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DISCUSSION DRAFT OF THE FOOD AND DRUG 

ADMINISTRATION GLOBALIZATION ACT 

LEGISLATION: DRUG SAFETY 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HEALTH 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

MAY 1, 2008 

Serial No. 110–111 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 

COMMITTEE ON ENERGY AND COMMERCE 

JOHN D. DINGELL, Michigan, Chairman 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chair 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

DARLENE HOOLEY, Oregon 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. ‘‘CHIP’’ PICKERING, 

Mississippi 

VITO FOSSELLA, New York 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PROFESSIONAL STAFF

DENNIS B. FITZGIBBONS, Chief of Staff 

GREGG A. ROTHSCHILD, Chief Counsel 

SHARON E. DAVIS, Chief Clerk 

DAVID CAVICKE, Minority Staff Director 

(II)

(III) 

SUBCOMMITTEE ON HEALTH

FRANK PALLONE, JR., New Jersey, Chairman 

HENRY A. WAXMAN, California 

EDOLPHUS TOWNS, New York 

BART GORDON, Tennessee 

ANNA G. ESHOO, California 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

Vice Chair 

TOM ALLEN, Maine 

TAMMY BALDWIN, Wisconsin 

ELIOT L. ENGEL, New York 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

MIKE ROSS, Arkansas 

DARLENE HOOLEY, Oregon 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

JOHN D. DINGELL, Michigan (ex officio) 

NATHAN DEAL, Georgia, 

Ranking Member 

RALPH M. HALL, Texas 

BARBARA CUBIN, Wyoming 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

STEVE BUYER, Indiana 

JOSEPH R. PITTS, Pennsylvania 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas (ex officio) 

(V) 

C O N T E N T S 

Page 

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

New Jersey, opening statement .......................................................................... 1 

Hon. Steve Buyer, a Representative in Congress from the State of Indiana, 

opening statement ................................................................................................ 3 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 5 

Hon. Tim Murphy, a Representative in Congress from the Commonwealth 

of Pennsylvania, opening statement ................................................................... 6 

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

California, opening statement ............................................................................. 7 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 8 

Hon. Darlene Hooley, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 9 

Hon. Jim Matheson, a Representative in Congress from the State of Utah, 

opening statement ................................................................................................ 10 

Hon. Edolphus Towns, a Representative in Congress from the State of New 

York, opening statement ...................................................................................... 11 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 12 

Hon. Diana D. DeGette, a Representative in Congress from the State of 

Colorado, prepared statement 1 ........................................................................... 13 

Hon. Hilda L. Solis a Representative in Congress from the State of California, 

prepared statement 2 ............................................................................................ 13 

WITNESSES

Janet Woodcock, M.D., Director, Center for Drug Evaluation and Research, 

Food and Drug Administration ........................................................................... 14 

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

Submitted questions 3 .......................................................................................

William K. Hubbard, senior advisor, Coalition for a Stronger FDA ................... 44 

Prepared statement .......................................................................................... 46 

Answers to submitted questions ...................................................................... 200 

Lori Reilly, vice president of policy, The Pharmaceutical Research and Manufacturers of America ............................................................................................. 50 

Prepared statement .......................................................................................... 53 

Answers to submitted questions ...................................................................... 201 

James C. Greenwood, president and chief executive officer, Biotechnology 

Industry Organization ......................................................................................... 75 

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

Answers to submitted questions ...................................................................... 209 

Christine Mundkur, chief executive officer, Barr Laboratories, Inc. ................... 84 

Prepared statement .......................................................................................... 86 

Answers to submitted questions ...................................................................... 215 

Ron Bone, senior vice president, Distribution Support, McKesson Corporation 89 

Prepared statement .......................................................................................... 90 

Answers to submitted questions ...................................................................... 216 

Kevin Nicholson, R.Ph., J.D., vice president, Pharmacy Regulatory Affairs, 

National Association of Chain Drug Stores ....................................................... 92 

Prepared statement .......................................................................................... 95 

Answers to submitted questions ...................................................................... 230 

Ami Gadhia, policy counsel, Consumers Union .................................................... 113 

Prepared statement .......................................................................................... 115 

Page

VI 

SUBMITTED MATERIAL

Discussion Draft ...................................................................................................... 131 

1Ms. DeGette did not submit a prepared statement for the record in time 

for printing. 2Ms. Solis did not submit a prepared statement for the record in time for 

printing. 3Dr. Woodcock did not answer submitted questions for the record. 

(1) 

DISCUSSION DRAFT OF THE FOOD AND DRUG 

ADMINISTRATION GLOBALIZATION ACT 

LEGISLATION: DRUG SAFETY 

THURSDAY, MAY 1, 2008 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON HEALTH, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:11 a.m., in room 

2322 of the Rayburn House Office Building, Hon. Frank Pallone, 

Jr. (chairman) presiding. 

Members present: Representatives Pallone, Waxman, Towns, 

Green, DeGette, Schakowsky, Solis, Hooley, Matheson, Dingell (ex 

officio), Buyer, Pitts, Murphy, Burgess, and Barton (ex officio). 

Staff present: Jeanne Ireland, Jack Maniho, Virgil Miller, Melissa Sidman, Ryan Long, and Chad Grant. 

Mr. PALLONE. The hearing of the subcommittee is called to order, 

and today we are having a second hearing on the Food and Drug 

Administration Globalization Act today, specifically with regard to 

the drug provisions. As I think you know, last week we discussed 

the food-related provisions and today we will be focusing on the 

drug-related provisions only. I recognize myself for an opening 

statement. 

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

In recent years, there have been a number of revelations about 

drug safety that have shaken public confidence in the FDA’s ability 

to ensure that consumers are using safe and effective drugs. Tens 

of thousands of patients have been placed in harm’s way due to the 

failings of our current drug safety system, and while we boast that 

America has the safest drug supply in the world, clearly more 

needs to be done. The American people must be able to trust that 

the drugs they take to save their lives will not cause additional 

harm. 

Earlier this week, the Subcommittee on Oversight and Investigations held a hearing to examine the events of the recent tainted 

heparin tragedy. The heparin case resulted in the deaths of at least 

81 Americans, caused 785 severe allergic reactions in the United 

States, and affected patients in 10 other countries as well. The O&I 

findings revealed that not only are FDA’s inspection policies inadequate, but worse, they actually could have contributed to the hepVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
2 

arin-related deaths. This is simply unacceptable, and I have to say 

that I am outraged by the fact that this type of situation could 

have occurred and I would like to express my sympathy to the individuals and families affected by the incidents. But what worries me 

is that without congressional intervention, this could happen again. 

We have an obligation to the American people to ensure that the 

FDA has the resources it needs to protect them from these types 

of situations. 

We have heard from a number of sources including the GAO, the 

FDA’s Science Board, and other stakeholders that the FDA is woefully underfunded and that this underfunding is the driving force 

behind the Agency’s inadequacies, and finally the Agency itself during the hearing on Tuesday confirmed this fact. They cited that 

they need $100 million more for domestic inspection and regulation 

activities and $225 million additional to adequately inspect and 

regulate foreign manufacturers. Clearly, the paltry $11 million 

budget for foreign inspections in 2008 doesn’t even come close to 

being enough to enable the FDA to ensure a safe drug supply. At 

present, 80 percent of all active ingredients in drugs sold in the 

United States are made in other countries and yet the FDA only 

inspects foreign facilities in countries such as China and India once 

every 30 years. 

The draft we are discussing today would change that. As with 

the food companies, it would require all facilities, foreign and domestic, to register annually with the FDA, providing the Agency 

with an up-to-date list of all drug manufacturing facilities and active ingredient manufacturing facilities as well. It will generate the 

revenue needed to allow the FDA to conduct frequent inspections 

of all facilities by charging an annual fee that we are fully intending to specify in the final bill. It establishes new and stronger enforcement tools that the FDA can use against bad actors and requires manufacturers of drugs and biologics to test their products 

carefully for contaminants. And I do also want to point out that the 

funding proposed in this discussion draft is intended to supplement, not supplant, current FDA appropriations. 

I feel confident that we will be able to put together a strong bill 

and I am pleased that the industry, pharmaceutical companies, biologic companies, and generic companies have been so far willing to 

cooperate and assist in our endeavors. We have even received letters of support for this bill from leading drug manufacturing companies. I know there are still areas that we need to work on and 

details we need to iron out, and I look forward to hearing your testimony today highlighting those areas from the witnesses. 

I also wanted to mention that my colleagues, Mr. Buyer and Mr. 

Matheson, are particularly concerned about the surge in counterfeit 

drugs in the marketplace and I welcome a discussion of their proposed legislation, H.R. 5839, Safeguarding America’s Pharmaceutical Act, during today’s hearing. Particularly I am looking forward to a discussion around the issue of leveraging information 

technology to protect our Nation’s drug supply. It has been identified in multiple GAO reports that the FDA is currently operating 

with a severely under-equipped information technology system 

which actually also may have played a role in the heparin case. 

While I applaud the initial progress that has been made on FDA’s 

3 

part by hiring a new chief information officer and centralizing the 

existing systems, more can be done to support the Agency in their 

IT investments, which I believe will not only benefit the patients 

but will also enable the Agency to be more efficient and effective 

in carrying out the required tasks. 

Finally, patients and their health providers have to have confidence that the medicines they take to treat diagnosed illnesses 

meet the highest standards of safety and efficacy, and again, I look 

forward to hearing from today’s witnesses and the discussion 

around some of these issues. 

Mr. PALLONE. I understand Mr. Deal is not here today so Mr. 

Buyer is going to act as the ranking member, and I yield to the 

gentleman 5 minutes for his opening statement. 

OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF INDIANA 

Mr. BUYER. I thank Chairman Pallone for holding the hearing 

today and I appreciate Chairman Dingell’s willingness to include 

H.R. 5839, a bill I introduced along with Jim Matheson, Mike Rogers, and Gene Green 2 weeks ago, in this hearing. I appreciate the 

chairman’s comments in reference to this bill. 

Our committee has been committed to addressing the dangers of 

counterfeit, adulterated, and misbranded pharmaceuticals affecting 

our Nation. When I use the word pharmaceuticals I also include 

biologics in that, and with that comment, I welcome our colleague, 

Jim Greenwood, to take special attention to that. 

I believe H.R. 5839, Safeguarding America’s Pharmaceuticals 

Act, aligns well with our commitments to not only providing for improved safety within our regulated drug supply chain but also protecting our drug supply chain from outside threats. I think we all 

understand the cost to America’s health from accepting the norm 

and disregarding and failing to protect our Nation from a new public health threat. Our Nation has set the gold standard for safety 

and efficacy of pharmaceuticals. However, even with the many 

steps that we have taken to protect this gold standard, our pharmaceutical market is attractive to criminal interests seeking to 

make tremendous profits by praying on America’s most vulnerable 

populations: the sick, the disabled, and the elderly. 

America is not insulated from the exploding counterfeit drug 

market, which is expected to earn an annual global profit in excess 

of $75 billion by year 2010. In fact, due to our weak adverse event 

reporting system, we cannot even grasp the effects of counterfeit 

and adulterated and misbranded medications upon people in our 

society. We do have some idea about the quality of prescription 

drug packages entering our Nation through testing that FDA has 

conducted in our international mail facilities. FDA periodically conducts blitz exams to test samples of pharmaceuticals entering our 

ports of entry. After a 2003 blitz exam of 4 of our international 

mail facilities, the FDA found that 88 percent of the drug products 

the Agency examined during this blitz contained unapproved drugs. 

Furthermore, within our own regulated pharmaceutical supply 

chain, we know counterfeiting and diversion occurs. In 2003, the 

FDA announced a recall of some 200,000 bottles of Lipitor that 

were believed to be fake, and in previous years 110,000 bottles of 

4 

other counterfeit drugs were used to boost red blood cell production 

in people with cancer and kidney disease that made their way into 

the marketplace. 

The main reason for the rash of counterfeit drugs is not surprising: it is money. Pharmaceutical counterfeiters are what I refer 

to as the new drug lords of the world. In fact, experts have claimed 

that it is more lucrative to sell counterfeit drugs than narcotics, 

and the criminal penalties for engaging in counterfeiting drugs are 

far less than those selling narcotics. I think when you use the term 

‘‘drug lord,’’ Mr. Chairman, people think of Colombians. I would say 

the analogy here is that Colombians are rather foolish. A drug lord 

who is a Colombian selling cocaine or marijuana is the equivalent 

of someone taking a gun down to the 7-11 and doing a robbery. 

Those criminal penalties are pretty stiff. But these new drug lords 

are highly sophisticated criminal syndicates that move their counterfeits through many different nations to insulate themselves from 

criminal prosecution and they do that because it is a highly leveraged, lucrative market, not only in the United States but around 

the world. Americans, I believe, must have the assurances that the 

medications they take are those manufactured and FDA-related 

pharmaceutical entities. 

H.R. 5839 is about patient safety. The bill ensures the destruction of unapproved and potentially dangerous drugs coming 

through our ports of entry and allows for the creation of a uniform 

Federal drug pedigree system. It raises the licensure standards for 

pharmaceutical wholesalers and calls for a study on how we can 

better protect Americans from counterfeit drugs. With our legislation, patients will benefit greatly in knowing that the medications 

they consume, in fact, the medication their doctor prescribed, is not 

a medication which has been counterfeited, adulterated, or diluted. 

I recognized earlier we had had a conversation on whether we 

should actually require our doctors to ask of their patients when 

you prescribe a drug, where are you buying your pharmaceuticals. 

The AMA did not want us to do further mandates upon docs, and 

I understand that, but docs today when they come up with their 

diagnosis and have a prognosis, they write their scrip, they believe 

their patient is going down to a local pharmacy, not realizing that 

many of their patients are buying them over these Internet Web 

sites, thousands of them, of which only 15 are even FIP-certified. 

So we have a real problem here that we are going to need to face. 

Congressman Matheson and I have carefully constructed H.R. 

5839. We have learned from experiences in States like Indiana, 

California, and Florida, which have taken a strong lead in 

strengthening their pharmaceutical distribution systems. We have 

engaged in extensive discussions with stakeholders across the supply chain, and I wanted Chairman Dingell to know that, that over 

this last 6 months Congressman Matheson and I, Chairman Dingell, have done everything we possibly can in discussions with everyone in the industry, and it is very difficult to come up with a 

consensus. You know that. You created the paper pedigree system. 

So we are just trying to modernize that into electronic form, and 

it is very challenging. I believe our approach provides for a great 

flexibility and a tremendous input from the stakeholders and I appreciate the support from some of the companies throughout the 

5 

supply chain including the manufacturers, big and small drug 

wholesalers, and pharmacists. 

I look forward to working with Chairman Pallone and Chairman 

Dingell and other members of the subcommittee as we move forward the Buyer-Matheson legislation, and with that I yield back. 

Mr. PALLONE. Thank you. 

I yield to Chairman Dingell for an opening statement. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

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

commend you for the hearing and I look forward to good things 

coming from this effort today. 

The hearing is an important one and it relates to how the Food 

and Drug Administration is going to better carry out its functions, 

and we are dealing specifically with our Food and Drug Administration Globalization Act discussion draft. Since last fall, under 

your leadership and that of Mr. Stupak, Mr. Shimkus, and others, 

and the Subcommittee on Oversight and Investigations, we have 

found many dangerous gaps in the foreign inspection system of 

Food and Drug Administration. What was found and what was confirmed by the Government Accountability Office and FDA’s own 

Science Board was a system which is grossly and grotesquely underfunded, with authorities largely outdated, based on a lot of trust 

but very little verification and quite small success. We cannot any 

longer follow this important regulatory function on blind faith. 

What was shown clearly at the hearing on the heparin disaster 

earlier this week by the Oversight Subcommittee confirms that. 

The consequences of this system led to the deaths of 81 people of 

whom we know, injuries and sickness of serious character for hundreds or perhaps thousands more. 

An important step toward addressing this occurred at the hearing on Tuesday. During this hearing, Dr. Janet Woodcock, director 

of the Center for Drug Evaluation and Research at FDA, candidly 

acknowledged the need for substantial new funding for inspections 

and stated that at least $225 million would be needed to put foreign facilities inspections on par with inspection of our domestic 

firms. Dr. Woodcock also indicated her agreement with the need for 

key authorities proposed in a discussion draft circulated 2 weeks 

ago by Congressman Stupak, Congressman Pallone, and I. She is 

to be commended for her leadership, frankness, and courage in this 

matter. 

The discussion draft would require FDA to conduct more inspections of foreign drug firms and to give the Agency authority to deny 

entry to those imports produced in facilities that refuse to be inspected or impede an inspection. We would also require drug manufacturing facilities to register with FDA annually, pay a registration fee and be assigned a unique identifier to provide a more accurate accounting of facilities and allow FDA to move quickly in the 

event of safety incidents. 

Finally, we would enable FDA to explicitly require manufacturers to know and verify the safety of their suppliers. This is the first 

time we have heard from a high-ranking Administration official in 

6 

ways which would enable that agency or this committee to see to 

it that FDA does and has the resources it needs to do the job. 

And again, I want it known that I appreciate Dr. Woodcock’s candor. To her credit, she has stepped forward in the midst of a public 

health crisis to deal honestly with the Congress and tell the Congress what her agency needs to better protect the American people 

from unsafe drugs. How I wish that others in the Administration 

would show the same vigor, responsibility and leadership. I hope 

that we can continue our dialog today with the same degree of candor on the part of all of the persons involved, including members 

of the Committee. 

I am pleased to note that the drug industry’s willingness to work 

with us in addressing these problems is rather better than that of 

the Administration or of some other industries. While we may differ on details, in marked contrast to food manufacturers, the drug 

industry appears to recognize that a safer drug supply is not only 

in the interests of the public health but is also a matter of interest 

in their bottom line. I appreciate the letters of support we have received from two generic manufacturers, Ranbaxy and Teva, as well 

as consumer groups, such as Consumers Union and Center for 

Science and the Public Interest. 

Mr. Chairman, food, drug, device, and cosmetic safety are important to American consumers. The discussion draft is a good and 

meaningful step forward in providing what FDA needs to serve as 

a premier public health agency of the United States government. 

I remember when this was so. Regrettably, it needs some rather serious effort to get us back to where Food and Drug will again serve 

in that capacity. 

I look forward to working with all my colleagues on the Committee and with FDA and interested stakeholders to craft good, responsible and bipartisan legislation so that the Food and Drug Administration is able to competently fulfill its critical mission. 

Mr. Chairman, I commend you for the hearing and I thank you 

for your courtesy. 

Mr. PALLONE. Thank you, Chairman Dingell. 

Next I would recognize the gentleman from Pennsylvania, Mr. 

Murphy. 

OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA 

Mr. MURPHY. Thank you, Mr. Chairman. 

In this Congress, we have had numerous Oversight and Investigation hearings regarding drug safety. During one such hearing 

last November, I asked the witnesses if they would allow their children to take prescription drugs, knowing they contained active ingredients all imported from China. All the witnesses somewhat reluctantly answered ‘‘yes,’’ but given that the GAO estimates the 

FDA only has about 7 percent of foreign establishments inspected 

per year, I understand the witnesses’ reluctance. Unfortunately, we 

don’t even know if the FDA really inspects 7 percent of foreign establishments, as the GAO reports that one FDA database indicated 

there were 3,000 establishments. Another one indicated there were 

7 

6,800 establishments. Clearly, we need to manage our information 

technology infrastructure better. 

Regardless of the number of actual inspections, we know the 

number is low and that importing active pharmaceutical ingredients from countries like China can be dangerous. Sixty-two deaths 

have been linked to the nationwide recall of heparin. Every death 

was linked to an active pharmaceutical ingredient produced in 

China. The FDA admitted it did not perform a pre-approval for the 

facility and obviously domestic quality control measures in place 

were not adequate. We must raise the bar, and I hope we hear 

from the witnesses today how we can improve drug safety without 

crippling the supply chain. 

After speaking with drug manufacturers in my district like 

Mylan and GlaxoSmithKline, I believe we have universal agreement that we must improve drug safety. The question is how we 

improve drug safety in a way that best maximizes the limited resources of the FDA and the robust quality control measures already in place at most of our domestic facilities. This bill provides 

additional authorities to conduct inspections, destroy counterfeit 

imported products, and mandate recalls, all worthy improvements. 

However, if we are to institute a registration fee on manufacturers, 

I am concerned that the fee be targeted to increasing oversight of 

foreign drug manufacturing facilities rather than just placing additional burdens on domestic manufacturer facilities. 

I also want to applaud the good bipartisan work of Congressmen 

Buyer and Matheson for introducing legislation to improve our 

drug pedigree system. States like California are undertaking individual efforts to establish track-and-trace policies that could lead 

to a patchwork of State laws. The Buyer-Matheson bill would 

produce an updated Federal standard to our drug pedigree system. 

From my work developing legislation to harmonize the reporting of 

hospital-associated infections where you now have over 26 different 

State laws, there is real value in introducing a Federal standard. 

I look forward to witnesses’ testimony today, and with that, I 

yield back, Mr. Chairman. 

Mr. PALLONE. Thank you. 

I recognize Mr. Waxman for an opening statement. 

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

Mr. WAXMAN. Thank you, Mr. Chairman, and I want to commend 

you for holding this hearing and also to commend you, Chairman 

Dingell and Chairman Stupak, for their efforts in pulling together 

the strong legislation to address the dangerous gap in FDA’s authority and the critical lack of resources. 

As Americans are all too aware, the demands being placed on the 

FDA have essentially overwhelmed the Agency’s ability to effectively respond and FDA is now indeed in a crisis. That strain is 

in large part due to an increasingly globalized drug development 

and manufacturing model. Twenty years ago, 90 percent of U.S. 

drugs came from the United States or the European Union. Today 

that number has dropped to 20 percent. This clearly means that 

FDA must amplify its international presence if it is to have the 

8 

hope of keeping up. FDA will need a serious infusion of resources 

and multiple new authorities to do the job we all expect it to do. 

In a moment of much appreciated candor, FDA told us on Tuesday 

it would take an additional $225 million for the Agency to inspect 

the 3,300 drug manufacturing facilities abroad, but according to 

GAO, FDA’s information technology systems are so out-of-date that 

the Agency cannot even be sure that there are actually only 3,300 

facilities abroad in need of inspection. In 2001, one of FDA’s databases said there were 3,000 foreign establishments while another 

said there were 6,800. FDA’s inability to even assess basic information, like how many facilities abroad it should be inspecting, is simply unacceptable. By creating a mandatory registration fee for drug 

and device manufacturers, both in the United States and abroad, 

the bill will generate critical dollars that will enable FDA to conduct more inspections, and I hope the industry will get behind 

those fees. We must also ensure FDA gets the necessary funding 

to revamp its IT systems. Otherwise it won’t be able to effectively 

use the information gleaned from an increased inspection force. 

The bill fills some critical gaps in FDA’s authority by granting 

FDA recall and administrative detention authority and enhanced 

enforcement tools like civil monetary penalties for improper import 

filings. At the heparin hearing, FDA highlighted the fact that they 

currently lack subpoena authority and indicated that authority 

would be helpful. The bill doesn’t have that in its present form but 

I think we should look at adding it and other authorities as well. 

On the drug pedigree issue, I commend Mr. Matheson and Mr. 

Buyer for their work on this legislation. I hope we will proceed 

with great caution when talking about a bill that might preempt 

the efforts of States. As many of you know, California has enacted 

a strong bill, so any Federal legislation that seeks to nullify California’s law must provide the same or greater degree of protection 

or else preserve California’s ability to proceed with its legislation. 

Let me finally stress the importance of moving this legislation 

now. Without the authorities and resources provided in the bill, we 

leave ourselves vulnerable to another heparin debacle. I want to 

congratulate the people who have authored the strong legislation 

before us and look forward to working with them and others to 

pass it into law. 

Mr. PALLONE. Thank you, Mr. Waxman. 

I next recognize our vice chair, Mr. Green, for an opening statement. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman, for holding the hearing 

today on the discussion draft of the Food and Drug Administration 

Globalization Act. 

Today we are focusing specifically on drug safety. I have had the 

opportunity to participate in several hearings led by Chairman Stupak in the Oversight and Investigation Subcommittee on drug safety. Last week we had a hearing on the foreign drug inspection program and this week we had a hearing on the heparin incident. All 

these hearings have clearly shown that the FDA does not have the 

9 

resources, funding, or technology it needs to protect the American 

public from counterfeit or tainted drugs entering this country. 

In light of these hearings and the recent heparin incident, I 

signed on as an original cosponsor of Mr. Buyer, Mr. Matheson, 

and Mr. Rogers’ legislation, H.R. 5839, the Safeguarding America’s 

Pharmaceuticals Act. I believe the Safeguarding America’s Pharmaceuticals Act and Chairman Dingell’s discussion draft can help 

us address many of the concerns we have with regard to drug safety. This discussion draft calls for increased resources for overseas 

facility inspections by FDA, an up-to-date registry of all foreign 

drug manufacturing facilities, country-of-origin labeling, 

verification of drug purity and safety, and gives the FDA the ability 

to issue fines and mandatory recalls. 

H.R. 5839, the Safeguarding America’s Pharmaceuticals Act, is 

an especially well thought through approach. It makes changes to 

help protect our Nation’s pharmaceutical supply as well. Currently, 

FDA does not have the authority to destroy adulterated, misbranded, or inadmissible drugs at the Nation’s international mail 

facilities. The FDA must waste time and money returning the 

packages to the sender. Often the FDA sees the same rejected 

packages with their own return-to-sender stamps at the mail facilities that have been sent in a second attempt to pass through the 

FDA system. H.R. 5839 gives the FDA the ability to destroy these 

packages when they are first rejected. Safeguarding America’s 

Pharmaceuticals Act gives us one national pedigree system to allow 

for consistency and efficiency when pharmaceuticals are moving 

about the country. The bill also creates a track-and-trace system 

that would establish a drug identification and tracking system 

through which drug manufacturers, repackagers, wholesale distributors, and dispensers can authenticate the wholesale distribution history of any prescription drug that has a standardized numerical identifier. I know the National Association of Chain Drug 

Stores that are testifying before us today have some concerns regarding the track-and-trace system. I am hopeful we can work out 

their concerns because they are definitely part of our healthcare 

delivery system. The discussion draft of the Safeguarding America’s 

Pharmaceuticals Act makes great strides toward assuring drug 

safety at home and abroad. 

Again, I want to thank you for your leadership, for holding the 

hearing. I want to thank our witnesses for appearing today, and I 

yield back my time. 

Mr. PALLONE. Thank you. 

Next, the gentlewoman from Oregon, Ms. Hooley, for an opening 

statement. 

OPENING STATEMENT OF HON. DARLENE HOOLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Ms. HOOLEY. Mr. Chairman, thank you and your staff for this extraordinary effort in putting this discussion draft together. The 

American people want to know that their pharmaceuticals are safe 

and this bill goes a long way toward achieving that assurance. 

This bill creates a registration process and fee for domestic and 

foreign drug and device establishments. I have said for years that 

the FDA is underfunded. This bill begins to address the muchVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
10 

needed resources for drug safety in a fair manner. I especially appreciate the fee amount will be determined by the Secretary based 

on a case-by-case basis per facility. 

This bill also improves the inspection of facilities that produce 

drugs, active pharmaceutical ingredients, devices and device parts. 

This bill requires inspection before a product is put into the stream 

of commerce as well as a portion that inspects facilities already 

producing products that are in commerce. One of the most innovative aspects of the bill is that it requires for the first time the inspection of foreign as well as domestic drug and device establishments every 2 years. 

This bill also has a section on country-of-origin labeling, or what 

we call COOL. Being a longtime proponent of COOL, I am pleased 

that this portion of the bill takes COOL one step further to make 

the well-documented origin of drug ingredients the norm for the industry. Under Section 204, this bill allows the Secretary to deem 

a drug adulterated if upon request the manufacturer of the ingredient and each drug that contains that ingredient does not have 

adequate documentation to establish where the ingredient was 

made. Country-of-origin labeling allows the Secretary to deem misbranded a drug or device if its labeling fails to identify the country 

which is the source of the active pharmaceutical ingredient in 

whole or in part and of its place of manufacturing in the case of 

a drug, or the country of manufacturing in the case of a device. 

Our citizens want to know that their medications and their medical devices are safe. This discussion draft provides additional authority for the FDA’s efforts to assure the safety of imported foreign-manufactured drugs and devices. I am looking forward to 

working with you as this bill moves forward so that we can assure 

the public that their drugs and devices are safe. 

Thank you. 

Mr. PALLONE. Thank you. 

I recognize the gentleman from Utah, Mr. Matheson. 

OPENING STATEMENT OF HON. JIM MATHESON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF UTAH 

Mr. MATHESON. Well, thank you, Mr. Chairman. As my colleagues before stated, I do want to thank you for allowing consideration of the legislation that Representative Buyer and I have been 

working on. I want to thank Representative Buyer for all of his efforts on this issue. He has been a real leader and it has been a very 

good experience to work with him in forming this legislation. And 

in the tradition of this committee working in a bipartisan way, 

when this bill was originally introduced, in addition to Representative Buyer and myself, we also had Representative Green and Representative Rogers from the Committee as original cosponsors, and 

I think that speaks well to the broad-based support for this legislation. 

I just want to highlight three key points that bear noting with 

regard to this legislation. I want to be clear with my colleagues regarding the intent of this legislation is to protect our Nation’s pharmaceutical supplies from domestic and international counterfeiting 

threats. I think this is a carefully thought-out approach to achieving this goal. 

11 

So specifically this legislation does the following. It creates a system by which we will be able to track drugs from the time they 

leave the manufacturing facility until the time they reach patients 

in the pharmacy, hospital, nursing home, or doctor’s office. Counterfeiting of drugs is a public health concern. People need to know 

that when they take a prescribed pill, it is real, undiluted and not 

laced with phony ingredients. By implementing these steps now, 

we can go a long way toward safeguarding the medicine people 

need to get well and stay healthy. 

Second, the legislation provides for one uniform national pedigree 

system. By having one Federal standard, we can ensure our Nation’s drug market is efficient and can ensure products flow safety 

and freely throughout the country. This is a guiding principle that 

seems to unite a majority of the members of the supply chain. 

And third, this legislation raises the standards for drug wholesalers while maintaining States’ rights to regulate drug wholesalers. I believe this is a necessary step to ridding the market of 

bad actors and ensuring that anyone handling American’s pharmaceuticals should be held to high standards. 

Counterfeit drugs harm people. Our families, our friends, and 

our constituents need to know that they have secure sources of 

medication. The victims are often people who need real quality 

drugs the most: cancer patients, AIDS patients, and people being 

treated for heart disease. And the main reason, as Mr. Buyer indicated in his testimony, the main reason for why we are so concerned about the counterfeit drug issue, not surprisingly, is money. 

The Centers for Medicine and the Public Interest predicts that the 

worldwide market for counterfeit drugs will go to $75 billion annually by 2010, and some experts say it is more lucrative to sell a 

counterfeit drug than a narcotic. Counterfeiters are alarmingly 

good at their jobs. They can create pills and drug packages that are 

so close to the real products that they are indistinguishable to consumers. By strengthening current laws and regulations and by creating a uniform national standard, our legislation further secures 

the healthcare supply chain. This enhances our country’s current 

high standard of patient safety. 

I look forward to the witnesses’ testimony regarding this important issue and, Mr. Chairman, I will yield back. 

Mr. PALLONE. Thank you. 

The gentleman from Pennsylvania, Mr. Pitts, recognized for 

an—— 

Mr. PITTS. I will waive. 

Mr. PALLONE. Thank you. 

The gentleman from New York, Mr. Towns. 

OPENING STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW 

YORK 

Mr. TOWNS. Thank you very much, Mr. Chairman. Let me thank 

you also, Mr. Buyer, and of course, Mr. Matheson and Chairmen 

Dingell and Stupak and other members who took the leadership on 

the discussion draft and topic. I support the intent of these efforts 

to eliminate threats to our Nation’s safety from drug and medical 

device products regardless of where they actually emanate. I pledge 

12 

to work with my colleagues to achieve the overall safety goal as we 

better understand the challenges. I look forward to hearing from 

the FDA and other witnesses this morning. 

I am particularly interested in the FDA’s plan to establish a foreign office in China and the agencies beyond our borders initiative, 

which seeks to provide for certification by third parties and the 

FDA plans to upgrade its system to gain the necessary information 

about the entire life cycle of imported products. In our current 

modern day America, I cannot imagine that a record 81 deaths 

could occur from an unsafe prescription drug produced outside of 

the United States. That to me is something that I have difficulty 

understanding in this day and age. I believe the overarching problem of a resource challenged FDA can be solved and foreign country regulatory gaps can be closed in order to keep the door on trade 

open to allow for all to have a win-win outcome. 

In 2007, America’s biopharmaceutical research companies may have spent an estimated $59 billion in domestic drug research and 

development, yet it may take a mere $71 million for the FDA to 

be able to biannually inspect drug manufacturers. For the United 

States to effectively meet this critical aspect of our challenge, the 

bottom line is, the FDA must be able to take a science- and riskbased approach and perform surveillance inspections of foreign 

drug manufacturing places and implement other methods to ensure 

compliance with U.S. requirements for drug products which come 

into the U.S. market. 

Mr. Chairman, I would like to thank you and the staff and everyone who is really working on this. I think this is a very serious and 

very important issue, and I hope we stay with it until we come up 

with some kind of resolution. Thank you so much for your involvement. I yield back. 

Mr. PALLONE. Thank you, Mr. Towns. 

Ranking Member, Mr. Barton, for an opening statement. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Mr. Chairman. I appreciate the regular 

order that is being used on this issue. 

As we learned during Tuesday’s hearing, drug imports are not 

very well supervised currently, but it is an issue that I think can 

be addressed in a successful fashion if we work together across the 

aisle and also work with the stakeholders and the FDA to solve 

this problem. 

I think everyone understands that the Food and Drug Administration lacks sufficient resources to conduct its core mission. Both 

the Agency and industry recognized that fact last year, and we 

were able to work together to negotiate the fourth installment of 

the Prescription Drug User Fee Act, or PDUFA. PDUFA 4 did have 

significant increases in user fees that were paid by the industry, 

and as we said, that has now become law. We did find out though, 

during the debate on PDUFA, that many witnesses and members 

of this committee began to express the fear that the Agency might 

become too dependent on industry user fees. The draft that is currently before this subcommittee, which, I might add, the Minority 

had no input into, would exacerbate this problem by becoming even 

13 

more user fee oriented. I think that, as I said a minute ago, we obviously need more assets and more resources for the FDA. We 

should really pay attention to how we give them those resources, 

and it might better to just authorize out of the general revenue as 

opposed to becoming more and more dependent on user fees. 

There are some ideas in the draft before us that are worth exploring. One is the idea to give the FDA mandatory recall authority. I support that, and I think most members of the Minority 

would support that. I also believe that the premise that the FDA 

should be conducting more frequent inspections overseas is valid. 

We need to work to find a way to make that happen. I do believe, 

however, that instead of setting a specific amount, we should work 

with the FDA and develop an inspection priority system based on 

real risk. We also need to ensure that the quality systems are in 

place to conduct those inspections and to protect the integrity of 

the products that are being inspected. We do not need, in my opinion, to just waste more resources by scheduling mandatory inspections at specific times. I am not sure that that would be a worthwhile use of our resources. 

The draft offers other concepts that are important. I think that 

nobody should mistake country-of-origin labeling and restrictions 

on ports of entry as safety provisions, however. That is something 

that may come up in the discussion and the questions of the witnesses. 

Chairman Dingell has told me and he has stated publicly that he 

is willing to work with the Minority to develop a bipartisan product. I am going to take him at his word. We are going to work in 

a positive way. Hopefully we can come to a consensus to develop 

a product that is worthy of support not only in the subcommittee 

but in full committee and on the Floor. But it is going to take work 

and we on the Republican Minority side are not going to be a rubber stamp for the draft that is currently before the subcommittee. 

With that, Mr. Chairman, I appreciate your regular order process 

and I yield back. 

Mr. PALLONE. Thank you, Mr. Barton. 

Ms. DeGette passes. 

Ms. DEGETTE. I will put my opening statement into the record. 

Mr. PALLONE. She will insert her statement into the record. 

The gentlewoman from California, Ms. Solis. 

Ms. SOLIS. I will also insert my statement in the record. 

Mr. PALLONE. Thank you. I think that concludes our opening 

statements so we will now turn to our witness. Dr. Woodcock, come 

up and take a seat at the panel. I want to welcome Janet 

Woodcock. Dr. Woodcock is director for the Center for Drug Evaluation and Research at the FDA, and I understand you are accompanied by Doctor—is it Elisa Bernstein—who is director of pharmacy affairs of the Office of Policy at FDA, but you are going to 

speak and she is going to be available to answer questions, correct? 

Dr. WOODCOCK. Yes, that is correct. 

Mr. PALLONE. You know we have 5-minute opening statements. 

The statement becomes part of the hearing record and each witness 

may in the discretion of the Committee submit additional brief and 

pertinent statements in writing for inclusion in the record. 

I now recognize you, Dr. Woodcock. Thank you for being here. 

14 

STATEMENT OF JANET WOODCOCK, M.D., DIRECTOR, CENTER 

FOR DRUG EVALUATION AND RESEARCH, FOOD AND DRUG 

ADMINISTRATION 

Dr. WOODCOCK. Thank you, Mr. Chairman, and members of the 

subcommittee. I am Janet Woodcock. I am director of the Center 

for Drug Evaluation and Research at FDA. I am accompanied by 

Elisa Bernstein, who is director of pharmacy affairs at FDA. Dr. 

Bernstein is an expert in the pharmaceutical distribution chain and 

track-and-trace technologies. 

Thank you for the opportunity to testify on the important issue 

of globalization of our pharmaceutical supply. The rapid and now 

rapidly accelerating shift in drug manufacturing from the United 

States to other countries has caused a great deal of concern over 

the past decade. Currently, as the members have already alluded 

to, a substantial majority of active pharmaceutical ingredients used 

in the United States are made outside its borders, and many of 

these are being increasingly made in developing countries. Questions have been raised about FDA’s ability to oversee the quality 

of this large and very rapidly growing inventory of foreign manufacturing establishments. 

The Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce has actually held a number of 

hearings on many aspects of this issue over the years. In 1998, the 

GAO issued a report entitled ‘‘Improvements Needed in the Foreign 

Drug Inspection Program’’ that detailed many of the challenges 

that FDA faces. 

Over the last decade, FDA has made extensive efforts to improve 

its ability to oversee the quality of imported drugs, including negotiating data-sharing agreements with other countries, devising 

risk-based approaches to selecting foreign sites that we go inspect, 

developing international guidance on good manufacturing practices 

for active pharmaceutical ingredients—that guidance has been 

adopted around the world—publishing a regulation requiring foreign establishments to register, and many other efforts. 

Last year, President Bush issued an Executive Order creating a 

cabinet-level working group on import safety to promote the safety 

of imported products and asked the HHS Secretary to lead the 

group. This group included representatives from 12 Federal departments and agencies including FDA. It reviewed the procedures, 

regulations and practices for ensuring that imported food, drugs, 

and other consumer products are safe. 

On November 6, Secretary Leavitt presented the Import Safety 

Action Plan to the President. Several new authorities pertinent to 

drug importation were recommended, including authorizing FDA to 

refuse admission of imported products if access to the foreign establishment was unduly delayed, limited, or denied, providing authority to expedite destruction of drugs of low value and high risk that 

were inappropriate, providing FDA with the authority to require 

under certain circumstances a certificate or other assurance that 

an imported product complies with FDA requirements, and providing the FDA with the authority to accredit independent third 

parties to evaluate compliance with FDA requirements. In addition, 

the Administration has announced plans to establish FDA offices 

in several countries, including India and China. 

15 

In January of this year, FDA and then the world became aware 

of deaths and adverse reactions that ultimately were traced to contaminated heparin sourced from China. This problem of contaminated heparin is continuing to unfold in countries worldwide. So 

the introduction of this discussion draft is certainly timely. We are 

the process of reviewing the discussion draft in detail and look forward to working with you on this legislation. At this time I can 

make some general comments using the framework that guided the 

Action Plan for Import Safety, which could guide the development 

of drug safety legislation. 

Any legislation should allow flexibility for FDA to set requirements and priorities based on scientific risk assessments. Any legislation should not rely on inspection as the sole or primary means 

of assuring quality. Quality must be built in. That is a premise of 

the quality movement. It cannot be tested or inspected into a product. FDA in 2003, I believe, introduced the concept of quality by design, which puts the responsibility on the manufacturer to ensure 

that the quality of their products is high by managing the quality 

of the components, the manufacturing process, and the systems 

surrounding the manufacturing process. Quality is a system property and cannot be assured by a single component of a quality system. It must be maintained by multiple surrounding components of 

the quality system. 

While the Administration is supportive of user fee programs in 

which regulated industry provides funding for additional performance designed to recoup costs, the Administration will carefully review any proposed user fee program to ensure it is being assessed 

against identifiable recipients for special benefits derived from Federal activities beyond those received by the general public, and any 

legislation should be carefully designed to avoid creating real or 

perceived trade barriers. The legislation should explicitly incorporate the Administration’s strategy of levering efforts by certification bodies and foreign nations that is already underway. And finally, several provisions of this bill may need to be reviewed in 

light of U.S. trade agreement obligations and we are reaching out 

to the United States Trade Representative for further insight. 

As you can see, efforts are underway at FDA to further ensure 

the safety of human drugs regardless of where they are manufactured. We share your interest in enhancing the safety of imported 

products and look forward to working with members and staff on 

the Committee and Subcommittee. The Administration is carefully 

evaluating the provisions in the discussion draft. 

Thank you for the opportunity to testify today, and I am happy 

to respond to any questions. 

[The prepared statement of Dr. Woodcock follows:] 

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25 

26 

27 

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Mr. PALLONE. Thank you, Dr. Woodcock. 

I am going to recognize myself for 5 minutes to begin the questioning, and I want to thank you, not only for being here today but 

also for being at the O&I hearing on Tuesday. Everyone was talking about your candor there, and we certainly appreciate that with 

regard to this discussion draft that we are circulating. 

I wanted to ask some questions that I think probably were asked 

Tuesday as well but I want this subcommittee to have the benefit 

of hearing your response. 

As you stated in Tuesday’s testimony before O&I, well, you said then that the FDA needs $225 million annually to inspect foreign 

drug facilities at the same rate that is required currently for domestic facilities. Is that correct? 

Dr. WOODCOCK. That is what I stated. I wasn’t given the chance 

to explain the assumptions behind that. 

Mr. PALLONE. Well, I will probably get into some of those with 

these additional questions, if that is OK. 

Dr. WOODCOCK. OK. 

Mr. PALLONE. According to the FDA budget documents reviewed 

by GAO for its testimony last week, FDA estimates that it will 

dedicate a total of $13 million in fiscal year 2009 to conduct foreign 

inspections. But you stated that an additional $100 million would 

be needed to meet the current statutory requirement to inspect domestic facilities every 2 years. So is that correct, this additional 

money for domestic? 

Dr. WOODCOCK. Yes. If I can explain how we arrived at those figures? 

Mr. PALLONE. You can explain it to me by probably answering 

this, whether that estimate includes the cost of compliance, the 

staff needed to review the reports, the inspectors. Does it include 

costs for information technology infrastructure to ensure that the 

FDA can access these reports? I wanted to know if those things are 

part of that. 

Dr. WOODCOCK. The estimates that I gave were based on a 2011 

projection of the inventory based on the current rate of change of 

the domestic and foreign inventory and they were based on the current productivity rate of inspectors both domestic and foreign and 

was based on what we call fully loaded cost of inspector per 

annum, which would include overhead costs, processing, enforcement, and so on but would not include information technology improvements. So that estimate did not include any estimates for improving the drug registration and listing or OASIS and so forth. 

And obviously we can’t send our inspectors over there unless they 

know where to go. 

Mr. PALLONE. OK. Now, is it your view that FDA should have 

the ability to deny entry to imports if the facilities in which they 

were produced refuse, delay, or impede in inspection? 

Dr. WOODCOCK. Yes, and I believe that is reflected in the Import 

Safety Action Plan that I referred to as well. 

Mr. PALLONE. And now, what about drug facilities? Should they 

be subject to an initial inspection before they can begin shipping 

products or ingredients? 

Dr. WOODCOCK. We try now to make sure that inspection is accomplished for any new facility that we haven’t seen. However, 

30 

some facilities make multiple products. They may add another 

product in a line of products, and we would like to preserve the 

ability to have flexibility to send our inspectors to what we deem 

to be the highest risk plants. 

Mr. PALLONE. So does that mean you don’t think that every facility should be subject to an initial inspection? 

Dr. WOODCOCK. Yes, we believe—let me explain again. Every facility should be subject to an initial inspection. However, a facility 

that is making multiple products and adds a product that is very 

similar to its product line, it might be lower risk than another facility that perhaps added an injectable product to its existing line. So 

we believe it would be best for FDA to have its flexibility preserved 

to put our resources, whatever they are, against the highest risks. 

Mr. PALLONE. All right. Now, what about—— 

Dr. WOODCOCK. That said—— 

Mr. PALLONE. OK. What about requiring the drug facilities to 

register and pay a fee on an annual basis to help clean up FDA’s 

databases and provide a more accurate accounting of firms providing drugs to American consumers? 

Dr. WOODCOCK. Well, this puts the finger on one of our major 

problems, which has already been alluded to by the members. 

Right now we don’t have a means of assuring an accurate inventory of what firms are producing drugs that are imported into the 

United States around the world. We believe we need a unique identifier in addition to having an annual registration and listing of all 

products that are produced. The mechanism, by ensuring that 

firms do this, there are probably several options for that. 

Mr. PALLONE. That was my next question. You already answered 

it. Now, in your view, would it be helpful to have additional enforcement tools to use against bad actors, for example, strong civil 

money penalties, mandatory recall, the ability to destroy contaminated imports when they are discovered so they can’t just be 

shopped to a new point of entry? 

Dr. WOODCOCK. As I said, the Administration is evaluating the 

provisions in the bill, but in my testimony on Tuesday, I stated 

that I believe that it would be helpful for FDA to have additional 

authorities to go after those who are performing improper acts, 

misrepresenting imports, and so forth. 

Mr. PALLONE. Well, would you include those additional enforcement tools, the civil money penalties, mandatory recall, ability to 

destroy contaminated imports? Would you suggest that those be included? 

Dr. WOODCOCK. My personal opinion is that those would improve 

our efficiency of being able to accomplish our operations. For example, if the products that we are not letting in have to sit at the port 

and we have to deal with them, that creates great efficiency problems for us and actually for Customs as well. So we need mechanisms that enable us to efficiently deal with products that are violative or should not get into this country. 

Mr. PALLONE. OK. Thank you. My time is up. 

Mr. Buyer. 

Mr. BUYER. Thank you very much, Dr. Woodcock, for being here, 

and thank you for bringing Dr. Bernstein. The foundation of her 

31 

expertise is well recognized and we appreciate your service to country. 

I have a series of questions I am going to ask, so please take 

some notes, and I would ask each of you the best field of your expertise on this to provide these answers. 

Can you explain the return-to-sender policy that FDA employs at 

the international mail facilities when it returns products which it 

deems inadmissible to our country? Next, can you explain why FDA 

does not destroy counterfeit, adulterated, or misbranded products 

that come into the international mail facilities and the express carrier hubs? Next, does FDA support section III of H.R. 5839, which 

gives the Agency the express authority to destroy pharmaceutical 

products which appear to be counterfeit, adulterated, or misbranded? Next, I have reviewed an alternate proposal circulated by 

the chain drug stores that wants to—their proposal is for a certification process which would do away with the Federal-State pedigree systems. Is that something which you would endorse or not? 

The next is, the FDA Commissioner was quoted as stating at the 

NACDS/HDMA RFID health industry adoption summit that it is 

vital to get this technology implemented now, stressing that a waitand-see attitude is not good enough. The industry needs action and 

it needs it now. The question is, do you agree with the Commissioner’s assessment that we need action on a track-and-trace now, 

and if so, can you update us on the FDA’s work on developing the 

unique identifier standard and the standard for track-and-trace 

system, and does FDA support a phased-in approach to implementing such an identification and track-and-trace system? With 

that, I will pause and allow you to munch on that. 

Dr. WOODCOCK. To begin with the return-to-sender policy, I will 

ask Dr. Bernstein to respond to that. 

Dr. BERNSTEIN. There are current authorities in the law—— 

Mr. PALLONE. Is your mic on, Dr. Bernstein, or maybe put the 

mic closer to you. 

Dr. BERNSTEIN. If it is OK with you, can I answer a couple of 

those together? OK. There are current authorities in the law that 

require us to go through certain steps when we look at a package 

and we detain a package, and we work with CBP at the international mail facilities, and the current law provides some challenges and some—in order to destroy products, and so what we do, 

the process of what we do is, when we get a product that CBP 

hands over to us, we will send a letter, a notice of detention, to the 

person who is supposed to get that package and give them 20 days 

to get back to us to whether that product should be admitted and 

is compliant with the Food, Drug and Cosmetic Act. Because of 

some of the measures in the current law, after 20 days we will 

often return it to sender, otherwise it has to sit on the shelves for 

at least 90 days before we can destroy it. Well, you yourself have 

been to these international mail facilities and seen the number of 

products that are piled because they are going through this detention process, and CBP and FDA have been working together to try 

to come up with ways to make this process easier, and in the Import Safety Action Plan that Dr. Woodcock mentioned, we did say 

that streamlining the destruction authority would be very beneficial, and I know there are provisions in your bill, and we are lookVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
32 

ing at those provisions now and we will be glad to work with you 

on how we can make sure that those streamlined authorities and 

destruction authorities—— 

Mr. BUYER. To have that express authority to be able to destroy? 

Dr. BERNSTEIN. To streamline the current process to destroy 

products, yes. 

Mr. BUYER. Thank you. 

Dr. Woodcock? 

Dr. WOODCOCK. I don’t have—— 

Mr. BUYER. You didn’t take a list? 

Dr. WOODCOCK. I have the list. I don’t have any further comments. I think Dr. Bernstein is our expert on this. Do you want to 

go down the list further? All right. Why don’t we use, does FDA 

support authority to destroy, you have already covered adequately. 

What about the Federal-State pedigree? 

Dr. BERNSTEIN. Should we do away with the pedigree, the Federal and State pedigree system? I believe we should not. The pedigree system, although we have had the Prescription Drug Marketing Act pedigree system in place, a pedigree provides accountability and transparency and a chain of custody for products as 

they move through the supply chain. We need that transparency, 

we need that accountability in the supply chain to know where the 

drugs—where they come from, where they are going, where they 

have been, where they are supposed to go, and who had them along 

the way. That helps not only to ensure that you have a safe and 

effective product that the patient gets but also allows for law enforcement and regulators to actually trace back the product 

through the supply chain if there was any suspicious activity with 

respect to that product along the way. 

Mr. PALLONE. Mr. Buyer, you are a minute over. What I was 

going to suggest—— 

Mr. BUYER. I will go to the second round on the follow-up. 

Mr. PALLONE. Well, I don’t know if we are going to have a second 

round, but what I would definitely ask is that you answer those 

questions in writing and get back to us as soon as possible because 

I don’t know that we are going to have a second round because we 

have another panel. 

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

Mr. PALLONE. If you could do that, please. 

Next is the gentlewoman from Oregon if she has some questions. 

No? 

Mr. Matheson? 

Mr. MATHESON. Thank you, Mr. Chairman. Thank you, Dr. 

Woodcock, for being here today. 

As you know, and Mr. Buyer just asked you questions related to 

the legislation that he has introduced and I have joined him in 

doing that, let me ask you—and there may be a little repetition but 

first of all, does the FDA support looking at track-and-trace technology and maintaining or improving from the 1988 pedigree law 

in doing that? 

Dr. WOODCOCK. Yes. Again, I will turn to Dr. Bernstein because 

she has been spearheading that effort. 

Dr. BERNSTEIN. The FDA, we have in 2004, 2005, 2006, we have 

continuously put out reports on ways that the drug supply chain 

33 

and measures that could be taken to further supply the drug supply chain. Tracking-and-tracing and electronic technology measures 

and solutions are one of the cornerstones of that approach. So yes, 

we do support it. The Food and Drug Administration Amendments 

Act of 2007 had provisions in it that requires FDA to develop 

standards for tracking-and-tracing, authentication and identification and we think these measures will further move the supply 

chain and provide incentives for them to implement track-andtrace. 

Mr. MATHESON. You are probably also familiar that our legislation will create the one uniform national pedigree standard to prevent proliferation of 50 different State requirements in this area. 

In your opinion, does the FDA support a uniform national pedigree 

standard as opposed to having the 50 State standards? 

Dr. BERNSTEIN. We have said that a single national uniform 

standard would be ideal to help the distribution of drugs in the 

United States. 

Mr. MATHESON. This may sound like an obvious question but I 

think it is important to have it on the record. What is the importance of having chain of custody information for drugs as they flow 

through the supply chain? 

Dr. BERNSTEIN. As I said, the measures for tracking, tracing and 

pedigree and chain of custody is to ensure accountability and transparency, and that chain of custody where you know where the drug 

has been, where it is going, who has had it, makes that—allows 

you to be accountable, allows everyone to be accountable to ensure 

that that patient gets a safe, effective drug and genuine drug. 

Mr. MATHESON. Where do you think the technology is now? We 

are hearing different opinions from different witnesses about if we 

are ready to do this. 

Dr. BERNSTEIN. There has been tremendous progress and movement in the technology and standards, though as part of the provisions in the Food and Drug Administration Amendments Act, 

FDAAA, we are in the process right now of a data call. We have 

put out a Federal Register notice and asked for comments on the 

state of technology and the technologies that are available and, in 

addition, where the standards are. So we should know very soon 

because by May 19, that docket is closing and we will have more 

information. But in my opinion, the technology has progressed significantly since we first called for the use of technology in 2004. 

Mr. MATHESON. Excellent. 

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

Mr. PALLONE. Thank you. 

The gentleman from Pennsylvania, Mr. Pitts. 

Mr. PITTS. Thank you, Mr. Chairman. 

You stated that FDA cannot rely on inspections as a primary 

means of ensuring product safety and that any legislation should 

allow FDA to set requirements and priorities based on a strong scientific FDA risk assessment. Can you explain that further? 

Dr. WOODCOCK. Certainly. We have—as I said, we have developed a modern program for pharmaceutical quality, which involves 

a quality systems approach, and quality systems is what is used to 

ensure quality in many industries, for example, semiconductors, 

aeronautics, what have you, cars, automobiles. That involves conVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
34 

trol of every part of the manufacturer process, from the components, the supply chain of each component, the understanding that 

manufacturing process, having a scientific understanding of the 

product, and then making sure all the systems around that are 

under a state of control. 

When we do an inspection, what we do nowadays, modern inspection, make sure that those systems are functioning. We don’t 

serve as the quality control unit for the plant. We make sure they 

have one and that they have a quality assurance program that is 

functioning and that they are managing their supply chain. So we 

need to make sure that the scientific standards are in place, that 

the entire supply chain is under control and that includes, for example, the brokers, the customs agents at the borders, the distributors inside the United States, as Elisa was saying. Any place that 

chain is broken, then quality problems can be introduced into the 

product, or counterfeits, for that matter. So inspection is a form of 

verification that the systems that are in place are working, but 

those systems have to be run by the manufacturers, by the importers and so forth. They have to act properly for the quality of the 

product to be maintained. 

Mr. PITTS. Can you describe the type and scope of training that 

FDA inspectors receive? How long, on average, does it take for an 

FDA inspector to be fully trained to conduct facility inspections? 

Dr. WOODCOCK. It takes about 3 years, and there is a rigorous 

progression of training. Furthermore, a number of years ago, we established something known as the pharmaceutical inspectorate, 

which is even another level of training to allow our inspectors to 

be fully able to inspect modern, complicated pharmaceutical operations. So that takes about 3 years to be an investigator, and then 

if you are going to be a foreign investigator, investigate foreign facilities, we would like our inspectors have a number of domestic inspections under their belts and be well trained at that before they 

go and deal with the challenges of another country, additional languages, and so forth. 

Mr. PITTS. How long would you estimate it would take the Agency to recruit and train a sufficient number of new inspectors to conduct the requisite number of foreign inspections, and are there any 

difficulties or challenges that FDA faces in recruiting and training 

new inspectors? 

Dr. WOODCOCK. Our difficulties are mainly, I would say, resources. We brought on a very large number of investigators in 

2001 after that crisis and we were able to get them on board and 

begin their training, but regardless of how many we would hire, it 

would take us 3 years to train them up, and even 4 years if we are 

talking about a foreign inspectorate and fully trained investigators 

who can work on their own in foreign countries. So there is a significant training component, and we would have to keep working 

on that over a number of years, and that is why my estimate for 

the resources was that 2011 estimate, the trajectory that we would 

get to by 2011. 

Mr. PITTS. And that would permit you to make how many foreign 

inspections? 

35 

Dr. WOODCOCK. That was an estimate of what would be required 

to inspect 50 percent of the firms each year, of the inventory 

abroad. 

Mr. PITTS. OK. There has been a lot of discussion about manufacturers of active pharmaceutical ingredients. Does the FDA currently have the authority to inspect those facilities and do those inspections differ from inspections conducted on facilities making a 

finished product? 

Dr. WOODCOCK. Yes, we definitely have the authority and we do 

inspect manufacturers of active—the manufacturing plants for active pharmaceutical ingredients. They are different in the sense 

that they are making different kinds of products. They are making 

what we call bulk ingredients rather than finished pharmaceuticals. They are not making pills or vials of product, they are 

making an ingredient that goes into, then, a finished product. So 

in that respect it is different, but the basic fundamentals of inspecting quality systems are very much the same. 

Mr. PITTS. Thank you, Mr. Chairman. 

Mr. PALLONE. Thank you, Mr. Pitts. 

Ms. DeGette is recognized for questions for 5 minutes. 

Ms. DEGETTE. Thank you very much, Mr. Chairman. 

Mr. PALLONE. I am sorry. You have 8 minutes. 

Ms. DEGETTE. That is what I thought. Thank you very much, 

Mr. Chairman. 

I would like to ask you a little bit about this heparin situation 

because, Dr. Woodcock, you had testified earlier, in response I 

think to Mr. Pallone’s questioning, that—to paraphrase what you 

said—while it was important for the FDA to have the authority to 

inspect all of these foreign factories, you also felt like it shouldn’t 

be a mandate that you inspect all of those facilities because it 

would probably be better if you could put your resources on the 

most high-risk areas. Would that be a fair summary of your testimony? 

Dr. WOODCOCK. Yes, that the FDA should be given flexibility. 

Ms. DEGETTE. So my question is, then, at least according to the 

media accounts, the FDA did not inspect the Chinese manufacturer 

of the active ingredient in heparin because of a clerical error. I 

know there is some dispute about this, but there is some view that 

if it had been inspected, then we may have found the problems on 

an initial inspection. What is your view on that? 

Dr. WOODCOCK. Well, we may have found problems on initial inspection but we don’t think we would have found contamination because we don’t have any evidence from testing that there was contamination in the heparin supply in 2004. 

Ms. DEGETTE. Now, aside from the clerical error, would the heparin ingredient manufacturer have been one of those high-risk facilities that you would have inspected as a matter of routine? 

Dr. WOODCOCK. Yes, we would have gone to that pre-approval inspection. It was simply flagged wrong. 

Ms. DEGETTE. OK. So you wouldn’t think that that would be a 

lower-priority inspection? Aside from the clerical error, you would 

have inspected that facility? 

Dr. WOODCOCK. Well, let me clarify this so you completely understand the situation. 

36 

Ms. DEGETTE. OK. 

Dr. WOODCOCK. The firm came online in 2004 and we didn’t—it 

would have been a pre-approval inspection at that point, and we 

didn’t inspect because of a clerical error but we would have inspected. 

Ms. DEGETTE. Great. Thanks. 

Dr. WOODCOCK. But we would not have inspected probably subsequently to that. The contaminant, as far as we can tell, was introduced into the bulk heparin supply in China, at least headed to 

the United States, in many different plants in 2006. 

Ms. DEGETTE. Let me just stop you right there. I am sorry. I just 

don’t have a lot of time. But that goes to some of the other questions that I want to ask, and that is, how do we catch some of this 

contamination that comes in along the line? In your testimony, you 

said that the FDA conducted 332 inspections of foreign drug manufacturers last year, which was the most ever in the Agency’s history. That still, however, is staggeringly low in proportion to the 

number of U.S. inspections that same year. So I guess the question 

is, what else can we do? I mean, we can increase resources, but as 

you say, it will take several years to bring those inspections online. 

I want to explore some other areas. For example, do you think that 

we can develop a pathway so that FDA inspectors can inspect foreign facilities without advance notice or invitation from the foreign 

government? This is one of the issues that we have been exploring 

for several years in the Oversight and Investigation Subcommittee. 

Dr. WOODCOCK. Yes. I am not a lawyer but I understand we 

could do that now. It is simply there are practical barriers. We 

have to get visas from the country. We have to state our purpose 

of coming in. Perhaps we could make international agreements 

with countries, but—— 

Ms. DEGETTE. And do you think that would help the FDA in its 

mission of finding these problems? 

Dr. WOODCOCK. We would like to do unannounced inspections. 

Ms. DEGETTE. So if there are things we can do to help you get 

that authority, that would be useful? 

Dr. WOODCOCK. Although I do believe we have the authority, 

there is just a host of practical problems. For example, we can’t go 

find the plant has shut down for a month-long national holiday and 

have our inspectors wait around a month until they get online 

again because we need to inspect them when they are producing 

product. So those are some of the practical—— 

Ms. DEGETTE. All right. Well, perhaps you can have your staff 

get back to us and tell us if there are some barriers that we could 

help you break as we propose legislation. 

Here are a couple of other questions. Unfortunately, I couldn’t be 

at Tuesday’s hearing because I was busy flying in, but you said 

that the FDA currently lacks subpoena authority and it would be 

helpful if you had it. Is that correct? 

Dr. WOODCOCK. That is what I stated. 

Ms. DEGETTE. And can you briefly describe how subpoena authority would benefit the Agency? 

Dr. WOODCOCK. I would like to, but it would be better to get back 

to you since I am not a lawyer, I am a doctor, and what would help 

is for us obviously to be able to subpoena witnesses and documents 

37 

and things like that to aid in our investigations but it is hard for 

me—— 

Ms. DEGETTE. But you have been advised by your legal counsel—— 

Dr. WOODCOCK. Correct. 

Ms. DEGETTE [continuing]. That it would be helpful to have subpoena authority? 

Dr. WOODCOCK. I have been advised by our compliance experts. 

Ms. DEGETTE. OK. I understand that historically your inability 

to copy and retain a firm’s records during an inspection has been 

a problem. Would it be helpful if you had clear authority to copy 

and retain records? 

Dr. WOODCOCK. I don’t know the answer to that question. 

Ms. DEGETTE. I would appreciate it if you could get back to me 

as we develop the legislation. Some of us think the bill probably 

needs to be clarified on that point, and I will tell you, I am a lawyer, and although I am on inactive status, I can tell you that it is 

helpful if you can get documentation as you go forward and be able 

to retain it. 

One last question. You mentioned some of this, but I want to talk 

about the new FDA office in China for a second. I am assuming 

that having foreign-based staff would help improve some of the current issues with foreign inspections, like the language barriers, cultural barriers, and insufficient time for thorough inspections, but 

I am wondering if the new FDA office in China will facilitate sufficient changes within the inspection process to ensure that the inspections are adequate in nature and on par with domestic inspections. Is that the goal of the FDA? 

Dr. WOODCOCK. Certainly we want to attain that. However, having an office in China, although it will help with the issues you 

raised, will not put the resources against doing the every-2-year inspection, which is the goal domestically is to not just do pre-approval inspection of a plant but be in that plant every 2 years. 

Ms. DEGETTE. And so what would help us meet that goal? 

Dr. WOODCOCK. That requires, as I said on Tuesday, additional 

resources to have more inspectors. 

Ms. DEGETTE. And will the FDA officials in China with this office now be able to perform unannounced inspections? 

Dr. WOODCOCK. Well, potentially they could. As I said, my understanding is that FDA has the authority to do that. However, China 

is a very big country and we are talking about a small office of 

FDA officials, and it isn’t to address the entire problem of—— 

Ms. DEGETTE. So I am confused, because you say that you think 

unannounced inspections are important. You say that you think 

you have the authority, but you are saying that you are not so sure 

you are going to do it because the office is small? 

Dr. WOODCOCK. I just believe there is a resource issue in covering all the facilities in China. 

Ms. DEGETTE. Right. So you are saying you don’t think you are 

going to do unannounced inspections or you are going to try to do 

them, or what? 

Dr. WOODCOCK. It would increase the probability of us being able 

to do any given inspection on an unannounced basis. 

Ms. DEGETTE. OK. Thank you very much, Mr. Chairman. 

38 

Mr. PALLONE. Thank you, Ms. DeGette. 

Next for questions, I recognize the gentleman from Texas, Mr. 

Burgess. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Dr. Woodcock, good to see you again. I am not a lawyer. I am 

a doctor too. Let us go through this together. Now, Representative 

DeGette was talking a little bit about the cultural and language 

barriers that exist. When we were working through our problems 

on the consumer product side of this in November and December 

of last year, I went out to the Consumer Product Safety Commission testing facility out at Bethesda, and one of the things they 

mentioned was just exactly that, the language and cultural barriers 

that exist, and when we talk about voluntary inspections or voluntary recalls here in this country, it has a different meaning than 

it does in China. Here a voluntary recall is one which the manufacturer will enter into an agreement with the Agency in order to expedite things, get the product off the shelves faster, rather than 

going through a prolonged court proceeding with all due process 

and defendants’ rights. In China parlance, apparently voluntary 

means you do it if you feel like it and no penalty for not complying, 

and they had to get past that on the voluntary compliance aspect 

at CPSC in order to get some of the withdrawals of lead-based 

paint in toys. Has that problem, has that presented itself in what 

we are dealing with with the importation of active ingredients, 

pharmaceutical ingredients from China? When we talk about 

things as being on a voluntary basis, does that not get interpreted 

properly on the other side of the ocean? 

Dr. WOODCOCK. We generally are dealing with global manufacturers, large manufacturers who are sourcing the active ingredient 

from a Chinese source and so the entity that would be responsible 

for recall of finished product would ordinarily be the large manufacturer who would have been responsible and then the voluntary 

operation of a recall, as you alluded to, would come into play. However, heparin in the United States in the sourced for many different purposes including for compounding, it is imported to be 

placed into medical devices and so forth, and so with the smaller 

manufacturers, it has been difficult for us actually to identify all 

sources of heparin that might be entering the country. 

Mr. BURGESS. And I appreciate that. It just underscores the— 

when something is lost in translation, you have got so many people 

involved, I think Congresswoman DeGette is onto something and it 

does behoove us to pay attention to that. On Tuesday when we 

were talking about the heparin issue, I brought up some of the aspects of the funding, and we have heard a lot of different numbers 

and I know no one could answer some of the budgetary questions 

I had on Tuesday. I suspect the answer today would be the same, 

we don’t know, and I have spent some time with the budget resolution that we just passed in March and the appropriations bill of the 

USDA agriculture appropriations bill from last summer and I am 

having a very, very difficult time finding out the number of dollars 

that this Congress has said, at least last year, was appropriate for 

doing these foreign inspections. Since we talked on Tuesday, do you 

have any better sense of what we appropriated last July in our bill 

and what we have asked for in the budget this year? 

39 

Dr. WOODCOCK. Well, I can tell you it isn’t appropriated that 

way. There is appropriation to the drugs program, if you have 

looked at the appropriations, and part of it is to the field operation 

and part of it is to the center for drugs and then it isn’t line-directed further down than that. I can tell you, more or less, what 

we spent, if you would like to, or I can get back to you with that 

information. That might be more productive. 

Mr. BURGESS. I think that would be productive, and I think the 

subcommittee would be interested in that. We are hearing a lot of 

talk about user fees in the legislation that is before us. Are any of 

the user fees that are in the recently passed Prescription Drug 

User Fee Act of last June, does any of that apply to the—are any 

user fees applied currently to the active pharmaceutical ingredients 

that are imported from other countries? 

Dr. WOODCOCK. Yes, and this is confusing so let me walk 

through it a little bit. 

Mr. BURGESS. I don’t have much time. 

Dr. WOODCOCK. The Prescription Drug User Fee Act is for new 

drugs, not generics. Now, as we have heard, about 60 percent of 

the medicines that Americans actually consume are generics. They 

don’t have a user fee program. So the Prescription Drug User Fee 

program that applies to new drugs does allow and pay for pre-approval inspection of any given plant, including the API plant, as 

part of the program, but that, as you can see, is a small amount 

of inventory compared to the entire inventory. It doesn’t pay for 

surveillance inspections, which are the every-2-year inspections, 

after approval for a new drug. 

Mr. BURGESS. I don’t have much time left. From a philosophical 

standpoint, I mean, Congress, we don’t have many things that we 

are really required to do under the Constitution but defending the 

borders, delivering the mail are some of the things that we should 

do. To me, this is a defending-the-borders issue so this to me is one 

of those things for which we should appropriate money, and I don’t 

know how deeply we have gotten into the discussion of user fees 

for this activity but when we looked at user fees last June, it almost seemed to be that user fees became a way of supplanting us 

having to appropriate dollars, and for me, this is such a fundamental issue of protecting the borders, defending our country, protecting our borders, that this should be one of the activities for 

which direct appropriation of funds occurs. If we need to make it 

up somewhere else with other fees or reducing spending, God forbid, in some other area—goodness knows, every dollar in that $3 

trillion budget that is spent is worthwhile, but it seems to me that 

this is an area where we should appropriate the money and not 

leave it to user fees. The other thing that concerns me is that there 

seems to be a lot of reprogramming going on in last year’s appropriations bill so that if we come up with a number, and I have 

heard various figures mentioned from $11 million up to $600 million, if we oversubscribe user fees, we are merely going to reprogram that money into other activities that has nothing to do with 

defending our borders or import drug safety, and I know I have 

gone over, Mr. Chairman. I will yield back my time. 

Mr. PALLONE. Thank you. 

The gentlewoman from California, Ms. Solis. 

40 

Ms. SOLIS. Thank you, Mr. Chairman. 

I wanted to ask you, Dr. Woodcock, if you could explain for us, 

you gave an amount at a previous hearing what you might need 

for foreign inspections. We talked about that already. But you 

could give me a more descriptive amount that would be needed so 

that you could upgrade your systems, which would include technology, and go a little bit further in detail and if you could do that 

quickly? 

Dr. WOODCOCK. Yes, I think I can answer factual questions on 

that. The FDA’s Science Board report, the subcommittee report, 

which I don’t know whether all of you have seen, went over the 

state of FDA’s information technology and our systems, and they 

could best be described as in a crisis, they are obsolete. So we 

need—FDA will need to invest at least $20 million this year and 

for many upcoming years to put our basic infrastructure, IT infrastructure in place. There is no use us building new systems for imports if we can’t run them on our infrastructure. So that will cost 

probably about a $20 million investment each year for a number 

of years. And then I think for imports, what we need to do is do 

electronic drug registration and listing, OK, so it is totally electronic. That would be a very modest amount of money, perhaps $10 

million to build a quick fix type of system. We have done a business plan for this. I was requested by Mrs. Emerson to develop a 

business plan and we have developed that. So that would be a modest amount of money. Then fixing the interface, the processing at 

the border, the interface with Customs would probably require 

again tens of millions of dollars for a number of years to get that 

repaired, but none of those I think are extreme expenditures that 

would be required. 

Ms. SOLIS. So could you provide our committee with more detailed figures about how—I mean, this is probably not the time for 

you to give us all that but if could come back and give us something in writing as an approximation. I mean, when you are saying 

years, 5 years, 10 years or—— 

Dr. WOODCOCK. Three years. I don’t think we can wait. 

Ms. SOLIS. That is what we need to know. 

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

Ms. SOLIS. And one concern I have, I mean, given that we got 

this information, I mean, our consumers that were affected by the 

importation of heparin from China and the detection was so late 

and unfortunately we had numerous deaths as a result of that. I 

am very concerned about what we are doing to reach communities, 

particularly communities of color that speak different languages 

that may not understand information that is provided by your office. I know that you have a website so people who have Internet 

access can get that information but for the most part, we have a 

lot of people including those in my community who don’t have access to the Internet and they may not even be able to read at the 

12th-grade level the information that you post, and you have been 

told that you need to lower that level of literacy to the 4th- and— 

well, the 8th and even 4th-grade level. So I want you to touch on 

that, and I want to know what you are doing to help provide more 

information to people of different—that speak different languages, 

and I am talking right now especially the Hispanic population, 

41 

which is the largest ethnic minority and has a tendency to—the 

first language they speak is Spanish in some cases. 

Dr. WOODCOCK. Certainly, I can’t agree with you more. This is 

on the other end of our efforts, which is not—that is sort of prevention, but if something has happened, how do we respond and how 

do we actually reach out and make sure people are kept safe by 

using the knowledge, getting the knowledge that we actually have 

and being able to utilize it. We are working on our early alert system, evaluating translating that into different languages. We write 

patient-level information that we put on the Internet. But as part 

of our Safety First and Safe Use Initiative, as we move into our 

Safe Use Initiative in the Center for Drugs, it is going to involve 

partnering with healthcare organizations and professional and patient advocacy information to make sure that that handoff works 

so that what we know, they know, and that they can help provide 

that information to their group, whatever it might be. 

Ms. SOLIS. Would that be an additional cost, then, that you 

would—I mean, you are going to need funding, I would imagine, 

some resource to be able to do that, but again, many in our community don’t have access—even if you are in rural American, may not 

have Internet access. So, what kind of plan—is that in your business plan, I would ask? 

Dr. WOODCOCK. Well, our business plan is on the other end, 

which is finding these events and picking that up. This is on our 

other initiative that has to do with patient safety and drug safety, 

adverse events and so forth. Certainly we could do more if we had 

more resources but we do plan to do this. We received additional 

resources for patient drug safety under the Amendments Act and 

this is part of our implementation of that. 

Ms. SOLIS. What is that budget, by the way? 

Dr. WOODCOCK. Well, we received $25 million additional, but to 

do a very large number of things. 

Ms. SOLIS. Can you get back to me with that information? 

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

Ms. SOLIS. Because I think it is really important to be able to 

have a rapid response. 

Dr. WOODCOCK. I agree with you. 

Ms. SOLIS. And you mentioned—well, we talked about inspections and the lack of inspections abroad, and could you tell me if 

there is any data on how many inspections are conducted for facilities that manufacture brand-name drugs versus generic? 

Dr. WOODCOCK. Yes, I have that information and can get it back 

to you. We have it cut that way. 

Ms. SOLIS. Can you just briefly give me an idea of what that is? 

Dr. WOODCOCK. I can’t right now. There is a higher proportion 

of the generics have their API sourced in foreign countries and so— 

and also the pre-approval inspections are supported by user fees for 

the new drugs. So naturally we are able to get to more of the new 

drug facilities that are producing those drugs than to the generic 

drug facilities because we don’t have support, as much support for 

that activity, and a higher number of them are in foreign countries. 

But it is—— 

Ms. SOLIS. Doesn’t that raise—I mean, for me, that raises a red 

flag. 

42 

Dr. WOODCOCK. Absolutely. 

Ms. SOLIS. OK. I will yield back the balance of my time, Mr. 

Chairman. 

Mr. PALLONE. Thank you. 

The gentleman, our chairman, Mr. Dingell, is recognized for 5 

minutes. 

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

Dr. Woodcock, I want to thank you again for your testimony 

today and for your testimony the other day. Your candor does you 

great credit as a public servant, and I must say, it comforts me to 

know that somebody down at Food and Drug is not intimidated and 

not inhibited in coming up here and telling us the situation as they 

see it, and I want to commend you for that and thank you. 

You and others have mentioned to the Committee a desire to 

move towards a more risk-based inspection system. We all appreciate the need to focus on areas of greatest concern and risk. However, I am concerned about the ability of FDA to identify facilities 

that present the highest risk when its information systems are in 

shambles. So I am concerned about that. I am further concerned 

that risk-based has become a code for, we don’t have adequate resources for proper oversight so we are going to try and only reach 

the facilities that appear to be most dangerous and not to address 

all of the areas of concern and not to proceed with the business of 

FDA in a way which assures that we do not allow things like heparin or other things to take place because they don’t fit properly 

into this, quote, risk-based, close quote, approach. What comments 

do you have on that? 

Dr. WOODCOCK. I agree with you that our current inspectional 

coverage is inadequate and that the first priority ought to be to improve that coverage. We agree, there is no use doing a risk-based 

approach if you are only inspecting such a small percentage of the 

high-risk firms that you are sort of rearranging the deck chairs. 

Mr. DINGELL. One of the problems we have had is, that on the 

basis of pressure from the Office of Management and Budget, the 

White House, Department of Health and Human Services, FDA has 

constantly been compelled to come forward to the Congress and 

say, ‘‘oh, we want to go with a risk-based approach,’’ and to say, 

‘‘oh, we have a new stronger and better way of addressing this for 

less money, and this goes back, as I have told the Commissioner 

in this set of hearings, better than 40 years. I have been listening 

to commissioners of Food and Drug come up here and tell us how 

we are going to do better with less, and I have found in each instance that that has been a lot of hooey, and my concern is that 

I don’t want to hear people coming in here and telling us the urgent need for risk-based approach, which appears to be just an excuse for doing less with less money, and for allowing matters to fall 

between the cracks and the public to be put at risk on food, on 

pharmaceuticals, on devices, and on cosmetics. So how are we to 

establish a good risk-based mechanism for dealing with these problems, which first of all, doesn’t permit the matters to fall between 

the cracks, which does have proper inspections and other safety 

mechanisms utilized, but which also doesn’t allow important matters and important investigations or inspections to fall between the 

cracks? How is that to be done? 

43 

Dr. WOODCOCK. Well, that is a very challenging question. Obviously doing routine inspections provides a deterrent function. Otherwise people will get—— 

Mr. DINGELL. And we do need routine inspections, do we not? 

Dr. WOODCOCK. Right. Otherwise there is sloppiness that leads 

to harm and death, and we see that all the time where people just 

make mistakes and then they manufacture products improperly 

and then there are the criminal elements that were talked about 

earlier, and we need to have a strong deterrent function by having 

a presence. If we are not there, if we are not expected to be there, 

then of course people will feel free to relax their standards or there 

would be an opportunity for other types of elements to intrude. 

Mr. DINGELL. What I am hearing you say is, you have to continue with the routine inspection system. 

Dr. WOODCOCK. We have to. 

Mr. DINGELL. You have to continue with other things which are 

important in terms of dealing with the routine events and that 

risk-based, if it is to be properly used, has to mean that we are 

talking about assuring that we put the greatest emphasis on the 

areas of highest risk but that we do not disregard other areas of 

concern or the general responsibilities of FDA under the law. Is 

that correct? 

Dr. WOODCOCK. That is correct, and we believe that even the 

low-risk facilities should believe they are at risk for having an FDA 

inspection. 

Mr. DINGELL. And of course, that cannot be done without adequate resources to the Agency. Now, Doctor, again I want to thank 

you for your response to Mr. Pallone’s questions about the bill. I 

view those questions as being extremely important to the Committee in terms of addressing the business before you. Can you tell 

us whether—and I am going to ask you to submit this for the 

record rather than to say so in our hearing today. Are there additional authorities not in the draft that is before the Committee at 

this time which in your professional opinion you believe we should 

consider adding, and would you please submit that to the Committee at your convenience? 

Dr. WOODCOCK. I would be delighted to. 

Mr. DINGELL. Now, let us look back. We have had bad fish and 

seafood coming in. We had the heparin disaster. We had the mushroom disaster of time back. We have had problems with people getting sick from leafy green vegetables and strawberries and all 

kinds of things, and we had the animal food supplement scandal 

of not long back. We seem to have a succession of scandals, misbehavior, unsafe commodities marketed to the communities and to 

the people of the United States. How am I not to be concerned and 

how are you not to be concerned that a similar case or similar 

cases of contamination of food or pharmaceuticals will not occur in 

the immediate future? 

Dr. WOODCOCK. I am extremely concerned about pharmaceuticals. The world is changing and our ability to assure the quality of the drug supply has become diminished, and we all need to 

recognize that, and I think heparin is a wake-up call that we are 

not as able as we were to assure that quality. 

44 

Mr. DINGELL. It tells us that that could happen again at any 

time unless some rather startling changes are made. Isn’t that so? 

Dr. WOODCOCK. I believe we must act swiftly and decisively. 

Mr. DINGELL. Doctor, I thank you. 

Mr. Chairman, I thank you for your courtesy. 

Mr. PALLONE. Thank you, Mr. Chairman, and that concludes our 

questions. But I want to thank both of you for being here today. 

It was very helpful, as was your testimony the other day before the 

O&I Subcommittee. We appreciate it. 

Mr. BUYER. Mr. Chairman? 

Mr. PALLONE. Yes? 

Mr. BUYER. I will have additional questions to submit for the 

record for the FDA. 

Mr. PALLONE. Absolutely. Any member that would like to submit 

additional questions to Dr. Woodcock or Dr. Bernstein, feel free to 

do so.Thank you very much, and we are going to move to the second panel. Now, let me explain that we expect votes about 12:15 

so I would like the second panel to come forward. If the votes are 

called, then we won’t complete your opening statements and we 

will just complete them when we come back and then do the questions as well, but we are going to try to move forward with the second panel and hopefully complete at least the opening statements 

before we have the votes. So if you could all come forward, please. 

As you can see, we have a large number. It is hard to squeeze 

in but we will do the best we can. Let me welcome all of you and 

go from my left to right to introduce each of you. First on my left 

is Dr. William K. Hubbard, senior advisor for the Coalition for a 

Stronger FDA. And then next to him is Ms. Lori Reilly, who is vice 

president of policy for PhRMA, the Pharmaceutical Research and 

Manufacturers of America. And then next to her we have one of 

our colleagues, Congressman Greenwood, who is now president and 

CEO of the Biotechnology Industry Organization. Thanks for being 

here today. And next to Jim Greenwood is Ms. Christine Mundkur, 

who is chief executive officer of Barr Laboratories. And then we 

have Mr. Ron Bone, who is senior vice president, distribution support for McKesson Corporation out of San Francisco, California. 

And then Mr. Kevin Nicholson, who is both a Ph.D. and a lawyer— 

that is an interesting combination—vice president for pharmacy 

regulatory affairs for the National Association of Chain Drug 

Stores. And then the last is Ms. Ami Gadhia, who is policy counsel 

for the Consumers Union. 

Now, as I said before, we have 5-minute opening statements. 

Those statements become part of the hearing record. Each witness 

may in the discretion of the Committee submit additional brief and 

pertinent statements in writing for inclusion in the record, and we 

will start with Mr. Hubbard. 

STATEMENT OF WILLIAM K. HUBBARD, SENIOR ADVISOR, 

COALITION FOR A STRONGER FDA 

Mr. HUBBARD. Thank you, Mr. Chairman. I have a written statement but I will just make a few opening remarks. 

I want to both thank you and commend you for your work on this 

bill and moving quickly. The committee has well documented the 

problem so obviously you are moving now into the phase of fixing 

45 

it. I think your bill has tremendous potential for addressing these 

problems. 

The way I look at the bill, there are three principles we need to 

follow in trying to fix this problem. First, we need to strengthen 

the FDA. The FDA has a very old paradigm for imported drugs 

with all the responsibilities on the Agency to find the problem at 

the border, and that needs to be shifted, and I think your bill does 

that by saying we need to shift more of that to the source of these 

drugs’ origin. We need to give FDA the authority to register these 

folks and know who is making our drugs, where they are, what 

they are making, and FDA needs the inspectors, as your bill would 

provide, to go to these foreign countries. And then of course, FDA 

needs authority here at the port to be looking at more of these 

drugs, destroying them if necessary, turning them back or whatever. 

But also, I think we need to take into account the fact that pharmaceutical leaders already do a good job in many cases of securing 

their supply chain, and I think your bill suggests that everyone 

needs to come up to that there are companies that in the case of 

heparin, for instance, traced the drug all the way back to the pig, 

and that is the kind of concept that I think you are looking for with 

registration and universal identifiers to know where all of these 

products are coming from. So trying to get the entire industry to 

follow these leaders, I think, is a worthy goal. 

And then lastly, we have got to send a signal to these foreign 

countries. It is well documented, as Mr. Dingell said, that some of 

these countries have demonstrated they simply cannot uniformly 

produce safe products and there is a long stream of examples that 

I won’t go through today. But they need to understand there is a 

cop on the beat and that FDA will be looking at them, and I think 

the registration provisions will do that, and letting them know that 

when you do find a bad drug, it is going to get turned back or destroyed, and having that presence by FDA in these countries I 

think will be tremendous, which, as you know, does not exist now. 

So I think, Mr. Chairman, your bill is a historic opportunity to 

fix these problems and I wish you well in the endeavor. There is 

one point I would raise some concerns about though and that is 

these user fees. The reliance on user fees I believe is a problem. 

There has been a disconcerting trend that the existing user fees 

have shifted appropriate dollars out of FDA and there have been 

programs that have been simply lost I believe because of the user 

fee program. So I am concerned about that continuing if the Agency 

is funded more and more by user fees. While some of the fees like 

requiring a foreign firm to pay a fee to register, I think that is good 

because, first of all, you are going to be assured of where they are, 

and second, you may actually give some disincentives to some people that don’t know what they are doing to get out of the business, 

which would be a good thing. 

But all in all, we as taxpayers pay about a penny and a half a 

year for the FDA, and I think if you polled people, they would say 

they would be more than willing to pay 2 or 3 cents a day for safe 

and effective food and drug supply. So I certainly would encourage 

you to also find ways to increase FDA’s appropriations rather than 

keep moving more and more toward user fees. 

46 

With that, I thank you. 

[The prepared statement of Mr. Hubbard follows:] 

STATEMENT OF WILLIAM K. HUBBARD

INTRODUCTION 

Mr. Chairman and members of the Committee, I am William K. Hubbard. Before 

my retirement after 33 years of Federal service, I served for many years with the 

U.S. Food and Drug Administration, and for my last 14 years was an FDA Associate 

Commissioner responsible for, among other things, FDA’s regulations and policy development. Today, I serve as an advisor to The Alliance for a Stronger FDA, a consortium of patient, public interest, and industry organizations whose mission is to 

urge that FDA’s appropriations be increased. The Alliance and its constituent members are greatly concerned that FDA’s resource limitations have hampered the 

Agency’s ability to ensure the safety of our food and drug supply. Today’s hearing 

is focused on proposed solutions to the ever increasing numbers of drugs and medical devices being imported into the United States. I will focus my comments on 

pharmaceuticals, but many of those comments would apply as well to medical devices. 

BACKGROUND 

As you know, Congress created the current regulatory structure for assuring the 

safety of human drugs in 1938, through its enactment of the Food, Drug and Cosmetic Act. That statute recognized that drugs could be a key component of our 

health care system, but that drugs were also powerful chemicals with the capability 

to produce great harm if not carefully regulated. Thus, Congress determined it necessary to create a relatively pervasive regulatory system, which has served us well. 

Under that construct, American patients have access to safe and effective new drugs 

as fast or faster than anywhere else in the world, and FDA is widely recognized 

internationally as the ‘‘gold standard’’ for pharmaceutical regulation. FDA is also 

tasked with assuring that a drug, once approved for marketing, is actually the same 

compound that is manufactured and is of consistently high quality. To do that, FDA 

requires that a drug be manufactured under specific controls mandated by the 

Agency—known as Good Manufacturing Practices (GMPs). These include requirements that active ingredients of the drug be of a prescribed purity, strength and 

quality; that the drug be made in well-controlled, sanitary conditions; that its labeling and packaging be equally well controlled; and that laboratory tests of the drug 

be performed routinely using well established scientific methods and properly calibrated equipment to confirm that the drug is always produced in the form approved 

by the FDA. 

Those controls have resulted in a remarkable record of success for American pharmaceuticals. The U.S. manufacturers of our drugs agree with the need for such 

strict controls and take great care to implement them faithfully. Accordingly, FDA 

inspectors generally find adherence to GMPs when they examine a U.S. drug manufacturing facility, and the occurrence of injuries and deaths from improper drug 

manufacturing in this country is rare. 

THE GLOBAL SITUATION 

The portrait of pharmaceuticals elsewhere around the world is not so positive. 

Drugs developed and produced in other countries do not always have the same 

record of therapeutic success as American pharmaceuticals. But perhaps more importantly, drugs made in other countries—particularly less developed nations—are 

often purchased from suppliers who have little or no oversight by regulatory bodies; 

where key elements of safe drug production are ignored—such as quality testing, 

expiration dating, and labeling controls; and where producers of substandard and 

counterfeit drugs have a relatively easy access to the marketplace. 

In recent years, this Committee has documented numerous reasons for concern 

about drugs made offshore: 

• 80% of our domestic drug supply is now comprised of ingredients produced in 

other countries, and increasingly those are less developed nations such as China 

and India. 

•FDA has the capability to inspect only a small percentage of foreign drug manufacturing facilities, and inspection rates of drugs arriving at U.S. ports are equally 

dismal. 

47 

• Deaths and injuries from compounds made overseas are seemingly more and 

more common—from antifreeze substituted for glycerin, melamine in pet food, antibiotics that don’t effectively treat bacterial infections, and, of course, most recently, 

heparin contaminated with chondroitin. • Counterfeiting of drugs is increasingly common in many countries, and has been 

steadily growing in the United States. The World Health Organization has reported 

that in some areas of the world, particularly parts of Africa and Asia, more than 

one-half of the pharmaceutical supply is counterfeit. Indeed, drug counterfeiting is 

considered to be endemic around the world, with China alleged to be a principle 

world supplier of such products. 

FDA AND IMPORTED DRUGS—NEED FOR A NEW PARADIGM 

At a time in which drug safety problems overseas have become more and more 

prevalent, the FDA has simply not been able to keep up. While it can continue to 

ensure that drugs made in United States meet our high safety standards, the Agency is not positioned and funded to assure the safety of imported drugs. FDA is asked 

to regulate these products with a law that was enacted 70 years ago—at a time in 

which there were few drugs being made anywhere in the world, and none being imported into the United States. The system created in 1938, with origins dating all 

the way to the turn of the last century, authorized FDA to examine imported drugs 

at the border and refuse entry to any drug that ‘‘appeared’’ to be unsatisfactory. 

Thus, the law placed the responsibility on the FDA to catch a problem and stop the 

drug’s entry into our country, as opposed to asking the foreign manufacturer to 

demonstrate that they were taking care to follow established standards for drug production. So, while domestic drug manufacturers are held to a high standard of drug 

safety, with regular GMP inspections, foreign producers often need worry only about 

the remote possibility that an FDA inspector at a border crossing will find a problem and stop the drug’s entry. Moreover, a domestic drug manufacturer using foreign ingredients can adhere to strict quality control procedures, yet be victimized 

by a contaminated ingredient that was unsuspected. 

More specifically, we have failed to provide FDA with the appropriations and 

other tools it needs to carry out the mission we have assigned to them, such as: • Staff to conduct regular inspections in foreign facilities as are now done for domestic manufacturing plants. The Food, Drug and Cosmetic Act dictates that each 

U.S. drug manufacturer be inspected at least every 2 years, but the current rate 

of foreign inspections is infrequent at best. Thus, we are buying ever larger percentages of our drug ingredients from producers in developing countries who receive virtually no FDA inspection, despite a congressional determination that domestic manufacturers be inspected regularly. • Modern IT systems that would allow FDA to effectively track and monitor the 

production and movement of imports. The import data system is so old and communicates so poorly with other FDA information systems that it is difficult for FDA 

officials to use risk as a predominant driver of their compliance; • Registration procedures for foreign drug manufacturing that would allow us to 

know who is making drugs for our market, where they are located, and what they 

are manufacturing; and •Port inspectors to examine the almost 20 million annual shipments of foods, 

drugs, and other products that FDA is expected to regulation. For over 400 ports 

of entry, FDA has only 450 inspectors, meaning that most ports aren’t staffed at 

all and many can be staffed only part time. 

THE HEPARIN EXAMPLE 

We are, of course, especially mindful today of the recent deaths from contaminated heparin. It is, sadly, a realistic example of the problem FDA faces in assuring 

the safety of imported drugs. Indeed, I believe one could use the well worn cliche 

of a ‘‘perfect storm’’ in describing the conditions upon which the heparin incident 

unfolded —initial extraction of heparin on pig farms that have been described as 

‘‘primitive,’’ no regulation by authorities in the producing country, no FDA inspection of the heparin exporter’s manufacturing facility, and violative conditions found 

by FDA in the manufacturing facility when subsequently inspected. When you add 

to that the technical capability of chemists to modify and substitute chondroitin for 

heparin, the resulting profit margin by using cheaper ingredients, the low risk of 

being caught substituting another ingredient, and the even more remote likelihood 

of being punished by U.S. authorities, one could accurately conclude that there was 

highly fertile ground upon which this could occur. 

But the heparin case also demonstrates FDA’s inherent weaknesses in its ability 

to adequately oversee foreign drug production. The facility in China had not been 

48 

inspected by FDA, the suppliers of raw material to that facility were not registered 

with the FDA, and the Agency’s IT systems were not up to the task of identifying 

and tracking the facilities in China and the movements of their products. In sum, 

the FDA’s poor capabilities, in my view, contributed to the likelihood that a counterfeiter could feel emboldened to substitute the chondroitin with relatively little fear 

of regulatory action by the United States. 

WHAT MUST BE FIXED 

We must find a way forward to ensure that drugs made with foreign ingredients 

meet the same high standards as those of fully domestic origin, by assuring the enforcement of the rules that govern drug production and the promulgation of needed 

new rules. It does no good to have rules if they are not obeyed, no good to set high 

standards if they are not used, and no good to develop advanced scientific skills if 

they are not employed. That some less developed countries have a record of serious 

problems in drug manufacturing is indisputable. And the disparity in drug inspections—in which FDA inspects U.S. facilities regularly and those in China and India 

almost never—is indefensible. 

Some would say that we should not be buying products such as drugs from developing nations, but that flies in the face of the reality of global free trade. Others 

would rely upon agreements negotiated with foreign countries, under which those 

nations would assure the safety of drugs exported to the United States. I believe 

that a developing country without a strong counterpart to the FDA is incapable of 

effectively implementing such an agreement, and that such a course of action is a 

prescription for frustration. In the end, I believe we must rely upon what we know 

has worked in the past to protect our drug supply—rigorous control of pharmaceuticals within a system closed to unregulated and unscrupulous suppliers and 

overseen by a strong FDA. 

I believe that there are three main principles to be considered in correcting the 

imbalance between the strong safety oversight of US-produced pharmaceuticals and 

medical devices and those made overseas: 

1) FDA’s statutory construct must be changed to take into account the 

globalization of drug and devices. As you know, the current version of the Food, 

Drug and Cosmetic Act places much of the burden for assuring the safety of imported drugs onto the FDA and at the point of entry—the border ports. That paradigm is outdated in a world that is far more globalized today, and more of the responsibility needs to be shifted to the source of production—to preventing problems 

from occurring rather than relying on FDA to find them at the border. FDA also 

needs to know that imports are equally important in the development of policy and 

the allocation of resources as domestic programs. Your proposal, if enacted, would 

make that point in several ways—by requiring the same frequency of inspection for 

foreign and domestic manufacturing facilities; allocating new resources for foreign 

inspections; creating a foreign inspectorate dedicated to overseeing manufacturing 

in exporting countries; giving FDA the information it needs about who is making 

these products and where they are located; and strengthening inspection of these 

products when the arrive at our borders with new powers to detain, destroy or recall 

drugs and devices that are deemed to be dangerous. 

While inspections are not the only solution to these problems, they are an absolutely necessary piece. It is particularly important that we place a focus on drugs 

and devices made in countries without a history of safe manufacturing and internal 

regulation. Without GMP inspections in less developed nations, we essentially have 

no oversight of those manufacturers. A GMP inspection is far more than just a snapshot of that facility the day the inspector arrives. It is a detailed survey of how that 

plant has been operating for months, which allows a realistic conclusion about 

whether that facility can and does follow accepted drug production procedures. Relying on testing by the FDA or the U.S. drug company that receives the foreign ingredients is not a substitute for examining the source of production. 

Your proposed creation of a dedicated foreign inspectorate will go far in ensuring 

that the inspection requirement can be successful. Currently, FDA must utilize its 

domestic inspection force to travel overseas to conduct inspections. That practice is 

expensive and often a hardship on inspectors. The agency needs to recruit an inspection force that is hired and trained to do foreign inspections, and many will need 

to be housed in the countries with the greatest number of manufacturing facilities. 

2) Build upon the best practices many U.S. firms already use in securing their 

supply chain. Supply chain integrity is increasingly a watch word among leading 

pharmaceutical manufacturers. The most advanced firms today have contractual arrangements with suppliers that require strict conformance to quality control procedures, and insistence that every party to their supply chain be known to them and 

49 

of sufficient technical competence. And those firms regularly inspect and monitor 

the performance of their suppliers, as well as test ingredients for purity, stability 

and other necessary qualities. I believe that your bill will reinforce the commitment 

of those firms already utilizing such practices and should encourage others to join 

in them. For example, the bill would ease entry into the United States of drugs and 

drug ingredients that can document compliance with applicable FDA drug safety requirements. Further, it will provide for additional contaminant testing which, in the 

light of the heparin injuries, will be a necessary part of a strengthened system of 

import controls. 

3) Send a message to foreign manufacturers and their nations’ governments that 

the focus of regulation will shift from FDA’s border inspection of drugs to the conditions in the overseas manufacturing facilities. In the past, there have been relatively 

few incentives for foreign manufacturers to be assertive in protecting exported drugs 

and devices from contamination or other violations of FDA drug safety standards. 

Indeed, some contend that the current system—of placing most of the burden for 

catching unsafe drugs onto the FDA—has comprised a disincentive, thus indirectly 

encouraging ingredient substitution and other cost saving ‘‘short cuts.’’ Your bill will 

start an important shift toward expecting exporters to take greater care in manufacturing drugs for our market—by requiring all foreign producers to declare their 

identity and location, by permitting FDA to suspend a facility’s registration if it impedes an FDA inspector’s ability to carry out his duties, by ensuring parity among 

U.S. and foreign drug inspections, by encouraging certification and other evidence 

of quality controls on the part of foreign drug facilities, by requiring foreign drug 

manufacturers to pay facility registration fees that mostly been limited in the past 

to American facilities, by ensuring that violative drug imports are more likely in the 

future to be either detained or destroyed if found at U.S. ports, and by requiring 

contaminant testing of drug ingredients before they leave the exporting country. 

ADDITIONAL CONSIDERATIONS 

While I believe that your bill contains most of the elements that FDA’s scientists 

would like to have instituted for a safer drug import system, there are two additional considerations that I would urge you to include: 

- Appropriated funds to strengthen the FDA. Your bill includes user fees to pay 

for more FDA oversight. Such fees are reasonable for facility registration, as domestic manufacturers must now pay such a fee, and bringing foreign facilities on par 

would be a logical addition. Plus, fees could have the complementary effect of driving from pharmaceutical manufacturing business some inadequate foreign facilities 

for which registration would trigger an eventual inspection. However, I am skeptical 

that user fees are the solution to FDA’s funding problems, as budget officials have 

tended in recent years to shift agency funding from appropriated dollars to user 

fees, leaving the Agency with little or no net gain. Indeed, some programs, such as 

food safety and FDA’s inspection corps, have absorbed large staff cuts over the past 

decade, and I believe those cuts are largely attributable to the fact that other parts 

of FDA were receiving new funding from user fees (for drug and device application 

review). We, as American taxpayers, today spend only 1-and-a-half cents per day on 

the FDA. I believe the vast majority of our citizens would gladly pay 2 or 3 cents 

a day for an effective FDA that can vigorously protect our food and drug supply. 

- A commitment to information technology improvements. As your Oversight and 

Investigations Subcommittee, the GAO, and FDA’s Science Board have all documented, FDA’s inadequate IT systems are a fundamental lag on the Agency’s ability 

to improve its import program. I urge you to make IT enhancements a key goal of 

your legislation, even if that is achieved merely by a sense of the Congress statement about your expectations for IT begin the process of improving our coverage of 

imports. The IT systems should be configured in a way that allows the Agency to 

use a myriad of risk factors, including potential impact on the public health, to direct its inspectional and import efforts. The Science Board recommends increased 

appropriations of $800 million for FDA’s overall IT needs, so there is a long way 

to go if FDA is to have state-of-the-art information systems, but we could at least 

start with funding an effective import information system. 

In conclusion, I believe FDA’s scientists and regulatory officials are nothing short 

of terrific. They are well trained, intensely dedicated to the public health, and a true 

bargain for the American taxpayer. But they have been handed a task—an expectation—that they realistically cannot fulfill with their current resources. History has 

shown that when FDA is given the resources and tools it needs to be effective, it 

will perform well and in doing so protect the health of those who depend every day 

on this critical agency. 

50 

Thank you for inviting me to give my views on this subject. 

Mr. PALLONE. Thank you, and thank you for keeping well within 

the 5 minutes. 

Ms. Reilly. 

STATEMENT OF LORI REILLY, VICE PRESIDENT OF POLICY, 

THE PHARMACEUTICAL RESEARCH AND MANUFACTURERS 

OF AMERICA 

Ms. REILLY. Thank you for the opportunity to be here today and 

testify. I am Lori Reilly, vice president for policy and research at 

PhRMA. I am here today on behalf of Billy Tauzin, our chairman 

and president, who apologizes for not being able to be here himself. 

This is an issue that he is extremely passionate about and wanted 

to offer his thoughts in terms of commending the Committee in 

looking at this important issue. I think we share your goals in ensuring a safe and effective pharmaceutical drug supply. 

The work of this committee over many years has helped to ensure the safety of the prescription drug supply, going back to the 

1980s and the extensive investigative work this committee did that 

led up to the Prescription Drug Marketing Act, which closed the 

current drug supply system to drugs that had circulated outside 

the jurisdiction of the FDA, outside the control of the manufacturer, and this was as a result of counterfeit drugs that had proliferated inside the United States, and we applaud the Committee 

for that work and its interest in taking additional steps to secure 

the supply chain. 

As Dr. Woodcock testified earlier, the current regulatory system 

in this country is built on good manufacturing practices and the notion that you need to build quality into every element of the product, and our companies do that. They abide by GMP requirements. 

They often go way above and beyond those requirements by having 

their own systems, vendor qualification programs, vendor audit 

programs. In fact, one of our companies testified just last week before the Senate about the extensive amount of additional resources 

they spend to ensure the suppliers they use meet these very stringent requirements. 

As stated previously though, this comprehensive system, while 

excellent and arguably the safest in the world, there is always 

room for improvement, even with the very best systems, and once 

again, we commend the Committee for looking at opportunities to 

further strengthen the system. 

In response to concerns regarding the rate and extent to which 

FDA is currently conducting inspections, I am pleased to offer several ideas for consideration as you continue to work on the discussion draft as well as our own comments on the draft that has been 

put forward to date. 

Previous congressional testimony has revealed a great disparity 

in the number of foreign facilities that exist and thus are subject 

to FDA inspections. In addition, concerns have been raised about 

the interoperability of the Agency’s databases for tracking and 

monitoring foreign establishments. We agree with the Committee 

that foreign establishments should and need to be registered with 

FDA to the extent they are already not required to do so by law, 

51 

and we also agree we need a better accounting of what those facilities are and where they are located. Having a more accurate picture of the number of facilities that exist abroad in a single database will allow the Agency to ensure that inspections are occurring 

on a more timely basis. 

With respect to funding, the committee draft, specifically section 

201 of the draft bill, sets up a new annual registration fee for the 

purpose of defraying costs of inspecting establishments registered 

with the FDA. We believe a strong, well-funded FDA is critical to 

the health and safety of American patients and we, along with 

other stakeholders, have been supportive of increased funding for 

the FDA. We have lobbied Congress as a part of a coalition to 

argue for increased appropriations so that FDA has the needed resources to meet its many mandates. 

We have also supported user fees for other purposes. For example, PhRMA endorsed user fees as part of the PDUFA program, 

and in general we believe they have worked well. With regard to 

whether user fees are appropriate in this instance, we still have 

some outstanding questions that we would like to work with the 

Committee on in the future, for example, what the amount of any 

user fee may be, whether there will be a cap on such user fees, 

what FDA can specifically use these resources for, what performance measures will exist for the FDA, whether the fees will have 

a sunset date and whether there is any link to appropriated funds. 

Moreover, we believe, as others have stated previously today, that 

any new user fees should not supplant appropriations and should 

support specific identified FDA activities. And as stated previously, 

we believe that the Agency is currently underfunded and we would 

love to work with the Committee and Congress to address this 

issue as well. 

With regards to enhancements to FDA’s current inspection regime, sections 202, 403 and 404 of the discussion draft set out targeted reforms to the FDA’s current inspection regime, including a 

2-year interval for foreign inspections as well as a requirement for 

initial facility inspection before a product can be offered in the 

United States. We agree with the Committee that FDA should increase its inspections of foreign facilities. The FDA currently has 

broad authority to conduct inspections of domestic and foreign establishments and we recommend that FDA increase its GMP inspections of foreign facilities, including API facilities. 

In addition, we support the Committee’s recommendation that 

would require FDA to establish and maintain a core of inspectors 

dedicated to inspections of foreign facilities. The current discussion 

draft, as I said, requires those inspections to occur at least once 

every 2 years, which would be consistent with FDA’s current mandate for domestic establishments. While we believe it is a laudable 

goal, it is important to recognize that it will take time. As we heard 

from Dr. Woodcock this morning, training of inspectors alone could 

take anywhere from 3 to 4 years. So it will take time to get individuals up to speed and allocated to do this. Therefore, we believe 

Congress should give FDA flexibility to develop a risk-based approach to efficiently use its resources to prioritize foreign establishments for inspections, particularly in light of the practical realities 

regarding the time it will take to establish an enhanced FDA proVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00057 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
52 

gram. In our view, categorizing and prioritizing FDA inspections of 

foreign establishments based on the risk they present, looking at 

such criteria as time since last inspection, their compliance history 

and type of product produced, geographic location and volume of 

product import will enhance their ability to target their inspection 

resources more efficiently. 

Given the reality that the Agency—— 

Mr. PALLONE. Ms. Reilly, I hate to interrupt because I like that 

you are being very specific about the bill, but you are over a 

minute, so you have to wrap up. 

Ms. REILLY. I will wrap up, and let me do that by briefly mentioning the legislation offered by Congressmen Buyer and Matheson, and again, we applaud the leadership that they have taken on 

the issue and the tireless efforts they have gone to in trying to 

work with all stakeholders on the bill. We appreciate their thoughtful approach, and we look forward to working with them further on 

this bill. 

Again, I thank you for the opportunity to be here today and look 

forward to your questions. 

[The prepared statement of Ms. Reilly follows:] 

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Mr. PALLONE. Thank you. I appreciate the fact that you were 

very specific about the bill but we only have 5 minutes. 

Jim, thank you for being here. 

Mr. GREENWOOD. My pleasure. 

Mr. PALLONE. You are recognized for 5 minutes. 

STATEMENT OF JAMES C. GREENWOOD, PRESIDENT AND CEO, 

BIOTECHNOLOGY INDUSTRY ORGANIZATION 

Mr. GREENWOOD. Thank you, Mr. Chairman, Mr. Acting Ranking 

Member Buyer, Mr. Matheson. It is my privilege to provide testimony before this subcommittee today on behalf of the Biotechnology Industry Organization, BIO, on the efforts of BIO member companies to ensure the safety of the ingredients that they use 

to manufacture their pharmaceutical and biological products for the 

American public. We applaud the subcommittee for convening this 

hearing and we are committed to collaborating closely with you and 

the FDA to better ensure the safety, purity and potency of imported drugs and biologics. We welcome this opportunity to inform 

you of the steps that our members have been taking to ensure the 

quality of their products as part of the successful closed regulatory 

system for imported drugs and drug products. 

I want to reiterate that the commitment of BIO and its member 

companies to work with you and this subcommittee in this endeavor. We do so because the continuing safety of our products is our 

responsibility to the patients we serve and it is number one priority. 

Regarding the draft FDA Globalization Act, BIO has previously 

publicly acknowledged that the FDA is woefully underfunded, particularly given the enormous and rightful demands that this Congress and the American public have placed upon it. In fact, BIO led 

the formation of the Alliance for a Stronger FDA, which successfully advocated for $40 million in additional appropriated funds for 

FDA’s Human Drug Review Program last year, and we are advocating for more this year. While we respect the fact that user fees 

are and will continue to be a part of the solution to the Agency’s 

funding crisis, BIO strongly believes that the imbalance between 

user fees and appropriated fees within the Agency’s budget has become too great, hence the need for a much larger appropriation. 

BIO would urge the subcommittee to ensure that if new user fees 

are created, that the amount and the use, and I believe Mr. Pallone 

has already acknowledged that you will have a specific amount in 

the bill, but also that the use of any new user fees are set forth 

clearly in any new legislation, to ensure both transparency and accountability. It is also essential that inspection user fees for drug 

and biologic manufacturers are not duplicative of existing registration and establishment fees and are not used to subsidize unrelated 

activities or other agency functions. 

Second, any new legislation in this area should recognize the significant differences between biologics and small molecule drugs, as 

well as between and among different types of biologics. This is particularly relevant with respect to the type of testing that may be 

required to ensure safety and purity. Biologics are complex products that are derived from living organisms. In some instances, the 

active substance may not be well characterized. In other cases, it 

76 

may be known but not easily separable from other components of 

the product using current scientific methods. Of course, all biologics 

like all other drugs are regularly tested for purity and to ensure 

that they continue to meet their approved regulatory standards but 

it is important that Congress not seek to create a one-size-fits-all 

testing requirement to ensure purity and identity because a onesize-fits-all approach will not work for all safe, pure, and potent 

biologics. Rather, FDA must have the responsibility and the discretion to ensure appropriate testing based on each particular product. 

Third, there currently exists a highly detailed regulatory framework governing approval and post-approval manufacturing of drugs 

and biologics including requirements for ensuring the consistent 

manufacture of a safe and effective product in accord with its FDAapproved package. If the Congress is to enact new requirements or 

programs in this area, it is critical that they build upon and 

strengthen FDA’s GMP requirements to ensure that the manufacture of drugs and biologics can be reproduced consistently in accordance with agency standards and avoid imposing confusing or 

vague new mandates. 

Fourth, any new legislation should ensure that the FDA has the 

time, resources and direction to successfully implement the new requirements and programs in a way that will not result in shortages 

or disruptions to the supply chain of life-saving and life-enhancing 

medicines because of FDA’s failure to conduct timely inspections in 

accordance with the time frames in the legislation. It is important 

to recognize that the current closed regulatory system has been 

successful overall and improvements to this system should not result in the unintended consequences of limiting patient access to 

needed therapies. 

Finally, it bears emphasis that the closed regulatory system for 

imported drugs and biologics is an essential element in ensuring 

drug safety here in the United States. As we seek to strengthen the 

closed system together, we must keep in mind that any efforts to 

broaden permissible importation of drugs that are currently illegal 

to import in the United States will only undermine such efforts and 

add to the FDA’s already heavy burden. 

I want to thank the subcommittee in advance for the consideration of these views. 

[The prepared statement of Mr. Greenwood follows:] 

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Mr. PALLONE. Thank you, Congressman. 

Next is Ms. Mundkur recognized for 5 minutes. 

STATEMENT OF CHRISTINE MUNDKUR, CHIEF EXECUTIVE 

OFFICER, BARR LABORATORIES, INC. 

Ms. MUNDKUR. Thank you for the opportunity to present today. 

I am Christine Mundkur, the CEO of Barr Laboratories, a global 

generic pharmaceutical company. 

Prior to being CEO, I spent about 15 years at Barr Laboratories 

in the areas of quality, regulatory, and safety, and most recently 

I have served as the executive vice president of Global Quality, 

overseeing our manufacturing facilities located in the Czech Republic, Poland, Croatia, as well as the United States, and as well as 

ensuring the distribution of high-quality generic pharmaceuticals 

in over 30 markets. 

I am proud to be here today on behalf of GPHA, which represents both domestic as well as multinational companies that 

manufacture 90 percent of the FDA-approved generic pharmaceuticals dispensed in the United States. We are committed to 

work with Congress, the Committee and FDA to ensure that adequate oversight of the Nation’s drug supply is in place to ensure 

the availability of safe and high-quality products. We are pleased 

today to support the overall goals and the fundamental provisions 

of the draft FDA Globalization Act of 2008, and we continue to support HHS’s Import Safety Action Plan. 

While we have stringent regulations on all drugs approved by 

FDA, as you are aware, we have drugs today in the United States 

that do not have FDA approval and are not regulated. We know 

these to be counterfeit drugs. The safety of our supply chain is only 

as strong as the weakest link. We continue to encourage this committee to place a high priority on the prevention of these counterfeit drugs. 

Also, while we support your efforts to enhance the foreign inspections, we encourage this committee to recognize the need to carefully balance the competing demands of FDA resources to prevent 

the increased emphasis on foreign inspections from unintentionally 

or negatively impacting the timely availability of U.S. generic pharmaceuticals, which already have a significant backlog in the review 

and approval times. 

As Dr. Woodcock stated, quality cannot be tested in nor can we 

inspect our way to safety. FDA has acknowledged as well as the 

industry has acknowledged these statements through the implementation of risk-based approaches. Risk-based approaches don’t 

take away from the necessary need of human resources as well as 

additional capital, but allows us to prioritize the needs of what we 

need for GMPs. In addition, FDA and the industry continues to 

work in the area of improving our quality systems. As Dr. 

Woodcock stated, GMPs and the quality of our product are really 

based on the quality systems that we manufacture, produce, and 

distribute our products by, and these have also taken on a global 

nature through our ICH initiatives and the quality area, including 

quality risk management, quality systems, and GMP for API suppliers. 

85 

The pharmaceutical industry has continuously improved its quality systems, both the branded side as well as the generic side. I 

think it is important to understand that we all operate under the 

same laws whether you a branded company or a generic company, 

and many of our quality systems actually go beyond what is written in the law. As similar to what Lori stated, our quality starts 

from the design and development of our products and it continues 

through very robust quality organizations utilizing robust and complicated quality systems. For example, in the area of third parties, 

we have very defined systems for our vendor qualification programs, how we source APIs, making sure that we have long-term 

relationships with our API suppliers through quality agreements 

and our vendor audit programs. 

One of the challenges that we have had, as you heard, is that as 

the pharmaceutical industry has become more global, many additional challenges have hit both the industry as well as FDA’s responsibilities for ensuring that there is quality and safe supply of 

pharmaceutical products coming to the United States. As we have 

heard, one of the areas that has probably been most challenging is 

in the area of foreign inspections, and we support the establishment of one uniform high-quality inspection program for all facilities. Today what we have is, we have a domestic inspection program and a foreign inspection program and they are not necessarily linked as one. We support the idea of having one inspection program that will serve as both the domestic as well as the 

foreign manufacturers. We also believe that all foreign inspections 

should be comparable in frequency and duration to those of their 

domestic counterparts. We do understand that FDA must have the 

resources, both human and capital, necessary to conduct both domestic and foreign inspections equally across all manufacturers for 

both APIs as well as for finished products. These resources need to 

be supported by additional agency appropriations and also by the 

establishment or the registration fees by manufacturers. 

It is our position that the current agency appropriations should 

be adequate to support the domestic facility inspections. However, 

we believe that the registration and establishment fees should be 

allocated solely to the support of the foreign inspection program for 

both GMP as well as pre-approval. We support a fee structure tied 

to facility inspections, that is, what do I mean by that? That the 

fee is actually due upon the completion of the inspection, which has 

a very similar model in the EU system. 

We further support and continue to encourage FDA’s use of a 

risk-based approach for the inspection program that would 

prioritize the need of inspections based on the compliance history 

of the company, the compliance history of the facility, as well as 

the products that that facility manufactures, such as OTCs versus 

sterile products. 

In addition, we believe that it is necessary to establish a foreign 

inspection cadre that may also include the establishment of FDA 

inspection offices in various regions worldwide and we commend 

the FDA in looking at the idea of putting FDA offices in China and 

India and other regions where it may be necessary. 

With regard to third-party inspections, we understand that additional work is necessary in crafting the final language, and we are 

86 

committed to working with you on that language. However, we believe that there are opportunities for FDA to collaborate with third 

parties, and most specifically with other international regulatory 

authorities through such programs as—— 

Mr. PALLONE. I am going to mention again you are a minute over 

so if you could wrap up. 

Ms. MUNDKUR. So in closing, I do believe that we strongly have 

the—the United States enjoys the world’s safest supply of pharmaceutical products, and as an industry we are committed to supporting both Congress and FDA in strengthening the foreign inspection program. 

[The prepared statement of Ms. Mundkur follows:] 

STATEMENT OF CHRISTINE MUNDKUR

Good morning Chairman Pallone, Ranking Member Deal, and Members of the 

House Energy and Commerce Committee Subcommittee on Health. Thank you for 

asking me to participate in this very timely and important hearing. 

I am Christine Mundkur, Chief Executive Officer of Barr Laboratories, Inc., the 

global generic pharmaceuticals business unit of Barr Pharmaceuticals, a leading 

global manufacturer of generic and brand name prescription drugs, and over-thecounter medicines. Barr currently operates in more than 30 countries, with manufacturing and packaging operations of finished dosage form products in multiple 

sites in the United States, and manufacturing of active pharmaceutical ingredients 

and finished dosage form products in Croatia, Poland, and the Czech Republic. 

Prior to being named CEO of Barr Laboratories in March of this year, I held a 

variety of legal, regulatory, quality, and safety management positions since joining 

the company in 1993. I am also a regulatory attorney. Most recently, I served as 

Executive Vice President, Global Quality, Safety and Regulatory Affairs, and had responsibility for leading the Company’s global quality, safety, regulatory affairs and 

pharmacokinetics/bioequivalence (PK/BE) operations. Following Barr’s acquisition in 

2006 of PLIVA, a leading European pharmaceutical company based in Croatia, I had 

the opportunity to relocate to our European headquarters in Zagreb, Croatia. In this 

position, I worked to harmonize the quality, safety, regulatory, and manufacturing 

processes across the global operation and gained valuable experience and knowledge 

working with the European drug regulatory system. 

I have worked extensively over the past 15 years with FDA in all aspects of product review, approval, and the regulation of manufacturing and quality standards, 

and actively managed our relationships with suppliers of active and inactive pharmaceutical ingredients in our products. 

In addition, I am proud to speak on behalf of the Generic Pharmaceutical Association, which represents domestic and multinational companies that manufacture 90% 

of the FDA-approved generic pharmaceuticals dispensed in the United States, as 

well as active ingredient suppliers for this market. 

OVERVIEW OF TESTIMONY

I would like to make two brief points in my testimony today, before commenting 

in some detail on the proposed Food and Drug Administration Globalization Act, 

and in particular Title II of the Act, which addresses drug and device safety. 

First, we applaud the work of this subcommittee, and the commitment of Congress to ensure the safety of America’s drug supply—brand and generic. For nearly 

a quarter of a century America’s generic drug industry has been developing, manufacturing, and marketing generic versions of brand-name prescription drugs. Last 

year, approximately 65% of the 3.6 billion new and renewal prescriptions dispensed 

in the U.S. were filled with generics, saving patients and consumers literally billions 

of dollars. We are committed to doing everything possible to work with Congress 

and the FDA to ensure that adequate oversight of the Nation’s drug supply is in 

place to ensure our safety. 

Second, I want to make clear that the generic pharmaceutical industry is among 

the most highly regulated in the world. FDA promulgates strict rules governing the 

development, manufacture, approval, packaging, marketing, and post-marketing 

surveillance of prescription drugs. And to ensure the highest purity and quality, 

FDA has in place rigorous inspection standards for facilities that manufacture and 

supply prescription drugs. 

87 

These stringent regulations apply equally to all brand, generic, and biological prescription drugs approved by the FDA. However, as you are aware, there are drugs 

being sold in the U.S. today that do not have FDA’s approval. I am speaking primarily of counterfeit drugs, which are sold over the Internet and on the black market. We do not want to lose sight of this untenable situation and the grave risk 

these unapproved and unregulated products carry for U.S. consumers. Our drug 

safety system is only as strong as its weakest link, and we encourage this committee 

to continue to place high priority on preventing counterfeit medicines from reaching 

consumers. While we support your efforts to enhance foreign inspections, we encourage the 

subcommittee to recognize the need to carefully balance competing demands for 

FDA resources to prevent the increased emphasis on foreign inspections from unintentionally and negatively impacting the timely availability of U.S. generic pharmaceuticals. Generic applications already are backlogged at the FDA, with the average 

review and approval time for Abbreviated New Drug Applications (ANDAs) now approaching 20 months, according to the Office of Generic Drugs. This is a delay of 

more than a year longer than the 6-month statutory approval period specified by 

the Hatch-Waxman Act. Action related to enhancing foreign inspections cannot be 

permitted to further delay FDA’s timely approval of generic drug applications. 

Now, I would like to spend my remaining time outlining the generic industry’s 

position regarding modifications to the Foreign Inspection process. 

CONSUMER SAFETY IS PARAMOUNT

The Government Accountability Office (GAO) reported to Congress in November 

that FDA’s effectiveness in managing its foreign drug inspection program continues 

to be hindered by weaknesses, and that fundamental flaws in the program identified 

a decade ago continue to persist. The GAO report, coupled with the recent recall 

of heparin containing foreign-made active ingredients, has served to amplify the call 

for revamping the FDA’s foreign drug inspection program to ensure the safety and 

quality of imported pharmaceutical products. 

The generic industry applauds the diligent efforts of Chairman Dingell and Members of the Energy and Commerce Committee who, for more than a year, have been 

working on initiatives aimed at protecting American consumers from substandard 

and unsafe medicines. Product safety and efficacy must always be paramount, and 

our industry has long supported measures to strengthen regulations that assure 

that all medicines—whether manufactured here or overseas—meet the highest 

standards for quality and safety. 

We agree with Chairman Dingell that we cannot ‘‘inspect our way to safety.’’ FDA 

must have the resources to enforce programs designed to prevent drug safety problems before they occur. And when prevention fails, the Agency must have the authority to impose appropriate penalties. That is why we are pleased to support the 

overall goals and fundamental provisions of the FDA Globalization Act. 

Our industry has long supported measures to strengthen safety standards across 

the board and to deal with the problems posed by insufficient current Good Manufacturing Practices (cGMP) inspections. The key to addressing these issues is to provide FDA the resources it needs to do the job. 

First, the generic industry realizes that FDA needs additional funding to defray 

the costs of sustaining an adequate inspection. Therefore, we support, in principle, 

Section 201 and the need for annual registration fees applicable to producers of 

drugs. However, the draft legislation proposes that these fees be allocated to support 

inspections of both domestic and foreign facilities. It is the position of the generic 

industry that current agency appropriations already are adequate to support domestic facility inspections. Thus, our position is that annual registration fees proposed 

in Section 201 be allocated solely to support the inspection of foreign facilities, 

where there is an immediate and significant need for resources to address the larger 

issues that are providing the momentum for this legislation. 

The generic industry advocates a ‘‘flat fee’’ structure that would cover both cGMP 

and pre-approval inspections, and would also have provisions to incorporate re-inspections. We support a fee structure that is tied to facility inspections, very similar 

to the system currently in place in the European Union. Under this fee model, payment of the inspection fee is due upon completion of the inspection. However, regardless of whether fees are registration-based or inspection-based, the fee structure 

should be tiered, with one rate for API manufacturers and another rate for finished 

dosage suppliers. 

In conjunction with generating the funds needed to achieve a successful inspection 

program, the fee system should require that the FDA adhere to certain performance 

metrics and adequate reporting to Congress to monitor program effectiveness and 

88 

help ensure inspection goals are being met. Such performance-based metrics should 

help maintain a system under which manufacturers have product entry assurances 

that are tied to timely pre-approval inspection. In this way, the program would to 

a certain degree parallel the goals and assurances that are fundamental to the 

PDUFA user fee program for new drug applications. 

It also is critical that fees collected are ‘‘locked in’’ for their intended purpose, 

namely defraying the costs of foreign inspections. We would not be inclined to support a program that permitted fees to be comingled into other accounts that do not 

support foreign inspections. 

The inspection program must ensure a fair and level playing field between foreign 

and domestic manufacturers. The generic industry urges the establishment of one 

uniform, high quality inspection standard for all facilities, with foreign inspection 

as inclusive and robust as the strictly controlled processes that FDA requires of domestic manufacturers. This would include assurances that products are made in facilities that have the proper core competencies, laboratories, and operational infrastructures, and that inspections are conducted with the same frequency, whether 

the facility is domestic or based overseas. 

We further support a ‘‘risk-based’’ model for the inspection program that would 

prioritize the allocation of inspection resources according to a company’s safety and 

compliance track record. This system would ensure that questionable or problematic 

facilities receive a comprehensive review and evaluation. At the same time, companies with strong records of compliance and positive inspections could be permitted 

to proceed to market with their products based upon this track record, without 

delays resulting from waiting for FDA pre-approval or surveillance inspections on 

every product. By no means would a risk-based approach exempt companies with 

solid compliance from FDA inspections, but rather it would put them further down 

on the inspection schedule, allowing the Agency to focus its immediate attention on 

companies that have compliance needs. 

We also support Section 202, which would require an initial inspection before the 

introduction or delivery for introduction into interstate commerce of any drug or active pharmaceutical ingredient. We particularly endorse the provision in this Section 

that would require both domestic and foreign drug facilities to be inspected at the 

same frequency. Again, we urge the drafters of this legislation to ensure that implementation of this biennial inspection does not unnecessarily inhibit the introduction 

of new products from company’s that have and continue to meet the highest standards of FDA cGMPs. 

In talking with committee staff, we understand that there is more work needed 

in crafting final language relative to third-party inspections, which is covered in 

more depth in the Food section of the Act, but also comes into play in the Drug and 

Device section. We agree that additional language needs to be incorporated that ensures that third-party inspections, including other foreign regulatory authorities, are 

performed using consistent standards and that third parties involved in inspections 

meet the highest levels of conflict of interest standards. 

In the matter of testing for drug purity and identity, addressed in Section 205, 

generic manufacturers currently test their finished products and the active ingredients they contain for purity. However, prior to providing full support for this section, we would like to work with the Committee to ensure the appropriate testing 

practices are in place. 

Section 206 of the Act addresses country of origin labeling. While our product labels currently specify the country in which the finish dose is made, there would be 

significant practical problems associated with indicating countries of origin for every 

component of a finished product. Therefore, we request clarification of the Committee’s intent in this Section—whether the country of origin labeling applies only to 

finish dose, the active ingredient, or all components of a product. 

It should be noted that country of origin information for the components of the 

finished dosage are already contained within ANDAs, and such information is updated annually and submitted to FDA. Because of the complexity of this issue and 

the myriad of technicalities involved in adding to labels the country of origin information for every component of a finished dose product—which could include all inactive ingredients, color agents, capsules or tablet coating materials, etc.—we believe 

that this section of the Act needs to be further examined in light of the practical 

issues related to its implementation if all inclusive. 

There has been some talk about drug tracking, so-called pedigree, as part of the 

drug safety initiative. The generic industry believes this bill could be an appropriate 

vehicle to implement a federal pedigree program that would ensure a uniform and 

strong national safety regime. We advocate adoption of a federal pedigree system, 

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enforced regulations. The challenge will be to ensure that the technology is reasonable and feasible in light of numerous economic, technical and logistical factors. 

To address potential quality concerns with inactive ingredients, we recommend 

that the GMP requirements as currently provided in the pharmacopeias, USP, EP, 

and JP, be further clarified and revised as deemed appropriate. 

Lastly, we support those sections of the discussion draft dealing with the destruction of adulterated, misbranded or counterfeit drugs offered for import; providing 

civil money penalties for violations; and granting the Secretary the same authority 

for detention of drugs as is currently available for devices. 

SUMMARY

Our Foreign Inspection Process is only as strong as its weakest link. Failure to 

infuse adequate resources and implement reform measures will perpetuate a system 

where there is one standard for domestic FDA-approved prescription drug manufacturers and a lesser standard for foreign manufacturers. 

In conclusion, Mr. Chairman, while we strongly believe the U.S. enjoys the world’s 

safest pharmaceutical supply chain, we know from recent and unfortunate events 

that there still is room for improvement through enforcement of more rigorous 

standards. As an industry, we stand ready to support Congress and the FDA in 

strengthening the foreign inspection program to ensure we continue to lead the 

world in safety. 

Thank you. I would be happy to address any questions of the Committee. 

Mr. PALLONE. Thank you. 

Mr. Bone. 

STATEMENT OF RON BONE, SENIOR VICE PRESIDENT, 

DISTRIBUTION SUPPORT, MCKESSON CORPORATION 

Mr. BONE. Mr. Chairman and members of the Committee, I 

thank you for the opportunity to testify today. I am Ron Bone, senior vice president of distribution support for McKesson Corporation, 

the largest pharmaceutical distributor in North America. I have 

worked for McKesson for 36 years with senior-level management 

positions in distribution, sales, finance, and independent pharmacy 

management. I am responsible for overseeing McKesson’s electronic 

tracking systems for pharmaceuticals and I am a member of the 

leadership team of GS1 Healthcare on track-and-trace standards 

internationally and in the United States. 

I am testifying today on behalf of Healthcare Distribution Management Association (HDMA), a national association representing 

primary pharmaceutical distributors. HDMA members are responsible for storing, managing, and delivering 80 percent of the prescription medicines sold in the United States. I am here today to 

express HDMA’s support for H.R. 5839, the Safeguarding America’s 

Pharmaceuticals Act, introduced by Representatives Buyer and 

Matheson. 

Pharmaceutical distributors play a critical role in the delivery of 

medicines in the United States. HDMA members purchase medicines from more than 700 manufacturers. Each day we deliver 13 

million prescription drugs to more than 144,000 pharmacies, hospitals and other healthcare settings in the United States. Our customers order electronically every evening. We pick the order that 

night and it is delivered the next morning. 

Critical public health functions are performed with tremendous efficiency and save the Nation’s healthcare system $34 billion each 

year. The U.S. pharmaceutical supply chain is extremely secure, 

providing an effective system for safe and efficient delivery of medicines to patients nationwide. Recognizing emerging threats from soVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00095 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
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phisticated criminal elements, the distribution industry is consistently developing innovative ways to preserve the integrity and the 

security of the network. The industry has promoted legislation in 

multiple States to tighten licensure requirements and to increase 

the criminal penalties for those who counterfeit and divert medicines. HDMA members also have a record of supporting current 

and emerging track-and-trace technologies such as those required 

in California. 

In 2006, HDMA established Rx Safe Track, an industry task 

force of manufacturers, distributors, and pharmacies dedicated to 

identifying the operational and technical requirements for trackand-trace implementation. 

There are three critical reasons our industry supports this bill. 

First, the bill provides for a uniform electronic pedigree standard 

that the national supply chain can implement. The current patchwork of State pedigree laws causes confusion, erodes efficiency, and 

disrupts the availability of medicines. These conflicting requirements slow the development and adoption of uniform approaches to 

pedigree implementation. 

Second, the bill allows the industry to focus on and invest in uniform technology to track-and-trace pharmaceuticals across the supply chain. One standard for the country, rather than 50 potential 

State requirements, will be more efficient and less costly. 

Third, the world is moving towards a unique identifier for each 

prescription drug. This bill builds upon the standard numerical 

identifier provisions of the FDA Amendments Act. These standards, 

mandated by Congress, are under development by the FDA. 

As pharmaceutical distributors, our greatest priority is the security of the supply chain. Uniform pedigree requirements will support the existing national pharmaceutical inventory and enables 

the safe, reliable, and efficient distribution of critical medicines and 

facilitates our rapid response in times of emergency. This legislation strikes the right balance by providing the FDA with the authority to establish federal standards while preserving the critically 

important roles of States to license, regulate and enforce. 

With a net industry profit margin of approximately 1 percent, 

HDMA members have every incentive to ensure the technology is 

right the first time. Pharmacies and hospitals will look to their distributors for assistance in implementing track-and-trace technologies. The distribution industry has pioneered innovative electronic ordering and other inventory management systems in the 

past and we will continue to support and ensure our customers’ 

success. 

We urge the Committee to consider this important legislation, 

which we believe will successfully reduce the threat of counterfeit 

and diverted medicines in the legitimate pharmaceutical supply 

chain. 

Thank you for your consideration, and I would be pleased to answer any questions. 

[The prepared statement of Mr. Bone follows:] 

STATEMENT OF RON BONE

Mr. Chairman, thank you for the opportunity to testify before the House Energy 

and Commerce Subcommittee on Health about the safety and security of the U.S. 

91 

pharmaceutical supply chain. My name is Ron Bone and I am Senior Vice President 

of Distribution Support for McKesson Corporation, the largest pharmaceutical distributor in North America. I have worked for McKesson for 36 years with senior 

management positions in distribution, sales, finance, and independent pharmacy 

management. Currently, I am responsible for overseeing McKesson’s electronic 

tracking systems for pharmaceuticals and serve as a member of the leadership team 

of GS1 Healthcare, which is developing track-and-trace standards internationally 

and here in the U.S. 

I am testifying on behalf of the Healthcare Distribution Management Association 

(HDMA), the national trade association representing primary pharmaceutical distributors. HDMA’s member companies are responsible for storing, managing, and 

delivering 80 percent of prescription medicines sold in the U.S. 

Today, I am here to express HDMA’s support for HR 5839, the ‘‘Safeguarding 

America’s Pharmaceuticals Act,’’ as introduced by Representatives Buyer and 

Matheson. 

This comprehensive bipartisan legislation would establish a uniform, national requirement for the tracking-and-tracing of prescription medicines from the manufacturer, through the distributor, to the pharmacy. 

ROLE OF DISTRIBUTORS IN U.S. PHARMACEUTICAL SUPPLY CHAIN

HDMA’s pharmaceutical distributor members typically purchase prescription 

medicines from more than 700 different manufacturers. We safely store these medicines in state-of-the-art distribution centers across the country and make daily deliveries to the Nation’s 144,000 pharmacies, hospitals, nursing homes, physician offices, and other healthcare providers. Each day, HDMA member companies deliver 

13 million prescription medicines and other healthcare products. This critical public 

health function is performed with tremendous efficiency, saving the Nation’s 

healthcare system nearly $34 billion each year. 

INDUSTRY EFFORTS TO FURTHER SECURE THE U.S. PHARMACEUTICAL SUPPLY CHAIN

The U.S. pharmaceutical supply chain is extremely secure, providing an effective 

system for the safe and efficient delivery of medicines to patients nationwide. Manufacturers, distributors, and pharmacies together share a responsibility to continuously monitor, protect, and enhance this secure system against increasingly sophisticated criminals who may try to introduce counterfeit or diverted drugs into the legitimate supply chain. 

HDMA members have a long history of working with Congress, the FDA, state 

legislatures and regulators, law enforcement, and supply chain partners to identify 

business, policy, and technology improvements that can be made to enhance patient 

safety. 

The industry has promoted legislation in multiple states to tighten licensure requirements and to increase the criminal penalties for those who counterfeit or divert 

medicine. HDMA members also have a record of supporting current and emerging 

track-and-trace technologies such as those required in California. 

In 2006, HDMA established Rx SafeTrack, an industry task force of manufacturers, distributors, and pharmacies dedicated to identifying the operational and technical requirements for track-and-trace implementation. In addition, HDMA has led 

the development of track-and-trace research and education, as well as technical 

guidelines. 

We are pleased the ‘‘Safeguarding America’s Pharmaceuticals Act’’ includes provisions that build upon these innovations, as well as the work already underway in 

many states. 

INDUSTRY SUPPORT FOR THE ‘‘SAFEGUARDING AMERICA’S PHARMACEUTICALS ACT’’ 

HDMA members support this bill for three primary reasons. 

First, the bill provides for a uniform, federal electronic pedigree standard that the 

national supply chain can implement. Today’s pharmaceutical supply chain is regulated at both the Federal and State levels of government. Federal law establishes 

minimum licensing and pedigree requirements as a baseline, while each State can 

enact additional requirements. The variability of these state requirements creates 

a patchwork of regulations that causes confusion, erodes efficiencies, and disrupts 

the just-in-time availability of prescription medicines. These conflicting requirements slow the development and adoption of uniform approaches to pedigree implementation. 

Second, this bill will allow the industry to focus on and invest in interoperable 

technologies to track-and-trace pharmaceuticals across the supply chain. One standVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00097 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
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ard for the country, rather than 50 potentially conflicting State requirements, will 

be more efficient and less costly. The development of end-to-end systems based on 

the unique identification and tracking of individual prescription drugs will achieve 

true, long-term safety benefits for all Americans. 

Third, the world is moving toward a unique identifier for each prescription drug. 

This legislation builds upon the standardized numerical identifier provisions of last 

year’s Food and Drug Administration Amendments Act (FDAAA). These standards, 

mandated by Congress, are under development by the FDA. 

CONCLUSION

As pharmaceutical distributors, our greatest priority is the security of the supply 

chain. 

National, uniform pedigree requirements will support the existing national pharmaceutical inventory that enables the safe, reliable and efficient distribution of critical medicines and facilitates our rapid response in times of emergency. 

This legislation strikes the right balance by providing the FDA with the authority 

to establish Federal standards, while preserving a critically important role for states 

to license, regulate, and enforce. 

With a net industry profit margin of approximately one percent, HDMA member 

companies have every incentive to ensure the technology is right the first time. 

Pharmacies and hospitals will look to their distributors for assistance in implementing track-and-trace requirements. The distribution industry has pioneered innovative electronic ordering and other inventory management systems in the past, 

and we will continue to help ensure the success of our supply chain partners. 

We urge the Committee to consider this important legislation, which we believe 

will successfully reduce the threat of counterfeit and diverted medicines in the legitimate pharmaceutical supply chain. 

Mr. PALLONE. Thank you, Mr. Bone. 

We have four votes on the Floor, one 15-minute followed by three 

5-minute votes. I am going to try to get through the last two panelists before we break, and we will be breaking for about a half an 

hour and then we will come back with the questions. 

Mr. Nicholson, you are recognized. 

STATEMENT OF KEVIN NICHOLSON, R.PH.D., J.D., VICE PRESIDENT, PHARMACY REGULATORY AFFAIRS, NATIONAL ASSOCIATION OF CHAIN DRUG STORES 

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

Health Subcommittee, thank you for the opportunity to testify. I 

am Kevin Nicholson, a pharmacist and an attorney, and vice president of pharmacy regulatory affairs for the National Association of 

Chain Drug Stores. 

Chairman Pallone, NACDS first reiterates our thanks for your 

leadership in sponsoring H.R. 3700, the Fair Medicaid Drug Payment Act. This bill would mitigate reimbursement cuts that could 

force 20 percent of all U.S. pharmacies to close, including those 

serving our most vulnerable low-income patients 

Now onto drug safety. Our industry is committed to assuring 

that we purchase and dispense only safe and high-quality pharmaceuticals. We take a back seat to no one in our commitment to the 

health and well-being of our patients. The U.S. drug supply chain 

is among the safest in the world, if not the safest. Both the FDA 

and the World Health Organization agree that prescription drug 

counterfeiting is rare in the United States. Still, we are committed 

to working with you to maintain and strengthen this highly reliable system. 

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mend the leadership of this committee, Chairmen Dingell, Pallone, 

and Stupak, for developing a strong and thoughtful food and drug 

safety discussion draft. It contains several important measures that 

would bolster existing safeguards and provide new programs to further protect the drug distribution system. 

However, we do have concerns regarding the bill’s provisions on 

country-of-origin labeling. These concerns are detailed in my written statement. 

Now onto track-and-trace legislation. As the Committee is aware, 

Representatives Buyer and Matheson have introduced H.R. 5839, 

mentioned by my colleagues, which contains a specific requirement 

for the tracking-and-tracing of prescription drugs. This is a mandate we do not support. We appreciate that the Committee draft 

does not contain this provision. We want to state our strong concerns with this approach and urge the Committee to resist any attempt to add a track-and-trace mandate. 

The sponsors of H.R. 5839 share our goal of enhancing the security of the drug supply chain. In fact, the bill does contain certain 

promising concepts. For example, the bill would allow the destruction of adulterated and misbranded drugs. This is an idea we support. It would also strengthen the requirements for licensure of 

wholesale drug distributors, another idea we support. And the bill 

creates a study to determine the threats to the domestic prescription drug supply chain, which could yield very important information. However, we cannot support this or any legislation that would 

mandate a track-and-trace system. Such a proposal is fraught with 

technical difficulties and formidable costs and would not live up to 

safety expectations at this time. 

First, track-and-trace systems are many years away from full development. They have not been fully tested and lack uniform standards and patient privacy safeguards. This was recently acknowledged by the State of California, which has delayed its mandate 

twice, recognizing that the distribution chain is not ready. Second, 

track-and-trace systems could be hugely disruptive to the efficient 

delivery of prescription drugs and patient care. Pharmacies face 

special challenges implementing such technologies since we are the 

only members of the pharmaceutical supply chain that have direct 

patient care responsibilities. Requiring pharmacies to adopt nascent technologies will take away resources from providing care to 

our patients. And finally, track-and-trace could cost as much as 

$30,000 per individual pharmacy location. With 55,000 pharmacies 

nationwide, this could cost the industry $1.65 billion, a devastating 

blow when also facing billions in reimbursement cuts under Medicaid. 

Some proponents of track-and-trace reference this year’s recall of 

contaminated heparin. The related deaths are tragic and heartwrenching. Our condolences go out to anyone injured or harmed by 

this incident. But track-and-trace would not have prevented this 

situation. Four key points are crucial to understanding this. The 

heparin incident was caused by contamination in China of the active ingredient used to manufacture the product. Tracking-andtracing the finished product would not have prevented the contamination of the active ingredient. The FDA recall process was immediate, robust, and effective. Track-and-trace would not replace the 

94 

need for the FDA recall process and a thorough and effective FDA 

investigation. Bottom line, drug tracking addresses drug distribution, not production, and would not have prevented the events resulting in this incident. 

Although we strongly believe the domestic supply chain is safe, 

we have developed a set of principles that we believe will lead to 

a stronger and more secure system. One: Create strong uniform 

federal requirements for state licensure of wholesale drug distributors. Two: Create an FDA-administered certification program for 

manufacturers, distributors, and pharmacies assuring adherence to 

secure drug distribution supply chain practices. Three: Require 

chain of custody pedigrees for distribution by uncertified supply 

chain entities. We believe this approach is more feasible than disruptive and costly changes contemplated under track-and-trace proposals. 

Mr. Chairman, Chain Pharmacy has taken a leadership role to 

ensure the integrity of the products we dispense. We pledge to 

work with Congress to help further strengthen drug chain security. 

I will be happy to answer any questions. 

[The prepared statement of Mr. Nicholson follows:] 

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Mr. PALLONE. Thank you, Mr. Nicholson. 

Ms. Gadhia, I think I am going to wait until we come back for 

you because there is only about 6 or 7 minutes left. So we will take 

a break, I am not going to say exactly but approximately half-anhour for all the votes, and then we will come back, finish with Ms. 

Gadhia, and take questions. So the subcommittee stands in recess. 

[Recess.] 

Mr. PALLONE. The subcommittee hearing will reconvene, and we 

left off with Ms. Gadhia, who is recognized for 5 minutes. 

STATEMENT OF AMI GADHIA, POLICY COUNSEL, CONSUMERS 

UNION 

Ms. GADHIA. Good morning, Subcommittee Chairman, Subcommittee Ranking Member, my name is Ami Gadhia and I am 

policy counsel with Consumers Union, the nonprofit publisher of 

Consumer Reports magazine. I am here today to testify about the 

drug, device, and cosmetic safety provisions of the discussion draft 

of the FDA Globalization Act. Consumers Union commends Chairman Dingell, the subcommittee chairman, the ranking members of 

the Committee and subcommittee and the members of the Committee for Chairman Dingell’s leadership on the proposed legislation and the members of the Energy and Commerce Committee for 

holding today’s hearing on this critical consumer safety issue. 

The call for a major overhaul of the FDA has now become a roar. 

A November 2007 GAO report put the problem in stark relief. Of 

all foreign plants, at most only 7 percent of them are inspected in 

a year. Some of the more high-profile failures of our regulatory system are well known at this point. The import of contaminated heparin, which is suspected to have been involved in the deaths of over 

80 people, the 2006 recall of 183,000 packages of contact lens solution manufactured in China because of bacterial contamination, 

and a June 2007 import alert about toothpaste made in China that 

contained the very dangerous chemical diethylene glycol, which is 

used in antifreeze and as a solvent. 

There have been lots of mentions today about counterfeit drugs, 

but we would just like to mention that largely what has brought 

us here today has been not counterfeit drugs but unsafe drugs, devices and cosmetics that are properly sold under their brand 

names. 

Consumers Union believes that the discussion draft of the FDA 

globalization bill contains a number of strong provisions that will 

help make consumers safer. First, the bill would require mandatory 

inspection of both domestic and foreign drug and device facilities 

every 2 years. Consumers Union would respectfully recommend 

that this inspection occur annually, and more frequently if there 

are problems, given the host of serious public health risks that 

have emerged. 

Second, the discussion draft would require destruction of adulterated, misbranded, or counterfeit drugs that accompany attempts to 

import into the United States. This provision is necessary to prevent importers from shopping until they find a U.S. port that will 

admit entry for their products. We would also recommend that the 

bill provide for a similar destruction of unsafe medical devices. 

114 

Third, the discussion draft would give the FDA the authority to 

recall seriously unsafe drugs, an authority that the Agency currently has for dangerous devices but which has been lacking for 

drugs. 

We also applaud members of the Committee for including in this 

draft a provision requiring a label with the country of origin of 

APIs and biologics and a label with the country of manufacture for 

devices. We believe that consumers and their healthcare professionals are better served by more information rather than less. 

We are also glad that the bill includes provisions addressing the 

safety of cosmetics. It is not sufficient for FDA’s inspection resources to stay at their current, extremely inadequate level with regard to imported cosmetics. Creating a fee requirement for importers of cosmetics is one step towards addressing this problem. 

There are, however, some implementation time frames in the discussion draft that Consumers Union would urge the Committee to 

consider shortening. It appears that the effective dates of a number 

of the bill’s provisions are too far out in the future, sometimes 2 

or 3 years out. These should be shortened. 

We support the discussion draft’s provision creating a user fees 

regime for various new FDA functions. However, we urge the Committee to ensure that the user fees do not turn into a pay-for-play 

scenario. We would not want to see regulated entities have the 

ability through the user fee program to exert undue influence over 

the FDA in its decisionmaking or other functions. In addition, like 

the user fees for food safety importation, the drug and device importer fees should be indexed for inflation. 

Consumers Union also believes the civil money penalties for violations are set too low. For a large manufacturer, producer or other 

multinational, a penalty of $100,000 could simply be a cost of doing 

business or perhaps a few hours worth of profit. For the penalties 

to serve as a true deterrent against unsafe or illegal actions, they 

should be set higher. 

FDA must also have the ability to perform unannounced inspections of foreign facilities. Because of advanced warning, foreign 

manufacturers, unlike domestic companies, are able to clean up to 

ensure that they past inspection, even if they are not in compliance 

every other day of the year. 

We wholeheartedly support providing FDA with new authorities 

and resources. We are pleased that this discussion draft gives FDA 

a number of new and very necessary additional powers to better 

ensure the safety of our drugs, devices, and cosmetics. We also urge 

that manufacturers and others who profit from the sale of such 

products to American consumers fairly shoulder their full responsibility for improving the safety and quality of the products they sell. 

I thank the Committee for the opportunity to testify today, and 

we at Consumers Union look forward to working with the Committee to help move forward on the strongest FDA reform bill possible. Thank you. 

[The prepared statement of Ms. Gadhia follows:] 

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Mr. PALLONE. Thank you, Ms. Gadhia, and thank you all the 

panel. We will start taking questions and I will recognize myself 

for 5 minutes for questions. 

I wanted to start with Mr. Hubbard. In your testimony, you mentioned the heparin incident. Obviously that is of grave concern to 

us and should never—obviously we don’t want it to happen again. 

In some of the meetings we have had with pharmaceutical manufacturers, they have pointed out that regardless of increased inspection, we currently do not have the technological capabilities to 

actually prevent similar incidents as the heparin case, and actually 

in her testimony on Tuesday, Dr. Woodcock pointed out that, and 

I quote, ‘‘Conventional laboratory testing did not identify the contaminant’’ and that the Agency had to develop a new test but they 

had to know that they were looking for something that shouldn’t 

have been there. 

So basically the way I understand it, Mr. Hubbard, the industry 

is saying that they can’t test for unknowns that are unknown. They 

have got to have some idea what they are looking for. So it possible 

to screen drugs and biologics for unknown contaminants, and if 

not, what else can be done to ensure that the drugs sold to the 

American people are truly pure and safe? 

Mr. HUBBARD. Well, it is certainly difficult to look for something 

that shouldn’t be there and we saw that with melamine last year, 

but I think this case points up the fact that we have got to find 

a way because if people can do this kind of contamination so easily, 

save so much money and get it into our system without being 

caught, there has to be a way. If widespread use of capillary electrophoresis or these other sophisticated technologies are going to be 

difficult, it may have to be so be it, but I would hope that you 

would have a magnitude of scale that if you had more testing along 

these lines, that you would be able to have some cost savings, plus 

if FDA is regulating more and enforcing its GMPs, you are going 

to presumably raise the standards generally and deter these folks 

anyway and so you are going to have a secure supply chain where 

whoever put that chondroitin in at some point will know that there 

are more people looking, there is more testing, there is more overall quality assurance. So I think you have got the two pieces. You 

have a stronger system and perhaps some testing. And maybe you 

don’t need to test everything but I think that some testing is probably going to have to be necessary. 

Mr. PALLONE. No, I understand what you’re saying, which is 

that, you know, we have to try to check things through the chain 

and set up standards. It is not just a question of a test at the end, 

but at the same time, we have to try to maybe invest in new testing methods too, just can’t give up. 

Let me ask Ms. Gadhia, I wanted to ask you a question about 

the country-of-origin labeling. You mentioned it, and of course a 

number of the other panelists voiced their concerns about countryof-origin labeling. The most common argument we have heard is 

that knowing what country the drug was made in or where the ingredients came from would only make consumers more worried and 

confused about the products they are purchasing. Is this countryof-origin labeling important, and why, and what would you say 

about the industry’s concerns? 

124 

Ms. GADHIA. Well, I understand, and I have heard those concerns 

and generally speaking, the approach that we take is that consumers are better served by more information rather than less, and 

in fact, we think that the internal customers within the supply 

chain system would also be served by the internal information on 

a packaging or on what have you, letting them know where the 

product is from. The way that things like heparin, for example, 

work, it is not something that the consumer takes off the shelf 

themselves. It is something that a purchasing manager within a 

hospital would buy, or something like that, and we would like to 

see the awareness of potential red flags for danger or safety issues 

to go to those consumers, so to speak, as well. So we think that everyone across the board would be better served by that kind of information. 

Mr. PALLONE. I wanted to ask Mr. Bone one more question here. 

You said that McKesson, I guess, has the electronic tracking system, right? You mentioned that. And you mentioned in your testimony the need for interoperable technologies to track-and-trace 

pharmaceuticals across the supply chain. We have heard today 

about concerns with respect to technology, at least in its current 

state, to be able to actually accomplish what is set forth in the bill 

that we have, and I know that the term ‘‘interoperability’’ is used 

often with respect to health information technology and EHRs, yet 

really doesn’t mean that the systems truly are interoperable. So I 

guess what I wanted to ask you, I know that even like in hospitals, 

because I visit them all the time, they struggle to connect with 

other providers in the region or the Nation and a lot of times the 

technologies don’t work the way they are supposed to. There are 

significant concerns about radio frequency identification, and in 

your opinion, is the technology there yet and are you confident that 

if each pharmacy purchased a different system, your suppliers will 

be able to integrate seamlessly with each other? Just basically tell 

me what McKesson is doing to ensure that their systems are truly 

able to connect seamlessly with all other technology manufacturers 

out there. You should know, we are probably going to deal with a 

larger HIT bill in the subcommittee too in the next few weeks so 

obviously this is of concern. If you want to just comment, if you 

will? 

Mr. BONE. So what is happening in the industry, and I do serve 

on two leadership groups that are working on the standard for 

track-and-trace, both domestically and internationally. We are 

building the backbone for those standards. They are not specific in 

saying that you have to do it precisely this way, meaning you have 

to use RFID. There are other ways that you can communicate that 

information, and one of those is using a barcode. We have a 

barcode that is more robust. It is a 2–D barcode that a number of 

manufacturers are looking at. In the work that we have done so far 

in the standard setting, we recommend unit level packages that 

have RFID chips backed up with a 2–D barcode. That means that 

you would have an alternative method, for those who say I am not 

technologically sophisticated enough to read RFID chips. And quite 

frankly, I think reader costs are going to come down in price dramatically in the coming years. Those people could say that at this 

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thing more akin to what they are using today, which is a linear 

barcode. Now, a 2–D barcode is a barcode kind of on steroids. A 2– 

D barcode is a more sophisticated barcode because it can store 

more information on it. There are manufacturers that are experimenting with this system. We have actually been moving RFID 

product for over 2 years now, almost 3 years, where we have been 

testing with some manufacturers on that piece. So there is more 

work to be done. That is why I like the timing of this bill because 

it does give us the time to complete the standards work that we 

are doing, which we intend to get done later on in this year, first 

part of next year, which fits in the timing that you have here. And 

we are also trying to do it on an international basis, because many 

of the manufacturers are international based. We feel that it is important to expand that scope. But for us, what is most important 

is one standard for the Nation. 

Mr. PALLONE. Do you think you can—I mean, I just want to restate the question. You think that with respect to the technology 

you will be able to actually accomplish what is set forth in the bill? 

I am talking about the Buyer-Matheson bill obviously. 

Mr. BONE. That is correct. Yes, we do. 

Mr. PALLONE. OK. Thank you. 

Mr. Buyer. 

Mr. BUYER. Thank you. 

This will be a yes or no question and I am going to go right down 

the line. Do you see a value and a necessity and therefore support 

a one uniform national pedigree standard as opposed to 50 separate State pedigree standards? Mr. Hubbard? 

Mr. HUBBARD. Absolutely. 

Mr. BUYER. Ms. Reilly? 

Ms. REILLY. Yes. 

Mr. BUYER. Congressman Greenwood? 

Mr. GREENWOOD. I certainly do. 

Mr. BUYER. Ms. Mundkur? 

Ms. MUNDKUR. Yes. 

Mr. BUYER. Mr. Bone? 

Mr. BONE. Yes. 

Mr. BUYER. Mr. Nicholson? 

Mr. NICHOLSON. Well, it is difficult—— 

Mr. BUYER. ‘‘Well’’ is not a yes or no response. 

Mr. NICHOLSON. I do have difficulty answering that as a yes or 

no response. 

Mr. BUYER. All right. Thank you. 

Ms. Gadhia? 

Ms. GADHIA. No. 

Mr. BUYER. The next question I have, Mr. Greenwood, in H.R. 

5839, there is a provision on page 23 which would exempt drugs 

from being required to have an identifier such as 2–D barcode, 

RFID chip or other technology. So if a manufacturer can demonstrate that the identifier would adversely affect the safety, effectiveness, purity or potency of the drug or would not be technically 

feasible, do you believe that this provision that we have in the 

Buyer-Matheson bill would be important for you to ensure that any 

new technologies do not affect biologics, which are known to be 

highly sensitive drugs? 

126 

Mr. GREENWOOD. I believe the answer to that is yes. I would like 

to reserve the opportunity to give you an answer in writing after 

I check with some of our technical staff. 

Mr. BUYER. All right. Thank you. 

Mr. Bone, first, on a personal note, let me thank you for your 

service as a Vietnam veteran. You state in your testimony that a 

track-and-trace system will create efficiencies and decreased costs. 

Can you explain just a little further? 

Mr. BONE. Yes, and this is particularly relative to the uniform 

pedigree standard that is in your bill. We are focused on making 

sure the same serialized pedigree system is used, which means serialization when we start that product, and the receipt of that item 

in any one of our facilities throughout the distribution network, 

and as we pass that on to our customers, is the same system. What 

we have demonstrated over time, once we have that in place, and 

there are provisions in this bill to incrementally bring people on, 

so at the early stages I would say that is not going to happen but 

as we have the entire network in place, what we will do is, we will 

determine those places that we can improve inventory, recalls, returns processing, and the knowledge that we are going to have of 

those products and the quickness with which we will be able to 

handle those products will give us those savings. 

Mr. BUYER. Thank you, Mr. Bone. 

Now, Mr. Nicholson, I have got a series of inconsistencies that 

I want to give you the opportunity to clarify. One would be, you in 

your testimony, you use a $30,000 figure as a cost per pharmacy, 

and yet one of your own board members, the former CEO and 

chairman of Walgreen’s, used a $20,000 figure. I would like to 

know if you are familiar with his May 2007 comment. The chairman and CEO of Walgreen’s was quoted as stating, ‘‘Working together through our recently formed coalition within independent 

pharmacies, I am convinced that we can take hundreds of millions 

of dollars out of the pipeline by fully exploiting potential RFID in 

pharmacy. Even more promising is the vast improvements in data 

management networks over the last decade are justification for tremendous optimism.’’ When he broke down the cost savings of an 

RFID technology for pharmacy, $7,250 per store for improved productivity, $2,000 per store per year in reduced labor costs on cycle 

counts, $2,500 per store in reduced returns and recalls, $4,000 per 

store per year in improved shrinkage, $24,000 per store per year 

in better inventory forecasting, improved out of stock positions and 

improved pharmacy workflow. Have you seen this analysis? 

Mr. NICHOLSON. Yes, I have. 

Mr. BUYER. Can you reconcile? 

Mr. NICHOLSON. Well, Mr. Buyer, yes, I have. What I can tell you 

is that our members have—as Mr. Bone has indicated, our members have participated in track-and-trace pilot programs and the 

numbers that I spoke of today are the numbers that they have developed as part of the participation in the pilot programs. The costs 

that I spoke of today are—we do have a very diverse membership 

and for some members the costs may be greater than for others but 

these are the costs, this is the average cost that our members have 

indicated they would have to put out, that they would have to 

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spend in order to adopt a track-and-trace system at this point in 

time. 

Mr. BUYER. Do you recognize that there have been decreased 

costs in track-and-trace technology in recent years? Do you acknowledge that? 

Mr. NICHOLSON. I don’t have that personal knowledge, and I—— 

Mr. BUYER. Would it surprise you if I were to tell you that industry analysis has found that for one identification system, which is 

the RFID, prices have fallen by 70 percent by year 2005? Would 

that surprise you? 

Mr. NICHOLSON. No, that would not surprise me. 

Mr. BUYER. OK. With regard to your ambivalence to a yes or no 

question, would you acknowledge that your organization, that there 

would be considerable costs to pharmacies for you to comply with 

50 State separate pedigree requirements as opposed to one uniform 

standard? 

Mr. NICHOLSON. We do prefer, as an association that represents 

large companies that operate in many States, we generally do support the harmonization of State requirements and we actually have 

been working in the States to harmonize the pedigree requirements 

among the States. More than half the States have passed legislation requiring pedigrees for distributions outside the normal distribution channel, so we feel that this has been an adequate way 

of addressing that situation. 

Mr. BUYER. Mr. Chairman, I appreciate your indulgence. I have 

one last question. 

Mr. Nicholson, you state that you cannot support legislation 

which would mandate a track-and-trace system. 

Mr. NICHOLSON. At this point in time. 

Mr. BUYER. However, your own lobbyist testified in California on 

April 7 that your organization supports the California legislation 

currently in the California Senate, which is a track-and-trace system. So I note their system, we have worked with them, mirrors 

a lot of our own provisions. How do you reconcile your testimony 

of April 7 supporting the California position, yet stand here and 

say emphatically that you do not now support a track-and-trace 

system? 

Mr. NICHOLSON. Mr. Buyer, let me address that also. Our position in California is that pharmacies would need 2 years after the 

supply chain changes required to implement that changes are required for us to proceed. We have not endorsed track-and-trace in 

California. The legislation currently moving in the California legislature would amend current statutory requirements for track-andtrace. We are working with the Board of Pharmacy. We are working with stakeholders in California and so we are not supporting 

track-and-trace in California. 

Mr. BUYER. You are not supporting? So you disavow the testimony that occurred in California on April 7? 

Mr. NICHOLSON. Our testimony in California was not a support 

of track-and-trace. 

Mr. PALLONE. We have to move on here. Let us go to Mr. Matheson. Maybe he can follow up on this. You don’t have to. I recognize 

the gentleman from Utah. 

Mr. MATHESON. Thank you, Mr. Chairman. 

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Mr. PALLONE. You are welcome. 

Mr. MATHESON. I have a whole bunch of questions. Mr. Nicholson, in your testimony you mentioned that advocates of the BuyerMatheson legislation are somehow implying that it would have 

stopped the heparin issue that took place. I just want to make a 

statement. We are not naive. We don’t think our legislation deals 

with tainted drug supply and I don’t think we have ever said it 

deals with stopping tainted drug supply and to set up an argument 

in your testimony to criticize legislation, it is a false argument. It 

is a straw man that you were able to knock back down but we have 

never said that and that hasn’t been part of why we have justified 

this legislation. So just for the record, I don’t think that part of 

your testimony really is germane to our bill. We would stipulate 

that our bill would not have prevented the heparin situation. 

I have a whole bunch of questions and again, I know you didn’t 

like the yes or no before, but in terms of on page 7 of your testimony where you mentioned the organization’s concern with mandating use of any technology that is under development and premature. Let us try some yes-no questions on that. Are you aware 

of the provisions in H.R. 5839 which require the development of 

identifier and track-and-trace standards before anyone in the industry would be required to buy technology with such standards? 

Mr. NICHOLSON. Yes, sir. 

Mr. MATHESON. Are you also aware that the bill provides 18 

months for identifiers to be placed on pharmaceuticals and at least 

18 months for the supply chain to adopt track-and-trace after the 

standards are announced by the FDA? 

Mr. NICHOLSON. Yes. 

Mr. MATHESON. Additionally, are you aware of the comment period currently underway at the FDA as FDA develops standards for 

a unique identifier to be applied on all drug units? 

Mr. NICHOLSON. Yes, we are providing comments to FDA. 

Mr. MATHESON. Are you aware of the rulemaking process written 

into the bill for stakeholders to provide input to the FDA as it 

forms standards for the track-and-trace system? 

Mr. NICHOLSON. We do support FDA’s initiative. 

Mr. MATHESON. It seems to me that the bill allows for pretty sufficient time for the supply chain as the FDA creates its standards 

for the track-and-trace system. 

Mr. NICHOLSON. Well—— 

Mr. MATHESON. I understand—— 

Mr. NICHOLSON. My response to that would be is that we have 

been talking about track-and-trace for many years now and, you 

know, various stakeholders had promised the State of Florida 

track-and-trace. Back in 2003 they promised we would have trackand-trace in 2006. We didn’t. California was promised track-andtrace in 2007. 

Mr. MATHESON. What I am going to tell you, Mr. Nicholson, is 

our legislation puts in a buffer and it gives the FDA the time to 

develop these standards. We are not mandating specific dates in 

this legislation, and you imply that we are trying to push premature technology, and what I am telling you is, our legislation 

sets up a process by which the FDA through a rulemaking process 

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ards. So you can talk about Florida in 2003 all you want. That is 

not what our legislation does. We are not setting a date certain 

where it has to happen. 

Let me move on. I understand that actually NACDS has been at 

the forefront of promoting use of track-and-trace technology. You 

sponsored annual summits right here in Washington for several 

years to promote the use of track-and-trace technology. According 

to Drug Store News, on December 10, 2007, your summit in 2007 

drew nearly 500 attendees that came together to learn on how 

RFID and track-and-trace can be tightened for pharmaceutical supply chain security and enhance business processes. I also read an 

article in the 2007 RFID track-and-trace healthcare industry adoption summit, which was hosted by your organization, that 

Walgreen’s CEO, David Bernauer, and I think Mr. Buyer mentioned this, he called on supply chain executives to adopt a comprehensive uniform system of RFID and track-and-trace technology 

and he further stated that RFID or other track-and-trace technologies could usher in a far more efficient supply chain, reducing 

shrink, out-of-stocks and returns of outdated product and would 

improve order accuracy and reduce costly inventory levels. Does 

your organization recognize those comments by one of your member 

companies at the summit that happened just last fall? 

Mr. NICHOLSON. Yes, sir. Yes, Mr. Matheson, we do recognize 

that. We do support the—as you will notice in our testimony, we 

do not say that RFID or track-and-trace technology is bad. We say 

that it has much promise, that it should continue to be reviewed 

and to be researched, that it does have much promise for creating 

efficiencies in the supply chain. However, we are not comfortable 

with any legislation that mandates track-and-trace technology. 

Mr. MATHESON. Did you know he noted in your 2005 summit you 

hosted that while it may mean supply chain improvements and 

heightened patient safety, the related benefits associated with the 

implementation of the new technology also includes increased customer retention? He thinks it is going to increase sales. That is 

what the chairman of Walgreens said. Did you note these benefits 

in your testimony? I don’t think you did actually. You talked about 

the costs with the $30,000 amount, which Mr. Buyer has already 

brought into question, but one of your own member companies, one 

of your significant ones, has acknowledged that track-and-trace 

technology actually creates a lot of business opportunity and benefits for your industry as well. 

Mr. NICHOLSON. We don’t dispute that. 

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

Mr. PALLONE. I am going to start dreaming track-and-trace here 

tonight with all the track-and-trace back and forth. 

Thank you all. We certainly appreciate your testimony and obviously this is the second—we are actually going to have another 

hearing on this bill, I think, next week dealing with the cosmetics 

and the medical devices, but all of your testimony has been very 

helpful. 

Let me mention that the members can submit additional questions for the record to be answered by you, and basically we get 

those questions submitted to the clerk within the next 10 days, so 

within 10 days or so, the clerk will notify your offices that you may 

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have written questions and we would certainly ask you to respond 

to those. 

Mr. BUYER. Mr. Chairman, I would like to thank you for your 

courtesy today, not only to do your draft bill but to take into consideration Mr. Matheson’s and my bill. I appreciate it. 

Mr. PALLONE. You are welcome. It is very important and I am 

glad that we have a good discussion about it. 

So thank you again, and without objection, the meeting of the 

subcommittee is adjourned. 

[Whereupon, at 1:45 p.m., the subcommittee was adjourned.] 

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WILLIAM K. HUBBARD, ANSWERS TO SUBMITTED QUESTIONS

QUESTION SUBMITTED BY HON. JOHN D. DINGELL: 

1. Mr. Hubbard, the discussion draft would require a unique identification number for registered facilities and importers so FDA can more effectively track facilities in case of emergencies. There has been talk from various groups of using a Dunn and Bradstreet Number as a unique identifier. 

What would be the advantage of using that number specifically? Are there 

any disadvantages to using that number? 

A: It is clear from the findings by the Committee and the GAO that the current 

registration system for foreign facilities has not been successful, as demonstrated by 

the inaccurate and changing information about which foreign drug manufacturers 

are registered and sending drugs to the United States. Therefore, unique identification # is needed, and FDA officials now recognize that need. The advantage of using 

the Dunn and Bradstreet (DUNS) system is that it is a well established one that 

has worked well in the past, and does not require FDA to create a new system from 

‘‘scratch.’’ I do not know of any disadvantages to using the DUNS system. 

QUESTIONS SUBMITTED BY HON. STEVE BUYER: 

1. During your time at the FDA, why was FDA unable to destroy counterfeit, adulterated, and misbranded pharmaceuticals coming through our 

international mail system? Do you think FDA should have the ability to destroy these unregulated drugs? 

A: Under current law, FDA is required to go through certain legal processes, such 

as notifying the intended recipient of the drug that it may be in violation of law, 

hold the drug while the recipient considers that notification, and permit the recipient to have a hearing on the drug’s detention. FDA has little storage capacity at 

border points, and does not have the staff to detain and notify the thousands of such 

drug shipments that arrive via the mail each week. The agency has requested the 

authority to destroy such shipments, much as the Drug Enforcement Administration 

can for controlled substances under its purview, but Congress has not acted on that 

request. If FDA did have such authority, it could deter the purchases over the internet of drugs from unknown and unsafe sources, and thus provide a significant deterrent to the sale in the US of counterfeit and otherwise dangerous drug imports. 

2. Do you support a uniform national pedigree system and do you think 

a track-and-trace system will help to secure our Nation’s pharmaceutical 

supply chain from counterfeiting and diversion? 

A: Yes, a uniform national pedigree system, allied with an effective trace and 

trace system for monitoring the movement of drugs, is, in my opinion, the single 

most effective strategy that the United States can adopt to deter the counterfeiting 

and diversion of pharmaceuticals. The technology exists for doing so, and should be 

mandated as soon as possible, with a reasonable period of time for manufacturers, 

wholesalers and others in the supply chain to implement. 

3. Do you believe drug counterfeiting and drug diversion are problems in 

the United States? 

A: Yes. Not only are drug counterfeiting and diversion a problem today in this 

country, it is a growing problem that increasingly threatens the safety of our citizens. The counterfeiters are seeking more and more each year to sell their dangerous products in the United States, as they currently do commonly in many countries around the world. FDA is unable, with current resources and authority, to effectively stop this trend, and I urge Congress to strengthen the Agency’s capability 

to do so. 

QUESTION SUBMITTED BY HON. DIANA DEGETTE

1. Counterfeiting is becoming increasingly more common worldwide, and 

I believe that it is vital for FDA and border control agents to have tools 

at their disposal that will enable them to appropriately deal with adulterated or counterfeit drugs at the point of entry. 

I want to make sure that there will be sufficient technology, resources, and authority available to border control agents to ensure the continued safety of our Nation’s drug supply. Could you please comment on what you believe is necessary at 

the border in order to safeguard our pharmaceutical supply? 

A: FDA needs a range of new tools to effectively deter counterfeit drugs that are 

imported from other countries. First, the Agency needs sufficient resources. The 

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1Public Law No. 110-85 (Sept. 27, 2007). 

agency has only 450 import inspectors to cover more than 400 ports of entry, so that 

effort is clearly massively underfunded. And the Agency has inspectors to conduct 

only a handful of surveillance inspections in foreign countries each year (where most 

of our drug ingredients are now produced). 

Second, FDA needs to be able to require state-of-the-art technology for trackingand-tracing pharmaceuticals, using a universal pedigree for each drug. Such technologies are available today and have been demonstrated to be an effective deterrence against counterfeiters, who are essentially prevented from introducing their 

dangerous products into the US market. 

Third, border inspectors need changes in their current authority over drugs that 

are found at the border. Currently, inspectors must go through such complicated 

procedures to detain suspect imported drugs that they must let most go through 

unimpeded. Those procedures were created in an earlier day in which few drug imports arrived at border points, and the border inspectors are now overwhelmed by 

the volume of drug imports. Specifically, border inspectors need the authority to either immediately refuse entry or destroy imported drugs that violate US law, without going through the cumbersome notice procedures required by current law. 

LORI M. REILLY, ANSWERS TO SUBMITTED QUESTIONS

Dear Chairman Dingell and Rep. Buyer: 

Thank you for your letter dated June 9, 2008, which sets out additional questions 

from Rep. Steve Buyer. For your convenience, I have reproduced your questions 

below, followed by answers on behalf of the Pharmaceutical Research and Manufacturers of America (PhRMA). PhRMA represents the country’s leading pharmaceutical research and biotechnology companies, which are devoted to inventing 

medicines that allow patients to live longer, healthier, and more productive lives. 

PhRMA companies are leading the way in the search for new cures. PhRMA members alone invested an estimated $44.5 billion in 2007 in discovering and developing 

new medicines. Industry-wide research and investment reached an estimated record 

$58.8 billion in 2007. 

QUESTIONS SUBMITTED BY HON. STEVE BUYER

1. Do you see value in one, uniform national pedigree standard as opposed to 50 separate state pedigree standards? 

PhRMA sees great value in the establishment of a single, national pedigree standard. In fact, several states have adopted pedigree and electronic track-and-trace requirements. In addition, many other states are considering pedigree and electronic 

track-and-trace legislation. Because of the complexity of these systems and the need 

for coordination among many different trading partners, there should be one uniform national pedigree and/or electronic track-and-trace system, not multiple and 

potentially inconsistent state requirements. This would provide national uniformity 

of all pedigree and track-and-trace laws, and will help encourage the adoption and 

use of anti-counterfeiting technologies rather than promoting multiple and potentially inconsistent state requirements. 

2. What have your member companies done in terms of moving toward 

track-and-trace systems? 

Based on discussions intended to inform PhRMA’s advocacy with Congress, the 

Food and Drug Administration (FDA), and state legislators and regulators, we can 

confirm that numerous manufacturers are working towards implementing electronic 

pedigrees. The increase in activity compared to just a few years ago demonstrates 

manufacturers’ ongoing commitment to assuring a safe supply chain that will enhance patient safety. We view electronic pedigree as a key approach to meeting the 

mandate of the Food and Drug Administration Amendments Act of 2007 (FDAAA). 

Section 913 of FDAAA directs the FDA to, among other things: ‘‘develop a standardized numerical identifier (which, to the extent practicable, shall be harmonized with 

international consensus standards for such an identifier) to be applied to a prescription drug at the point of manufacturing and repackaging . . . . at the package or 

pallet level, sufficient to facilitate the identification, validation, authentication, and 

tracking-and-tracing of the prescription drug.’’ 1 Neither Section 913 of the FDAAA 

nor FDA’s Federal Register notice defines the term ‘‘standardized numerical identifier.’’ The FDA has begun the process to collect information as directed under 

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FDAAA, and PhRMA will continue to work closely with the Agency and relevant 

stakeholders as the FDA progresses. 

Additionally, in October 2007, as requested by the California Board of Pharmacy 

Enforcement Committee, and to help inform our advocacy, PhRMA conducted a confidential survey of its member companies on their activities and mechanisms to 

track the distribution of pharmaceutical products in the supply chain. Twenty-one 

members of PhRMA responded to the survey. U.S. antitrust laws prevent disclosure 

of the identity of companies responding to the survey; that information has not been 

shared with PhRMA staff or member companies. Company-specific information has 

been aggregated to protect its confidential nature. 

E-PEDIGREE WITHOUT SERIALIZATION

PhRMA’s survey results revealed that more than 2/3 of our member companies 

were in the planning phase for non-serialized electronic pedigree, or e-pedigree, as 

of last fall. Of the remaining respondents, the majority are currently conducting epedigree pilots. A small number of companies, less than 10% of the respondents, 

have implemented non-serialized e-pedigree for all of their products in commercial 

distribution. 

PhRMA’s members report that, based on their pilot studies, pharmacy involvement in non-serialized e-pedigree pilots is extremely limited; wholesaler participation is greater but still limited. 

SERIALIZATION

The PhRMA survey results reveal that the research-based pharmaceutical manufacturers’ experiences with serialization pilots are in the preliminary stages. Multiple companies are conducing serialization pilots at the case, pallet and item level, 

and the majority of these pilots involve limited product tagging. The majority of respondents conducting serialization pilots at the item level are using 2–D barcode 

technology. The majority of serialization pilots involving tagging at the case or pallet level are using UHF/RFID technology. Eighty-two percent of the serialization pilots involving wholesalers and/or pharmacies affect no more than 25% of the volume 

of that product in the commercial marketplace. 

The PhRMA survey results reveal that planning and conducting serialization pilots is a time and resource-intensive process. The majority of the pilots our member 

companies are involved in are taking 12–18 months to plan and implement, and the 

majority have an expected duration of 12–18 months. Thus, a serialization pilot at 

the case, pallet or item level takes approximately 3 years from planning to completion. The cost to conduct these pilots ranges from approximately $200,000 for a limited scope serialization pilot to anywhere from $1 million to $15 million for one 

pilot. 

PhRMA’s survey indicates that the impact of item-level serialization for manufacturers would be significant. Based on our survey, more than 2000 medicines of the 

research-based prescription drug industry are affected, with each manufacturer having an average of 113 affected products. A total of 431 packaging lines in 162 plants 

are impacted, with an average of 25 packaging lines in 8.5 different plants impacted. Our manufacturers estimate that nearly 900 internal company personnel 

would be involved in any commercial serialization, with an average of 53 people per 

company. 

PhRMA’s survey results also reveal that each implementation is unique. Taking 

into account the significant time and resources necessary to plan and conduct pilots, 

it is clear that each implementation of item-level serialization will be time-consuming and resource-intensive, and could face unexpected challenges and delays at 

any time. Survey estimates of the time to serialize all products range from approximately 1 year per product to 5–7 years to serialize all products. Moreover, PhRMA’s 

survey results suggest that the costs to serialize all medicines of the research-based 

pharmaceutical companies in commercial distribution range between, at the low 

end, $5–$10 million for a company all the way up to $200 million for a single company. PhRMA’s best estimate of the initial investment to implement serialization at 

the smallest unit shipped by the manufacturer, for all innovator human prescription 

drugs sold in the United States, is $4.5 billion, based on our survey results. 

3. What other steps have manufacturers taken to help secure the prescription drug supply chain? 

PhRMA believes there is no technological ‘‘silver bullet’’ to protect against counterfeits. PhRMA member companies currently employ and routinely enhance a variety of anti-counterfeiting technologies, including covert and overt features on the 

packaging of high-risk prescription drugs. They have also adopted a range of business processes to better secure the supply chain and help facilitate the early detecVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00208 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
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2FDA, ‘‘Counterfeit Drugs Questions and Answers,’’ available at: http://www.fda.gov/oc/initiatives/counterfeit/qa. 3World Health Organization, ‘‘WHO and partners accelerate fight against counterfeit medicines; Up to 50% of medicines sold through rogue web sites are fake,’’ November 15, 2006. 4 ABC News, ‘‘Dateline’s Bitter Pill Investigation Highlights Need for Consumer Awareness 

of Counterfeit Drugs,’’ June 6, 2006. 

tion of criminal counterfeiting activity. These are additional tools to help strengthen 

the security of the pharmaceutical supply chain. 

PhRMA member companies have a strong interest in ensuring that the supply 

chain that moves drugs from the manufacturer to the patient is safe and secure. 

Our companies manufacture these products following exacting standards and use 

extensive quality systems to assure that innovative medicines provide consistent 

positive health outcomes. However, even the most effective medicines cannot help 

patients if those medicines are compromised by breakdowns in the distribution system, such as diversion and counterfeiting. America’s pharmaceutical research companies are committed to embracing new technologies as a means of protecting the 

integrity of the American drug supply. PhRMA has also collaborated with other 

members of the supply chain to explore a variety of approaches to help assure 

American patients that the drugs they get are not counterfeit. 

Manufacturers of pharmaceuticals sold legally in the U.S. must comply with the 

‘‘gold standard’’ of quality manufacturing—FDA’s GMP regulations. The GMP regulations are applicable to all pharmaceuticals sold in the U.S., wherever they are 

made, and extend to all components of a finished drug product, including active 

pharmaceutical ingredients (APIs), without regard to where those ingredients are 

sourced. These regulations are extensive and thorough and require manufacturers 

to build quality into the design and production of pharmaceuticals, thereby helping 

to assure the safety, integrity and quality of every product approved and sold in the 

U.S. from the outset. FDA’s GMP regulations are based on the fundamental quality 

assurance principle that quality, safety and effectiveness ‘‘cannot be inspected or 

tested into a finished product,’’ but instead must be designed and built into a product. GMPs represent a comprehensive, systems-based approach that requires a company to build quality directly into the entire manufacturing operation, in order to 

ensure that the process itself is under control and therefore will consistently 

produce a drug product that meets designated specifications. Pharmaceutical manufacturers employ extensive quality systems and take extraordinary measures to secure the supply chain throughout the life cycle of the product since any loophole or 

breakdown in the pharmaceutical distribution system may provide an opportunity 

for diversion or counterfeiting to occur. Thus, in our view, the most effective way 

to combat counterfeiting is to adopt a multi-pronged strategy that addresses weaknesses throughout the distribution system. 

4. Does PhRMA see a problem with thousands of unregulated pharmaceutical packages coming through our Nation’s international mail system 

every day? 

While the current system has been effective in the U.S. for protecting public 

health, it faces increased threats with the proliferation of Internet drug sellers outside the U.S. and outside the jurisdiction of the FDA. The safety concerns that exist 

today are many and include concerns over the introduction of unsafe or counterfeit 

drugs into the U.S. stream of commerce as well as concerns about individuals using 

the Internet as a means to avoid getting a prescription for their medicine. Both pose 

considerable safety concerns. 

Experts agree that buying prescription medicine from unknown Internet drug sellers poses inherent risks to patients. FDA estimates that counterfeits make up 10 

percent of the global medicines market. 2 The World Health Organization (WHO) 

has found that 50% of prescription medicines from rogue Internet sites are counterfeit. According to the WHO, ‘‘.the message for now is: do not take the risk of buying 

your medicines from unknown sources, such as the Internet. If you must buy from 

the Internet, ensure that the Web site is that of a pharmacy you know and trust.’’ 3

According to counterfeit expert Tom Kubic, Executive Director of the Pharmaceutical Security Institute (PSI), ‘‘Counterfeit drugs are posing increasing risk to 

U.S. consumers, especially when shopping online.Except [for] a few legitimate U.S. 

Internet pharmacies, there is little or no effective control over drugs purchased over 

the Internet.’’ 4

According to a recent National Public Radio report, the Internet and the growth 

in international commerce, as well as easy access to sophisticated technology has 

facilitated the rise of counterfeit medicines in the marketplace. Recently, the FDA’s 

Director of Pharmacy Affairs Ilisa Bernstein noted that there are ‘‘counterfeiters circulating all over the world’’ and it is difficult to ‘‘tell how many there are because 

204 

5 Allan Dodds Frank, ‘‘Illegal Viagra Leads 24% Jump in Counterfeit Medicine Seizures,’’ 

Bloomberg News, June 10, 2008. 6 National Public Radio, ‘‘Counterfeit Drug Cases on the Rise,’’ May 22, 2008. 

7Gregory Lopes, ‘‘Patients Get Wrong Drugs Online; Anti-Psychotics Substituted for Depression, Insomnia Medicine,’’ The Washington Times, February 17, 2007. 8FDA News, ‘‘FDA Operation Reveals Many Drugs Promoted as ‘Canadian’ Products Really 

Originate From Other Countries,’’ December 16, 2005. 9Letter from FDA to Robert P. Lombardi, Esq. of The Kullman Firm: February 12, 2003, 

available at: <http://www.fda.gov/ora/import/kullman.htm>. 10FDA Test Results of Prescription Drugs from Bogus Canadian Website Shows All Products 

are Fake and Substandard, FDA Press Release, P04-65, July 13, 2004. 11Leonard Zehr, ‘‘Internet Pharmacies Aim Overseas,’’ Globe and Mail, February 6, 2005. 12 Christopher Rowland, ‘‘Drugs from Anywhere; As Importation Networks Spread, Concerns 

for Consumer Safety Grow,’’ The Boston Globe, December 16, 2004. 13 ‘‘FDA Seizes Drugs Imported Under States’ Program, Supplier Says,’’ Bloomberg, March 9, 

2005. 

the counterfeiters are just so good at what they do.’’ According to Bernstein, the 

FDA is unable to inspect ‘‘millions and millions and millions’’ of packages coming 

in making it ‘‘very difficult to find and catch all of these drugs that are coming in.’’ 5

And, according to Dr. Valerio Reggi, head of the WHO’s Anti-Counterfeiting Task 

Force, inspections may not be successful in finding all counterfeit drugs. According 

to Reggi, ‘‘no counterfeiter would manufacture one pill or even container of pills.for 

every drug that you find, it means at least one batch. And one batch usually is between 30,000 and 60,000 tablets.’’ 6

A recent example illustrates the real safety concerns that exist. In February 2007, 

the FDA alerted consumers to ‘‘unsafe, misrepresented drugs purchased over the 

Internet.’’ According to FDA, patients recently ordering drugs online for depression 

and insomnia instead received schizophrenia medication that caused them to seek 

emergency medical treatment for breathing problems. Side effects ranged from muscle spasms to difficulty breathing. 7

The FDA has conducted a number of investigations and analyses that illustrate 

that consumers may be misled into believing that the drugs they have ordered online came from locations such as Canada, when in fact, they may have come from 

anywhere in the world. In late 2005, an FDA investigation revealed that many 

drugs being promoted as ‘‘Canadian’’ products really originated from other countries 

and a number of the products were counterfeit. FDA’s operation confiscated parcels 

containing pharmaceuticals from India, Israel, Costa Rica and Vanuatu—43 percent 

of which had been ordered from Canadian Internet pharmacies. Of the drugs being 

promoted as ‘‘Canadian’’, 85 percent actually came from 27 countries around the 

globe. According to the FDA commissioner, ‘‘These results make clear there are 

Internet sites that claim to be Canadian that in fact are peddling drugs of dubious 

origin, safety and efficacy.’’ 8

According to FDA, ‘‘In our experience, many drugs obtained from foreign sources 

that purport and appear to be the same as U.S.-approved prescription drugs have 

been of unknown quality. We cannot provide adequate assurance to the American 

public that the drug products delivered to consumers in the United States from foreign countries are the same products approved by FDA.’’ 9 An FDA analysis of three 

commonly prescribed drugs purchased from a Web site advertised as Canadian 

showed that so-called ‘‘Canadian Generics’’ bought from the Web site were fake, substandard and potentially dangerous. One was a controlled substance. According to 

FDA, ‘‘This firm shipped drugs that were the wrong strength, including some that 

were substantially super-potent and that pose real health risks as a result, drugs 

that didn’t dissolve properly, drugs that contained contaminants, and drugs that 

should not have been given because of potentially dangerous drug interactions.’’ 10

Even many pharmacies based in Canada are admittedly purchasing drugs from 

all over the world to fill their Internet orders. According to Dean Jorgensen, founder 

of Winnipeg-based Canadameds.com, ‘‘We’re filling 50 percent of our prescriptions 

[from international pharmacies.]’’ Jorgensen’s website boasts, ‘‘Not just from Canada 

anymore! Choose your country and your savings.’’ 11 The president and owner of 

CanadaRx.net, Harvey Organ, also confirmed that the medicines his web site sells 

are not coming only from Canada. According to Organ, ‘‘I can get drugs from all over 

the world.’’ 12 A Bloomberg news article reported that CanaRx Services Inc. ‘‘has 

joined other Canadian Internet pharmacies in finding sources of drugs from partners in the U.K., Continental Europe, Israel, Australia and India.’’ 13 This is particularly troubling since according to a study by the Temple University for Pharmaceutical Health Services Research, India is a worldwide leader in the production of 

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14 ‘‘Pharmacists React to CanaRx Exploring Importation of Drugs from India, Bloomberg Article Reveals Canadian Internet Pharmacy is Considering Use of Drugs From Country Associated 

with Counterfeits,’’ Yahoo, March 16, 2005. 

counterfeit drugs with as much as 35 percent of the world’s drug counterfeiting originating in that country. 14

Of added concern is recent news from the FDA that many Americans are buying 

drugs over the Internet from foreign countries in an apparent effort to avoid the 

need for a prescription. The Agency conducted a yearlong investigation of imported 

drugs and according to Randall Lutter, the FDA’s deputy commissioner for policy, 

‘‘The data leads us to believe that many people are buying drugs online not to save 

money but to bypass the need for a prescription from their doctor, since these Web 

sites typically do not require the purchaser to have a prescription.’’ The FDA’s investigation confirms the finding of a survey conducted by PhRMA last year. The 

PhRMA survey found that a significant number of American adults have recently 

purchased medicines from a foreign country. Half of those surveyed said they are 

buying drugs in another country because they lack a doctor’s prescription. The survey found that antibiotics and pain relief medicines are, in most cases, the typical 

medications consumers seek from other countries. Other key findings include: one 

in five Americans purchasing drugs online earn more than $100,000 annually; they 

are more likely to be under the age of 35; and 85 percent have insurance with prescription drug coverage. 

5. In your testimony, you state that any legislative or regulatory requirements to authenticate products and pass pedigree information should be 

uniform, should apply to all parties in the pharmaceutical supply chain, 

and should recognize the recent Federal requirement for a standardized 

numerical identifier. You state that H.R. 5839 meets these criteria. Does 

this mean that PhRMA believes that everyone in the supply chain should 

pass pedigrees—manufacturers, wholesalers, and pharmacies? 

Commercial technologies, such as electronic pedigree, Advance Ship Notices 

(ASNs), and emerging product serialization technologies, offer new tools to help combat counterfeiting of drugs. The use of an electronic pedigree with an e-signature 

or an ASN without an e-signature are currently viable measures to help further secure the supply chain. PhRMA has supported the mandatory use of non-serialized 

electronic pedigree by all parties in the pharmaceutical supply chain as a viable 

near-term solution to help enhance patient safety and to provide additional supply 

chain security. 

Use of lot-level numbers is required of manufacturers by FDA’s GMPs, and has 

been used for years to support business processes such as product recalls and lot 

reconciliation. A manufacturer-initiated e-pedigree or similar requirement would 

provide a formal means to associate this lot information with customer shipments 

and pass this information forward in the supply chain. Requiring the extended supply chain to account for product movement at the lot level would provide additional 

security, with added benefits to patient safety and resulting public health impact. 

For example, implementation of an electronic pedigree that contains lot number information would establish the documented change of ownership for products based 

on specific customer shipments and would help facilitate recall of products. Additionally, implementation of an electronic pedigree or similar mechanism will continue to help facilitate investigation and prosecution of potential counterfeit cases, 

and thus could have a deterrent effect. 

6. Do you agree that H.R. 5839 is technology neutral and allows FDA the 

flexibility to work with the supply chain to determine the proper technologies for an identification and track-and-trace system? 

Section 5 of H.R. 5839 directs FDA to develop, no later than 18 months after enactment, a report ‘‘evaluating the feasibility and operational efficiencies of adopting 

. . . security technologies including barcodes, Radio-Frequency Identification Tags, 

nanotechnology, or other promising track-and-trace technology throughout the prescription drug supply chain.’’ FDA is directed to consider these report findings when 

it develops a standard numerical identifier under FDAAA. Section 5 does not mandate a particular type of technology, but rather directs FDA to consider the report 

findings on efficiencies of adopting a variety of technologies. 

Further, section 6 of the bill sets out a process for FDA to issue regulations to 

establish a drug identification and tracking system. In developing such regulations, 

FDA shall ‘‘consider the technical feasibility of compliance’’ by manufacturers, repackagers, wholesale distributors, and dispensers, and for different types of drugs. 

These provisions direct FDA to consider technical issues related to a drug identification and tracking system, but are silent with respect to the particular technical aspects of such a system. 

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17 Allan Dodds Frank, ‘‘Illegal Viagra Leads 24% Jump in Counterfeit Medicine Seizures,’’ 

Bloomberg News, June 10, 2008. 18 Royal Canadian Mounted Police, ‘‘The Counterfeit Report,’’ 2006. 19PR Newswire, ‘‘New Report Says Counterfeit Drug Sales to Reach $75 Billion in 2010, up 

92% From 2005,’’ September 13, 2005. 20 European Commission, Report on Community Customs Activities on Counterfeit and Piracy: 

Results of the European Border—2007. 21 Nikki Tait, ‘‘Surge in European Seizures of Fake Drugs,’’ Financial Times, May 20, 2008. 22 Jeremy Laurance, ‘‘Why Britain is a Good Target for the Counterfeiters,’’ The Independent, 

January 2, 2007. 

7. You reference contaminated Heparin that recently entered the U.S. 

While the Heparin incident dealt with our Nation’s legitimate supply chain, 

do you recognize the overall increasing problem of counterfeit pharmaceuticals entering our Nation through regulated and unregulated means? 

America’s patients trust that the drugs they and their loved ones take meet the 

high standards set by the FDA for safety and efficacy and are not substandard or 

counterfeit, and they rely on our complex and comprehensive regulatory system to 

ensure that is the case. Patients also depend on a secure pharmaceutical supply 

chain, and this is a responsibility our companies share with the FDA. The lifeblood 

of America’s research-based pharmaceutical companies is dependent on a safe, secure prescription drug supply chain. 

The regulatory system that governs the development, approval, marketing, and 

surveillance of new drugs in the United States is the most complex and comprehensive in the world. To ensure that Americans have the safest drug supply in the 

world, it has become increasingly comprehensive and robust over time. For example, 

the Prescription Drug Marketing Act of 1987 (PDMA), authored principally by 

Chairman Dingell and Rep. Waxman, was passed following an investigation of incidents of counterfeit drugs reaching American consumers. This landmark legislation 

closed the U.S. prescription drug supply to products that have circulated overseas, 

beyond the jurisdiction of FDA and outside the control of the manufacturer. The 

PDMA, coupled with exacting FDA regulatory requirements such as GMPs, has 

helped significantly minimize the possibility that a U.S. consumer receives a counterfeit drug. 

However, the growth in a global marketplace, rise of the Internet and easy access 

to sophisticated technology has helped facilitate the rise of counterfeit medicines 

around the world. According to recent data from PSI, counterfeit medicine seizures 

rose 24% in 2007. Among the $3 billion worth of counterfeit medicine seized in 99 

countries were versions of 403 different prescription medicines, including copies of 

19 of the world’s 25-best selling drugs. 17 A 2006 counterfeiting report by the Royal 

Canadian Mounted Policy (RCMP) found a ‘‘dramatic increase in the amount, sophistication and type of counterfeit products which are being sold across the country.’’ The report found that counterfeit pharmaceuticals are being sold to consumers 

in Canada in ‘‘alarming amounts.’’ The report continued to state that, ‘‘The goods 

are no longer only being offered for sale by ‘mom and pop’ operators but are being 

controlled by large sophisticated organizations including traditional and non-traditional organized crime groups.’’ According to RCMP Commissioner Zaccardelli, ‘‘The 

face of crime is being facilitated by the Internet and counterfeit goods are threatening the health and safety of Canadians.’’ 18

The WHO has estimated that tens of thousands may be dying due to counterfeit 

malaria, HIV/AIDs, diabetes, and tropical disease medicines. And, the problem is expected to continue to grow in the future. According to a report by the Center for 

Medicines in the Public Interest, counterfeit drug sales are expected to reach $75 

billion in 2010, a shocking 92% increase from 2005. 19

According to the European Commission, counterfeit medicine seizures rose 51% in 

2007 in the European Union (EU). Last year, 4.1 million counterfeit pharmaceuticals were seized by EU customs officials. 20 The Financial Times reported that 

medicines to treat hypertension, osteoporosis, and high cholesterol were among the 

counterfeits seized. Laszlo Kovacs, the EU’s taxation and customs commissioner 

noted that the 2007 figures showed ‘‘some new and alarming tendencies’’ given the 

increase in counterfeit seizures in medicine and personal care products that could 

pose dangers to consumers. 21 A January 2007 report in the The Independent found, 

‘‘Counterfeit drugs are flooding into Europe from across the world. Customs seizures 

published in November listed them as a separate category for the first time, in an 

indication of the growing trade.’’ 22 According to a report by the School of Pharmacy 

at the University of London, ‘‘the UK is the most vulnerable country in Europe to 

counterfeiting owing to the high level of ‘parallel importing’ drugs sold to a foreign 

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23 Id. 24MHRA, <http://www.mhra.gov.uk/Safetyinformation/Generalsafetyinformationandadvice/ 

Adviceandinformationforconsumers/Counterfeitmedicinesanddevices/index.htm> (Accessed on 

April 23, 2008). 25 European Commission. ‘Public Consultation in preparation of a legal proposal to combat 

counterfeit medicines for human use’’ < http://ec.europa.eu/taxation—customs/resources/documents/customs/customs—controls/counterfeit—piracy/statistics/counterf—comm—2006—en.pdf> 

(Accessed 29 May 2008) 26 European Commission, ‘‘Public Consultation in Preparation of a Legal Proposal to Combat 

Coutnerfeit Medicines for Human Use,’’ March 11, 2008. 27 Jonathan Harper, MB, ChB, BSc (honors), MBA, ‘‘Harmonised provisions for legislative and 

administrative procedures applicable to counterfeit medicines in the Council of Europe Member 

States,’’ January 2005. 

country and then imported into Britain and the fact that English is an international 

language.’’ 23

Of notable concern is the evidence that counterfeiters are increasingly targeting 

chronic care and life-saving medicines. According to a report by the European Commission, the trend in counterfeiting medicines is increasingly moving towards counterfeit life-saving medicines, rather than ‘‘lifestyle’’ medicines, including ‘‘medicines 

to treat cancer and heart disease, psychiatric disorders, and infections.’’ In the past 

four years, the UK’s Medicines and Health Regulatory Agency (MHRA) has issued 

nine recalls of medicines including heart and cancer treatments that reached pharmacists and patients. 24 On five other occasions, the MHRA discovered counterfeit 

drugs at the wholesale level before they reached patients. A recent paper from the 

EU notes the ‘‘criminals increasingly target life-saving medicines, including medicines to treat cancer and heart disease, psychiatric disorders, and infections.’’ The 

EU believes that this ‘‘trend may increase as the main driving factor is high value, 

high turnover and total disrespect for patient health.’’ 25

The European Commission has identified other factors that are driving the increased presence of counterfeit drugs. According to the report by the Commission, 

‘‘the licensed distribution chain, including authorized wholesalers, parallel traders 

and pharmacies are being increasingly targeted by counterfeiters.’’ 26 Similarly, a 

Council of Europe report found, ‘‘The existence of a significant level of parallel trade 

in the EU, and the absence of adequate controls on repackaging and relabeling, provides an opportunity for the inadvertent entry of counterfeit medicines into the market.Furthermore, parallel trade means that any counterfeit product within the legitimate distribution chain in one MS [Member State] can easily contaminate other 

MSs.’’ 27

While the U.S. has arguably the safest system in the world with one of the lowest 

percentages of counterfeit drugs in the market, no system is perfect and the proliferation of Internet drug sellers and the ease of ordering medicine online, without 

even a prescription in many cases, have introduced new threats that cause concern. 

At a time when we, and others around the globe, are struggling to combat counterfeit drugs and tighten security at our borders, we should be searching for ways to 

close existing loopholes in the drug distribution chain, not creating new ones. Maintaining a closed system is one way to ensure that U.S. consumers are protected 

against counterfeit medicines. 

8. In your testimony, you note that domestic challenges to our Nation’s 

closed distribution system remain great and that counterfeit and tainted 

products do surface even with all of our regulatory controls. Can you explain where the weaknesses exist in our regulated supply chain? 

While the current supply chain in the U.S. for prescription medicines is arguably 

the best in the world, it is not perfect and weaknesses exist. As mentioned above, 

the proliferation of Internet drug sellers has created a weakness in our current supply chain since they have been responsible for introducing unsafe and counterfeit 

medicines into the supply chain and into the hands of consumers. 

In our opinion other weak spots in the supply chain exist but could be addressed 

in future legislation. For example: 

1. Increase Requirements for Repackagers. Repackaging has been an identified 

weak spot in the drug distribution system that can be used as an entry point and 

distribution center for diverted and counterfeit drug products. Repackagers remove 

drug products from their original packaging and labeling, thereby destroying any 

counterfeit resistant technologies employed by the original manufacturer. Consequently, additional oversight is necessary to ensure that repackaged drug products are authentic and are not compromised by repackaging operations. PhRMA believes FDA could better regulate the authenticity and quality of repackaged drug 

products if it had authority to require prior approval of repackaging operations. At 

a minimum, FDA should increase its inspections of repackagers and, where approVerDate Nov 24 2008 16:10 Oct 07, 2010 Jkt 037690 PO 00000 Frm 00213 Fmt 6633 Sfmt 6633 C:\DOCUMENTS AND SETTINGS\CWELLS1\HEARINGS\110-111 SCOM1 PsN: JIMC
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priate, initiate enforcement action. In addition, repackagers should be subject to the 

same requirements regarding overt and covert counterfeit resistant technologies as 

original manufacturers. 

2. Strengthen Federal Requirements for Wholesalers/Distributors. PhRMA is supportive of efforts to strengthen the licensure requirements for wholesalers and distributors. Recent investigations, such as the Florida Grand Jury and the Washington Post, have identified systemic weaknesses in the oversight of the wholesale 

drug industry in many states. These weaknesses permit individuals, even those with 

prior felony convictions, to obtain wholesaler licenses for operations that deal in diverted and counterfeit drug products. PhRMA supports efforts by Florida and Nevada to strengthen requirements for the licensure of wholesalers by, for example, 

requiring the posting of a substantial performance bond (e.g., $100,000) and conducting detailed pre-licensure background checks and facility inspections. PhRMA 

believes, however, that licensure requirements should be strengthened consistently 

across states to prevent diverters and counterfeiters from re-locating to states without strong licensure requirements. This can be accomplished through revisions to 21 

U.S.C. §503(e)(2) specifying higher minimum standards for state licensing of drug 

wholesalers and distributors similar to those currently in place in Florida and Nevada. FDA also should review state requirements for the licensure of wholesalers 

to ensure that they meet any enhanced minimum federal regulatory requirements. 

3. Increase Criminal Penalties for Counterfeiting Activities. PhRMA believes that 

the criminal penalties for counterfeiting prescription drug products must be significantly increased. The current penalty under the Federal Food, Drug, and Cosmetic 

Act (FFDCA)—a maximum of 3 years imprisonment—does not reflect the serious 

public health risks associated with counterfeit drugs or serve as an adequate deterrent to prospective counterfeiters. PhRMA thus supports increasing the maximum 

criminal penalty for counterfeiting drug products from three to twenty years imprisonment. PhRMA also believes that criminal penalties should be imposed against entities that create a market for diverted and counterfeit drug products by purchasing 

drug products without adequate due diligence into the source and authenticity of 

such drugs. PhRMA therefore supports making it a prohibited act under the FFDCA 

to purchase prescription drugs from a wholesale distributor without first obtaining 

and verifying the information provided on a drug pedigree. 

Thank you very much for the opportunity to further elaborate on my testimony 

of May 1, 2008. Should you have additional questions, please feel free to contact me. 

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CHRISTINE MUNDKUR, ANSWERS TO SUBMITTED QUESTIONS

Dear Congressman Buyer: 

I am writing to answer the questions submitted to me after my May 1, 2008 testimony before the Committee on Energy and Commerce on behalf of Barr Pharmaceuticals and the Generic Pharmaceutical Association, GPhA. I have set forth the 

answers to the best of my ability to each of the questions, which are repeated below 

for ease of reference. 

QUESTIONS SUBMITTED BY HON. STEVE BUYER

What is the value of preemption and one Federal pedigree standard? 

A Federal Pedigree, preempting state initiatives, would provide a single standard 

and directive aligning the entire pharmaceutical supply chain into a single focused 

initiative. The risk of different standards, arising from multiple states and segments 

within the industry, carries a significant cost to the entire pharmaceutical supply 

chain. Multiple disjointed initiatives would potentially involve multiple system driven implementations and multiple serialization solutions, ultimately costing the entire industry unnecessary and additional time and resources to implement. Simplifying the process to a single Federal initiative would provide focus and provide the 

momentum necessary to drive a single solution throughout the industry. We also 

recommend that strong enforcement of the normal chain of distribution be the foundation for a Federal resolution, and requirements for pedigree requirements be limited to product supply that has been outside the normal supply chain. 

What is Barr’s position on the California identification and track-andtrace system currently on the books? 

While Barr fully appreciates the CA legislature’s efforts to combat counterfeiting 

within the Pharmaceutical industry, the legislation in CA requiring electronic pedigree and unit level serialization for all pharmaceutical products by January of 2011 

represents an approach, which may negatively impact the ability for Californians to 

have access to affordable medicines and inherently raise healthcare costs with little 

commensurate benefit to the general public. Many manufacturers simply won’t be 

able to meet the requirements by the given deadline, resulting in fewer manufacturers operating within this market segment potentially causing opportunities for less 

competition (and therefore higher costs) and product availability concerns. The most 

reasonable approach to improving the security of the drug supply chain is to focus 

on areas of vulnerability, such as the internet and secondary wholesaler markets, 

and products which are most likely to be targeted by counterfeiters. The Generic 

industry provides significant savings in healthcare costs by providing affordable 

medicines, and the resources required to implement serialized electronic pedigrees 

will significantly affect the affordability of generic medicines, when in reality, generic medicines are the least likely candidates for counterfeiting due to their inherent lower profitability. Enforcement of the normal chain of distribution combined 

with a risk based pedigree approach, focusing on high risk product supply outside 

the normal chain of distribution would provide a more commensurate benefit to the 

public without negatively impacting supplies or increasing healthcare costs. 

Does Barr support Senate Bill 1307 in the California Senate? 

Barr does not support SB1307. This bill requires specific percentages of products 

to be serialized/pedigreed within a fixed time schedule without consideration to alternative solutions such as strong enforcement of the normal chain of distribution, 

and if required, a risk based approach to drugs that are being introduced by parties 

outside the normal chain of distribution or deemed to be at high risk of counterfeiting. However, Barr does support the current proposal from the California Governor’s office and CA State and Consumer Services Agency that establishes an ‘‘accredited distribution chain’’ model to meet the common goals of ensuring the safety 

and efficacy of drugs provided to consumers. 

Please do not hesitate if I can provide any further assistance. 

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