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Prepared Witness Testimony The House Committee on Energy and Commerce
A System Overwhelmed: The Avalanche of Imported, Counterfeit, and Unapproved Drugs into the U.S.
Subcommittee on Oversight and Investigations
Dr. Gregg Jones R.Ph
Mr. Chairman and Members of the Subcommittee, I am Gregg Jones, Pharmaceutical Program Manager for the Bureau of Statewide Pharmaceutical Services, Florida Department of Health (FLDOH) and registered pharmacist. I have 18 years of drug regulatory experience with Florida's Department of Health. Also present representing Florida's Department of Health is Mr. Cesar Arias, Drug Inspector Supervisor in South Florida. Together Mr. Arias and I represent 34 years drug diversion investigative experience with the FLDOH. We both gained much of our early investigative experience working in Miami on many of the cases and issues that came before this committee from 1986 to 1990. Thank you for the opportunity to discuss the issues affecting the safety and integrity of our nation's prescription drug supply. Despite the concerns that we are raising today, I am confident that the United States drug supply remains unequaled in safety and efficacy. We will share problems being faced in Florida with counterfeit and adulterated drugs entering the wholesale drug market, the schemes, the magnitude of the problem, and efforts to fight the problem. The Bureau of Statewide Pharmaceutical Services is a part of the Florida Department of Health, a public health agency, whose mission is to promote and protect the health and safety of all people in Florida through the delivery of quality public health services and promotion of health care standards. The Bureau is responsible for enforcing Florida's Drug and Cosmetic Act that is modeled after the federal Food, Drug and Cosmetic Act. We license over 4500 companies, approximately 1000 out of state. We have a broad range of regulatory responsibilities that include the licensure and inspection of Drug, Device, and Cosmetic manufacturers, including compressed medical gas manufacturers, dispensers of medical oxygen for home use, veterinary drug distributors, drug return companies, and drug destruction companies. We have a small administrative staff and a total of nine drug inspectors all of whom are registered pharmacists. Our inspectors are not sworn law enforcement officers. All actions taken by the Bureau are done under Florida's Administrative Procedures Act, although we are increasingly making referrals of violations to law enforcement agencies and work very closely with these agencies in the investigation and prosecution process. Florida currently has approximately 435 licensed drug wholesalers, including brokers that do not take possession of drugs. We also license approximately 975 out-of-state drug wholesalers that sell prescription drugs into the State of Florida. The 975 out-of-state drug wholesalers are made up of many drug manufacturers and multiple locations of major wholesalers. Wholesale Industry The number of small secondary drug wholesalers who typically sell drugs among themselves is increasing. The drugs they sell appear to travel from secondary wholesaler to secondary wholesaler to secondary wholesaler, until ultimately they are sold to a primary wholesaler, or directly to a pharmacy. Many of the small secondary drug wholesalers never handle products and only generate elaborate paper trails, their existence only serving to hide the original source of the drugs. State laws vary widely as do enforcement actions, and minimal penalties allow the entry of counterfeit and adulterated drugs into our drug supply. We are working closely with other states and we know that our counterparts are also concerned about the increase in small drug wholesalers entering tainted drugs into the national drug supply through their states. A Florida task force has been intensely and tirelessly investigating the criminal side of Florida prescription drug diversion since late 2001. The task force includes members from the Miami-Dade Police Department, the Attorney General's Offices of Statewide Prosecution and Medicaid Fraud, and the Florida Departments of Law Enforcement and Health. Criminal law enforcement involvement has been essential in unraveling and revealing a nationwide secondary drug wholesale market riddled with corruption drugs of questionable integrity. The prescription drug distribution system in this country is complex. Ideally the prescription drug distribution system of the United States would be a closed system of distribution from manufacturer to wholesaler to dispenser to the patient. The most recognized closed distribution system for drugs is found with controlled substances. Every unit of a controlled substance is tracked from the manufacturer to the distributor and to the dispenser through a uniform federal system administered by the Drug Enforcement Administration. Many states expand on this tracking and some monitor information on the flow the actual prescriptions of the most abused controlled substance. This system has been continually strengthened for many decades. The U.S. prescription drug industry is one of the most tightly regulated and monitored industries in the world. Oversight and licensing is extensive from drug development, approval, manufacturing, and distribution, to medical prescribing, administering, and pharmacy dispensing. Unlike controlled substances, however, the history of drug wholesale regulation is very short. When the 1987 Prescription Drug Marketing Act was being drafted, a little over 30 states licensed their wholesalers. It has only been 11 years since all states were required to license their drug wholesalers in accordance with federal guidelines established by the Food and Drug Administration. A huge gap existed in drug protection between the time a drug left the manufacturer and arrived at the pharmacy, hospital, or doctor's office. These same concerns remain today, fifteen years after the passage of the Prescription Drug Marketing Act. A crime is committed every time a diverted drug enters the system through an unscrupulous wholesaler, yet little threat of punishment, and the lure of millions of dollars in profits, continues to fuel the problem nationwide. A diverted drug is one that has left the regulatory channels of licensed wholesalers, thereby bypassing health authority oversight. Chronology Events leading to the present situation in Florida: 1992 - Florida's Legislature as part of complying with FDA guidelines on licensure of drug wholesalers required the pedigree paper, once created to go back to the manufacturer and be passed on, even by an authorized distributor of record once it was created. The intent was to prevent an authorized distributor of record from not passing a pedigree paper when it purchased a drug from a non-authorized distributor of record. Mid 90's - FLDOH began warning and educating drug wholesalers that did not provide pedigrees of drugs that were purchased from non-authorized distributors of record. Late 90's - FLDOH began seeing increases in the number of small wholesalers whose primary function was dealing in expensive brand name medications that were purchased from licensed wholesalers and resold to licensed wholesalers. In conjunction with the City of Miami Police Department, the Attorney General's office of Medicaid Fraud, and FDA's Office of Criminal Investigation among other local, state, and federal law enforcement agencies FLDOH investigated the proliferation of drugs dispensed to Medicaid patients being sold to "Street Brokers" and then sold back to pharmacies. 2001 - FLDOH began verifying pedigree papers finding large numbers to be falsified. Counterfeit drugs began to proliferate. With the assistance of FDA's South Florida Office of Criminal Investigation, FLDOH sought the assistance of Florida's Attorney General's Office of Statewide Prosecution in the case of a small secondary wholesaler dealing in a counterfeit of the drug Serostim. Late 2001 - FLDOH began working with the Florida Department of Law Enforcement investigating the sources of drugs in both licensed and unlicensed drug wholesale operations. This investigation rapidly developed into a task force composed of the Miami-Dade Police Department, the Attorney General's Offices of Statewide Prosecution and Medicaid Fraud, the Florida Departments of Law Enforcement and Health. In November of 2001 the FLDOH sent a letter to every licensed drug wholesaler in the format of Q and A regarding the pedigree paper due to the increase in counterfeit and adulterated drugs entering the market with false pedigree papers or no pedigree papers at all. The industry was informed that the FLDOH had begun to initiate action where pedigrees were at issue. In short it said that Florida's pedigree requirement was stricter than the federal law requiring: 1. PEDIGREES TO GO BACK TO THE MANUFACTURER 2. PEDIGREES MUST BE PASSED ON EVEN BY AN AUTHORIZED DISTRIBUTOR ONCE CREATED. 3. AUTHORIZED DISTRIBUTOR STATUS IS TRANSACTION (BOTTLE) SPECIFIC (If you purchased a bottle of a Rx Drug from any one other than direct from the Manufacturer, you must pass on a Pedigree showing every prior sale of that bottle.) The drug wholesale industry responded with serious concerns about FLDOH's interpretation of the state law and requested a delay in the implementation of FLDOH's interpretation of the pedigree from the Secretary of Florida's Department of Health, John Agwunobi, M.D. After meeting with industry, Dr. Agwunobi, announced the formation of an Ad Hoc committee composed of representatives from industry and government. This committee met monthly for 7 months. Dr. Agwunobi charged the committee with presenting recommendations to resolve the pedigree paper dilemma that satisfy the department's public health mission to protect the public from misbranded and adulterated drugs, while attempting to lessen the regulatory cost of compliance on the regulated industry. This charge included empowering the department by providing investigative tools to trace the source of drugs that are counterfeit or that have been diverted from regulated distribution channels so as to identify and prosecute the person or persons putting these drugs into the marketplace. This committee recommended that licensing requirements be strengthened, penalties be increased, and a full pedigree be enforced for certain high cost drugs. In December of 2002, due to increasing concerns over the safety and security of Florida's prescription drugs, Governor Jeb Bush petitioned Florida's Supreme Court to impanel a Grand Jury to investigate counterfeit and adulterated drugs entering Florida's drug supply. In February of 2003 the Seventeenth Statewide Grand Jury of Florida issued its First Interim Report. It is an understatement to say that the findings were shocking. The report speaks for itself and can found at http://myfloridalegal.com/grandjury17.pdf. Also in late February of 2003, Florida's Office of Program Policy Analysis and Government Accountability (an office of the Florida Legislature) released a report on its investigation of counterfeit and diverted drugs within the prescription drug wholesale market. Essentially both entities made the following recommendations. 1. Clarify state law related to pedigree papers and direct the department to enforce the state law. "Requiring pedigree papers to accurately trace drug sales histories back to the manufacturer is vital to ensuring the integrity of Florida's prescription drug market." "pedigree papers are necessary for investigators to trace counterfeit and diverted drugs back to their source." 2. Authorize the department to strengthen the permitting process. 3. Authorize the department to levy increased administrative penalties and fines. 4. Consider increasing criminal penalties for prohibited acts involving prescription drugs. In May of 2003, the Florida Legislature passed the Prescription Drug Protection Act, a comprehensive rewrite of Florida's prescription drug laws aimed at protecting Florida's citizens from counterfeit drugs and drugs adulterated by diversion. Governor Bush signed this law into effect on June 13, 2003, less than two weeks ago. At the signing Governor Bush stated, "The bill I am signing today supports our efforts to ensure that when our citizens fill their prescriptions, they get what their doctor ordered." Florida Attorney General Charlie Crist said "It is hard to imagine a more heinous individual than one who is willing to profit from the suffering of others." The new law raises the standard for wholesalers by adopting new and more strict requirements for permitting wholesalers including the following provisions: · Raises bond requirements to $100,000 · Requires stricter background checks · Requires every wholesaler to designate a contact person responsible for all transactions enhancing accountability for the drugs wholesalers distribute. · It strengthens criminal laws by creating new felony crimes penalizing anyone who tries to obtain or sell drugs without proven history or "pedigree papers." It also creates more serious felonies for forging drug labels, prescription drug trafficking of more than $25,000 worth of prescription drugs and the sale of prescription drugs that result in injury or death to a person. · It requires wholesalers to authenticate prior transactions on the pedigree papers. · The law requires that by 2006, all drugs (each bottle) not purchased from a manufacturer, must have a pedigree that goes back to the manufacturer, and is passed all the way to the retailer by anyone that receives a pedigree. It eliminates the ambiguity of the industry's current interpretation of Authorized Distributor of Record. In the interim, it allows the FLDOH to create a list of specified drugs for which full pedigree requirements must be met. The full pedigree requirement will go into effect for a list of 30 drugs in September of this year. · Increases regulatory authority of the Department of Health by allowing the department to shut down wholesalers operating in violation of Department of Health rules and to seize and destroy adulterated drugs posing an imminent danger to the public. Problems Observed in the Wholesale Industry I am sure there are legitimate drugs in the secondary market but many of the drugs we see moving among small wholesalers are of questionable origin. These drugs all enter at some weak point in the system, usually a small drug wholesaler. ¨ Special priced drugs from Health Care Entities Drugs sold at reduced price to closed-door pharmacies, nursing home pharmacies, and physicians represent a large amount of drugs in the secondary market. These drugs are often looked on as not presenting a public health threat because the drugs are good, only being diverted from their intended channel of trade. However, a fraud is being committed against the manufacturer, and both state a federal drug distribution laws are being violated. The pathways these drugs take into the mainstream wholesale market punch holes in the integrity of our closed drug distribution system and allow the entry of drugs from every conceivable scheme of diversion. The drug Lupron is a good example. It is sold to physicians cheaper than to drug wholesalers. Physicians all over the country have been buying excessive amounts of the drug, in some cases obtaining drug wholesale licenses to sell these products back into the market. Others simply sell the drugs with no license to drug wholesalers or unlicensed individuals willing to violate both state and federal law. ¨ Stolen Drugs Within the last 2 years we have seen the same drugs stolen from one wholesaler sold back to them. A trailer containing $3,000,000 worth of drugs was hijacked in route to South Florida from the wholesaler Cardinal and the entire contents removed. A trailer hijacked in Miami last fall contained HIV and Transplant drugs requiring refrigeration. ¨ Drugs Intended for Export Drugs are often sent to Miami freight forwarders for shipment overseas. These are most often drugs shipped form the manufacturer to a location of their customer who has represented themselves to be a charitable group or agent of a foreign account. A couple of years ago a generic drug sold to a South American hospital at 10% of the domestic price was shipped to Miami for export but within a week the drug showed up in a large Southeastern U.S. wholesaler. Last summer 50 pallets of Gammagard, Baxter's immune globulin was shipped to a freight forwarder in Miami for export. The drug was transferred to an unlicensed food storage warehouse where it stayed for several months while small quantities were diverted to Miami wholesalers. One of the wholesalers was actually an authorized distributor of Baxter, thus was not producing a pedigree when selling the product. ¨ Repackaged Adulterated/Counterfeit/Foreign Unapproved Drugs The recent case of counterfeit Lipitor being repackaged by MED-PRO, Inc., of Lexington, NE illustrates this alarming new avenue for substandard drugs to enter the market and easily make their way to pharmacies, nursing homes and other institutions. It is a common practice for drugs to be repackaged from large containers into units convenient for dispensing such as 30's 60's and 90's for sale to pharmacies by all levels of the wholesale market. Some drugs are repackaged in unit dose packages for sale to nursing homes or other institutions. A recent case in Florida involved a smuggled a foreign drug being repackaged into unit dose. In our case, the drug was purchased from a licensed wholesaler, however no pedigree was issued. The paperwork, which is the only thing left behind after a sale, did not identify the foreign drug. This scheme has a huge potential for entering tainted drugs into the market because the original packaging is lost. (Florida's new law will require repackagers to provide pedigree papers.) ¨ Medicaid Drugs diverted from patients into the wholesale market Sophisticated operations buy drugs from patients and the drugs are resold into the wholesale market. We are certain that this form of diversion is not unique to Florida and is happening in other states. The obvious public health threat is the lack of proper handling, especially for refrigerated items. ¨ Counterfeit Drugs Between 1985 and 2001 only 5 counterfeit drug cases were investigated by Florida's Department of Health. During the past 2 years, ten counterfeit drugs have moved through Florida drug wholesalers valued in tens of millions of dollars. With every new case we are shocked at the level of sophistication in the reproduction of labels, seals, and containers. The Serono product Serostim has been counterfeited to the point that the company has abandoned the drug wholesale system to deliver its product and now ships only directly to certain pharmacies authorized to dispense their product. In several of our cases the pedigree paper played a critical role. The number of smaller wholesalers selling directly to pharmacies and hospitals is increasing. They send emails, faxes, and sell online with daily specials. They are finding a new outlet for diverted drugs without having to sell them into the mainstream wholesale market. No pedigree is provided and the pharmacist or physician has no clue where the drugs have been. This is why the pedigree should go to the retail level, as required by the Florida legislation, effective 2006. We have found that the pedigree paper is a useful tool in uncovering counterfeit drugs for regulators, law enforcement, and equally if not more important in terms of prevention, the drug wholesalers themselves. Both Federal and Florida law requires that the pedigree be passed prior to the sale. Wholesalers could use the pedigree to insure the quality of the drugs they purchase. Our findings however, are more consistent with the Florida Grand Jury when they reported "It's not surprising to us that no one checks the pedigree papers because they simply don't want to know the true background of what they're buying. This is nothing less than a blatant example of willful blindness." There is very little use of the pedigree paper outside our state, and we have seen situations where drugs are offered to customers "with papers" or "without papers" drugs with pedigree papers costing more. Conclusion Florida will begin enforcing pedigree requirements that are bottle specific (must go back to the manufacturer), be passed on by everyone, regardless of authorized distributor status once a pedigree is created, for a list of 30 drugs, beginning in September of 2003. In 2006 all pedigrees will be furnished to the pharmacy. While the future is bright for technological advances like computer chips the size of grains of sand storing information on a label as complete as the serial number of the bottle, this technology is years away and we can not delay the protection of our drug supply any longer. The PDMA became law in 1988 and today, 15 years later, the final rule on pedigrees, set to take effect in 1999, has been stayed for a fourth time. This is a valuable tool that the Florida legislature recognized should be utilized with it's original intent, to simply reveal the true source of a drug. In 1987 this committee found that "American consumers cannot purchase prescription drugs with the certainty that the products are safe and effective" and "the integrity of the distribution system for prescription drugs is insufficient to prevent the introduction and eventual retail sale of substandard, ineffective, or even counterfeit drugs." As evidenced by the problems we have shared here, these same concerns still remain today, fifteen years after the passage of the Prescription Drug Marketing Act. Only when State laws and federal laws alike are strengthened will we have the tools necessary to fight this problem. Tougher licensing requirements and penalties are needed for perpetrators of the unconscionable crime of counterfeiting drugs used by the sickest and most vulnerable patients. The environment for corrupt prescription drug wholesalers is changing in Florida. A tremendous effort is being made by our Governor, legislature, health officials, law enforcement, and the regulated wholesale drug industry, working together to identify and remedy the problems in our drug delivery system and restore trust to our healthcare professionals and our citizens. We have a responsibility to do a better job of insuring the safety and efficacy of the drugs on which we depend to improve the quality, extend, and even save the lives of our citizens. Thank you for this opportunity to discuss these important issues affecting not only Florida's, but also our nation's prescription drug supply. I would be happy to answer any questions.
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