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S. HRG. 108–923 

EXAMINING THE IMPLICATIONS OF DRUG 

IMPORTATION 

HEARING 

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED EIGHTH CONGRESS 

SECOND SESSION 

JULY 14, 2004 

Serial No. J–108–89 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

ORRIN G. HATCH, Utah, Chairman 

CHARLES E. GRASSLEY, Iowa 

ARLEN SPECTER, Pennsylvania 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

LARRY E. CRAIG, Idaho 

SAXBY CHAMBLISS, Georgia 

JOHN CORNYN, Texas 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

JOHN EDWARDS, North Carolina 

BRUCE ARTIM, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Grassley, Hon. Charles E., a U.S. Senator from the State of Iowa, prepared 

statement .............................................................................................................. 184 

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 1 

prepared statement .......................................................................................... 187 

Kennedy, Hon. Edward M., a U.S. Senator from the State of Massachusetts, 

prepared statement .............................................................................................. 245 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 3 

prepared statement .......................................................................................... 248 

Feingold, Hon. Russell D., a U.S. Senator from the State of Wisconsin, prepared statement ................................................................................................... 168 

WITNESSES 

Breaux, Hon. John, a U.S. Senator from the State of Louisiana ......................... 12 

Catizone, Carmen A., Executive Director/Secretary, National Association of 

Boards of Pharmacy Boards ................................................................................ 36 

Disch, Joanne, Board Member, American Association of Retired Persons ......... 40 

Dorgan, Hon. Byron L., a U.S. Senator from the State of North Dakota ........... 9 

Durant, Elizabeth G., Executive Director of Trade Compliance and Facilitation, Office of Field Operations, Bureau of Customs and Border Protection .. 20 

Giuliani, Rudolph W., Former Mayor of New York City, and Chairman and 

Chief Executive Officer, Giuliani Partners, LLC ............................................... 49 

Hubbard, William K., Associate Commissioner for Policy and Planning, Food 

and Drug Administration and John Taylor, III, Associate Commissioner 

for Regulatory Affairs, Food and Drug Administration .................................... 14 

Jaeger, Kathleen D., President and Chief Executive Officer, Generic Pharmaceutical Association .............................................................................................. 43 

Nickles, Hon. Don, a U.S. Senator from the State of Oklahoma ......................... 8 

Sanders, Hon. Bernard, a Representative in Congress from the State of 

Vermont ................................................................................................................ 6 

Schondelmeyer, Stephen W., Professor of Pharmaceutival Economics, University of Minnesota College of Pharmacy .............................................................. 41 

Wennar, Elizabeth A., President and Chief Excutive Officer, United Health 

Alliance, bennington, Vermont, and Principal, HealthInova, Manchester 

Vermont ................................................................................................................ 38 

QUESTIONS AND ANSWERS 

Responses of Carmen A. Catizone to questions submitted by Senators Hatch 

and Leahy ............................................................................................................. 60 

Responses of Joanna Disch to questions submitted by Senators Leahy and 

Hatch ..................................................................................................................... 67 

Responses of Elizabeth Durant to questions submitted by Senators Hatch 

and Leahy ............................................................................................................. 71 

Responses of Rudolph W. Giuliani to questions submitted by Senator Hatch ... 77 

Responses of William K. Hubbard and John Taylor to questions submitted 

by Senators Hatch and Leahy ............................................................................. 83 

Responses of Kathleen D. Jaeger to questions submitted by Senators Hatch 

and Leahy ............................................................................................................. 113 

Responses of Elizabeth A. Wennar to questions submitted by Senators Hatch 

and Leahy ............................................................................................................. 126 

Page

IV 

Questions submitted by Senator Leahy to Stephen W. Schondelmeyer (Note: 

At the time of printing, after several attempts to obtain responses to 

the written questions, the Committee had not received a response from 

the witness.) ......................................................................................................... 129 

SUBMISSIONS FOR THE RECORD 

American Pharmacists Association, Washington, D.C., statement ..................... 130 

Biotechnology Industry Organization, Washington, D.C., statement .................. 136 

Catizone, Carmen A., Executive Director/Secretary, National Association of 

Boards of Pharmacy, statement .......................................................................... 145 

Disch, Joanne, Board Member, American Association of Retired Persons, 

statement .............................................................................................................. 153 

Dorgan, Hon. Byron L., a U.S. Senator from the State of North Dakota, 

statement .............................................................................................................. 165 

Giuliani, Rudolph W., former Mayor of New York City, and Chairman and 

Chief Executive Officer, Giuliani Partners, LLC, letter and attachment ....... 170 

Healthcare Leadership Council, Washington, D.C., statement ........................... 190 

Hubbard, William K., Associate Commission for Policy and Planning, Food 

and Drug Administration, statement and attachments .................................... 192 

Jaeger, Kathleen D., Generic Pharmaceutical Association, President and Chief 

Executive Officer, Arlington, Virginia, statement ............................................. 238 

Sanders, Hon. Bernard, a Representative in Congress from the State of 

Vermont, statement ............................................................................................. 251 

Wennar, Elizabeth A., President and Chief Excutive Officer, United Health 

Alliance, bennington, Vermont, and Principal, HealthInova, Manchester 

Vermont, statement and attachments ................................................................ 254 

(1) 

EXAMINING THE IMPLICATIONS OF DRUG 

IMPORTATION 

WEDNESDAY, JULY 14, 2004 

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:03 a.m., in Room 

2156, Hart Senate Office Building, Hon. Orrin Hatch, presiding. 

Present: Senators Hatch, Kyl, Leahy, Kohl, Feinstein and Feingold. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM THE STATE OF UTAH 

Chairman HATCH. I am happy to begin this hearing. 

Many Americans, especially senior citizens, are understandably 

seeking more affordable prescription drugs and are wondering if 

drugs imported from Canada and other countries may be the answer. Several bills have been introduced on this topic, including 

those by respectively Senator Grassley, Senator Gregg and Senator 

Dorgan, from whom we will be hearing shortly. 

The purpose of today’s hearing is to begin the Judiciary Committee’s deliberation over the many issues related to drug importation 

that fall under our Committee jurisdiction. Today’s hearing will 

largely focus on whether amending the longstanding, carefully 

crafted law, the Prescription Drug Marketing Act of 1988, that established a tightly regulated, closed system of prescription drug 

distribution in our country, will open the door to counterfeit and 

otherwise adulterated or misbranded drugs being widely distributed to an unwitting public. 

Representative John Dingell, the dean of the House of Representatives and a prime sponsor of the 1988 PDMA law, succinctly summarized the problem: ‘‘The very existence of a market for reimported goods provides the perfect cover for foreign counterfeits.’’ 

Now, we will hear today from the FDA, and the Bureau of Customs and Border Protection on the problem of counterfeit drugs. 

The FDA has documented many cases of what appear to be FDAapproved imported drugs that, in fact, were contaminated or counterfeit, contained the wrong product or the incorrect dose, were accompanied by inadequate directions or had outlived their expiration date. Unfortunately, the FDA has witnessed a sharp spike in 

such counterfeiting and their partners at Customs will tell us that 

this is not an easy crime to detect or to prevent. 

2 

Later in the hearing, we will hear from Rudy Giuliani, a former 

tough-nosed prosecutor, who will tell us why we should think twice 

before we do away with the protections in current law. 

I am mindful that on several occasions the Senate has adopted 

an amendment offered by Senator Cochran that requires the Secretary of Health and Human Services to certify the safety of imported drugs before they can enter the United States. Neither Secretary Shalala nor Secretary Thompson—one a Democrat, one a 

Republican—could make that simple, but prudent, certification 

with respect to the additional risk to public health. 

Given the testimony submitted by the Agency today, it seems 

that the safety of imported drugs remains in doubt in the minds 

of the experts at FDA and a strong case can be made that Congress 

would be well advised to retain the protection afforded by the Cochran Safety Amendment. 

Frankly, it may be beneficial for Congress to receive the report 

from the Secretary’s Task Force on Drug Importation before legislation is considered in this area. I recognize that the report is not 

due until after the election and that the strategy of the same is to 

attempt to use Election Day politics as leverage for legislation and 

that sound policy will not win out. 

We all want medicines to be safe and affordable, yet we do not 

want to take steps that stifle the innovation that has made the 

United States the world leader in pharmaceutical development. Importing drugs from other countries in order to take advantage of 

other countries’ price controls has other potential repercussions, including the prospect of diminished research into future lifesaving 

treatments. We need to think carefully about the long-term effect 

of this trade-off. 

In this regard, I commend the efforts of Senators Kyl and Thomas for a hearing they recently held in the Finance Committee that 

examined the critical, yet almost totally overlooked, question of 

whether U.S. trade policy can be used to see that the citizens of 

our trading partners are paying their fair share of pharmaceutical 

R&D. The fact is that American taxpayers are putting up $28 billion of their hard-earned money this year for biomedical research 

at the National Institutes of Health, while year in and year out 

many other countries essentially free-ride on U.S. research and development activities, and then set price controls on the approved 

drug products that are the fruits of this U.S.-financed research. It 

is the American taxpayer and consumer that is paying dearly. 

Consideration of pharmaceutical importation raises many complex issues beyond the problem of counterfeiting. For example, concerns have been raised about the manner in which Senator Dorgan’s bill, S. 2328, affects patent and antitrust law. The bill appears to alter current law with respect to domestic patent rights 

once overseas sales occur. One of the areas that this Committee 

should explore as this debate moves forward is how the doctrine of 

international exhaustion of patent rights might be altered by the 

Dorgan legislation. 

I would note that last year this Committee played a constructive 

role in correcting the excesses in the proposed changes to patent 

damages by the Gregg-Kennedy-McCain-Schumer bill even after it 

passed the Senate by an overwhelming majority. It can take time 

3 

to fully analyze and refine inherently intricate pharmaceutical-related statutes. For example, I think that most objective observers 

would now agree that last year’s Senate-passed bill contained a 

blatantly unconstitutional provision relating to declaratory judgments that was corrected in large part by this Committee’s involvement. 

In short, as drug importation legislation is crafted and considered, this Committee must remain vigilant in examining not just 

the counterfeit problem, substantial as it is, but also patent issues 

and other matters under our jurisdiction such as any potential 

antitrust and Takings Clause issues. For example, the extent to 

which the Dorgan legislation appears to preclude manufacturers 

from charging exporters market-based prices for drugs, if they are 

higher than the lowest price-controlled price of the exporting country, deserves the scrutiny of our Committee. As a defender of, and 

believer in, property rights, including international property rights, 

I am always leery of systems that impose Government-mandated 

prices, sales or licenses. 

Finally, I must note that I am far from certain that importation 

is the magic bullet that will, instantly and without repercussions, 

lead to lower drug prices. I am concerned that importation may 

eventually provide the bullet in a grand-scale game of pharmaceutical Russian roulette. 

I am willing to continue to work with my colleagues on ways to 

make prescription drugs more affordable for the American public 

and to devise ways to do so that do not jeopardize patient safety 

or undermine the incentives for the discovery of the next generation of therapies. 

This is an important hearing. Everybody who testifies here today 

is an important human being and person, and we look forward to 

hearing the testimony on both sides of these issues. 

With that, I will turn the time over to the distinguished Ranking 

Member. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Well, thank you, Mr. Chairman. And I agree 

with you that this is an important issue, actually one that has profound implications for the American public. Actually, Vermonters 

were among the first to throw a spotlight on this whole issue of 

prescription drug importation. We followed this issue closely for 

years. We have been pushing for a consumer-friendly solution. 

I am pleased that we on this Committee have the opportunity to 

restate the very compelling case for the establishment of a safe 

legal system to import portable drugs into the United States. I 

wish we might actually have a chance to vote on it on the Senate 

floor. We spend week, after week, after week debating issues that 

we know will go nowhere, but are designed to be used in campaign 

ads. It would be nice to actually debate something that might help 

the American people. Americans pay some of the highest prices for 

prescription drugs of any country in the world, despite the fact that 

many of these drugs are made right here. And we talk about research oftentimes as taxpayer-supported research that goes into 

these drugs. Prescription drugs become a lifeline not a luxury. 

4 

Now, when we were faced with this dilemma, and with Washington’s unwillingness to help, many Vermonters and other Northern 

border citizens were among the first to take matters into their own 

hands. Congressman Sanders, who is going to testify, started leading trips to Canada 5 years ago, and he used it this way. I think, 

Congressman, you remember having these to go. He wanted to let 

Vermonters safely buy affordable medicines on the other side of the 

border, where struggling seniors are able to find savings of anywhere from 50 percent to 70 percent, and buses like this were powerful early symbols in opening this debate. They have been effective, much like Senator Dorgan’s use of his famous orange rubber 

pylon in demonstrating the lack of security along the Northern border. 

Incidently, another issue, it would be nice if we could take time 

to pass the bill for homeland security. I understand the Justice Department now is turning loose a lot of the people that are picked 

up at the border who are illegal aliens because they do not have 

the people to hold them. 

Now, American consumers did not take long to figure out the 

deck is heavily stacked against them. They found ways to vote with 

their pocketbooks and with their bus tickets. But meanwhile the 

White House, big drug companies and many in Congress have done 

all they can to thwart this. Now, those trips worked for a while. 

But for seniors who could not easily make the trek across the border, there had to be another option. That is where mail-order entered the equation. And now mail-order has drastically transformed 

the importation of medicine. 

The fact is, again, to use a symbol of the bus, I think Congressman Sanders, and I and everybody else would agree this is not the 

way Americans should have—they should not have to get on a bus 

to go and get affordable medicine prescribed by their doctors. And 

the fact that they have had to resort to creative solutions like that 

should have shamed the Congress and the White House into acting 

long before now. 

In my home State of Vermont, our Republican Governor, our 

Democratic attorney general, the mayor of our largest city have all 

spoken out on the unmet needs of the people of our State, but their 

pleas and those of State and local Governments have not been 

heard. At the same time, American consumers are moving ahead 

with or without us. They know they have been dealt a raw deal. 

They see this raw deal in black and white each month when they 

sit down at their kitchen tables to pay the bills. It boils down to 

access. 

A prescription drug is neither safe nor effective if you cannot afford to buy it. And we have to recognize this imposes real dangers 

on American consumers when they cannot follow what their doctors 

have prescribed. And while we have to do more to bring affordable 

health care to the millions of Americans who are currently uninsured or do not have good coverage, we cannot deny them this immediate market-based solution. 

And for many Vermonters purchasing drugs from Canada, it literally means the difference between following their doctor’s orders 

or having to roll the dice with their health and sometimes with 

their lives by not having prescription medication. It makes a difVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
5 

ference for the woman who has maxed-out her health plan’s annual 

prescription drug benefit only 3 months into the year. It makes a 

difference for the elderly man on a fixed income who is unable to 

afford both the heart medicine he needs to live and the fuel bills 

he needs to keep warm. 

As regulators and policymakers sit idly by in Washington, the 

pharmaceutical industry, in one of the most obscene moves I have 

seen, moving to cut off supplies to Canadian pharmacies in order 

to prevent Americans from purchasing their drugs at affordable 

prices. I wonder how these people sleep at night. Are we prepared 

to tell those in dire need that they have to go back to choosing between paying gas, food and heating bills or their medicine? 

We owe it to the American consumers to stop asking whether we 

can set up a system to provide safe importation. Of course, we can. 

We should be coming together without further delay to establish a 

self-financed system and give FDA and Customs the resources they 

need. We put our stamp of approval in allowing American consumers to purchase prescription drugs from Canada three times 

over the past 4 years. Of course, it gets blocked by the Executive 

Branch. Let us hope someday we might actually do what the American people want us to do. The administration fought every effort 

we made during debate on the Medicare prescription drug bill to 

give some leverage to consumers and taxpayers. 

In the last few days, we also have another thing which shows 

what the administration is doing to block this and to actually get 

in bed with the big drug companies. We have some very troubling 

and unpublicized provisions in the proposed Free Trade Agreement 

with Australia. That agreement that is negotiated by the White 

House seems to pose real threats to drug importation. It has new 

provisions not found in earlier agreement with other countries. It 

appears to have been written by the pharmaceutical companies. 

We have a lot of capable witnesses this morning, and I will put 

my whole statement in the record, but I know Senator Dorgan, 

Senator Breaux, Senator Nickles here, and Senator Dorgan worked 

so hard on this. And Mr. Hubbard, Mr. Taylor and Mr. Durant will 

be coming here, Mr. Giuliani, Mr. Catizone, Ms. Jaeger, Ms. Disch, 

Professor Schondelmeyer, of course a fellow Vermonter, Dr. Elizabeth Wennar, who is the CEO and executive director of United 

Health Alliance in Bennington, Vermont. Her organization, which 

is really reflective of community physicians, rural hospitals, nursing homes, home health agencies in Southwestern Vermont, is a 

model for the rest of the country. They were a pioneer in importing 

prescription drugs from Canada by mail, and she has done extensive research on this. 

Doctor, I thank you for being here. 

So, Mr. Chairman, I will put my whole statement in the record, 

so we can get on with the hearing. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Chairman HATCH. Thank you, Senator. 

I would like to welcome our first panel of witnesses. First, we 

have one of our colleagues from the House of Representatives, Congressman Bernie Sanders. We are happy to have you here. 

Representative SANDERS. Thank you very much. 

6 

Chairman HATCH. Next to testify will be Senator Don Nickles, 

who has been a strong supporter for protecting the health of the 

general public and has raised some serious concerns about imported drugs. 

Next, we will have Senator Byron Dorgan, who is the sponsor of 

S. 2328, the Pharmaceutical Market Access and Drug Safety Act of 

2004. 

And, finally, we have Senator John Breaux, who led efforts on 

the Senate floor to advocate for consumer safety and drug effectiveness. 

It is a diverse panel, and we are happy to have you here with 

us today, and we will begin with you, Representative Sanders. 

STATEMENT OF HON. BERNARD SANDERS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VERMONT 

Representative SANDERS. Senator Hatch, thank you very much 

for allowing me to say a few words. Senator Leahy, thank you for 

your strong efforts on this issue. 

Senator it seems to me that we are dealing with two issues here 

this morning. Number one, at a time when millions and millions 

of Americans are unable to afford the prescription drugs they need 

to stay alive or keep them healthy, the key question is whether the 

American people will be forced to pay, by far, the highest prices in 

the world for the prescription drugs they need or whether Congress 

will finally end that obscenity and allow Americans to pay world 

prices for the drugs that they need. That is Issue No. 1. 

And the second issue, equally important, is whether democracy 

will prevail on Capitol Hill or whether the pharmaceutical industry, which has spent hundreds and hundreds of millions of dollars 

in recent years, with lobbyists, with advertisements, with huge 

amounts of campaign contributions, will be able to continue to force 

the American people to pay these outrageously high prices. 

Senator this is not just about prescription drugs. It is about democracy. It is about whether senior citizens in the State of 

Vermont, who live on $12- or $15,000 a year, will get justice or 

whether big money will continue to prevail. 

As Senator Leahy indicated, some 5 years ago, I became the first 

member of the U.S. Congress to take constituents over the Canadian border, and we border on Canada, as you know. And I will 

never in my life forget that trip, Senator. I had on the bus with 

me a number of women who are struggling with breast cancer, and 

many of these women took Tamoxifen, which as you know is a 

widely prescribed breast cancer drug, but a lot of these folks just 

do not have a lot of money. And when they went to Montreal and 

were able to purchase Tamoxifen for one-tenth of the price that 

they were paying in the United States, when they were able to purchase a drug which was keeping them alive, they could not literally 

believe that reality. They were stunned. 

And all over this country, people are asking why is it that right 

across the Canadian border, in Europe, people are able to purchase 

the same, exact medicine, manufactured by the same companies, 

produced in the same factories, why are they able to purchase 

those medicines abroad for a fraction of the price that we pay in 

this country? 

7 

Now, the truth is the evidence I believe is overwhelming that the 

safety issue, the so-called safety issue, is a bogus issue. Senator, 

when we go out to lunch this afternoon, I am going to have—and 

I am happy to take you out to lunch this afternoon—and I will 

treat you to a salad. 

Chairman HATCH. Oh, no, I have to eat a lot if I go to lunch. 

[Laughter.] 

Representative SANDERS. And we will have some lettuce and tomatoes that probably come from Mexico or somewhere in Latin 

America or maybe we will have some grapes that come from Chile 

or we will have some pork that comes from someplace. In the 

United States, we eat food that comes from all over the world, from 

farms and ranches, frankly, that we know very little about, and yet 

what we say is that is not a problem or it is a problem that we 

can deal with because we have confidence in our Government agencies to protect the safety of Americans, health safety. 

Now, if we can eat food from all over the world, how is it that 

the Food and Drug Administration cannot regulate a handful of 

pharmaceutical industries and track the medicine that goes abroad 

and comes back? And obviously the answer is that in the House 

bill, which by the way, as you know, passed overwhelmingly with 

bipartisan support, in the Dorgan bill we have strong legislative 

language that makes sure that the FDA is watching and approving 

the medicine that comes back into this country. 

Now, people say, well, we have a potential safety problem here. 

And it is a problem, but it is a problem that I am absolutely convinced the FDA and the U.S. Government can address. But, Senator, let us talk about another safety problem that does not get the 

discussion that it needs. Let us talk about elderly senior citizens 

in Vermont living on $12,000 a year or $14,000 a year who get sick, 

and in some cases die, because they cannot afford the medicine 

that they need. How many thousands of people are needlessly suffering, and in some cases dying, because they cannot acquire the 

medicines that their doctors prescribe? 

Now, I do not know if you have had the same experience that I 

have had. But I talk to physicians in Vermont, and what they tell 

me is why should I bother making out a prescription for a patient 

when that patient cannot fill that prescription? They do not have 

enough money to go to the drug store to buy it? 

So let me just conclude by saying this: The pharmaceutical industry is the most powerful lobby in the United States of America. 

They lie very often, they set up phony organizations very often, 

they put out misleading campaign literature very, very often, they 

contribute huge amounts of money to members of the House and 

the Senate. In Europe and all over the world parallel trading has 

been going on for a very long time. It seems to me that the evidence is overwhelming that we can stand up for the senior citizens 

of this country. We can stand up for the sick of this country. We 

can lower prescription drug costs by 25 to 50 percent by simply 

saying that for all those folks here who believe in free trade for 

every item in the world, why can we not have free trade for prescription drugs? 

Senator Leahy was right. We have been talking about this issue 

year after year, after year. The American people have made it clear 

8 

in poll after poll this is what they want. And the spotlight right 

now is on the U.S. Senate, where I understand the votes are there 

to pass strong reimportation legislation. 

Senator let us stand up for the American people. Let us have the 

courage to take on the big-money interests. Let us lower prescription drug costs by 25 to 50 percent, and let us give the American 

people the help that they are crying out for. 

Thank you very much. 

[The prepared statement of Representative Sanders appears as a 

submission for the record.] 

Chairman HATCH. Thank you, Representative Sanders. 

Senator Nickles? 

STATEMENT OF HON. DON NICKLES, A U.S. SENATOR FROM 

THE STATE OF OKLAHOMA 

Senator NICKLES. Mr. Chairman and other members of the Committee, thank you for having this hearing and for having a divergent view of opinions on your first panel, and I expect on your subsequent panels as well. 

And I compliment Representative Sanders. He is an articulate 

spokesperson for his party. I happen to have a different view, a 

strongly different view. I do not want to import the Canadian 

health care system or pharmaceutical system or price control system into this country. He does. I respect that, but I disagree. 

He said that there would be savings of 25 to 40 percent. CBO did 

an analysis of H.R. 2427, the Pharmaceutical Market Access Act of 

2003, which passed the House last year, and they determined the 

savings would be ‘‘The reduction in drug spending from importation 

would be small,’’ 1 percent maybe. What would we get for that 1- 

percent savings? We would get a lot of safety problems. We would 

probably get a lot of counterfeit drugs. We would probably have a 

lot of people eventually die as a result of getting the wrong drugs 

or the wrong dosage, and probably more importantly than that, we 

would probably see a real deterioration of the research and development that we do in the pharmaceutical in this country. 

Many, many of our colleagues, many, many of our family members have had very serious illnesses. Many of their lives have been 

saved because we have advance medicines in this country. I am excited to think what advances will be made in the next 5 or 10 or 

20 years. Whether you are dealing with cancer or heart disease or 

Alzheimer’s, you name it, there is a lot of progress in a lot of areas 

that will save lives. 

I am really concerned that if in this effort to save not 25 or 50 

percent, but maybe 1 percent, that we will jeopardize safety, and 

we will also very much jeopardize the improved quality of drugs 

that we are now in the process of making in this country. That 

would be a very shortsighted, and I think a very significant, serious mistake. 

So I just wanted to mention that. I am concerned about quality. 

I am concerned about Canada’s law. I do not want the import Canadian law. I read the Canadian Food and Drug Act, and I will just 

quote Section 37.1. It says, ‘‘This act does not apply to any packaged food, drug or cosmetic device not manufactured for consumpVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
9 

tion in Canada and not sold for consumption in Canada if it is 

marked with export.’’ 

Then, the Canadian deputy health minister stated, ‘‘Canada has 

never stated that it would be responsible for the safety and quality 

of prescription drugs exported from Canada into the United States 

or any other country for that matter. Health Canada is first and 

foremost concerned about the health and safety of Canadians.’’ 

And we dealt primarily with Canada in previous iterations of 

drug importation bills. Now, I believe in Senator Dorgan’s bill that 

has expanded to another 19 or 20 countries. I do not know what 

the laws are in those other 19 or 20 countries. I do not know that 

I want to know what the laws are in those 19 or 20 countries, but 

I am concerned. Do those countries allow or do they provide for 

safety and quality inspections for drugs that are imported into 

their country for export? Canada did not. And so if Canada was importing drugs from other countries that maybe had less quality 

control or maybe from countries or companies that had a significant counterfeit experience, but yet saved money, would we be importing those drugs? Canada has already said it is not going to be 

responsible for it. 

So I think you could have a real deterioration of quality. We will 

hear from FDA or this Committee will hear from FDA shortly. 

They have repeatedly stated that we could not certify for the safety 

and quality of drugs that are imported from other countries. And 

so there was a reason why we put in language in the past that 

said, yes, importation is okay as long as the Secretary would certify 

that it was safe and cost-effective. 

Both Secretary Shalala of the previous administration—Democrat administration under President Clinton—and Secretary 

Thompson under President Bush have said that was not the case. 

Their neck was on the line, that they were responsible, and they 

stated that they could not certify that those drugs would be safe. 

I do not think we should ignore FDA nor do I think we should 

set up a system to be so intrusive to mandate companies that they 

have to sell any quantity to these 20 countries. You talk about an 

interference in free enterprise, I cannot think of anything. And I 

also understand that that was in the bill. I was reading that in 

Section 27, ‘‘Restraint of Free Trade,’’ basically mandating that 

U.S. manufacturers have to sell whatever quantity some importer 

for export might have in these 20 countries. That is such a violation, such an intrusion into the marketplace. It is almost an invitation for everybody to leave the United States. I hope, and expect, 

that that will not become law, and I will work to see that it does 

not. 

Mr. Chairman, thank you very much for your allowing us to testify. 

Chairman HATCH. Thank you, Senator Nickles. 

Senator Dorgan? 

STATEMENT OF HON. BYRON L. DORGAN, A U.S. SENATOR 

FROM THE STATE OF NORTH DAKOTA 

Senator DORGAN. Mr. Chairman, thank you very much. I am 

wondering if we should close the loop and tell Congressman Sanders that you are not going to have lunch with him? 

10 

[Laughter.] 

Chairman HATCH. Actually, it sounded like a pretty interesting 

lunch—salad, pork, just about everything. 

Representative SANDERS. It is on me. 

Chairman HATCH. We will do it someday, Bernie. 

Senator DORGAN. Mr. Chairman, this is a serious issue and requires, I think, thoughtful discussion. A man in North Dakota, 

about a week ago, came up to me and said, ‘‘You know, my wife 

has purchased Tamoxifen for 5 years in her battle against breast 

cancer, and she has traveled to Canada during the entire 5-year 

period to buy this Tamoxifen. She received an 80-percent discount 

on the price of Tamoxifen by driving across the border to buy the 

same pill, put in the same bottle, made by the same company, 

FDA-approved.’’ Five years they did that. 

The question I have is if she drove across the border for 5 

straight years, why should her pharmacist not have been able to 

access that same supply of drugs and pass those savings along to 

that woman who was battling cancer? 

Now, my colleague talks about importing Canadian law. Lord, we 

import everything from everyplace. We import Chinese law, incidently. Fruit of the Loom left America, as you know, to go to Mexico and China. So, if you are wearing Fruit of the Loom briefs, I 

assume you are importing part of Chinese law with whatever conditions existed with the production of Fruit of the Loom briefs. 

But this is not about importing anybody’s law. It is about using 

a market system to access a product. There is, in fact, a price control system in this country. There are price controls in the United 

States. It is just that the pharmaceutical industry controls the 

price, and the question is why should there not be a free market 

that is determining what pricing is with respect to pharmaceutical 

products. 

Now, I hear all of this discussion about how difficult this might 

be. This is a pretty inventive country. Europe has done this for 20 

years, and today if you are in Germany and want to buy a prescription drug from France, no problem. There is something called parallel trading within Europe. They do it every day. You are in Italy 

and want to buy something from Spain, no problem, parallel trading. They do it, and we have had them testify before our committees. It is routine. This is not some huge problem. It is routine, and 

it is done routinely in Europe. 

Now, I have gone to a one-room drug store in Emerson, Canada 

with senior citizens. I have seen the savings that they receive by 

buying an FDA-approved drug put in the same bottle. So the savings are not a fiction. I have brought two bottles with me today, 

one Canadian and one U.S. 

This happens to be Lipitor, but I could have brought any one of 

a dozen other bottles. Lipitor is the best-selling drug in our country. As you can see, not only the same size bottle, essentially the 

same colors. This is the same pill made by the same company, 

made in an FDA-approved plant. The only difference is—and, incidently, both made in Ireland—the only difference is one was sent 

to Winnipeg and one was sent to a drug store in North Dakota. 

Well, this costs $1.01 per tablet in Winnipeg and this is $1.86 per 

tablet in North Dakota. Why almost double the price for the North 

11 

Dakota consumer or for the American consumer? Because, under 

the current pricing scheme, the U.S. consumers pay the highest 

prices in the world. 

Senior citizens are 12 percent of our population. They consume 

one-third of our prescription drugs, and many of them take multiples of prescription drugs. We all know these are wonderful 

drugs, but miracle drugs offer no miracles to those who cannot afford them. So our bill is an attempt to allow reimportation under 

safe conditions. 

I introduced the first bill on this 5 years ago in the U.S. Congress, and we are not there yet. The debate is largely over in the 

public’s mind. Mayors, Governors, Republicans, Democrats, Senators, Congressmen, are all supporting importation. It is just those 

who are at this point blocking it that do not yet understand it. The 

only way this continues to be blocked is the White House and the 

leaders of the House and the Senate. The votes exist in both the 

House and the Senate to do this. Mayors and Governors around the 

country are already moving full steam on this issue. 

Now, at midnight, on the floor of the Senate, the Majority Leader, Senator Frist, in exchange for my allowing a vote on Dr. 

McClellan, has given me his commitment that we will be considering legislation that will lead to the reimportation of prescription 

drugs on the floor of the Senate. I read a statement in the paper 

yesterday that suggested some deviation from that, but that is a 

statement in the paper. I have not talked to Senator Frist about 

his statement, but my expectation is that he will keep the commitment he has made to me and that we will be voting on this issue 

in the Senate. 

Again, this is not, Mr. Chairman, a small issue. And I do not 

denigrate the pharmaceutical industry. I understand, if you are in 

that industry, your responsibility to your shareholders is to extract 

the best prices you can, keep the profits as high as you can. But 

the need to take prescription drugs is not an option for some. Some 

take 5, 10, and 15 different prescription drugs every day, and especially some senior citizens who are reaching that time of life where 

they have less income simply cannot afford it. 

And we believe an approach that is used in Europe routinely 

called ‘‘parallel trading,’’ we call it ‘‘reimportation,’’ is something 

that could be helpful in bringing down, putting downward pressure 

on the price of prescription drugs in this country. 

And so, Mr. Chairman, let me thank you for holding a hearing. 

I know there is wide disagreement about this subject, but the fact 

is this issue is largely over. Ultimately, those who are now blocking 

importation legislation will not be able to continue to block it, and 

we will have reimportation and let the market system be the arbiter of these pricing policies on all FDA-approved drugs just as it 

is in Europe. And so, Mr. Chairman, thank you very much. 

I have to leave, and my understanding is that you are not going 

to do questions of this panel. 

Chairman HATCH. That is right. 

Senator DORGAN. But let me thank my colleagues as well and 

understand that, while we have a disagreement, it is a respectful 

one, and I hope that this hearing will lead to movement on this legVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
12 

islation that Senator Snowe and I and so many others have introduced. 

[The prepared statement of Senator Dorgan appears as a submission for the record.] 

Chairman HATCH. Thank you. We will not hold any of you here 

who need to leave. We know how busy you are. 

Senator Breaux, you will be our last— 

Senator LEAHY. Mr. Chairman, may I just ask consent, we have 

a statement by Senator Kennedy on this. 

Chairman HATCH. Without objection, we will put that in the 

record. 

STATEMENT OF HON. JOHN BREAUX, A U.S. SENATOR FROM 

THE STATE OF LOUISIANA 

Senator BREAUX. We will send each other copies of our statements so we can read them as soon as we get back to our offices. 

[Laughter.] 

Senator BREAUX. Thank you very much, Mr. Chairman, Senator 

Leahy, and Senator Feinstein, and Senator Kyl. Thank you for allowing a Congressional panel to present testimony. 

I think I want to make three points: 

First is: Why are we here? Well, we are here because a substantial number of American citizens, particularly senior citizens, are 

complaining loudly, longly, and very effectively to the Congress of 

the United States that their prescription drugs are unaffordable, 

that they cost too much. And they point out to us that some countries have drugs that are cheaper than ours. So what are you going 

to do about it, Congress? 

Well, Congress has acted. Congress has acted responsibly. Just 

this year, the Congress passed, and the President signed, legislation that is going to spend approximately $400 billion. For what? 

To help seniors in particular who have the biggest problem be able 

to afford adequate prescription drugs in a timely and safe manner. 

Four hundred billion dollars of tax dollars have been put into a 

Medicare program to assist American citizens to be able to buy 

their prescription drugs at an affordable price. We now have a discount card program in effect. If you are a poor senior couple, you 

can make as much as $1,200 a year on going to your prescription 

drug bill. When the program is fully implemented, we are talking 

about prescriptions costing as little as $1 to $3 for seniors who 

have a difficult time paying for their prescription drugs. 

Senator Leahy showed us the Vermont bus. I would suggest that 

people in that bus were not going to Canada to see a doctor, even 

though doctors in Canada are much cheaper. I would suggest that 

people on that bus were not going to Canada to go to a hospital, 

although hospitals in Canada are much cheaper than in the United 

States of America. Why? Why? Because they have insurance that 

covers their hospital bills. They have insurance that covers their 

doctor bills. 

And I would suggest that when the Medicare prescription drug 

legislation fully is implemented, it will, for the first time, provide 

seniors a prescription drug insurance plan just like they have today 

with regard to doctors and hospitals, greatly alleviating the need 

to get on a bus and go to Mexico or Canada or import drugs from 

13 

anywhere else in the world. Congress has responded. Congress has 

acted responsibly. Four hundred billion dollars will help solve the 

problem so that we do not force our seniors to go to foreign countries for our health care. I think that is very significant. 

Second point. Are drugs cheaper in Canada or in Mexico? Of 

course, they are. Drugs are substantially cheaper in Canada. Why? 

Not because of a U.S. drug conspiracy by the companies to sell 

products cheaper in another country, but because Canada and 

other countries arbitrarily, through Government policies, fix prices. 

They are forcing the United States’ consumers to pay more for our 

products in this country because our citizens are forced to pick up 

the burden of what other countries should be sharing with us in 

terms of research and development. We are forcing American constituents and consumers to pay more because of flawed policies in 

other countries. 

This is a trade problem, and it should be addressed through 

trade negotiations to tell other countries that we are not going to 

be buying your products or allowing you to market your products 

in this country if you continue arbitrary price-fixing policies that 

we condemn in this country. It is obvious that the answer to this 

problem is not to accept policies of foreign Governments that we 

criticize in our own country. 

I would suggest that when Canada fixes wheat prices, which they 

do through a monopolistic system, do we say, ‘‘Bring all the Canadian wheat into the United States with no restrictions because, by 

golly, it is good for our consumers?’’ 

When the timber that is grown in Canada is fixed because of governmental policies, do we say, ‘‘Sell all the lumber that you want 

in the United States at any price you want because it is cheaper 

than we can produce it in this country?’’ Of course, not. 

When a dairy producer in another country can, because of fixed 

prices and subsidies in a foreign country, can sell milk in this country cheaper than we can produce it here, do we say, ‘‘Bring it all 

in’’? Of course, not. We address it through tariffs and trade negotiations, and this is what we should be doing as well with regard to 

pharmaceuticals. We should not say, ‘‘Come on in. Bring it in because it is fixed prices, and we love it.’’ 

Not only does this legislation that is before us say, ‘‘You can 

bring it in,’’ we actually demand that companies sell more than 

they need for the consumers of Canada so that they can, in reverse, 

bring it back to this country. A great shareholders’ liability suit 

would I think prevail in that circumstance. That is not the way to 

address the problem. 

Third and final point. It is a question of safety. My good friend 

Byron Dorgan brought out his two bottles. I am going to bring out 

two bottles as well. This bottle sells for $2 a bottle. This bottle sells 

for about $40 a bottle. It is a high blood pressure medicine. It looks 

the same, does it not? Same label. Same good marks on it. Same 

numbers on it as when it expires, when it was produced. It has the 

same company label on it. But this one, the real thing, which costs 

more, is real. It actually solves a person’s high blood pressure problem and keeps them perhaps from dying because they are taking 

the proper pharmaceutical medicine. 

14 

This, on the other hand, is filled with something that if you eat 

enough, it may fill you up, but it is not going to take care of your 

high blood pressure because it is fake. It has not one single safe 

ingredient in it that this one does. Is it cheaper? Yes, it is a lot 

cheaper, but it is not real. It is fake. 

If we get one mad cow that comes across the border form Canada, this country goes berserk. We stop imports. Other countries 

stop exports because one cow came over which had mad cow disease. Should we not at least say to people who are taking medicine 

to save their lives that they are going to have the same belief and 

certainty that it is safe as if that medicine was produced in our 

country, and FDA said it was safe? Why make a special exception 

if it was produced in another country? Drugs come in from Canada, 

not just those that are made in Canada. They are made in Singapore, Ecuador, Thailand, Indonesia, Pakistan. Canada is and will 

become a great funnel for foreign drugs which are unsafe, and in 

many cases counterfeit if we take that approach. 

I would suggest that Congress has already done what is right. 

Let us make it work. 

Thank you. 

Chairman HATCH. Thank you. We appreciate all four of you and 

appreciate the testimony each of you have given. As you can see, 

there is a wide disparity of agreement and disagreement here. 

We will put a statement by Senator Grassley into the record at 

this point or at the appropriate point, and let me introduce our second panel. 

We have Mr. William K. Hubbard, the associate commissioner for 

policy and planning for the Food and Drug Administration; Mr. 

John Taylor, the associate commissioner for regulatory affairs for 

the Food and Drug Administration; and Elizabeth G. Durant, director of trade programs for the Bureau of Customs and Border Protection. 

We want to welcome all of you here. Senator Kyl, if you will take 

over for a few minutes. I will be right back. I just have to step out 

for a minute. But we will begin with you, Mr. Hubbard and then 

go right across the table. 

I will be right back. 

STATEMENT OF WILLIAM K. HUBBARD, ASSOCIATE COMMISSIONER FOR POLICY AND PLANNING, FOOD AND DRUG ADMINISTRATION, AND JOHN TAYLOR, III, ASSOCIATE COMMISSIONER FOR REGULATORY AFFAIRS, FOOD AND DRUG ADMINISTRATION 

Mr. HUBBARD. Thank you, Mr. Chairman. If it is acceptable to 

the Committee, Mr. Taylor will make a couple of brief remarks 

about FDA’s policy in this area, and then I have got some exhibits 

that I would like to show the Committee about some of our concerns. 

So, with that introduction, Mr. Taylor? 

Senator LEAHY. Excuse me, if I might, Mr. Chairman. Are those 

these things that were just handed to us a couple minutes ago? 

Mr. HUBBARD. Yes, those are our exhibits, essentially. 

Senator LEAHY. I will tell you what, I will read them, if that 

saves you the time, but go ahead. 

15 

Mr. HUBBARD. Thank you. Go ahead. 

Mr. TAYLOR. Thank you. Mr. Chairman and members of the 

Committee, I am John M. Taylor, associate commissioner for regulatory affairs of the Food and Drug Administration. With me, is 

Mr. William K Hubbard, associate commissioner for policy and 

planning. 

We appreciate the opportunity to discuss with you issues relating 

to counterfeit drugs and importation of prescription drugs into the 

United States. 

FDA shares with Congress its concern for senior citizens and 

other patients who have difficulty paying for prescription drugs. 

That is why the administration worked closely with Congress to 

enact the new Medicare prescription drug law, and that is why 

FDA has made it a priority for its medical and scientific experts 

to establish and expand programs that promote access to innovative treatments and affordable medications. 

Nonetheless, FDA continues to have serious public health concerns about the importation of drugs outside the current safety system established by Congress under the Food, Drug and Cosmetics 

Act. When it comes to buying drugs, absent our existing regulatory 

protections, FDA has consistently concluded that it is unable to endorse a buyer beware approach. 

Currently, the new drugs market in the United States, regardless of whether they are manufactured here or in a foreign country, 

must be approved by FDA based on demonstrated safety and efficacy. They must be produced in inspected manufacturing plants 

that comply with good manufacturing practices, and the shipment 

and storage of these drugs must be properly documented and, 

where necessary, inspected. 

Unfortunately, the drug supply is under unprecedented attack 

from a variety of progressively more sophisticated threats. This is 

evident in the recent increase in efforts to introduce counterfeit 

drugs in the United States market.FDA’s counterfeit drug investigations have risen fourfold since the late 1990s. Although once a 

rare event, we are now seeing greater numbers of counterfeit Finish drugs being manufactured and distributed by well-funded and 

elaborately organized networks. 

At the same time, inadequately regulated foreign Internet sites 

have also become portals for unsafe and illegal drugs. Fifteen years 

ago, after safety concerns were identified with the importation of 

significant volumes of adulterated and counterfeit drugs, Congress 

responded by passing the Prescription Drug Marketing Act. History 

has shown that the protections provided by Congress, coupled with 

FDA’s regulatory system, have worked well. However, the very concerns that prompted Congress to pass the PDMA still exist today. 

For example, FDA recently worked with domestic and international authorities to shut down a website advertising FDA-approved and safe European birth control pills and other drugs, but 

they were actually importing ineffective counterfeit products. 

In addition, the Agency, in February issued a press release warning the public about an Internet site selling contraceptive patches 

that contained no active ingredient. The website that sold these 

products appeared to be a United States site. However, FDA determined that it was registered in New Delhi, India. FDA sought and 

16 

obtained the cooperation of the U.S.-based Internet service providers in discontinuing this site and three other related sites that 

were purporting to sell FDA-approved products, but in fact were 

selling drugs from unknown sources and of unknown safety and efficacy. 

FDA believes that these four websites are indicative of the dangers consumers face when they purchase drugs off the Internet. 

Evidence strongly suggests that the volume of these foreign drug 

importations is rising steadily, presenting an even more difficult 

challenge for Agency field personnel at ports of entry, mail facilities 

and international courier hubs. 

Consumers are exposed to a number of potential risks when they 

purchase drugs from foreign sources or from sources that are not 

operated by pharmacies properly licensed under State pharmacy 

laws. These outlets may dispense expired, sub-potent, contaminated or counterfeit products, the wrong or contraindicated product 

and incorrect dose or medication unaccompanied by adequate directions for use. The drugs may not have been packaged and stored 

under proper conditions to prevent degradation, and there is no assurance that these products were manufactured under good manufacturing practice standards. 

When consumers take such medications, they face the risk of 

dangerous drug interactions and/or suffering adverse events, some 

of which can be life-threatening. More commonly, if the drug are 

sub-potent or ineffective, patients may suffer complications from 

the illnesses that the prescriptions were intended to treat without 

ever knowing the true cause. 

To help assess the extent of the problem posed by imported 

drugs, FDA and Customs conducted import blitzes at four international mail facilities last summer. We found that 88 percent of 

the drug products we examined were unapproved or otherwise illegal. Examples of the potentially hazardous products encountered 

during the blitz included drugs never approved by FDA, drugs 

withdrawn from the market, drugs requiring careful dosing, drugs 

without adequate labeling, drugs with clinically significant drug 

interactions, drugs inappropriately packaged, drugs requiring initial screening and/or close physician monitoring and controlled substances. 

Clearly, many of these imported drugs may pose safety problems. 

Chairman HATCH. What percentage was that again? 

Mr. TAYLOR. Eighty-eight percent. 

Chairman HATCH. Eighty-eight percent. 

Mr. TAYLOR. Yes. 

Chairman HATCH. In other words, you found 88 percent to have 

some problems one way or the other. 

Mr. TAYLOR. Well, what we found were 88 percent of the products were unapproved, and then a subset of those had the safety 

problems that I just outlined in my testimony. 

Chairman HATCH. Do you know what the subset percentage is? 

Mr. TAYLOR. No, but I can certainly get that for you, sir. 

Chairman HATCH. Okay. 

Mr. TAYLOR. In conclusion, FDA firmly believes that we can and 

should do a better job of making safe and innovative drugs more 

affordable in the United States, but to succeed we need to find safe 

17 

and affordable solutions that do not put consumers at risk. The 

standard for drug review and approval in the United States are the 

best in the world, and the safety of our drug supply mirrors these 

high standards. 

We believe that U.S. consumers should not have to settle for less. 

FDA would urge Congress to ensure that any change to our drug 

regulatory system does not require consumers to give up the gold 

standard in drug safety that they have come to rely on. FDA’s scientists, doctors, health care experts and regulators must be empowered to protect us from bad medicine. We owe it to patients today 

and tomorrow to make our medical future brighter, healthier and 

more affordable. 

Thank you for this opportunity to testify. We look forward to responding to any questions that you may have, and I will now turn 

to my colleague, Mr. Hubbard. 

Mr. HUBBARD. Senator Hatch, you know from your long experience with FDA that one of our main missions is access to pharmaceuticals for citizens, and we are very proud of the fact that, 

thanks to recent laws passed by Congress, Americans have access 

to the important new breakthrough drugs before anyone else in the 

world. But FDA’s job is not a price-control job, it is a safety job, 

and we do have great concerns about importation as it currently 

exists because we do not believe we can safely look at these drugs. 

And I would like to show you a few examples. 

When drugs come in, in huge volume into mail facilities, they 

come to a Customs inspector like this and are X-rayed to examine 

to determine whether there were are drugs in there. Then, they go 

into these bins, in massive numbers per day, and there might be 

one FDA inspector there who is incapable of opening all of these 

packages and making medical judgments about the quality of these 

products. 

And, in fact, we also believe, because of this volume, enormous 

numbers of controlled substances are coming in. This mountain of 

controlled substances up at JFK is just a few weeks’ worth that 

Customs has held pending disposition. 

The Agency is totally incapable of screening all of these small 

Internet purchases. Now, Internet purchase of drugs can be fine if 

done legally. We are all familiar with legal Internet sites, such as 

cvs.com, and if you ask where are these people, for a legitimate 

site, it is easy to find out. You can inquire. Where do they say they 

are? They are in Rhode Island. Who runs that site? We know the 

name of the person. Where is that person? We know, by tracing 

back down the pipeline of the computer Internet system, that they 

are in Rhode Island. So it is very transparent. 

We recently did a survey, however, of a thousand sites that appeared to be Canadian and found all sorts of problems that these 

sites are carrying out, such as selling controlled substances and 

such as saying they are FDA approved, when they are not. And of 

particular concern to me is the fact that they ask patients to disclaim any liability. They say, ‘‘If you are injured, we are not responsible. And if you do decide to sue us, you have got to come to 

our country and sue us there.’’ 

And that tells us that you have got a business that is not operating the way an American business was. No American drug store 

18 

would ask you to sign away your rights before you picked up a 

drug in an American drug store. 

Chairman HATCH. So, now, when you say there are 47 sold controlled substances, are these sold over-the-counter or— 

Mr. HUBBARD. No, they are sold over the Internet. They allow 

you to purchase a controlled substance from the Internet, and then 

it arrives in the mail— 

Chairman HATCH. Is that with a doctor’s prescription? 

Mr. HUBBARD. In some cases, yes, but in many cases no prescription at all is required. 

Chairman HATCH. So anybody can get these controlled substances. 

Mr. HUBBARD. Absolutely. And we understand that teenagers 

are, in fact, using their parent’s credit card to do just that. 

Chairman HATCH. So, if somebody wanted to get Percocet or 

Percodan or— 

Mr. HUBBARD. Absolutely, Vicodan, whatever, absolutely, 

Oxycontin. 

And let me look at a couple of these sites that we examined. This 

is one, Pay Less Canadian Drugs. Looks fine, does it not? It has 

got all the right messages about being in Canada. So we ask, well, 

where do they say they are? They say they are in British Columbia. 

Well, when we go back and do the investigation of who they are, 

this one is registered to a gentleman named Anton Dvorak, the 

same name as the famous composer. Well, where is Anton Dvorak? 

Well, he is in the Czech Republic. You know, why, if that is a legitimate site, are they registered in the Czech Republic? 

Another one, Canada Drug Store. When you ask, well, where do 

they say they are, they are in Winnipeg, but who is the registrar 

there? It is a Mr. Thuong. Where is Mr. Thuong? Well, he is in 

Vietnam. Now, why is he in Vietnam if this is a Canadian business? What is going on here? 

Now, these sorts of problems suggest a sketchiness that raises 

real concerns for us. And in many of these sites, just in the last 

few weeks, they have decided not to sell drugs from Canada. They 

have decided to sell other things, such as sunglasses. Again, it 

raises questions about the legitimacy of these businesses. 

Now, here is one that we took particularly interest in because it 

appeared to be selling Chinese counterfeits, because when we 

searched for the Internet site, we learned that they were registered 

in Dandong, China, which is just on the border of North Korea. So 

we ordered the drugs from this business. When they came in, they 

had a postmark address of Dallas, Texas, but the return address 

was an address in Miami, Florida. Well, we asked the credit card 

company, well, who did you pay for this, and they paid a business 

on the Island of St. Kitts. And then we looked for a reorder number 

and found an 800 number, and we said, well, where is that 800 

number, and we tracked it down to the country of Belize. 

Well, now the important thing about this list is Canada is not 

involved at all, although the citizen was told you are getting a Canadian generic, and in fact none of those drugs on that website 

sell—there are no Canadian generics for those drugs. 

So we actually purchased these drugs and did an analysis of 

them—of Lipitor, Viagra, and Ambien, Ambien being a powerful 

19 

sleep aid. We found that, in fact, there was some drug in there. 

These people had attempted to make the real drug. But in potency, 

they all failed, and in the case of Ambien, some of the tablets were 

more than double strength. So a senior citizen taking this powerful 

sedative could take one thinking they were getting the right thing 

and may not wake up at all because they are getting way 

overdosed with that drug, and of course underdosed with the others. 

They, also, these drugs did not properly dissolve in some cases, 

which meant the body was not able to take them up and have the 

medicinal effect. And we found impurities, which is not uncommon 

for foreign drugs—cadmium, lead, things like that are a problem. 

Here is an example of the dissolution issue. This is a calcium 

tablet that if you did a chemical analysis of would show as the very 

same drug as the approved marketed product, the legal product. 

But because it was made improperly, it did not dissolve. And as 

you can see, these tablets are going through this woman’s body 

completely undissolved. She is eating rocks, but the chemical analysis would show this is a good drug. And that is an example of why 

dissolution to us is very critical. You take the pill, it dissolves in 

your stomach, enters your bloodstream. It has the medicinal effect 

you are looking for. 

Now, I will close with a couple of comments about counterfeiting. 

These are dyes that fake counterfeiters use. They are very similar 

to what the Secret Service finds for counterfeit currency. People 

make up an imprinting dye. As you can see, there is the Pfizer 

name upside down. You pour your chemical in, and press it, and 

it makes the tablet. There is the other side of the tablet showing 

the code for the Pfizer brand. 

And then we see at JFK these things pouring in from countries 

all around the world, looking just fine, because they were made on 

a machine that could duplicate the real drug. 

And then, lastly, this is an example of one of the investigations 

Mr. Taylor has recently completed of a drug called Serostim for 

AIDS patients. As you can see, the authentic and the fake drugs 

were virtually indistinguishable. In fact, the drug companies tell us 

in some cases they cannot even tell themselves, on any sort of visual examination, whether a counterfeit drug is real or not. They 

have got to take it back and do sophisticated testing. So the possibility of counterfeiters using importation is a real concern for FDA. 

So, with those remarks, Mr. Chairman, I would like to take questions or turn to Ms. Durant. 

[The prepared statement of Mr. Hubbard appears as a submission for the record.] 

Chairman HATCH. Ms. Durant? 

Could I just ask one question? Those dyes look like they were 

contaminated themselves. 

Mr. HUBBARD. Well, and, Mr. Chairman, I think we could show 

you, if there was time, photographs of some of these organizations 

and where they operate that are just unbelievable, in back-room 

toilets, using contaminated water. We ran across one recently that 

was a fertility drug for women seeking to have a child, and they 

used contaminated water. So, instead of getting the proper drug, 

the woman would be injecting into her veins bacteria which would 

20 

give her septicemia, blood poisoning. In other words, she would be 

killing herself. And that is sort of the level at which these people 

operate. Not only are they not selling a legitimate drug, but they 

are selling a dangerous drug. But visually that drug looks just fine. 

It is a clear liquid in a vial. It is packaged well. It is a very good 

product in terms of its appearance, but a very dangerous product 

in terms of its reality. 

Chairman HATCH. Ms. Durant? 

STATEMENT OF ELIZABETH G. DURANT, EXECUTIVE DIRECTOR OF TRADE COMPLIANCE AND FACILITATION, OFFICE 

OF FIELD OPERATIONS, BUREAU OF CUSTOMS AND BORDER 

PROTECTION 

Ms. DURANT. Mr. Chairman, members of the Committee, thank 

you for this opportunity to testify. I am Elizabeth Durant, Director 

of Trade Compliance and Facilitation in the Office of Field Operations at the Bureau of Customs and Border Protection. 

Today, I would like to discuss with you CBP’s efforts to address 

the ever-increasing trend of personal and bulk importation of pharmaceutical products and controlled substances into the United 

States. Although the main focus of the CBP has shifted to protecting the United States from terrorist attacks, we also enforce 

over 400 requirements from more than 40 other Federal agencies 

at U.S. borders. These include the laws that prohibit the importation of illegal or unapproved pharmaceuticals that fall under the 

jurisdiction of the Food and Drug Administration, as well as those 

controlled substances that are under the jurisdiction of the Drug 

Enforcement Administration. 

The issue of U.S. consumers buying prescription drugs from foreign sources has become a significant concern. A growing number 

of Americans obtain their medications from foreign locations. However, the safety of drugs purchased from these sources cannot be 

ensured. Drugs produced outside the United States may be counterfeit. Counterfeiting can apply to both brand name and generic 

drugs, where the identity of the source is deliberately and fraudulently mislabeled in a way that suggests that it is the authentic approved product. 

The CBP is concerned with three avenues by which pharmaceuticals are imported: those that are purchased through the Internet and shipped through our international mail or express courier 

facilities, those carried into the United States by individuals 

transiting our land borders and bulk shipments of adulterated or 

counterfeit pharmaceuticals. 

During the course of the past year, we have taken several steps 

to address each of these areas. Millions of packages come through 

the mail and express courier facilities every year. Thousands of 

packages, particularly in the mail, are found to contain illegal and 

unapproved pharmaceuticals. We also estimate that 10 million people cross the land border annually carrying unapproved products. 

Additionally, we have found bulk pharmaceutical shipments that 

were attempted to be imported through the mail, potentially indicating that these products could be making their way to pharmacy 

shelves. In order to address what is clearly a growing threat to the 

public’s health, CBP has been working cooperatively with the DEA, 

21 

the FDA, our own U.S. Immigration and Customs Enforcement, 

ONDCP and the Department of Justice attorneys in an interagency 

working group directed at addressing issues related to the importation of prescription drugs and miscellaneous pharmaceuticals. 

The working group has conducted regular meetings since January 2004 and has achieved several key accomplishments since its 

inception, including conducting a joint interagency enforcement operation known as Operation Safety Cap, which was designed to 

look at passenger importations of pharmaceuticals from Mexico. 

Operation Safety Cap was an interagency plan to enforce the laws 

related to the importation of prescription drugs at the border. 

Both FDA and ICE participated in the enforcement operation. 

The plan began with a public outreach, followed by an enforcement 

effort at the Ports of Andrade, Yuma, Tecate, San Luis and 

Calexico. The purpose was to evaluate compliance with laws related to the importation of prescription drugs. 

During the course of the operation, there were several troubling 

instances of returning U.S. residents receiving different medications than the ones they thought were being prescribed. In one instance, there was no active ingredient on the unmarked, 

undeclared bottle that was brought into the U.S. The overall seizure detention rate was nearly 7 percent of the number of individuals inspected, which was significant enough to warrant additional 

enforcement efforts at our land borders. 

Based on an operation nicknamed Operation Safeguard that we 

have carried out over the last couple of years, we have found the 

volume of pharmaceuticals shipped through international mail to 

be enormous. We have also found a significant number of these 

products do not contain an active pharmaceutical ingredient, but 

merely contain substances such as starch or sugar. 

Other problems include expired materials, unapproved products, 

improper use instructions and products made in facilities not under 

proper regulation. The vast majority of the pharmaceuticals that 

enter the United States via the mail do so in a manner that, according to FDA, violates present FDA and other requirements. 

It is clear that the importation of pharmaceuticals and controlled 

substances remains an overwhelming problem for CBP. We are 

working with the FDA, the DEA, ICE and other regulatory agencies to develop a more practical and workable approach to solve 

this huge problem. 

I want to thank you and the members of the Committee for considering Customs and Border Protection in your review of the importation of pharmaceuticals and controlled substances. This is an 

issue that speaks directly to our mission. We will continue to make 

every effort possible to work with the Congress and our fellow inspection agencies to address the health and safety concerns of the 

American people. 

Thank you, Mr. Chairman. I look forward to responding to any 

questions. 

[The prepared statement of Ms. Durant appears as a submission 

for the record.] 

Chairman HATCH. Well, thank you. I appreciate all that you 

three do and other people at your respective agencies do to try to 

protect the health and safety of our people in this country. 

22 

Just a few questions. I take it that you do not think that checking lettuce, and pork, and some of the items that Congressman 

Sanders said were so easy to do is the same as checking for pharmaceutical ingredients. 

Mr. HUBBARD. It is a far different matter, Mr. Chairman, but 

perhaps Mr. Taylor could elaborate on that. 

Mr. TAYLOR. Sure. It is a challenge, and it is not easy to do. 

However— 

Chairman HATCH. Well, he seems to think all you have got to do 

is just do what you do for lettuce, and pork, and other food products that come into this country from all over the world. And if you 

can do it for them, why can you not do it for pharmaceuticals? 

Mr. TAYLOR. Well, I think an important point to keep in mind 

is that a few years ago Congress passed the Bioterrorism Act, and 

in that act they provided strengthened statutory powers, both for 

the Bureau of Customs, and Border Protection, and FDA, to ensure 

that the food that is coming in from overseas is indeed safe. 

One of the provisions requires prior notice of food before it is 

shipped here to the United States so that both FDA and Customs 

have an opportunity to check any packages that look like they 

could be potentially dangerous. It also provides requirements that 

all food processors throughout the world who are planning to ship 

food to the United States are registered, so that we have an inventory of facilities that we need to inspect if, Heaven forbid, there is 

a recall or something went awry with the food, and we need to determine the ultimate source. 

So we have additional authorities that help us with this difficult 

task of dealing with imported food. 

Chairman HATCH. I suspect it is a lot easier to check food substances than it is to check complex— 

Mr. TAYLOR. That is absolutely right. A mere visual inspection 

of a drug, as each of us have discussed today, does not ensure that 

a product is safe and effective or that it is going to work as intended. One of the things that concerns the Agency is that the 

counterfeiters that we have seen recently have become more savvy 

not only in terms of how they manufacture the product, but also 

in terms of how they label the product and how they introduce that 

product into domestic commerce. 

Mere visual inspection is not going to be able to discern in many 

cases whether a product is the authentic innovator product or counterfeit product. 

Chairman HATCH. I have two bottles. This one is fake. This one 

is real. The fake is much heavier, probably two or three times 

heavier than this one. It could be lead pills, as far as I know. I 

mean, the fact of the matter is, is that it is clearly fake, and it 

clearly could damage somebody who is relying on the efficacy and 

the safety of these drugs. That is what the FDA is all about is safety and efficacy. 

And some have said, well, we can just give you enough money, 

and enough facilities, and enough people, and you ought to be able 

to solve these problems for us. What do you think about that, Ms. 

Durant? 

Ms. DURANT. Well, you saw the boxes. I would like to add to 

what Mr. Taylor said about the lettuce. They are largely commerVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
23 

cial shipments. They are in commercial quantities, in commercial 

shipments, and they are manifested, and automated, and brought 

in by brokers, and commercial operations. And we have a much 

better way to target suspect shipments because of our automation. 

Our findings, at least in CBP, with this problem and one of the 

challenges for us is that most of this stuff is coming in for individuals, number one, of which there are many more smaller ones, and 

coming in through the mail, where we do not have a manifest. And 

so our targeting is— 

Chairman HATCH. Coming in from hidden countries, and hidden 

distributors— 

Ms. DURANT. Correct. 

Chairman HATCH. —and people that you have no control over or 

any kind of— 

Ms. DURANT. And no method of automating rules, and targeting 

and those things that we use with commercial shipments. 

To answer your direct question, just the visual that was presented by Mr. Hubbard can show you that it would take millions 

of people, and then we would probably still be holding up a lot of 

the mail in order to segregate it. It is an overwhelming problem in 

our mail courier facilities at this point. 

Chairman HATCH. Now, in your testimony, Mr. Hubbard and Mr. 

Taylor, you maintain that the public may be assured that the quality of drugs that consumers purchase from U.S. pharmacies remains high, but that the FDA cannot offer the same assurances 

about the safety, and efficacy, and quality of drugs purchased from 

foreign sources. That seems to be your testimony. 

So what happens if a drug importation bill is signed into law this 

year? How will the FDA overcome that obstacle of reassuring the 

public that drugs purchased from foreign entities or Governments 

will be safe and effective? And how much will it cost the Federal 

Government to guarantee the safety of drugs imported into this 

country? 

Mr. HUBBARD. Well, unfortunately, Mr. Chairman, the bills that 

are before Congress now, we fear, will not solve that problem, will 

not give FDA adequate authority to assure the safety of those products. So we would not be able to give the consumer the level of confidence that they would get. I mean, at an American drug store 

today, you have got a 99.9-percent chance of getting a good drug, 

virtually 100 percent. With these foreign purchases, we do not even 

know, but it is certainly not 100 percent, and it is a crap shoot. 

Mr. TAYLOR. And, sir, I also might add that if, indeed, Heaven 

forbid, there is a problem with the drug domestically, we obviously 

have the ability, because we have jurisdiction here in the United 

States, to follow up, determine where that product originated from, 

we have an opportunity to go to District Court and bring civil or 

criminal remedies against whoever is responsible for introducing 

the counterfeit drug or the unapproved drug into the marketplace. 

For many of these products that are coming in, in these individual packages from overseas, one of the main challenges is figuring out where those products come from. We obviously have several counterfeit drug cases that have originated from overseas. It 

is enormously difficult to figure out where the products originate 

from, for the reasons we have discussed. And then even if you do 

24 

identify who is responsible, without the help and concurrence of the 

regulatory body of a country where the suspects are identified, we 

do not have the jurisdiction to address them the way we do for 

those defendants who are located here in the United States. 

Chairman HATCH. Just one last question. When we did this once before, they put $23 million to defray the costs of protecting all of 

America from these type of knock-offs and counterfeits. What do 

you think about that? We could put up 23 million bucks. That is 

a lot of money, is it not? 

Mr. HUBBARD. We once calculated that you could give us the U.S. 

Army, us and Customs, to look at this stuff, and it probably would 

be inadequate because you have got to literally open millions of 

small packages, and then you have got a bottle of pills in your 

hand. And so now that you have gone to all of the trouble of opening the box, and opening the bottle of pills to see what is in there, 

it does not tell you much. 

Chairman HATCH. And if they look the same, they may be sugar 

pills, they may be lead pills— 

Mr. HUBBARD. That is right. 

Chairman HATCH. —they may be the real thing. 

Mr. HUBBARD. Right. And then how do you know at that point 

that you opened it, it is any good? As you say, it could be a sugar 

pill. So you could spend a thousand dollars testing one pill and far 

outweigh the benefit of that pill. So that is the dilemma with these 

sorts of personal imports. 

Chairman HATCH. Well, my time is up. 

Senator Feinstein? 

Senator FEINSTEIN. Thanks, Mr. Chairman. 

I must say I think your testimony was very powerful this morning, and it certainly concerns me. I come from California. A lot of 

people go to Mexico for their drugs because they are cheaper, specifically Tiajuana. I wanted to ask you whether that presented the 

same problem. 

I also want to just make a couple of things clear. You have one 

chart that says Canadian generics. This is off the Internet; is that 

right? 

Mr. HUBBARD. Yes. That arrived by so-called spam e-mail to one 

of our employees. So we traced it back to that site to determine 

where it was. And as I said, the registrant of the Internet site was 

in China, but we believe the drugs actually come from the South 

American country Belize. 

Senator FEINSTEIN. But they are sold, all of these drugs then on 

this site are sold in Canada. 

Mr. HUBBARD. No, there is no Canadian connection at all. The 

point of that, Senator Feinstein, is— 

Senator FEINSTEIN. It says, ‘‘Canadian generics.’’ 

Mr. HUBBARD. I know it does, and it is a lie, and that is the point 

because these websites pretend to be something else. The consumer 

is led to believe they are getting a Canadian generic of a drug regulated in Canada that is the same as they would get here. It is a 

total falsification. There is no Canadian connection, to our knowledge, with that website. 

Mr. TAYLOR. And, Senator, what has happened is that the use of 

the term ‘‘Canadian’’ has become a marketing tool for many of 

25 

these Internet sites, knowing that consumers are more likely to 

purchase a product if it is from what they believe to be a Canadian 

website, as opposed to a Thai website or a Nigerian website. And 

in actuality, what we are finding in some of these websites is that 

the products are originating from countries all over the world just 

like the contraceptive patches that I noted earlier in my oral testimony. 

Mr. HUBBARD. And that is not unique, Senator. There are many 

sites that pretend to be in Canada and are not. 

Senator FEINSTEIN. Well, that is I think a real problem. 

Let me ask you, you know, clearly, I think you know what the 

issue is. You know what people are doing today. They are probably 

going to continue to do it. I mean, it is easy for me to say because 

I would not want to take a chance with one of these drugs. But I 

think if people do not have money, and they are desperate, they 

may. The question is what can we do about it? 

And my question is, is it possible to take high-selling drugs, say, 

like Lipitor and work out an agreement with the Canadians that 

if it comes through Canada that the Canadian FDA test it before 

it goes on the market for American use; is that a possibility? 

Mr. HUBBARD. We have said repeatedly that for us to be able to 

assure the safety of these products, FDA would need to be given 

the statutory authority and the resources to assure the consumer 

that those are good drugs. Your suggestion may be one way. We 

have not examined that. I do not think the Canadians would necessarily want to take responsibility for American citizens, but— 

Senator FEINSTEIN. But I would think the Canadian people 

would be a little upset when they see drugs being pushed as Canadian generics that are not. That is fraud. I mean, I am amazed. 

Why does the Canadian Government not crack down on that? This 

is where life is affected. You just pointed out where you have tested 

Ambien. It is sometimes double the dose. There is no consistency. 

Mr. HUBBARD. That is right. 

Senator FEINSTEIN. Somebody could die by taking an Ambien 

pill. It would seem to me that the Canadian Government should be 

interested in that. It would also seem to me that we ought to clearly bring this to the attention of the Canadian Government. My 

question is have we? 

Mr. TAYLOR. Yes. 

Senator FEINSTEIN. And what is the response? 

Mr. TAYLOR. I think it is fair to say that we have had a modest 

level of success in working with them, and they certainly acknowledge the concerns that we have. The blitz results that I noted earlier and the background information that we found, we shared with 

the Canadian Government. 

And to the extent that there is not greater involvement on their 

part, I think it is largely a question of competing priorities and resources and the fact that their organizations are focused on protecting Canadian citizens, just like FDA is focused on protecting 

U.S. citizens, and is not focused on ensuring that products that are 

coming to the United States are safe and effective. 

Senator FEINSTEIN. No, but would these drugs not be available 

to Canadians as well? 

26 

Mr. HUBBARD. No. That website has no Canadianconnection at 

all. It only pretends to be in Canada. 

Mr. TAYLOR. That is right. It is marketed here to U.S. customers. 

It has no Canadian connection at all. 

Senator FEINSTEIN. Wow. 

Mr. TAYLOR. It just uses the Canadian name, quite frankly, as 

an imprimatur of legitimacy so that customers— 

Senator FEINSTEIN. Well, let me ask you this. What do we do 

about going out and getting these registrants who have falsified 

and perpetrated a major fraud on Americans? 

Mr. TAYLOR. Well, we open up criminal investigations, and we 

often work with our colleagues at Customs, but they are enormously complex because, using the example in my oral testimony 

the contraceptive patches, with the Internet technology being what 

it is, and even Mr. Hubbard’s illustrates this, you need to—your 

preconceived notions about where the product originates changes 

as you move from one website link, to a website link, to another 

website link. The contraceptive patches, there were four or five 

website links between the site that was selling the drug and the 

site that was registered. 

So we do work to try and determine who is responsible and bring 

them to justice. It is just that the investigations are very complex 

and often require the cooperation of the foreign body where the site 

is registered. And we have had some success. It is just very difficult to do. 

Senator FEINSTEIN. Well, if we have an extradition treaty with 

that nation, it would seem to me the individual could be extradited. 

Mr. TAYLOR. You are absolutely right, and they are. However, for 

some of our defendants, they are residing in countries where we do 

not have extradition treaties, knowing that we do not have extradition treaties, which is of course one of the challenges of bringing 

these people to justice. 

Senator FEINSTEIN. Well, let me ask you this. Does the FDA 

make this information available on these sites or other sites that 

people should not use this site? 

Mr. TAYLOR. Yes, we do. The information that Mr. Hubbard discussed was part of an FDA talk paper that was released last night 

warning people about this site. In the context of the contraceptive 

patches, not only did we put out two talk papers warning people 

about purchasing contraceptive patches, as well as any other products in those websites, we also put up links to our talk papers so 

that people could see what the actual websites look like. 

We have an on-line, what we call an on-line pharmacy link at 

FDA’s website, and it is one of the most-often used parts of our 

website. It gives people an opportunity to see what cases we have 

brought, what websites pose potential concerns. It also gives people 

guidance on how to purchase products over the Internet safely. 

Senator FEINSTEIN. Let me ask you one other question. These 

drugs here that you have—Ambien, Lipitor, Nexium, Paxil, et 

cetera—are not like Tamoxifen, for example. Is there evidence of 

bogus Tamoxifen? 

Mr. HUBBARD. Absolutely. As a matter of fact, one of the examples that Senator Dorgan gave was of a woman with breast cancer 

27 

who would travel to Canada to get Tamoxifen. And that may be an 

accurate example that he gave. 

We have another example of a woman in Oregon who purchased 

Tamoxifen over the Internet from a Canadian website to treat her 

breast cancer. They did not give her Tamoxifen. They gave her 

something different, and she continued to take it. Her breast cancer continued to grow, and she did not know that she had been defrauded by this Canadian drug store. 

So, for every example of a good drug, we can show you an example of a bad drug. 

Senator FEINSTEIN. Now, supposing the American goes through 

a bona fide Canadian drug store— 

Mr. HUBBARD. Well, in this case, it was a licensed Canadian drug 

store. The Canadian Government is not going to assure the safety 

of drugs for Americans. That is not their job. They have a very 

small FDA— 

Senator FEINSTEIN. A Canadian could have bought that drug in 

a— 

Mr. HUBBARD. Right. 

Senator FEINSTEIN. Well, does not the Canadian Government assure the safety of drugs for its own citizens? 

Mr. HUBBARD. Yes, I think generally they do. And I think— 

Senator FEINSTEIN. Then, how would phony Tamoxifen be sold? 

Mr. HUBBARD. Well, in some cases, the Canadian pharmacies do 

not bother to license themselves in Canada because they do not sell 

to Canadians. They only sell to Americans, and that way they can 

avoid licensure requirements in the provinces. 

Mr. TAYLOR. And also, unfortunately, cancer treatments and HIV 

treatments are some of the most often counterfeited products because they are so expensive. And so we have seen instances where 

counterfeit cancer treatments have been introduced in the distribution chain. The reason I use that as an example is that you can 

have the proper practice of pharmacy, you can have a valid prescription. However, if steps are not taken to ensure that the product that you are getting is the FDA-approved product and is safe 

and effective, you can still, despite those protections being in place, 

receive a product that is not necessarily going to treat your condition. 

Senator FEINSTEIN. What a surprise for all these men that use 

Viagra over the Internet. 

[Laughter.] 

Mr. HUBBARD. Well, if I may, Senator, even Viagra, you can 

argue that that Viagra, because it was subpotent, was not really 

a risk. The person just would not have the effect. But imagine if 

they decided, well, I did not get the effect with one, I will take two. 

And then the next prescription they fill has the American drug, 

which is fully potent, and they think, well, I needed to take two, 

and so then they take two with the American drug and have a 

heart attack or a stroke, that is a serious health risk. 

Mr. TAYLOR. And in the Viagra that Mr. Hubbard highlighted as 

a part of this Canada generic site, Viagra is not supposed to be 

taken with Erythromycin. And on the approved label, that contraindication is actually on the label. On the product that I believe 

that was ordered pursuant to this website, they did not have that 

28 

warning about using the Erythromycin with Viagra, so there is a 

potential danger there by using the non-FDA-approved product. 

Mr. HUBBARD. If you got Viagra from an American drug store, 

and the pharmacist had also given you Erythromycin, he would say 

to you, I cannot give you this because you are on Erythromycin. 

Those two will interact and harm you. But in this case, we actually 

told the Canadian generics firm, I am on Erythromycin, and they 

still sold the Viagra. So it is another example of the risk that these 

businesses put our citizens through. 

Senator FEINSTEIN. Thank you. Very helpful. 

Thanks, Mr. Chairman. 

Senator KYL. [Presiding.] Thank you, Senator Feinstein. 

Your questions and the testimony that has been presented here 

I think just make an overwhelmingly compelling case that it would 

be totally unsafe for us to rely on this importation, but that we 

have got a problem even today because we probably do not have 

the resources or the capability to inspect everything. And even 

though you may put on your website a warning to people about importing over the Internet, how many people are actually going to 

get that warning and how can you keep up with all of the different 

sites that pop up. I mean, can you? 

Mr. TAYLOR. No, we cannot. We cannot. And make no mistake 

about it, we are only, as Ms. Durant said, FDA is only able to look 

at a very small number of these packages. I think Ms. Durant 

made an excellent point. The Food, Drug and Cosmetics Act was 

designed to deal with commercial shipments of drugs. I mean, the 

very language in it contemplates being able to look at and deal 

with big drums of active pharmaceutical ingredients, in quantities 

that are easier for the Agency to look at as part of our importation 

scheme. 

With the advent of the Internet and with the increasing number 

of people seeking products from overseas, we now, estimates are 2 

million, 5 million, 10 million, 20 million packages a year coming in 

just through the mail. We do not know the exact number, but I can 

tell you whatever number you use between that range, we simply 

are not able to look at all of those packages. And so, unfortunately, 

there are a large majority of packages that are coming in that concern us, but we just do not have the resources to deal with it. 

Senator KYL. We have gone to a lot of trouble and expense in 

this country to create literally a gold standard, and the three of you 

are part of that. There are many public servants in the United 

States whose life is devoted to the safety of drugs, so that when 

an American buys a product in this country, you can count on it, 

and you have to be able to count on it because there is such a risk 

if there is something wrong with it because it relates directly to 

your health and perhaps your life, which is why we have devoted 

so much effort to this. 

And I cannot imagine that if it were not for the fact that some 

people are having a hard time paying for drugs, I mean, this would 

not even be an issue, if you look at the Alar or it was mentioned 

the mad cow situation, those were both situations in which the 

whole world seemed to panic over what seemed to be a relatively 

minor matter. And yet, with drugs, there seem to be a willingness 

29 

to overlook all of these compelling safety warnings and concerns because of the cost issue. 

And I just want to make a point again that was made by Senator 

Breaux earlier. Congress has already addressed the price issue. 

The Medicare bill that we passed last year has three very important provisions in it to provide pharmaceutical products to Americans and to reduce the cost of them. The first one has already 

taken effect. It is the drug discount card. And I have forgotten the 

average that it reduces the cost by, but it is something like by 

about 20 percent. And for those who are in the lower income brackets, it is essentially provided free. They get a $600-per-person credit, and when the full bill kicks in, I think the total cost is somewhere between $1 or $3 per prescription. 

So we have enabled people in this country, and when the full bill 

kicks in, in about another 12 or 14 months, we will have I think 

gone a long way toward reducing the cost of drugs. It seems to me, 

for that period of time, with the drug discount card available, we 

are exposing the citizens to a huge safety risk if we are not very, 

very careful. 

Now, two things that have not been discussed here, and one was 

alluded to, and I would like to, in my time, get into: 

One is the potential terrorist threat. I mean, we have had ricin 

scare here in Washington, the anthrax scare, and it seems to me, 

and I could point to some testimony and some material that has 

been written about the potential for terrorists to finance their activities through this kind of scheme, this counterfeit drug scheme, 

but also the ability to create panic, to sell panic in this country 

with some kind of counterfeit importation. 

And, secondly, the liability question has been just barely touched 

on. And Senator Feinstein broke the code when she said why does 

not Canada be concerned about this, and of course the response 

was because Canada has nothing to do with it. The website says 

Canada, but there is no connection to Canada whatsoever. And so 

then what about liability? If you are taking both an American product and a product that you have gotten elsewhere, and you get sick 

how do you prove which one made you sick? How do the American 

companies protect themselves? Who could you go after if there is 

a problem with it? 

The yellow light is on. So let me just ask you, just generally, all 

three of you, about the potential terrorist problem and the potential liability problem to be able to hold somebody accountable if 

something goes wrong? 

Mr. HUBBARD. Perhaps Mr. Taylor can answer this question. 

Mr. TAYLOR. As you said, in the past, counterfeit products, products across the broad spectrum have been used or linked to the 

funding of terrorism. So, obviously, we think it is a legitimate concern. We also know that products again just outside the pharmaceutical arena have been diverted and again used for terrorism 

funding. So we were concerned about that. 

We were also concerned, as we always have been, about the tampering of products by anyone who wants to intentionally inflict 

harm on the American public. The Tylenol situation is something 

that we’re all aware of. In that case, someone purposely tampered 

with a drug. We have had other situations where people have tamVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
30 

pered with all kinds of products that FDA regulates. So it is something that concerns us. 

Mr. HUBBARD. And on the liability question, Senator, you are absolutely right. These websites usually require the patient to sign 

away any responsibility of that business for the safety of the drug, 

which as I said would never happen in an American drug store. 

And then they also asked people to promise not to sue them if they 

are injured, and then they say we want you to promise, if you do 

sue us, you will come to our country and sue us under our laws. 

You know, it is just almost ridiculous. These are provisions that 

would never appear in an American drug store, and so the patient 

is really hanging out there in terms of responsibility because what 

these businesses are really saying to patients are, ‘‘You are on your 

own. You take responsibility for your judgment in buying these 

drugs,’’ and that is not fair. 

Mr. TAYLOR. And just to give you one other tangible example. In 

the example of contraceptive patches that I noted earlier, the reason we found out about that is because a consumer purchased a 

product over what they thought was an American site, and the 

product came in a plain plastic bag, which caused the consumer to 

be concerned. 

The consumer tried to figure out how to gain some type of recourse, how to figure out how to get her money back, how to figure 

out where to go to complain. Could not find anyone to complain to, 

and therefore notified the pharmaceutical company that manufactured the approved product and FDA, and that is how we found out 

about it, and it led to shutting down those four sites. But that was 

based on a consumer’s desire to get some type of recourse, but not 

being able to find any forum for her complaints. 

Senator KYL. Her case, before she used the product she took recourse. 

Mr. TAYLOR. Absolutely. 

Senator KYL. But for all of those who used the product first and 

then suffered the consequences, no recourse, bad situation. My time 

is up. 

Senator Kohl? 

Senator KOHL. Thank you, Senator Kyl. 

Almost every day I hear from people in Wisconsin who are frustrated, very upset about the high cost of prescription drugs. And 

of course we know they have a legitimate right to feel this way because we are paying some of the highest prices in the world for 

medicines that are manufactured right here in America. 

We often talk about the United States health care system as 

being the envy of the world, but that is just an empty promise, as 

we all know, if our lifesaving drugs are priced out of reach. Faced 

with the untenable choice of going broke or going without medicine, 

many Americans are going to Canada in search of affordable prescription drugs. Some States and local communities are doing the 

same thing. Wisconsin launched a website in February that connects consumers with three Canadian pharmacies. The website has 

had more than 145,000 visits this year alone. The Coalition of Wisconsin aging groups also has a prescription drug information center 

to help people find more affordable drugs, often in Canada. 

31 

It is my understanding that the results of both programs have 

been very positive, but as long as importation remains illegal under 

Federal law, we will not have a safety structure in place to prevent 

unscrupulous people from trying to taint the drug supply in the future. 

As we debate here in Washington, it is clear that in reality drug 

importation is already happening. It is time to stop asking the outdated question of should we allow it and start finding solutions 

that will give consumers the price relief and the safety assurances 

they need. 

The Pharmaceutical Market Access and Drug Safety Act introduced by Senators Dorgan and Snowe, of which I am a cosponsor, 

represents a real chance to finally make both of these goals a reality. 

The drug industry continues to enjoy some of the highest profits 

of any industry in the world, as we know. In 2003, profits were 

more than three times the median Fortune 500 company. So it is 

time for Americans to stop footing the bill, although drug importation is, by itself, not the whole answer for high health care costs, 

I believe, and many people believe, it is an important part of the 

solution. 

So members of the panel, as I have said, people do not understand why they must continue to pay the highest prices in the 

world for their medicines. They do not understand why the administration appears to stand in the way of fixing this problem. Most 

people in my State believe they are smart enough to utilize the free 

market to find the best price for their products. They believe that 

the Government should be smart enough to set up a system that 

allows them to safely shop around for the best price, whether that 

price is here or in Canada. After all, we import food from other 

countries with far fewer inspections than we are talking about for 

imported drugs under this bill. So why can we not assure people 

that just as we are in a position to set up safety standards for the 

importation of food, that we cannot also set up safety standards for 

the importation of these medicines. 

Mr. Hubbard? 

Mr. HUBBARD. It is just very difficult, Senator Kohl. These drugs 

were regulated by Congress in 1938 because they were considered 

to be special. You needed very precise manufacturing, very precise 

quality controls. And the source of inspection processes that you 

would do for produce or beef or whatever are far different and, in 

many ways, far easier. 

With pharmaceuticals, you need a bubble around them that oversees their approval, their manufacture, their shipping, their dispensing to the patient, and that exists in the United States. When 

you go outside the country, you have broken that bubble, and you 

have made it far, far harder to understand how those products 

were made, and where they have come from, and whether they are 

made under quality control procedures. 

I am not saying it is impossible, but unfortunately we have not 

heard a proposal yet that, in our view, gives as safe a system as 

we have now. It might be you can devise ways of importing drugs 

and ameliorate some of the safety concerns, but in our view, you 

are not going to have as safe a system as you have now because 

32 

you are simply going to be relying on drugs made outside of our 

control in most cases. 

Senator KOHL. But it is true, is it not, that we have a satisfactory system to check on foods that are imported into this country? 

Mr. TAYLOR. That is true, sir. But as I noted earlier, I guess to 

answer your broader question, I mean, what we think is necessary 

to set up the very system that you are contemplating are steps to 

add additional authorities that will add to the protective measures 

that are already in place, as opposed to detract from them. 

And in the context of foods, a couple of years ago, Congress recognized that we were struggling with the increase of food shipments here to the United States, and they recognized the threat 

that was posed to the United States population by our limited resources to inspect that food, and that is one of the reasons why 

Congress passed the Bioterrorism Act, which gave us additional 

tools to check the food shipments that are coming in, it gave us additional tools to prioritize our inspections of those foods based on 

risk criteria, as well as giving us other opportunities to find more 

information about the food producers who are marketing products 

to American citizens. 

So what I am saying is that, in order to do this correctly, what 

the Agency has said is we want to emphasize that to do this correctly and ensure that Americans are getting safe and effective 

products, that we need to make sure that any legislative proposal 

or any legislative discussion that is being engaged in recognizes the 

need to strengthen our protective measures and not to detract from 

them. 

Senator KOHL. Well, I think my time is up, but I just want to 

make this point. Again, you appear, and I do not want to believe 

it is true, but you appear to be supporting an overall system that 

winds up costing American consumers more for drugs than people 

all around the world pay. Often, these are products manufactured 

right here in this country. 

So it seems to me that instead of defending this system, you all 

need to come up with a way to work with us. I believe Snowe-Dorgan begins to move us in that direction, and the bill is going to reduce the cost of prescription drugs for Americans. I think we all 

agree with that, and yet you appear, and I do not believe you really 

intend to, but you appear to be supporting a system, whether it is 

a Medicare prescription drug bill that prohibits the Government, as 

you know, from negotiating with pharmaceutical companies on behalf of Medicare recipients—which is almost un-American in the 

sense that large consumers everywhere in our society negotiate for 

discounts on their purchases—so in that area, and in this area, 

saying that we have to have 100-percent safety certification before 

we can move forward, which is almost impossible to get, you appear to be supporting a system that is causing Mr. and Mrs. American to pay the highest prices, in many cases, in the world for products manufactured in this country. 

Now, I am sure you recognize that there is a real, real problem 

here that we cannot just debate, but we have to come up with some 

answers. 

Mr. TAYLOR. Senator, we absolutely agree, and we are completely 

sympathetic to the price issue. Our concern, though, here at the 

33 

FDA, and my concern, I mean, I run the enforcement and regulatory arm of FDA, is just to make sure that Americans have safe 

products. 

I mean, any action that I took that would detract from achieving 

that goal would be equally responsible, and all we are saying is 

that, to the extent that there is a contemplation of additional legislative steps, that people keep in mind to ensure that these protections stay in place and are strengthened in light of the advent of 

the Internet, in light of the practice that we are seeing and not detract from those protections. 

And even the State of Wisconsin, with their program, is facing 

some of the same challenges we are facing. I mean, I know that 

they have written a letter to their pharmacies who, outside the contractual relationship that Wisconsin has with those pharmacies, 

were sending in products that the State of Wisconsin deemed to be 

inappropriate. And that is the same challenge that FDA is facing, 

and we are sympathetic, but it just goes to show you that you just 

need to be terribly vigilant, no matter what program is being contemplated, to ensure that the public is getting what they think 

they are getting when they are purchasing products from these 

overseas sites or locations. 

Senator KYL. Senator Feingold? 

Senator FEINGOLD. Thank you, Mr. Chairman. Thank you for 

holding this hearing on a topic that is very important to the people 

of Wisconsin. It is no accident that in the middle of all of this that 

is going on in the Congress today that both Senators from Wisconsin would be here because of how important this is to our constituents. 

Each year, I travel to all 72 counties in Wisconsin, and I hold a 

town meeting in each county. For the past 12 years, the high cost 

of health care and specifically the skyrocketing prices of prescription drugs has been one of the top issues raised at these meetings 

by my constituents all across Wisconsin. 

I am a strong supporter of the bipartisan bill introduced by Senators Dorgan and Snowe that will help Americans purchase prescription drugs at reduced prices. Without it, Americans are at the 

mercy of the pharmaceutical companies, which are raising the 

prices of the most commonly prescribed brand-name drugs at twice 

the rate of inflation. It is our duty in the Senate to provide some 

relief. People in the United States pay substantially more for prescription drugs than people in any other industrialized country. I 

have long supported efforts to create a competitive marketplace for 

prescription drugs. Drug manufacturers are free to move their factories to countries that have cheaper labor or greater tax incentives 

and to buy supplies from countries with lower costs, but Americans 

cannot purchase the drugs they need that are offered at lower 

prices in other countries, and I do not think that makes sense. 

A growing number of American seniors, including a growing 

number of Wisconsinites, are obtaining their prescription drugs 

from Canada, whether they cross the border in person, order their 

prescriptions on-line or go to one of the Canadian company storefronts that have opened up in this country. 

I have heard from senior groups in Wisconsin that are concerned 

about the announcements by certain pharmaceutical companies 

34 

that they will discriminate against Canadian pharmacies that provide Americans the same discount that they provide to Canadians. 

To address this issue, I have introduced Senate bill 477, the Preserving Prescription Drug Discounts Act, along with Senators 

Leahy and Dayton, which would deny tax breaks to drug companies that limit supplies of prescription drugs to Canadian pharmacies that provide Americans with prescription drugs. If these 

drugs companies actively discriminate against American seniors, 

we should no longer provide them with tax breaks. 

At least six major pharmaceutical companies have announced 

that they are going to take steps to curb the reimportation of prescription drugs from Canada into the U.S. by limiting supplies provided to Canadian pharmacies. I am concerned the drug companies 

are only starting with Canada and will then extend these discriminatory practices to other countries that Americans now or in the 

future will turn to for cheaper prescription drugs. 

Seniors are forced to go to Canada because the price of prescription drugs in this country is out of control. The Congressional 

Budget Office estimates that brand-name drugs cost, on average, 

35- to 55-percent less than other industrialized countries than they 

do in this country. Drug companies say they need to charge high 

prices to recover the enormous research costs involved in bringing 

new medicines to market. Yet that argument overlooks the fact 

that Americans already fund much of the research and development of prescription drugs through taxpayer-funded research conducted at the National Institutes of Health and through tax breaks 

to the drug industry. 

It is simply unfair that some Americans cannot afford prescription drugs that their tax dollars helped develop. And when they try 

to go to obtain these drugs from Canada, they are discriminated 

against by the drug companies. It is far past time for Congress to 

allow Americans access to safe prescription drugs at the prices that 

the rest of the industrialized world enjoys. 

Mr. Chairman, I just have one question for the panel. The U.S. 

General Accountability Office recently conducted an investigation 

that found that all of the prescription drugs they purchased from 

legitimate Canadian websites were safe, packaged correctly and required prescriptions from physicians. S. 2328, the Dorgan-Snowe 

bill, would provide consumers with access to Canadian websites 

that are regulated and assured to be legitimate and safe. This bill 

would also require the FDA to post the list of approved Canadian 

pharmacies on its website and through a toll-free phone number so 

Americans can check to see if they are dealing with a legitimate 

pharmacy, not a rogue website. 

I would just ask the members of the panel, would not passing 

legislation such as S. 2328 be an improvement over the status quo? 

Mr. Hubbard? 

Mr. HUBBARD. As I have said to other members, we have said repeatedly that if Congress gave FDA the authority and the resources to set up a drug importation program, we would implement 

that as well as we could. Our concern is that the bills that have 

been introduced do not go far enough. They do not really solve the 

problem. In the case of the bill you are mentioning, we are concerned about its very broad scope. It allows drugs in that we do not 

35 

think should be allowed in, and it allows drugs in from many countries. It would just make it difficult for FDA to set up a meaningful 

program to screen those drugs. But we are happy to talk with you 

or other members about our concerns. 

Senator FEINGOLD. But is it not the case, the provisions that I 

just outlined, not the broader elements, but those particular provisions would be an improvement over the current system; is that— 

Mr. HUBBARD. Certainly a limit to Canada only would be one 

limitation that would be positive, but that still raises serious concerns for us, and again we would be happy to talk with you about 

those concerns. 

Senator FEINGOLD. Mr. Taylor? 

Mr. TAYLOR. Just two points. One, we are by no means saying 

that every single product that is purchased over the Internet or is 

purchased from Canada is unsafe or potentially harmful. But what 

we are saying is that you need to be vigilant, and you cannot assume that you are getting the same benefits as the FDA-approved 

product. 

And then to your other point, generally, we are supportive of any 

attempt to provide us more information about the website or about 

an importer or exporter who is shipping products to the United 

States. I think I noted earlier that one of the main challenges we 

have is determining if, for example, a problematic product is 

shipped to the United States, figuring out where it originated from, 

figuring out who actually is behind the website. 

So, to the extent that we are able to get more information, 

whether it is through the provision that you noted or through other 

steps, that is going to be beneficial to our enforcement and regulatory efforts. 

Senator FEINGOLD. Thank you. 

Ms. Durant? 

Senator KYL. I want to thank the panel—oh, I am sorry. Did you 

have a comment, Ms. Durant? I am sorry. 

Ms. DURANT. I just wanted to echo Mr. Taylor’s comments. For 

Customs, this is a bit of a selfish thing for us. We want to be able 

to identify the good from the bad. We will work with FDA to do 

that. Today, it is just, as was noted in Mr. Hubbard’s overheads it 

is overwhelmingly difficult for us to do that. So the more that we 

can refine it and be able to determine the risk of those that are 

not approved, the easier it is for us to enforce whatever is passed. 

So we could work— 

Senator FEINGOLD. I take that to mean these specific provisions 

that I just outlined would be helpful in that direction. 

Ms. DURANT. They would certainly help, yes. 

Senator FEINGOLD. Thank you to the panel, and thank you, Mr. 

Chairman. 

Senator KYL. Thank you, Senator Feingold. 

Again, thank you to the panel for a very enlightening presentation. I appreciate your testimony. You are excused. 

I am not sure that we have all of the members of the next panel 

present, but I would like to introduce them and please come forward for the ones who I think are here. And if I mispronounce your 

name, please correct me. 

36 

First, we have Mr. Carmen Catizone, who is the executive director of the National Association of Boards of Pharmacy and secretary of the Association’s Executive Committee. 

After Mr. Catizone, we have Dr. Elizabeth Wennar, who is the 

president and CEO of United Health Alliance of Bennington, 

Vermont, and principal of HealthInova of Manchester, Vermont. 

This says Manchester, and I am not sure that is correct. 

Next, we have Ms. Joanne Disch, who is a board member of the 

AARP. 

After Ms. Disch, we have Dr. Stephen Schondelmeyer, who is a 

professor of pharmaceutical economics at the University of Minnesota College of Pharmacy. 

And, finally, we have Ms. Kathleen Jaeger, who is the president 

and CEO of the Generic Pharmaceutical Association, and I guess 

we have all five of the names I read. I welcome all of you here. As 

I said, if I mispronounced your name, please correct it at this time. 

Let me mention to those in the audience and also those on the 

panel, as you can see by the in and out of members here, there are 

several conflicting hearings. I am supposed to be making a quorum 

in the Energy and National Resources Committee, as we speak, but 

I will stay here. At noon, there is supposed to be a vote ont Senate 

floor, and so we will probably have to recess the hearing for a brief 

period of time at that time. Presumably, Senator Hatch will return 

at that time. 

Let us begin. Let us just go left to right and start with you, Dr. 

Catizone, and did I pronounce your name correctly? 

Mr. CATIZONE. Yes, you did, Senator. 

Chairman HATCH. Thank you. 

STATEMENT OF CARMEN A. CATIZONE, EXECUTIVE DIRECTOR/ 

SECRETARY, NATIONAL ASSOCIATION OF BOARDS OF PHARMACY 

Mr. CATIZONE. Thank you. Thank you for the opportunity to be 

here before the Committee this morning. As mentioned, I represent 

the National Association Boards of Pharmacy, whose members are 

the State provincial jurisdictions which license pharmacies and 

pharmacists in the United States, Canada, Australia, New Zealand, 

and South Africa. We do not represent the pharmaceutical industry. We do not represent pharmacists or pharmacies and, in fact, 

less than 1-percent of our funding is obtained from funding from 

pharmaceutical companies. 

Our written testimony which was submitted in advance of the 

hearing provides critical information on the implications of the illegal importation of drugs from the perspective of the public health 

and patient safety. This morning, my comments will summarize 

that testimony and update the Committee members on the status 

of one of the most complex and emotional issues being debated 

today. 

Frankly, the illegal importation of drugs is thriving. Despite the 

efforts of States to enforce the law and protect the public health, 

the flow of drugs across our borders is growing and is undeterred 

by warnings from the FDA and State agencies. Even though some 

32 States have successfully prosecuted storefront facilities, pharmacies and disciplined the license of pharmacists and physicians, 

37 

millions of packages still enter the U.S. from Canada, Bulgaria, 

India and Pakistan. 

What is most frustrating and disturbing to the State agencies 

that are charged with protecting the public health is that their efforts are thwarted by political ambitions in a desperately flawed solution to the public policy issue of access to medications. 

Is the illegal importation of medications endangering patients in 

the U.S.? Yes. Do we have hard data to support that assertion to 

‘‘qualify the bodies,’’ as so many like to characterize the seriousness 

of this issue? Yes, but not to the quantity that people are requiring. 

NABP has quantified complaints from patients who have received the wrong or counterfeit medications from illegal importation and included that in the written testimony submitted to this 

Committee. 

NABP is also receiving new complaints every day as the problems from the illegal importation permeate and manifest throughout the U.S. medication distribution and health care systems. Unfortunately, the bodies, which so many have indicated must appear 

in emergency rooms before enforcement of existing laws can occur, 

are slowly surfacing and reports to the FDA and NABP. We will 

continue to monitor this situation and share our findings with this 

Committee. 

Besides concern for public safety, NABP is also alarmed by the 

impact on State regulation the illegal importation of drugs is having. In States where Governors, mayors and other public officials 

are ignoring State and Federal laws and facilitating the illegal importation of drugs, State boards of pharmacy and the regulatory 

framework that protects U.S. patients are being ignored, bypassed 

and possibly destroyed. Again, more detailed explanation of this 

implication is included in our written testimony. 

It does bear note to discuss recent actions in Rhode Island. Just 

last week, legislation requiring the Rhode Island Department of 

Health to license Canadian pharmacies became law. In a short 

time, the Rhode Island Department of Health will license Canadian 

pharmacies who are violating State and Federal laws and are acting based upon a law which the FDA has deemed unconstitutional. 

The only requirements for licensure in Rhode Island of the Canadian pharmacies is licensure and registration in the province where 

they reside, a fee, and a promise to follow the requirements of that 

province. 

If other States follow Rhode Island’s lead and their failure to require compliance with U.S. laws in patient safety standards, a race 

to the bottom will soon occur as States seek out the country with 

the lowest prices, ignorant or ignoring the standards in that country. Once one State has pushed the race to the bottom and has 

adopted drug approval and patient standards to a level far below 

the current U.S. standards, all States will be subject to those bottom standards because there will be no way to contain the imported drugs to that one State. 

Can the situation be avoided? Can importation occur safely? The 

answer to both questions is, yes. The how requires the change in 

the current laws and support to establish an inter-border regulatory framework, organized through the FDA and the State boards 

of pharmacy. NABP respectfully requests that the Committee recVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
38 

ognize that allowing and encouraging illegal importation, without 

the appropriate regulatory safeguards, is a serious threat to State 

regulation and patient safety. 

NABP requests further that if importation is legalized, the appropriate inter-border regulatory framework, as defined by the 

FDA and the State boards of pharmacy be first established. 

And, finally, NABP does not believe that even one patient should 

suffer or be harmed as a consequence of disregarding Federal and 

State laws that ensure the dispensing of safe and effective medications to U.S. patients. 

Thank you. 

[The prepared statement of Mr. Catizone appears as a submission for the record.] 

Senator KYL. Thank you, Dr. Catizone. 

Dr. Wennar? 

STATEMENT OF ELIZABETH A. WENNAR, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, UNITED HEALTH ALLIANCE, 

BENNINGTON, VERMONT, AND PRINCIPAL, HEALTHINOVA, 

MANCHESTER, VERMONT 

Ms. WENNAR. Thank you. I have introduced my written testimony, and I am not going to read from it. What I am going to do 

is also summarize mine and just try and make the relevant points. 

It was mentioned earlier that United Health Alliance, which is 

an organization that exists in Southwestern Vermont, is organized 

and was organized many years ago for a multitude of reasons. It 

is made up physicians, a health system, a rural hospital, a nursing 

home and a home health agency. And we, although involved in facilitating importation of prescription drugs, this was not our major 

goal when we started things many years ago. One of our guiding 

principles, which is to help the people we serve become the healthiest in the Nation, became quite impossible for us to succeed at 

when we began to realize that the people we were serving could not 

comply with their treatment plans. 

And compliance is a safety issue. It is a quality issue, and we 

looked at it from the perspective of, if an individual cannot take 

their medications as prescribed, then we were losing the battle. 

Physicians began to realize that they had an obligation. So these 

groups of physicians in this health system took it upon themselves 

to try and facilitate the process, exclusively from Canada. We are 

not talking about any country other than Canada. We became involved with pharmacies, legitimate pharmacies, in Canada and 

began to work with them in terms of bringing medications into the 

United States. 

We were not looking at this from the perspective of whether it 

was legal. We were looking at it in terms of an ethical dilemma 

that we had. Writing prescriptions for things that people cannot afford was an ethical dilemma for the physicians. 

So, as we began to see things become more and more successful, 

what started out as a very small program or initiative to serve individuals in the communities that we were serving, which are Massachusetts, Vermont and New York, began to grow. It grew hugely 

and very fast. To sort of cut to the chase, we ended up, this map 

that you see here, we ended up serving, wherever those dots are, 

39 

those were where the people ended up. It practically overwhelmed 

us. We were a small organization. We have now transferred that 

organization to another entity because it did overwhelm us. But 

having said that, I want to just make some quick observations, because when I became originally involved in importation, it was 

really from a research standpoint. I was looking at it in terms of 

a piece of policy under the Clinton administration that was being 

considered— 

MEDSA, which was passed, but never was implemented. And 

here comes the issue again from the standpoint of considering a 

piece of legislation. My one piece of advice and hope is, if you do 

pass something, make sure it is something that can be implemented. It is a waste of everyone’s time to work so hard and then 

have something that cannot be implemented and that is not meaningful. 

Now, having said that, I am going to just quote some facts and 

observations over the last 7 years. These are my personal observations. 

Number one, parallel trade has existed safely in the EU for 

years. There is no evidence that parallel trade promotes counterfeiting when the appropriate controls and regulatory processes are 

established. 

Secondly, reimportation or importation from Canada exists. It exists because the U.S. consumer has taken it upon themselves to 

demonstrate it and to prove that it does work. Millions are currently utilizing this as a means to comply with their treatment 

plans now. 

The Canadian system is well regulated and safe. 

Canada, as does other countries, have an FDA or the equivalent 

of the FDA to do oversight. 

Customer satisfaction and compliance for those that are utilizing 

mail-order from Canada appears very high. 

Physicians are engaged in the process. They are engaged with 

their patients in the U.S. and with additional physicians in Canada. This helps with compliance, and it does help with oversight 

and quality. Compliance results in better outcomes and potentially 

lower cost to the overall health system result. 

Guidelines and standards can be, and have been, established for 

oversight of mail-order. Accreditation processes must be much 

broader than just marketing via the Internet. In other words, the 

Internet is only a marketing tool. You cannot reach in there. There 

is no pharmacy that legitimately exists on the Internet. It is a marketing tool like anything else on the Internet. 

The fact is U.S. consumers have created the mail-order industry 

in Canada. Legitimate mail-order in Canada welcomes standards 

and the regulatory processes that need to be put in place to provide 

safety controls for U.S. citizens, to protect them from unscrupulous 

providers via mail-order, particularly around the lifestyle and metoo drug medications that are being promoted along with controlled 

substances. Because what we are talking here are really about 

maintenance drugs, drugs for chronic disease management, the 

community-based pharmacist must be reintegrated into the health 

management plan. Mail-order in general, even in the United 

States, has successfully carved out the community-based pharVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
40 

macist from quality oversight. We propose that they must be reengaged. 

Recent reports that have been referenced already here, with relationship to the GAO and AARP’s report and the Sagar report, 

which I have included as an exhibit in my testimony, are available 

for you to read. 

Legislation is necessary to provide standards and oversight for 

what already exist. 

The American consumer has already proved that importation 

from Canada can work. Millions of people are using it, have been 

using it for years, and are complying with their treatment plans. 

Thank you. 

[The prepared statement of Ms. Wennar appears as a submission 

for the record.] 

Senator KYL. Thank you. And your full statement and any other 

written statements will of course— 

Ms. WENNAR. All of the exhibits are included, yes. 

Senator KYL. You bet. Thank you. 

Ms. Disch? 

STATEMENT OF JOANNE DISCH, BOARD MEMBER, AMERICAN 

ASSOCIATION OF RETIRED PERSONS 

Ms. DISCH. Senator Kyl, I am Joanne Disch, a registered nurse, 

a professor and a member of AARP’s board of directors. Thank you 

for including AARP in your discussions about the need for safe importation of prescription drugs. 

Americans need affordable prescription drugs, but for too many 

people the price of drugs is beyond their means. Recent AARP 

studies that have been alluded to this morning reveal that drug 

prices continue to rise much faster than the rate of inflation. Our 

members tell us that these high prices are the single greatest barrier to obtaining needed medications. 

Importation is not the sole solution to soaring drug prices in the 

United States, but it will create downward pressure on drug prices 

and provide consumers some immediate relief. The simple fact is 

that importation is already happening. The examples that Mr. 

Hubbard gave earlier are frightening and actually, in my mind, 

they underscore the need for us to do something in this country to 

make safe what millions of people are doing on a daily basis. 

Many Americans already purchase their drugs from other countries. This legislation would only make it safer for what they are 

currently doing on their own. The trend is growing, and we have 

a responsibility to ensure that Americans can access lower-cost 

drugs safely. 

Safety is critical. It is possibly the most important factor, along 

with efficacy, in any importation system. The drafters of S. 2328, 

the Dorgan-Snowe bill, have improved their legislation to include 

additional safety measures and consumer protections, including 

anticounterfeiting, antitampering requirements, mandatory labeling and chain-of-custody requirements. My written statement outlines these safety protections. 

I would also like to add that we believe a system of safe importation cannot be realized if the industry curtails supply. We believe 

that a vital component of the Dorgan-Snowe bill are the provisions 

41 

that seek to prevent the drug industry from cutting off supply to 

countries engaging in importation to the U.S. As we delay voting 

on this bill, we see this occurring on a daily basis. 

As a result of these changes, AARP has endorsed the DorganSnowe importation legislation. We believe it meets the challenge of 

designing a prescription drug importation program that will ensure 

the integrity of pharmaceuticals and provide consumers access to 

lower-cost drugs. Our members want Congress to enact bipartisan 

legislation this year to allow for legal, safe importation of lowercost prescription drugs. 

AARP is pleased to see this Committee and Members of Congress 

from both sides of the aisle moving forward on this issue. We understand the challenges that Congress faces in designing a program 

that ensures the integrity of pharmaceuticals, but does not create 

an overly burdensome process that would prevent consumers from 

gaining access to lower-cost prescription drugs. However, this must 

be done. We must find a way to do this safely and effectively. 

Americans deserve our support through this important legislation. 

The Dorgan-Snowe legislation meets AARP’s criteria, and we urge 

its enactment this year. 

In conclusion, this morning, like millions of women across the 

country, I took my Tamoxifen. I am one of the fortunate ones who 

is covered by a comprehensive health plan, so I do not experience 

outrageous health care costs at this point in time. I am appalled, 

however, what other women face, whom I know, who are middle income and not just seniors, but women of all ages in this country 

who cannot afford their Tamoxifen. 

I have spoken with women who have discontinued it knowledgeably and prematurely, knowing the likely consequences. I cannot 

imagine, from my own experience, what kind of a decision that 

must have to be. It is time to bring cost-effective drugs safely and 

affordably to all Americans. 

Thank you again for inviting AARP here, and I will be pleased 

to answer any questions. 

[The prepared statement of Ms. Disch appears as a submission 

for the record.] 

Senator KYL. Thank you, Ms. Disch. 

Professor Schondelmeyer? 

STATEMENT OF STEPHEN W. SCHONDELMEYER, PROFESSOR 

OF PHARMACEUTICAL ECONOMICS, UNIVERSITY OF MINNESOTA COLLEGE OF PHARMACY 

Mr. SCHONDELMEYER. Thank you, Senator Kyl. 

I will provide a written statement as a follow-up. I was out of 

town last week and just received the invitation on Monday and 

worked the details out. 

I am glad to be able to present to the Committee. I want to try 

to add an economic perspective to this, as well as the safety perspective. Safety does have a cost, and safety also is an issue that 

is driven by cost. If one cannot afford a medicine that they need 

and does not have access to it, then their health care will get 

worse, and that adds a cost. 

And I think I have not seen good evaluations done of this issue, 

but just giving the number of people who express concerns about 

42 

ability to afford a medication and not getting it because of the cost, 

it would appear that the safety and cost problems are far greater 

from lack of access due to pricing issues than they would be from 

reimportation of legitimate products from legitimate sources to legitimate pharmacies and suppliers in the U.S. marketplace. So I 

think we need to evaluate how to try to make that system work 

better. But let us step back a minute and ask what are we seeing 

in the U.S. market? 

First of all, from the things I hear today, and I have heard these 

before in other circumstances, this is a very scary marketplace, and 

this is the marketplace today without reimportation. Reimportation, I do not see anything in the legislation proposed that would 

authorize any of the counterfeits that were talked about today by 

FDA, that would authorize any of the Internet sites that fraudulently proposed to sell drugs that are not good- quality medicines, 

none of these bills authorize any of those behaviors. In fact, they 

give tools to FDA and tools to Customs and tools to other Government agencies to help address and solve some of those problems. 

So I think, also, we have to step back and say we cannot draw 

upon the importation problems from illegal activities and assume 

that that is what the experience will be with legal importation with 

appropriately authorized tools and appropriately authorized resources for our Government agencies to address those issues. 

But what is happening? Why are consumers going to Canada? 

Are these seniors who wantonly want to defy American law and 

importation issues? No, these are consumers who are very price 

sensitive and trying to make a market work. They are trying to express their concern about prices in the marketplace and saying, 

yes, drugs are very valuable to me; yes, drugs affect my very life 

and health, but I do not have the resources, given the current system, but I see an alternative, and that is because of the convenience of Canada or because of the convenience of the Internet I can 

order these medicines. And, yes, it is possible for people to prey 

upon and take advantage of people in those circumstances as long 

as they remain unregulated, as they are in the marketplace today. 

So consumers are trying to make a market work, but we must 

also step back and remind ourselves that the pharmaceutical market is not a normal economic market. This is one of the most highly 

regulated industries we have. We grant monopolies, we grant extensions on exclusivities and multiple patents. And while those 

things do reward innovation, those are good, positive, in general, 

for society. Innovation that is not accessible to the public is of little 

or no value. And I would argue that in some cases we have pharmaceutical innovations that may be very beneficial medicines, but 

are not achieving a beneficial purpose in society because they are 

not reaching people due to lack of resources, a variety of other reasons why the pharmaceutical market does not work as a normal 

market. But let me address a couple of other points I have heard 

today. 

First of all, coverage, the Medicare Coverage Act is a laudable 

program, but it does not solve the problem. First of all, the $600 

that seniors can receive in the interim period goes faster as drug 

prices go up, and $600 covers about 4 to 6 months’ worth of a 

43 

brand-name prescription drug, not even one drug for a whole year. 

So it does not really address the problem. 

Generics do not solve the problem. Americans are not going to 

Canada to buy generic medications. We have, in general, the lowest-price generic medications in the world available in the U.S. already, and generics are an important part of this solution. We need 

to encourage and increase generics in every way we can, but they 

are not the problem either. 

Counterfeits need to be addressed. Internet pharmacy needs to 

be addressed. But if we allow importation of legitimate prescription 

products from already inspected FDA plants to legitimate purchasers in the American market and especially pharmacies and 

wholesalers and if those drugs are available at the corner drug 

store, how many Americans would be going to Canada or the Internet to buy their prescription drugs? I would argue allowing reimportation will solve more of these problems than it will create. 

Thank you, sir. 

[The prepared statement of Mr. Schondelmeyer appears as a submission for the record.] 

Senator KYL. Thank you. 

And, finally, Ms. Jaeger? 

STATEMENT OF KATHLEEN D. JAEGER, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, GENERIC PHARMACEUTICAL 

ASSOCIATION 

Ms. JAEGER. Yes, thank you, Senator. 

I am Kathleen Jaeger, and I serve as the president and CEO of 

the Generic Pharmaceutical Association. On behalf of GPhA and its 

members, we thank you for the opportunity to testify on the issue 

of drug importation. 

Twenty years ago, when Senator Hatch and Congressman Waxman wrote the Hatch-Waxman amendments, the Nation faced a 

health care crisis similar to the one it faces today. Since that time, 

generic pharmaceuticals have played a critical role in the effort to 

contain rising prescription drug costs. 

Senator Kyl, GPhA and all of its members are proud of our commitment to and our success at helping Americans access affordable, 

high-quality medicines. Today, generics account for more than 51 

percent of all prescriptions filled in the United States. Yet generics 

represent less than 8 cents of every dollar Americans spend on prescription drugs. 

Clearly, the existence of a healthy generic drug industry has enhanced access to affordable medicines, something all purchases 

should want to continue to encourage. Nonetheless, we well understand the frustration that consumers, businesses and health plans 

have with ever-increasing drug costs. As members of Congress 

struggle to respond to this frustration, it is critical to make certain 

that any policy option considered does not inadvertently undermine 

incentives for generic competition or sacrifice safety or quality of 

our medicines. 

Unfortunately, as currently drafted, we believe the legislation before Congress on importation has the potential for these unintended consequences. Many of the members we have worked most 

closely with in ensuring greater access to more affordable generics 

44 

are now seeking to develop a workable approach to import less-expensive prescription drugs from abroad. We have great respect for 

these bipartisan efforts, whether it be initiatives drafted by Senators Dorgan, Snowe, Kennedy and McCain, by Chairman Gregg of 

the Health Committee or by Chairman Grassley of the Finance 

Committee. 

GPhA, however, has serious concerns about the impact of proposed importations bills will have on the safety of the U.S. drug 

supply system and the unintended consequences they may have on 

the cost-saving opportunities that are already available to consumers. Because of these concerns, GPhA currently opposes importation. However, if Congress believes it is necessary to pursue legislation in this area, we believe the following issues need to be addressed: 

First and foremost, the Food and Drug Administration must be 

provided with adequate resources and the authority to ensure the 

safety of this Nation’s drug supply. GPhA recommends that oversight of safety issues related to importing drugs be the responsibility of FDA and that Congress ensure that any importation bill 

is accompanied by the necessary Agency funding to do this effectively. 

Consumers should be confident that the same strict standards 

that the regulators require for domestic brands and generic drugs 

will be in place for imported drugs as well, otherwise this Nation’s 

drug supply chain will be vulnerable to influx of inferior and potentially dangerous medicines, including counterfeit products. 

Secondly, GPhA recommends that the importation program be 

limited in scope and actually provide cost savings to health care 

consumers. Permitting the importation of generic drugs has the 

great potential to be counterproductive. As you have heard today, 

U.S. generic drugs are not only cheaper than potential imported 

brand drugs, but as several reports suggest, U.S. generic drugs are 

more affordable than generics in Canada and other industrialized 

countries. If we permit the importation of generic drugs and their 

brand counterparts, we will, in effect, be encouraging the use of 

prescription drugs, which may be more costly than the generic 

drugs available in this country while substantially adding to the 

burden placed on FDA by importation. 

Thirdly, while we prefer that the imported drugs be required to 

be therapeutically equivalent, we strongly recommend that the imported drug, if it is not therapeutically equivalent to the domestic 

brand here, consumers should be made aware of this difference 

through product labeling. FDA requires generics to be therapeutically equivalent to the reference brand drug before the Agency considers the two products interchangeable. Thus, if the imported 

product fails to meet this standard, FDA should have the authority 

to label drug products accordingly to ensure that health care professionals and consumers can make well-informed decisions about 

switching between products. 

And, lastly, any importation programs should protect the important balance between innovation and access to generics by prohibiting importation during the 180-day exclusivity period for generic 

companies. If importation of foreign drugs is permitted during the 

180-day period, it will undue the carefully crafted balance between 

45 

innovation and access that Congress has worked so hard to 

achieve. 

Although the debate about importation continues, there are steps 

that now can be taken immediately to lower prescription drug 

costs. Generic pharmaceuticals are a safe, reliable solution to the 

problem of increasing costs of prescription drugs. Increasing access 

to, and utilization, of generics would benefit all consumers and 

health care providers. 

And as Senator Hatch and this Committee recognized last 

month, one way to increase savings is to solidify a definitive, efficient pathway for affordable biopharmaceuticals. Another way is to 

increase generic utilization by substantially improving the funding 

for and the propriety of the timely approval of generic drugs. 

So, in summary, if Congress is to pursue importation legislation, 

we strongly believe that it must address some of the flaws of the 

current pending bills, and we look forward to working with you and 

all interested members from both parties in this regard. 

Thank you, Senator. 

[The prepared statement of Ms. Jaeger appears as a submission 

for the record.] 

Senator KYL. Thank you. And I want to thank all of you for being 

very conscious of the time constraints. The vote that I announced 

would occur has already begun. I am going to have to leave for that 

vote, and in consultation with Senator Hatch’s staff, I have concluded that the best way for us to proceed is to recess the hearing 

at this time. I would hope that as many of you as possible could 

stay because it is very possible that Senator Hatch and other members of the Committee could be returning within just a few minutes 

to reconvene the hearing. And therefore, if it is convenient for you 

to remain, I am sure there will be members who will want to ask 

questions.l 

So, if you could please indulge us, I would appreciate that. For 

the time being, this hearing will be recessed. 

[Recess from 12:18 p.m. to 12:29 p.m.] 

Chairman HATCH. [Presiding.] We are going to continue. I apologize for not having been here, but I had to manage the floor for 

about an hour. 

Let me just ask you this question, and it may be the only one 

I ask. The AARP support of the Medicare Modernization Act was 

greatly appreciated by me, as one who worked very long and hard 

on that, along with others on the Conference Committee and elsewhere. 

As you may recall, when we were drafting this law, the high cost 

of prescription drugs was heavy on everyone’s mind. We made good 

progress on this issue by including provisions that not only expedited approval of generic drugs, which I know you appreciated, Ms. 

Jaeger, and the generic drugs are significantly less expensive than 

brand-name drugs, but also we required the Secretary of Health 

and Human Services to permit imported drugs into the country if 

the safety of these drugs could be guaranteed. 

Now, to help with this monumental task, we asked HHS to submit a report to Congress on whether the safety of these drugs can 

be guaranteed, and Secretary Thompson has created a task force 

46 

to review this matter. Now, these recommendations should be provided to Congress no later than the end of this year. 

My question to you is do you not think that it makes sense to 

wait to see what the task force recommends to Congress before we 

approve drug importation legislation, especially in light of what we 

have heard from the FDA today? I hate to have it on my conscience 

to vote for a piece of legislation that might lead to harm to a lot 

of Americans because of the crooks and vicious people out there 

and because of what we have heard today from the FDA, much of 

which I think a lot of us knew before, just to score cheap political 

points. 

So I guess what I am saying is do you not think it is better for 

us to wait until we have the recommendations and see what they 

say, the experts say, before we rush pall-mall into this type of a 

situation, where we allow the reimportation of drugs in the way 

that has been proposed by the House yesterday, and of course 

maybe Senator Dorgan today? 

Ms. DISCH. Well, I do want to affirm the fact that safety is of 

paramount concern to AARP, and this is why we worked very closely with not only Senators Dorgan and Snowe, but with the other 

several dozen who are supporting this bill. 

Our concern is that we need to keep moving expediently forward, 

and I would respectfully disagree with the phrase ‘‘pell-mell’’ because we feel we have been working on this issue, with many others, and giving it due diligence. New information is always going 

to be helpful. We look forward to the findings from that because 

maybe it would indicate some new directions we should move, in 

addition to this bill. But we feel very supportive and very strong 

that the practices that are built into the current proposal in the bill 

really address our concerns about safety. 

Chairman HATCH. Are you not a little bit concerned, though, 

with what the FDA just told us and Customs just told us today? 

Ms. DISCH. Well, a comment that I had made in my earlier comments was it is very frightening, when I heard some of those stories. However, where it led me, when we heard about compelling 

evidence, it led me to the thought that we should do something 

today and vote this bill in because what it showed me is what the 

millions of Americans, who are currently using perhaps a rogue 

Internet access, what they are experiencing. 

But the provisions of this bill are very clear in how they limit 

some of the horrifying examples that were given earlier today. This 

bill has addressed a lot of those and we feel really create a very 

focused first steps. Let us get more information, let us build on it, 

but we feel that the testimony today actually would suggest we 

need to act sooner than we even thought. 

Chairman HATCH. But during that time, while we experiment 

with this type of legislation, without the full bureaucracy that it 

would take, that I think one witness said would be millions of people, what if we had a lot of people die because of knock-offs, because of out-of-date drugs and because of downright criminal activity with regard to this? I mean— 

Ms. DISCH. Well, as a registered nurse, I am very concerned 

about not only people living and dying, but people with chronic illness who cannot either keep their disease under control or have at 

47 

least some functional life. What I think we have in our country is 

a lot of creativity. We have some models that some of the States 

have used with protections built in place. We have heard testimony 

this morning about some ways that we could learn from either 

other industries or other programs that, on an even smaller basis, 

have had very good effect in assuring safety and efficacy. 

So I do not see us, and I do not believe the AARP board sees this, 

as just de novo starting from scratch. We have things upon which 

we can build. 

Chairman HATCH. Ms. Jaeger, let me ask you this question. You 

testified that GPhA does not currently support the Dorgan bill. 

Now, are there any circumstances under which you would support 

it and, if so, what are those circumstances? 

Ms. JAEGER. Well, as I said in our testimony, GPhA opposes all 

the importation bills that are currently before it. We think they are 

flawed because of some potential unintended consequences within. 

And, first and foremost, we think that FDA has to have the requisite authority and the necessary funding to ensure that our drug 

supply system remains safe. And until that occurs and until we can 

assure that the products coming into our country is being looked 

after and examined by FDA and are sure to meet the same strict 

standards that the domestic brands and the domestic generics 

meet, then we are going to have some concern about patient safety. 

Our products, as mentioned in my previous testimony, generic 

drugs have to be therapeutically equivalent. And that means they 

have to be pharmaceutically equivalent and bio equivalent before 

they can be interchanged with a brand counterpart. Imported products coming in, as they stand right now, cannot, I mean, there are 

no standards there. 

There are standards for pharmaceutical equivalents, but there 

are not the standards for interchangeability. And our concern there 

is that without interchangeability and without FDA providing some 

assurance to the consumer that these products are indeed interchangeable, you could potentially see some adverse events in patients, especially with products that are a narrow therapeutic 

index, a mental drug. There are a number of products on the market that swing one way or the other with respect to a drug blood 

level that could actually impact negatively the consumer and the 

patient. 

Chairman HATCH. Well, let me just say that I am very concerned 

about it because it now takes up to 15 years of patent life and up 

to a billion dollars to develop a marketable drug, and we are the 

best in the world at doing this. And if I have my way, we will move 

into bio, and we will also move into embryonic stem-cell research 

that will open the door to even more, hopefully, beneficial therapeutics. 

But I know one thing, I cannot ignore the testimony of the FDA 

here and the Customs people. I do not think there is any absolute 

way you can be sure, with the crooks that we have in the world 

today, that drugs imported, especially over the Internet, and even 

imported in bulk, are going to be what they claim to be. I sure do 

not want to risk our seniors. That is one reason why I work my 

guts to get the $400 billion to $530-plus billion bill through, to help 

those who are literally on the bottom of the totem pole. 

48 

I totally disagree with the distinguished Congressman from 

Vermont. It sounds good what he was saying, but the problem is 

that is what we are trying to do is take care of those people who 

are making $16,000 a year and cannot afford their pharmaceuticals 

and take care of them with real pharmaceuticals that will help 

them with their health care. 

And as Ms. Jaeger knows, I am the author of the Hatch-Waxman Act, which basically has brought drug prices down at least $10 billion a year—they tell me even more now—since 1984. Some have 

called it the most important consumer bill in the last century, and 

it is certainly one of the most important consumer bills. And that 

was not an easy thing to do. It took a long time to get us to that 

point. 

I just have to caution everybody. I would be very, very concerned, 

after hearing what the FDA has had to say, what Customs has had 

to say, that a generic bill is going to solve this problem, when you 

do not put the probably tens, if not hundreds, of billions of dollars 

in, with a huge upswing in Federal employment, to try and take 

care of it, which will not do it anyway because they will never have 

the capacities that the pharmaceutical companies themselves do to 

make sure that the drugs are efficacious and safe. 

So it is a matter of great concern to me. It is a nice, easy political 

thing to do, but I think it could really backfire on those who are 

pushing these types of legislation because all you need is to have 

just one really bad episode, and I think people in this country are 

going to get up in arms. 

But, in any event, I think it is important for us to try and bring 

that safety and efficacy process down from 15 years, maximum generally, down to a more reasonable level. That is one reason why we 

passed the FDA revitalization bill a little over 10 years ago, to create a central campus with state-of-the-art equipment, state-of-theart facilities, to be able to bring all of these FDA top scientists together so that we can save money, save time, save costs and, in the 

end, hopefully, still have even better safety and efficacy in our domestic drugs and hopefully bring down costs. 

These are some of the things that we are now doing. We just 

dedicated the first building last fall—last winter I guess it was in 

November—and I hope that we will proceed with that and continue 

to build that facility because we set the standards for the world. 

We have the greatest pharmaceutical companies in the world—no 

reflection on others that are co-equal. We have some great foreign 

companies as well. But I hope we will all think this through because I am very, very concerned about it. 

I just want to thank each of you for being here. I apologize that 

I could not be here for all of your testimonies, but I will read them 

and pay very, very close attention to them. This is an area that I 

take a great deal of interest in. I would like to bring the cost of 

drugs down, but I want to do it in a way that makes sense not just 

because somebody, in a populist way, pops off about, well, we ought 

to do this. I think you have got to think it through, and it has got 

to be done right. 

So, with that, I want to thank you all for being here, and we will 

release you from the witness table. 

Ms. WENNAR. Mr. Chairman, may I just point out one thing? 

49 

Chairman HATCH. Sure. 

Ms. WENNAR. I know we keep focusing on seniors. I would ask 

you to please consider the facts that we have had a large growth 

in people that are underinsured— 

Chairman HATCH. I agree with that. 

Ms. WENNAR. —and individuals that do not have any coverage 

for this. And so they are significantly at risk, also, and the Medicare bill does nothing for them, and we are seeing these numbers 

grow. In the provider network, we have more and more individuals 

that are coming in and telling us that they cannot afford or that 

they have maxed out on their benefits, and we are really only focused on Canada, in terms of things right now. 

Chairman HATCH. Oh, no, we are focused on a number of other 

countries. 

Ms. WENNAR. I understand that, but from the standpoint of what 

exists right now in this country, individuals, under personal importation, are bringing things in. 

Chairman HATCH. I think your point is well taken. I have to say 

that Canada is probably the safest of the importing countries in his 

hemisphere, but there are lots of others through which these types 

of pharmaceuticals or knock-offs or false drugs or whatever they 

are can come. 

So let us all work on it, and let us see if we can resolve these 

problems, but they are a lot tougher to resolve than meets the eye. 

But thank you all for being here. We appreciate it. 

If we can have order, we are going to call on Hon. Rudy Giuliani, 

former mayor of New York, former assistant attorney general of 

the United States, to testify before us today. 

Mr. Giuliani, we are grateful that you took time to come down 

from New York today or I think it was New York. I know you had 

some difficulty with the weather and had a difficult time getting 

here, but we are grateful to have your testimony. 

As you know, I have a great deal of respect for you. I knew you 

when you were an assistant attorney general of the United States 

and have watched you as the U.S. attorney in New York, plus as 

mayor. We are all very proud of your service and the great service 

you gave to the City and State of New York and to this country. 

I have watched the various committees you have been on and so 

forth, and we are just grateful to have you here, and we look forward to taking your testimony here today. 

STATEMENT OF RUDOLPH W. GIULIANI, FORMER MAYOR OF 

NEW YORK CITY, AND CHAIRMAN AND CHIEF EXECUTIVE 

OFFICER, GIULIANI PARTNERS, LLC 

Mr. GIULIANI. Thank you very much, Senator, and thank you to 

the Committee. I appreciate the opportunity to testify. 

Chairman HATCH. I apologize there are not more Senators here, 

but we just had a major vote, and we will see if some of them will 

come, but if they do not, you and I are going to have a dialogue 

because this is a very important hearing. 

Mr. GIULIANI. I will briefly summarize the findings that we have 

been able to achieve to date and then leave the maximum amount 

of time for questions. 

50 

There is no question that the availability of safe, effective, and 

reasonably priced medications is a very, very critical one for Americans, and for people all over the world. The cost of medications is 

extremely high, and a lot of solutions have to be found to not only 

reduce the cost, but increase the access and availability of medications. 

The concern that I have, however, is that in trying to find those 

solutions we do not take a situation that is already one that is dangerous, if not out of control, which is the importation of medicines 

into the United States and make it even worse, particularly at a 

time when we are trying very hard to establish some kind of orderly system for the movement of people and the introduction of 

goods and merchandise into the United States. 

A couple of months ago, my firm, Giuliani Partners, was retained 

to do a study of the risks associated with the importation of medicines—how importation exists today, what would happen if it were 

expanded based on what the findings are to date. And maybe the 

best way to summarize it is to give you one experience, and that 

is inspecting the mail facility at Kennedy Airport, where a significant amount of merchandise that is coming into the United States 

is sorted and processed. 

I visited Kennedy Airport, actually on March 17th of 2003, which 

was not an unusual day; in fact, it was described as a fairly light 

day, given I think some of the weather the weekend before. Generally, they have something like 40,000 packages a day that come 

in that should be inspected, packages that apparently contain 

drugs, medicine, and things like that. 

Given the number of Customs and FDA officials that they have 

available at the Kennedy facility, which is one of the largest in the 

country, they are only able to inspect 4- to 500, maybe in a really 

intense day 600. So that is 4- to 600 out of 40,000 packages that 

are coming in. So it is not an exaggeration to say that most of the 

medicines and drugs that come into the United States are totally 

uninspected. No one has any idea what is actually in the packaging, since you are looking at 1 percent of the medicines that are 

brought in. 

But then if you look at that 4- to 600 as a sample of what might 

be in that 40,000, in other words, the medicines that are put aside, 

what you find is that the overwhelming majority of them are FDA 

unapproved. Many of them have packaging that appears to have 

been tampered with, they come from an assortment of countries 

that would be as many as maybe 18 or 20 different countries 

around the world, and in some cases the medicine is expired. 

In that particular examination we did on March 17th of 2004— 

what we found were antibiotics that were expired by a year, 2 

years, and 3 years that were being sent in as efficacious medication 

today. We found a significant number of medicines that appeared 

to have been tampered with, appeared to be tampered with meaning the coloration of the medicine was different from the actual 

medicine. 

It looked like the packaging had been opened. And you cannot 

really tell whether they are correct medications or of the right potency because there really are no field tests that can be done for 

determining whether or not a medicine that is coming in as an anVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
51 

tibiotic is actually that antibiotic or a medicine coming in as a medicine for cholesterol, a statin, is actually the right medication. All 

of these tests take a very long time to produce. 

But by physical examination, they appear to be incorrect medications, and then some are clearly incorrect because they are expired 

by 2, and 3, and 4 years and, in some cases, they are medications 

that never should be self-administered. 

I was particularly shocked to see hormone medications that are 

used for prostate cancer treatment, a treatment that I underwent, 

which were sent in what appeared to be packaging that had been 

tampered with, but it also contained the syringe so that it seemed 

like somebody was going to self-administer this medication. And 

this would be medication that really has to be done under the direction of a doctor. It has to be done on a scheduled basis, and it 

has to be done in a way to test whether or not the medication is 

actually working and what side effects it might have. 

All told, I would have to say somewhere between 80 and 90 percent of the 4- to 500 packages that were put aside on that day appeared to have something either technically wrong or substantially 

wrong with them. 

Chairman HATCH. What was that percentage again? 

Mr. GIULIANI. Four- or five hundred packages, out of a total of 

40,000, which would be 1 percent, actually get inspected, and of 

that somewhere between 80 and 85 percent appear to be incorrect, 

tampered with— 

Chairman HATCH. Have some defect or some tampering. 

Mr. GIULIANI. They have something wrong with them, anywhere 

from something substantially wrong with them, like they are out 

of date by a year or 2 or 3 years or they have been opened, or from 

just physical examination, when you look at them, they are a different color or a different shape than the actual medication. So you 

would have to wonder whether they have been tampered with or 

something has been substituted for the real thing. 

That is not an unusual situation. I conducted this examination 

with my colleague, the former police commissioner of New York 

City, Bernard Kerik, and with Senator Coleman, who was with us 

that day. But what we were told is this was not an unusual day. 

This is typical for what goes on. And when you look at other tests 

that have been done, other inspections and examinations, including 

in Miami, which had been done by, I believe, the FDA, almost the 

same results, almost the same percentages. 

So it raises real concerns that as we presently sit here, without 

any opening for any further foreign importation of drugs, the system that we presently have is a system that is unreliable, it is a 

system that is dangerous, and it is a system that creates the real 

danger that we are polluting the drug supply system in the United 

States, since these compromised, imported drugs can be mixed with 

drugs here in the United States. 

Now, the kind of thought is that you could safely get most of 

these medications in Canada, but the problem is that medicines in 

Canada that are exported to the United States are not subjected 

to any of the inspections that go on for medications that are purchased in Canada. The Canadian government basically takes the 

position that it will inspect medications for domestic use, but it is 

52 

not going to waste the resources, the time and the energy, nor does 

it have the capacity—and from what I saw at Kennedy Airport and 

these other inspections, neither do we—to examine the medications 

that are for export. 

So, in many cases, if you deal with some pharmacies in Canada, 

you may not be getting medication that really comes from Canada. 

It may be a reimportation of an importation that is coming from 

Pakistan or from Spain or from some other part of the world. 

And in many cases, or at least I should say in the pharmacies 

that we have been able to look at in the 2 months that we have 

been doing this, the Internet pharmacies in Canada will require 

you to sign a waiver in which you agree that you will not proceed 

against them if they sent you the wrong medication, which of 

course would be kind of extraordinary if that same thing happened 

in an American pharmacy. 

If you went into an American pharmacy with your prescription 

from your doctor for a serious medication or any medication, and 

the pharmacist filled the prescription and then handed you a waiver to sign saying that you would not proceed against him if he gave 

you the wrong medication or if he did damage or harm to you, that 

would raise real suspicions as to whether or not the system that 

you are using is a reliable one. 

But that is essentially what the Canadian system is telling us. 

They are telling us that the medicines that we get, the pharmacies 

cannot really stand behind, and they cannot really vouch for because, in fact, many of those medications may be coming from 

somewhere else. They are coming from other parts of the world 

where the factories are not inspected in the same way, where the 

same kind of reliability does not exist. 

So the whole thrust of this report, and it was a preliminary report—we are still conducting an analysis and investigation—that 

before we open up our borders to even more importation of drugs 

from foreign countries or on some kind of vast scale, we should 

straighten out the system that we presently have. We should have 

a system in which we inspect more, we inspect more effectively, we 

develop technology so that we can trace medication, and so that we 

have pedigrees. Everyone wants to see more access to medications, 

but we do not want to see a system in which we create enormous 

risk and danger to health. That would be counterproductive. 

It reminds me when I was the mayor there was a tremendous 

desire for affordable housing because people could not afford housing, but that did not lead us to then create a system of housing 

that was dangerous. It led us to try to find creative ways to build 

housing that was safe and secure and satisfied the need of people 

for affordable housing, as opposed to running to a solution where 

you end up putting people in homes that are dangerous, homes 

that are poorly built, homes that might create other risks for their 

health. That is, essentially. . . I mean, the pressure is understandable, but the solution has to be looked at very, very carefully. 

So there is a great deal more that I could discuss, but I think 

I have summarized it. I am open to any questions that you have, 

Senator. 

Chairman HATCH. Thank you. That means a lot to me, to have 

your testimony, because you have been there, you have studied it, 

53 

you have lived in one of the most complex, difficult cities in the 

world, difficult-to-manage cities in the world, and you managed it 

very, very well. 

But you discussed a paper you wrote with interim findings on 

prescription drug importation from foreign sources. In that report, 

in your report, you state that the weaknesses in our existing system could potentially open the door for individuals interested in 

supplying drugs through illegal means, specifically, organized 

crime and terrorist organizations. Now, why do you believe that 

these types of activities would appeal to those groups, in particular? 

Mr. GIULIANI. Because it is an easy, unfortunately, it is an easy 

and safe, from their point of view, and unaccountable way of getting things into the United States. You almost hate to repeat this, 

but of course they know it, so you are not really emphasizing anything they do not already know. If you have a system that people 

are using and relying on to get medications that are enormously 

important to them, and valuable to them, something that they are 

going to take, and you are sure they are going to do that, and it 

is a system that is virtually uninspected, which this system is, then 

it is one that can easily be exploited by organized criminals, drug 

dealers, and even by terrorists as a way of harming particular individuals. It can create confusion with our drug supply, polluting the 

drug supply in the United States, particularly if it were to be 

opened to even more foreign importation. 

And that is the basic analysis of the people that I rely on to give 

me advice on this, people who have had a lot of experience with 

organized crime and terrorism. If the borders are porous and able 

to be exploited, then that is an invitation not just to terrorists, but 

to organized criminals and to drug dealers to take advantage of 

that. 

Right now, that is the case. If you open it up to even more foreign importation on a vast scale, then it becomes even more of a 

temptation and even more difficult. 

Chairman HATCH. How knowledgeable do you think, well, in 

your opinion, do you think our law enforcement agencies are about 

counterfeit prescription drugs, illegal Internet sales, et cetera? 

Mr. GIULIANI. I think the law enforcement agencies are not extremely knowledgeable about that for understandable reasons. 

There are not the kind of tests, either chemical or technological devices, that make it easy to detect this. My experience, and that of 

Bernie Kerik, who was my partner in doing this, who was not only 

the former police commissioner, but was formerly a detective who 

investigated large-scale drug importation cases, is with heroin, and 

cocaine and illegal drugs like that, where there are field tests available. You have a very quick, immediately available test that you 

can use that at least will give you a fairly good indication of whether you are actually dealing with heroin, whether you are actually 

dealing with cocaine and roughly the potency of it. 

Chairman HATCH. But that is a little bit different from the— 

Mr. GIULIANI. That is a lot different than this. 

Chairman HATCH. —complex pharmaceutical drug. 

Mr. GIULIANI. There are no field tests that tell you that the 

Lipitor is actually Lipitor or that the antibiotic is actually an antiVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
54 

biotic. So it becomes very, very difficult when you have 40,000 

packages a day and no field test for law enforcement to create that 

kind of security for us. So it is not their fault, but the processes 

do not exist to allow them to really secure our borders. 

Chairman HATCH. It seems like, to me, you would almost have 

to produce a small pharmaceutical inspection companies that know 

everything there is in these pharmaceutical drugs, and there is, 

what, 60,000 pharmaceutical drugs in our society today? 

Mr. GIULIANI. When we do the test, that is exactly the way it is 

done. The medicine is actually sent to the pharmaceutical company 

that manufactured it, and then they have to actually do the test 

to determine is this actually the medication that it purports to be? 

Sometimes it turns out that it is not. 

Chairman HATCH. And who pays for that? 

Mr. GIULIANI. That ultimately is paid for by the Government, I 

imagine. Actually, I do not know the answer to that, Senator. I 

would have to check. 

Chairman HATCH. I cannot imagine pharmaceutical companies 

who will want to get in a daily inspection routine that they have 

to pay for. 

Mr. GIULIANI. I will get the answer to you, but actually what I 

imagine is the Government pays for the part of it where it kicks 

it out, sends it over. I imagine the pharmaceutical companies do it 

as a way of protecting their brand. 

Chairman HATCH. Sure. In the paper that we have mentioned, 

your paper, you mentioned the distribution chain being fairly 

straightforward, but there are chances for exploitation or abuse 

within the distribution chain; namely, there are no uniform standards for wholesalers you say or distributors, and there are thousands of secondary pharmaceutical wholesalers. There is no uniform mechanism to track the medicine from the point of being 

manufactured to the point of sale and repackaging these products. 

Of course, these are all points of vulnerability. 

Could you talk about how we can make improvements in this distribution chain for pharmaceuticals or really is it even possible for 

us to do that? 

Mr. GIULIANI. I believe that is possible. I think it is impossible, 

as you know, to create a perfect system, but it is certainly possible 

to create a much better system than we presently have to determine pedigree, to keep track of it. 

Chairman HATCH. Do you have any idea what that would cost to 

do that? 

Mr. GIULIANI. I do not know how much it would cost. I know it 

would cost a lot of money. But given modern technology, the ability 

to sort information, to track information, I think it is conceivable 

that you could develop a system that is a lot better than the system 

we have now, to check the pedigree of a medication, to check the 

points where it has been, to make sure it has come out of the right 

factory so that those factories have been inspected, and to create 

devices that would much more easily be detectable at the border. 

That is the kind of thing that really should be the emphasis of 

what we are doing in the next year or two. 

Chairman HATCH. And you would have to have a lot of cooperation from the exporting country and companies. 

55 

Mr. GIULIANI. You would have to have a great deal of cooperation 

from the companies that— 

Chairman HATCH. It would cost them a lot of money, too, right? 

Mr. GIULIANI. You would have to have a lot of cooperation from 

the companies that are producing the medications. I expect that 

most of them would want to do that because they have a real interest in making sure that their medication is protected, and you 

would have to have cooperation from the countries through which 

the medicines pass. 

Chairman HATCH. But would that not then raise the costs even 

more of the medications? 

Mr. GIULIANI. It would probably raise the cost of some medications, but at the same time it would make it a lot more available. 

It would also make it a lot safer, in terms of determining whether 

or not you are actually using the medication that you are using. 

The other thing about these Internet sales is very, very often 

people are not saving a great deal of money on the medication. It 

appears as if they are, but the fact is that when they get into repetitious purchases, they are often expending a good deal of money 

getting the medication, and it is not terribly different from what 

they would spend if they got themselves into a plan, into the right 

plan. 

The savings are sort of unfairly distributed. Some people get 

them. Some people do not get them. 

Chairman HATCH. What would be your biggest concern that you 

might have with regard to importation of drugs being legalized or 

legislation to legalize? 

Mr. GIULIANI. My biggest concern with the present system, even 

before you get to the open it up even more, the present system is 

a system in which we are not inspecting anywhere near enough of 

the medications that come into the United States. We have not 

worked out systems for determining pedigree, for determining 

whether it is the proper medication. To add on top of that significantly more importation would take a system that is already, if not 

out of control, pretty close to it, and drive it to a much worse level 

of vulnerability to really exploit it. 

Chairman HATCH. Now, I was interested to read in your report 

that the Canadian Government is not inspecting drugs that have 

been imported to Canada and then exported to the United States. 

In fact, the Canadian Government, as I understand it, has stated 

that it will not be held responsible for the safety and quality of 

drugs exported from Canada to other countries, including our country, the United States. 

Personally, I find that to be quite disturbing, since most believe 

that drugs imported from Canada to the U.S. are safe. Do you care 

to comment on that? 

Mr. GIULIANI. Well, I think it is something where people should 

be absolutely aware of this. I mean, they should understand they 

are taking this risk because I think there is an assumption, as you 

say, that if you are getting medicines from Canada, they must be 

safe because, by and large, for Canadians getting medications in 

Canada, their system is as safe as ours. If you are a Canadian citizen, you go to a Canadian pharmacy, you get medicines in a CanaVerDate Aug 31 2005 14:46 Oct 07, 2008 Jkt 043983 PO 00000 Frm 00059 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\43983.TXT SJUD1 PsN: CMORC
56 

dian pharmacy, it is roughly the same system that we have getting 

medications in an American pharmacy. 

So people who are getting medicines through the Internet or by 

mail from Canada think they have the same protection as they 

would have if they were actually buying those medications in Canada in a Canadian pharmacy. They do not because the Canadian 

Government says we are basically going to save our resources to 

protect the domestic population in Canada, not to deal with all of 

this tremendous amount of exportation that is going on. 

So they do not inspect the medications that are being exported, 

and they are being honest with us. They are being honest with the 

American public by telling us that, if we pay attention to it. They 

are telling us not to expect the same level of reliability and safety 

if you buy medications by mail or over the Internet from us as you 

would if you bought those same medications in a pharmacy in Canada because we simply do not inspect the medications that are 

going outside the country, and we cannot. We do not have the resources to do it. 

Chairman HATCH. I understand that even some of the pharmacies they require a disclaimer. 

Mr. GIULIANI. The pharmacies, I cannot say that all of them do 

because we have not looked at anywhere near all of them, but the 

ones that we did look at require written waivers to do business 

with them, so that you will not hold them responsible. So if there 

is something wrong with the medication, if you order one medication, but you get another or you get a medication that is not of the 

right potency, you cannot hold them accountable for that the way 

you would if you were dealing with the medication domestically. 

I suspect—although I do not know the answer to this, it is a good 

question so we will find out—I imagine if a Canadian citizen goes 

into a Canadian pharmacy to buy that same medication, he or she 

does not have that waiver. 

Chairman HATCH. I think that is right. 

Mr. GIULIANI. The same way that we do not have it if you buy 

something in an American pharmacy. 

Chairman HATCH. Right. That means Americans would have no 

legitimate legal right to pursue the pharmacy that sold them a 

dangerous drug. 

Mr. GIULIANI. It means that Americans who do that have no 

right to pursue them. It also means that the system is not accountable. It means that those selling under a system like that knows 

that they are not going to be held accountable. 

Chairman HATCH. Yes, that is right. 

Mr. GIULIANI. So that if they have two available supplies of 

medication, the reliable one they are going to save for the domestic 

public in Canada, and theoretically, the less-reliable one they are 

going to sell by mail or over the Internet because there is no accountability for that. 

Chairman HATCH. Yes, and sell that with impunity because there 

is no way you can have redress for that. 

Now, as part of your investigation, you traveled to mail facilities 

to review the flow of prescription drugs into the facilities. What, if 

anything, surprised you or concerned you with these visits? 

57 

Mr. GIULIANI. Well, there were a couple of things. I guess the 

main thing would be the lack of resources. If you are going to be 

dealing with 40,000—that is the number they gave us for JFK, and 

I assume that is the correct number—40,000 packages a day coming in, it would seem to me that you would have to have more than 

two or three inspectors, that more resources have to be put into 

doing inspections. 

And then the technology is outdated. They do not have modern 

tracking equipment. They do not have the kind of computer technology that a major multinational corporation would have if it had 

to deal with having to even spot inspect some portion of 40,000 

packages a day. You would expect to see much more advanced technology being used to profile where you are going to look, to categorize different packages and kinds of packages you are going to 

look at more carefully. Even knowing what is going on in the area 

of inspection of passengers who are now traveling by air or inspection of cargo, which is now beginning to increase, the technology 

in both those areas is much more advanced than the technology 

that is being used for drugs. 

And I think that is where some very useful things can be done. 

That is where a lot of improvements could be made so that you 

would have a safer system, and then if anybody wanted to consider 

expanding it, they would be able to expand from the base of a safe 

system rather than one that is exploited as much as this one is. 

Chairman HATCH. Why do you believe that opening the borders 

for wholesale importation of drugs will increase the number of 

counterfeit drugs? 

Mr. GIULIANI. Well, because you are just going to, by some very, 

very large amount, take that inspection percentage and reduce it 

dramatically. If 40,000 packages a day becomes 80,000 or 90,000 or 

100,000 or 200,000, then, number one, there is even less safety 

and, number two, it is even more of an invitation to somebody trying to get things into the country to just play the odds and say to 

himself I can engage in a business of sending in ineffective or even 

dangerous medications, and nobody is going to catch me. Nobody 

is going to find out about it. 

Chairman HATCH. There is a lot of money in this business, too. 

Mr. GIULIANI. There is a tremendous amount of money in the 

business, and very often in some of these situations people think 

they are saving money, as I said before, but they are not because 

they are being charged sometimes very large amounts of money, 

and sometimes they are being charged that money for drugs that 

are not even working. 

Chairman HATCH. That is the point or maybe are not even drugs. 

Along that same line, what is your opinion about incentives for 

counterfeiting and diversion of prescription drugs compared to illicit narcotics? 

Mr. GIULIANI. I think that the penalties for prescription drug diversion abuse probably should be increased. Because when most of 

the penalties were passed, this was not a major problem in the 

United States. Our major focus, when most of those penalties were 

passed, decided and amended, was back in the days in which our 

major problem was illegal drugs, and that was the real focus of not 

only the Congress, but State legislatures. All during the time I was 

58 

assistant U.S. attorney, United States attorney, the real focus was 

on heroin, cocaine, marijuana, illegal drugs like that. 

Some of our drug abuse problem now, a much more significant 

percentage of it, is diversion of prescription medications, and it 

seems to me it would probably be a good time to take a look at, 

number one, the penalties, should they be increased because the 

problem is worse than it was 10, 15, 20 years ago, and, number 

two, it probably is a good time to even divert some of our resources 

to that area because that is an area now where abuse is growing. 

Chairman HATCH. Just one last question. Why do you suppose 

that investigating and prosecuting illegal drug Internet sales or 

counterfeit drug cases are a lower priority for both Federal and 

State law enforcement agencies? 

Mr. GIULIANI. I think it is, Senator, because we grew up in the 

era in which the dramatic focus was on heroin, cocaine, marijuana, 

and some of the other illegal drugs. It is really just a question of 

conditioning and culture, as it was when those illegal drugs were 

the real problem. And it takes a while, even for law enforcement, 

to catch up with the fact that, sure, that is still a problem, but this 

new problem has now become much, much worse; namely, the diversion and misuse of prescription medications, and particularly 

those that are controlled substances. That can create a real problem. 

Chairman HATCH. Well, I will tell you, it is a scary area because 

there is such a desire of a lot of people to try to be able to try and 

reduce the costs of their pharmaceuticals because, let us face it, it 

is expensive in this country, and they are almost willing to do anything to reduce those costs. 

But the testimony we have had here today is I think pretty 

frightening, and your testimony is as well because you and I both 

know that it does not take organized crime long to catch on to how 

they can make big, big bucks quickly. And diluting pharmaceuticals 

or selling knock-offs or even false drugs, fraudulent drugs, could 

be—and is in some areas—big business. 

I just want to personally thank you for the efforts that you have 

made. Not only do you understand these areas very, very well, because you have been there. You have prosecuted cases. You have 

been a principal law enforcement official in this country for many, 

many years, but as a mayor you saw some of these things happening as well. 

Let me just say that I want to thank you for your testimony and 

for your willingness to take the time to come down and be with us 

and help enlighten us on this particular set of subjects. And before 

concluding, I would just like to ask for unanimous consent to submit the written testimony of BIO, Health Care Leadership Council 

and the American Pharmaceutical Association into the record. I am 

also going to leave the hearing record open for one week for followup questions and other statements. 

But above all, I think all of the witnesses here today have been 

excellent, but in particular, I am very grateful that you would take 

the time to come and discuss this with this Committee because 

these are important issues, and a lot of people in this country just 

buy off on the populist explosive comments of some people about 

how wonderful this is all going to be, without having the necessary 

59 

safety and efficacy concerns that we have got to have if we are 

going to make sure that our seniors and others receive fully potent 

and reliable pharmaceutical prescription drugs in our society. 

So I, personally, appreciate all of the work you have done in this 

area, and I appreciate you being with us today. 

Mr. GIULIANI. Thank you very much, Senator. 

Chairman HATCH. With that, we are going to, I have nobody else 

to question, so we will recess until further notice. 

Thanks for being with us. 

Mr. GIULIANI. Thank you, sir. 

[Whereupon, at 1:17 p.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

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