have not been effective. 

In addition to recommending the submission of D-U-N-S Numbers, for many years 

FDA also has been assigning FEI numbers. However, as with D-U-N-S Numbers, 

there is no requirement that these numbers be submitted to FDA, and the Agency 

has been generating them on its own. This has led to a situation where multiple 

FEI numbers may have been assigned to a single establishment. This situation has 

created confusion both within FDA and industry. 

Giving FDA the authority to require submission of true, independent, and interoperable UFIs at registration and importation would help ensure the accuracy of our 

databases and better enable FDA to ensure proper import targeting and enforcement of our import alerts. This authority also better enables FDA to prevent potentially unsafe products from entering U.S. commerce. 

Specifically regarding UFIs and importation, CPB collaborates and enforces laws 

associated with multiple U.S. government agencies and, therefore, would presumably want to seek uniform agreement among the stakeholder agencies regarding 

what the UFI should be. CBP currently requires a Manufacture Identification (MID) 

number, but that is not a true, independent, interoperative UFI. If the MID number 

is entered incorrectly, the system will create a new FEI number in FDA’s database, 

thereby associating multiple FEB and MID numbers to, in actuality, one specific 

firm. This process has led to FDA’s databases containing inaccurate information, as 

noted by the Government Accountability Office (GAO). 

Currently, FDA does not have explicit statutory authority to require the submission of UFIs. In May 2009, FDA issued guidance requesting that establishment owners and operators submit D-U-N-S Numbers. Some registrants are providing this information, but not all. For those who do not comply with FDA’s request, the Agency 

seeks to obtain the number on its own. However, this process imposes a burden to 

FDA, and we are not always successful in obtaining the correct number. Absent explicit statutory authority to require UFIs, the Agency cannot obtain the information 

it needs to make its databases fully operational. 
87 

Question 4. Ms. Autor explained in her testimony that in many other countries 

the burden of proof is on the companies to prove that their drug is compliant with 

the regulatory standard of the country they are trying to enter. She noted that in 

the United States the opposite is the case—the burden of proof is on the FDA to 

prove that a drug is not compliant. Can FDA point to other countries that they are 

aware of that place the burden of proof on the manufacturer? 

Ms. Autor’s testimony was in the context of ‘‘Securing the Pharmaceutical Supply 

Chain’’ and, specifically, requesting a certification or other assurance of compliance 

with applicable standards or requirements as a condition of importation. Ms. Autor 

said in part that other countries place the burden on the importer or product owner 

to prove that its drug is compliant with country requirements. In the United States, 

FDA has the burden of showing an ‘‘appearance’’ of a violation to detain and refuse 

an imported product. 

Most countries require drug manufacturing sites to be licensed before product can 

be distributed in their countries. Canadian and European Union (EU) regulators, for 

example, issue an establishment (or site) license only after a Current Good Manufacturing Practice (CGMP) inspection finds the establishment compliant. Under the 

Federal Food, Drug, and Cosmetic Act (FD&C Act or the Act), drugs that are subject 

to premarket approval must pass a CGMP inspection to be approved. However, 

many over-the-counter (OTC) drugs sold in the United States are marketed under 

the OTC monograph system, rather than under individual approved product applications, and therefore, are not subject to CGMP inspection prior to distribution under 

this authority. For these OTC monograph drugs, there is no other provision in the 

Act requiring a passing CGMP inspection prior to distribution. Unlike the Canadian 

and EU establishment or site licensure requirements described above, the establishment registration provisions of section 510 of the FD&C Act do not require that a 

firm pass inspection before it is duly registered. Further, because section 510 of the 

FD&C Act requires only that an establishment’s owner/operator ‘‘immediately register’’ the establishment upon commencing manufacturing (see 510(c) and (i)), even 

upon receipt of a new registration, it will take FDA some time to conduct an inspection. 

As noted above, other countries can require persons who import a pharmaceutical 

product to provide sufficient evidence to show that the drugs are being imported in 

compliance with their drug laws. Because FDA may not have inspected a facility, 

or may not have inspected it recently, this kind of authority would be very useful. 

Additionally, some countries, like the EU Member States, also have a batch recontrol provision, requiring batch retesting before entry is permitted for certain countries of origin. FDA has no comparable requirement for most human drug products. 

SENATOR ROBERTS

Question 1. I have been on record raising concerns with additional government 

regulations in a time when companies and individuals are already overburdened 

with red tape. Some are suggesting that a sweeping statutory change is needed to 

promote safety and jobs. I am skeptical of this opinion. So instead I’ll ask, what improvements to the upstream supply chain integrity, and addressing the problems 

therein, are currently within FDA authority and how are you utilizing these current 

authorities to better ensure safety and effectiveness of drugs for American consumers? 

Answer 1. FDA has undertaken a wide range of activities aimed at addressing the 

challenges of globalization. The rapidly changing global environment, and a desire 

to move from a posture of intercepting harmful products to anticipating and preventing the arrival of such goods, has prompted FDA leadership to develop a strategy for addressing the challenges of globalization entitled ‘‘Pathway to Global Product Safety and Quality.’’ To achieve this transformation, FDA is developing an international operating model that relies on enhanced intelligence, information sharing, 

data-driven risk analytics, and the smart allocation of resources through partnerships. 

The new approach rests on four core building blocks: 

• FDA, in close partnership with its foreign counterparts, will assemble global 

coalitions of regulators dedicated to building and strengthening the product safety 

net around the world. 

• With these coalitions, FDA intends to develop a global data information system 

and network in which regulators worldwide can regularly and proactively share 

real-time information and resources across markets. 

• FDA will continue to expand its capabilities in intelligence gathering and use, 

with an increased focus on risk analytics and thoroughly modernized information 

technology (IT) capabilities. 
88 

• FDA will effectively allocate Agency resources based on risk, and leveraging the 

combined efforts of government, industry, and public- and private-sector third parties. 

The essence of this strategy marries creative international coalitions with cuttingedge investigative tools to continue to provide the consistently high level of safety 

and quality assurance the public expects—and deserves. FDA will continue to partner with other Federal agencies, the States, and nations across the world. It will 

also look to Congress to modernize its antiquated authorities so that FDA’s legal 

tools keep pace with globalization. 

Question 2. I believe that the statute is silent on how often foreign drug establishments must be inspected, so I guess my question is, does FDA really need new authorities to inspect foreign facilities? Because there is a difference between a need 

and a want. 

Answer 2. You are correct that the statute is silent on how often foreign drug establishments must be inspected. The statute does require that domestic drug inspections be inspected every 2 years. FDA does not need new authority to conduct foreign inspections, however, new authority would be required to change the biennial 

inspection requirement for domestic drug manufacturers to an inspectional frequency based on risk, regardless of facility location. Such authority would ideally 

enable FDA to adjust inspection frequencies based on risk factors like the nature 

of the drug, the processing and control methods, and the availability of other credible information about the establishment from other reliable sources, including other 

governmental and non-governmental inspecting or auditing organizations, and to 

use its limited resources most effectively. 

Question 3. The FDA committed to providing the committee with a full and complete list of all foreign drug establishments that are involved in the U.S. drug supply chain. Please provide that list. 

Answer 3. FDA provided this information via e-mail to your staff on October 18, 

2011. 

Question 4a. Drug counterfeiting, theft and diversion are a serious public health 

issue and a bottom line issue for industry as well. Just last year stolen insulin managed to make its way back onto legitimate pharmacy shelves and reached patients. 

This is a heat-sensitive product that will not work if improperly stored. How was 

this deception possible? Right now there is no comprehensive national system to 

track and authenticate packages of drugs as they travel from the manufacturer to 

wholesaler to pharmacy. 

Answer 4a. Stolen or diverted drugs are a public health concern for the very reason you have described, as we cannot be certain that these products have been 

stored or handled properly once they have left the legitimate supply chain. Loss of 

potency or integrity cannot necessarily be detected by physical examination with the 

naked eye, but may only be determined by laboratory analysis of potency and integrity. The lack of a comprehensive national system to track and authenticate packages of drugs as they travel from the manufacturer to wholesaler to pharmacy is 

the reason such diversion and reentry can occur. 

Question 4b. What steps can the FDA take to help increase security and transparency of drug distribution? 

Answer 4b. To further improve the security of the drug supply, FDA supports a 

comprehensive national track-and-trace system and continues its work to develop 

standards for identification, authentication, validation, and track and trace for prescription drugs, as directed by section 505D of the FD&C Act. A robust track-andtrace system will help protect consumers from threats posed by illegal or substandard products, in addition to providing accountability and transparency of the 

supply chain. An initial step of FDA’s track-and-trace standards development included issuance of a final guidance to industry entitled Guidance for Industry: 

Standards for Securing the Drug Supply Chain—Standardized Numerical Identification (SNI) for Prescription Drug Packages (See March 29, 2010, Federal Register (75 

FR 15440)), describing the Agency’s recommendation for unique identification of prescription drugs at the package level. In addition, in February 2011, FDA held a public workshop, which explored approaches for achieving an effective and feasible 

track-and-trace system for finished prescription drug products. Comments from supply chain stakeholders are being considered as we develop the standards for the validation, authentication, and tracking and tracing of prescription drugs to enhance 

the security of the drug supply chain against counterfeit, diverted, and other substandard drugs. 
89 

Question 4c. Does the FDA need additional authorities or a statutory mandate to 

ensure drug traceability becomes a reality? 

Answer 4c. We are working on developing standards for a national, interoperable 

track-and-trace system in the United States. However, even with standards developed, additional authority would be helpful to require a cost-effective track-andtrace system for all products throughout supply chain. 

Question 5. What are the potential costs to individual pharmacies if we implement 

a full track-and-trace program? 

Answer 5. Because the design of a track-and-trace system has not been determined by Congress, it is challenging to estimate the costs to individual pharmacies 

to implement; the cost would depend on the characteristics of the particular trackand-trace system that is eventually required; for example, limiting track-and-trace 

requirements to receipt by the pharmacy, rather than to the point of sale to the patient, would lower costs. We are sensitive to the costs that pharmacies might have 

to incur to implement and maintain such a system and are mindful of that as we 

develop the standards. Because track and trace is being done for products in other 

industries, the equipment and technology appears to be readily available and, therefore, the costs may have decreased since these reports were issued and continue to 

decrease as the technology advances and becomes more widely used. 

SENATOR KIRK

Question 1a. Earlier this year, FDA asked for input from stakeholders on beneficial system attributes for the tracking and tracing of prescription drugs. But this 

is only a preliminary step. What is the current status of FDA’s efforts to standardize 

tracking and tracing requirements for the pharmaceutical supply chain, and how 

will ‘‘promising technologies’’ be incorporated into the new standards? 

Answer 1a. During FDA’s February 2011 public workshop titled ‘‘Determination 

of System Attributes for the Tracking and Tracing of Prescription Drugs,’’ approaches for achieving an effective and feasible track-and-trace system for finished 

prescription drugs were explored. Following the workshop, FDA published a Federal 

Register Notice and opened a public docket to solicit feedback from supply chain 

stakeholders. The comment period was extended to allow for stakeholders to consider the workshop summary. The comments have been reviewed and considered as 

we continue to develop the remaining standards for authentication, validation, and 

track and trace. 

The Agency has reviewed and considered current and promising technologies as 

it develops these standards. Some technologies can be considered as on-product or 

standalone technologies that provide a method to identify or authenticate a product 

through visual assessment or specific analytical methods. These technologies can be 

applied directly on the package (i.e., holograms, tamper-evident packaging) or directly on or in the dosage form (i.e., nanotechnological component or chemical 

taggant). Other technologies to consider include those that can be used to enable 

identification, validation, authentication, and track and trace of prescription drugs, 

such as data carriers, scanners, serialization software, traceability software, data 

management software, and analytical software. The level of availability, adoption, 

and interoperability of each of these technologies is being considered as we develop 

the standards. The standards will likely entail several of these technologies to 

achieve an effective and feasible track-and-trace system for prescription drugs. However, as you note, industry will not be required to adopt FDA standards if the Agency is not given authority to do so. 

Question 1b. In addition, has FDA done any benchmarking with other Federal 

agencies to ascertain how those agencies are dealing with comparable policy objectives? For example, though different in nature, the Department of Defense is engaged in evaluating and/or deploying a variety of initiatives and technologies related 

to the tracking and tracing of high priority, high security items similar in importance and sensitivity to the protection of the pharmaceutical supply chain. What initiatives and technologies being considered or deployed by other Federal agencies 

such as DOD are you evaluating and benchmarking relative to securing the Nation’s 

pharmaceutical supply chain? 

Answer 1b. Yes, FDA has done benchmarking with other Federal agencies, including the Department. of Defense, U.S. Postal Service, Federal Aviation Administration, and National Aeronautics and Space Administration, to learn about their systems and technologies used to conduct tracking and tracing of supplies, mail, airplane parts, or aerospace parts, respectively. While this benchmarking was useful, 

we learned that no single system, model, or technology currently employed could be 

applied directly to the track-and-trace system that the Agency envisions for pre-
90 

scription drugs, in part due to differing supply chain and distribution models, and 

the entities involved. This benchmarking was conducted as part of our research to 

gain insight on technologies used or under consideration and systems or processes 

used to manage the tracking and tracing capability. 

Question 2. For a prescription drug track-and-trace system to be efficient and effective, it should be electronic rather than paper-based. An electronic system can incorporate human-readable elements on labels or tags. With today’s technology, a 

barcode—in particular, a 2-D bar code—can incorporate a great deal of information 

accurately and be read easily and inexpensively. RFID technology can capture even 

more information and be read even more easily, since the RFID tag does not need 

to be in the line of sight of the reader. Updated information can easily be added 

as prescription drugs move through the supply chain. Serialization software can 

uniquely identify individual packages or groups of packages (e.g., pallets). 

Furthermore, an electronic system may benefit from the existing, internationallyrecognized technical standards, such as those issued by GS1, to facilitate interoperability along supply chains that may extend beyond our borders. GS1 standards can 

also address FDA’s stated concern regarding the absence of a system of unique drug 

facility identifiers. To what extent has FDA considered the use of a partial or endto-end electronic track-and-trace system for prescription drugs, and will that system 

be compatible with, or conform to recognized international standards? 

Answer 2. FDA agrees that a fully electronic track-and-trace system is desirable 

to allow for interoperability and efficiency in processing data exchange between all 

supply chain participants. FDA also encourages accountability and transparency of 

all supply chain participants to improve the security of the drug supply and level 

the responsibility across the supply chain. As noted above, various technologies are 

being considered as we develop the standards for validation, authentication, and 

tracking and tracing, and the standards will likely entail several technologies to 

achieve an effective and feasible track-and-trace system, for prescription drugs. At 

the February 2011 public workshop, FDA shared the following as potential attributes of a track-and-trace system also under consideration: 

• Ability to capture the unique identification of a product and the status of the 

product. 

• Ability to ensure interoperability to enable supply chain participants to securely 

capture, store, and exchange track-and-trace data accurately and efficiently. 

• Ability to authenticate the unique identifier SNI and entire distribution history 

of each product. 

• Ability to create an electronic pedigree at any point during the movement of the 

product through the supply chain. 

• Ability to enable appropriate access to track-and-trace data necessary to achieve 

system goals. 

• Ability to ensure security of data and systems from falsification, malicious attacks, and breaches. 

• Ability to ensure confidential commercial information is protected. 

• Ability to ensure that patient privacy is maintained. 

While we are aware of track-and-trace models that include some and not all members of the supply chain, FDA believes these partial models leave potential 

vulnerabilities in the supply chain and do not provide sufficiently enhanced security. 

In addition, counterfeit or other substandard drugs can enter anywhere in the supply chain. For these reasons, FDA believes that all members of the supply chain 

need to be participating in the track-and-trace system. 

FDA intends to harmonize its standards development with international consensus standards to the extent practicable, as we have done with our Guidance for 

Industry for the Standardized Numerical Identification (SNI) for Prescription Drug 

Packages (March 2010). 

[Whereupon, at 12:07 p.m., the hearing was adjourned.] 

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