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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
Mr. Robert Penezic
Thank you for the honor, privilege and opportunity to speak to this sub-committee. Mr. Chairman and Members of the Subcommittee, I am Robert Penezik, Assistant Statewide Prosecutor for the State of Florida. Today, I will talk about the issues and problems raised in the Interim Grand Jury Report, which served as the conduit of the legislation, and ultimately the law signed by the Governor on June 13, 2003. The citizens of the State of Florida and the United States are safer today due to the collective efforts of a broad spectrum of representatives in the State including: Governor Jeb Bush, Attorney General Charlie Crist, State Senators Durell Peaden and Walter "Skip" Campbell, State Representative Ed Homan, Department of Law Enforcement Commissioner Tim Moore, Secretary of Health Dr. John Agwunobi, Statewide Prosecutor Pete Williams, and the members of the Seventeenth Statewide Grand Jury. This overall process that led to the new State law, was truly government at its best, because all parties recognized the problem and worked diligently and tirelessly to solve it. I think it is especially important to recognize the contributions of Governor Bush and Attorney General Crist for their leadership and vision. This morning, millions of people took a prescription drug. Most consumers probably give little or no thought to where their prescription drugs came from or who handled them before they received them from their pharmacist. We all know that significant precautions are taken in the preparation and manufacture of our prescription drugs. However, most of us are unaware of the current lack of controls on prescription drugs once they leave the custody of the manufacturer. To put it in the simplest of terms, before the new legislation in Florida, when you walked into a pharmacy, you had no idea who handled your prescription drug, how it was handled, or if anyone had done anything inappropriate to it. Further, the pharmacists who dispensed your medication might themselves not even know the trail your prescription drug had traveled. Unless the drug store bought all of the prescription drugs it dispensed directly from the manufacturer, the risk is present. This is the problem that I would like to discuss with you today. First, I believe it would be helpful to define a few terms included in the testimony. Drug Diversion - is the movement of legal drugs into the illicit marketplace. Adulterated drugs - are counterfeit, mislabeled, diluted, improperly stored and/or improperly handled prescription drugs are all considered to be adulterated drugs under Florida Statutes. Any of these acts make the drugs unfit for human consumption. Background & Interim Grand Jury Report At the end of last year, Governor Bush was briefed on the adulterated and counterfeit prescription drug problem in Florida caused by, among other things, the secondary pharmaceutical drug wholesale market. Governor Bush immediately petitioned the Florida Supreme Court to convene a Statewide Grand Jury. The Seventeenth Statewide Grand Jury was impaneled in early 2003 and, after weeks of testimony, the Grand Jury issued the "First Interim Report of The Seventeenth Statewide Grand Jury" in February 2003 (the "Interim Report"). Copies have been provided to the Members of the Subcommittee. In the Interim Report, the Grand Jury made a number of significant findings and proposed a comprehensive series of recommendations. The Grand Jury expressed its concern for the high risk of adulterated and counterfeited drugs entering the prescription drug supply of the State of Florida. It heard testimony of the many ways by which these adulterated drugs enter the stream of commerce and eventually end up on the shelves of our pharmacies, clinics and hospitals. Some prescription drugs were sold and resold 4 and 5 times, without any apparent legitimate economic reason, before reaching the ultimate dispenser. The Grand Jury also found that the "pedigree papers," or paper audit trails that track the drugs from manufacture to the point they are dispensed, are the most effective way to prevent diverted, adulterated or counterfeit drugs from entering the marketplace. Such pedigree papers would allow each purchaser of prescription drugs to determine who previously handled the drugs, and would thus serve to greatly minimize the introduction of adulterated drugs into the marketplace. However, the Grand Jury found that the pedigree paper standing alone was not enough. It stated, "[w]e believe that Florida should require pedigree papers to be delivered all the way from the manufactures to dispensers and that all buyers be required to verify pedigree papers through the exercise of due diligence." The Interim Report of Florida's Seventeenth Statewide Grand Jury Report illustrates the potential danger to the citizens of Florida as well as the citizens of this nation. The Grand Jury found that the wholesale pharmaceutical industry in Florida has been corrupted by the infiltration of a criminal element that is potentially reaping enormous illicit gains while tainting the prescription drug supply. It is important to note that we are not referring to the major prescription drug wholesalers. Rather, Florida's concern arose with some of the other 400 wholesalers licensed in the Florida and another 900 wholesalers licensed to ship prescription drugs into Florida. As the Grand Jury noted, Florida's licensing requirements for prescription drug wholesalers was inadequate. The Grand Jury made several recommendations to address these problems, including: 1. Create a standardized form of pedigree paper. 2. Require pedigree papers in every transaction from the manufacturer to the end-user. 3. Create new crimes for offenses involving pedigree papers. 4. Increase the penalties for anyone who introduces adulterated or counterfeit prescription drugs into the stream of commerce. 5. Clarify the definition of an authorized distributor of record. 6. Give the Florida Department of Health clear authority to shut down wholesalers in violation of state statutes. 7. Give the Florida Department of Health clear authority to seize and destroy drugs that pose a threat to the public health. 8. Increase the requirements to become a licensed pharmaceutical wholesaler in Florida. Florida Legislature Based on this compelling report from the Seventeenth Statewide Grand Jury, Florida Attorney General Charlie Crist immediately crafted legislation to address the problem and enact the Grand Jury's recommendations. The Florida Legislature responded quickly as well, and many of the Grand Jury's recommendations were proposed in bills sponsored by Florida Senators Durell Peaden and Walter "Skip" Campbell, together with Florida Representative Ed Homan. This led to the passage of Senate Bill S 2312, the "Prescription Drug Protection Act," which was signed into law by Governor Bush on Friday, June 13, 2003. A copy of this bill may be found at MyFlorida.com. Further information regarding the adulterated drug problem is addressed in a report issued by the Office of Program Policy Analysis and Government Accountability (OPPAGA). A copy of the OPPAGA report can be found at www.oppaga.state.fl.us. Among other things, Florida's new legislation requires or provides for: 1. Vastly improved documentation of vital pharmaceuticals in order to prevent their adulteration or counterfeiting. 2. Full pedigree papers on all prescription drugs by July 1, 2006. 3. Due diligence by those receiving pedigree papers. 4. Full authority by the Florida Department of Health to destroy medication that has been adulterated or improperly stored. 5. Full authority by the Florida Department of Health to shut down licensed wholesalers in violation of state statutes until the deficiencies are corrected. 6. Increased criminal penalties for pedigree paper violations, as well as other violations involving adulterated drugs. 7. Increased permitting requirements for drug wholesalers in Florida, including raising bonding requirements and stricter background checks. In describing the new legislation, Florida Attorney General Charlie Crist said, "We now have new tools to combat this type of health care fraud. Our most vulnerable citizens now have a place to go when money overwhelms compassion." It is extremely important to note that this legislation was a product of the cooperation between the Attorney General, law enforcement, the Florida Legislature, the regulators at the Florida Department of Health, and representatives of the legitimate prescription drug wholesalers. The legislation imposes an immediate requirement of pedigree papers on a select list of approximately 35 prescription drugs that have been shown by law enforcement to have been counterfeited or mislabeled. (Should law enforcement detect criminal activity in additional drugs, the legislation also provides for the emergency listing of such new drugs on the full pedigree paper list by the Florida Attorney General.) The pedigree paper requirement on the remainder of all prescription drugs, regardless of whether they are sold by authorized distributors of record, takes effect on July 1, 2006, in order to allow the pharmaceutical drug industry to develop cost effective technology for the tracking of every prescription drug shipment. Attorney General Crist is proud of this accomplishment and is hopeful that other states and the nation will consider taking similar action. Prescription drugs are wholesaled and dispensed in every state and often travel through many states before they arrive at their ultimate destination. Therefore, an action or lack of action in one state can easily affect the citizens of another state. That is why we believe it so important to have uniform laws applied and enforced nationwide. By now you have probably heard the horror stories involving counterfeit prescription drugs. The doctor who thought his son was being injected with a growth hormone, when in reality he was getting insulin. The young boy who thought he was receiving medicine to increase his red blood cell count, but was actually receiving counterfeit medication. More recently you may have heard of the individuals placing tap water in vials of medication and then labeling those vials with the name of a cancer medication. These despicable counterfeiters are preying on people who already have suffered a great misfortune. Much of the illegal activity is centered on very expensive drugs such as Epogen, Neupogen and Procrit, which are used in the treatment of cancer or HIV. However, it should be noted that fraudulent activity has also been detected in such lesser priced drugs like Lipitor and Viagra. In our opinion, the list of prescription drugs that could potentially be adulterated or counterfeited is quite large. Below are the prescription drugs most commonly found to have been either counterfeited or otherwise adulterated: Neupogen Gammagard Epogen Gammimune Procrit Oxycontin Serostim Viagra Nutropin AQ Viramune Panglobulin Sustiva Venoglobulin Prevacid Zyprexa Risperdal Trizivir Rocephin Combivir Avandia Epivir Lamisil Viracept Cipro Megace Lipitor Crixivan Celebrex Serostim Mepron Diflucan Aricept Norvir Zoloft Zocor Ziagen Vioxx Zithromax Albuterol Ipatropium Flonase Nizoral Conclusion The business of selling counterfeited and adulterated drugs is booming. As with almost all criminal activity, the motive is money. In the case of buying and reselling adulterated prescription drugs, the money that can be made from illegal activity is staggering. For example, a 2001 investigation discovered that South Florida criminals had counterfeited Procrit, a drug used to boost the immune systems of cancer and HIV/AIDS patients. The criminals re-labeled approximately 110,000 bottles of low strength Epogen to make the bottles appear to contain high strength Procrit, a drug 20 times the strength of the Epogen in the bottles. The criminals resold the re-labeled drugs into the wholesale market with forged pedigree papers, passing the drugs through four states. Investigators located 800 boxes of the counterfeit Procrit at a large Texas wholesaler, which had unknowingly purchased the counterfeit Procrit. In addition, investigators found some of the product in Kentucky. In all, investigators recovered less that 10% of the counterfeit Procrit. It is estimated that the criminals in the chain may have made an illicit profit of approximately $46 million. As prosecutors, we are now seeing a trend of prior illegal narcotic traffickers entering into the prescription drug business. Unfortunately for consumers, the drug traffickers have not had a moral enlightenment. Rather, they now apply the tools of their illegal trade to the prescription drug business. Most of us probably know someone that takes one of the above-mentioned prescription drugs. This, more than anything, illustrates the need for Congressional action. Thank you for the opportunity to speak to this sub-committee. I am happy to respond to any questions you might have.
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