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Randall Lutter, PhD - RFID World Conference

This text contains Dr. Lutter's prepared remarks. It should be used with the understanding that some material may have been added or deleted during actual delivery.

Speech before
RFID World Conference
Dallas, Texas

Remarks by
Randall Lutter, PhD

March 1, 2006


I would like to thank RFID World for this opportunity to speak about the promise that electronic track and track technologies such as RFID hold for efforts to fight counterfeit drugs in the United States. Americans are fortunate in being able to trust that the medicines they receive in hospitals or buy at their local pharmacies are indeed safe and effective products, approved by FDA. We are committed to preserving that trust and to keeping fake medicines out of pharmacies and medicine cabinets. Electronic track and trace technologies such as RFID can help us honor that commitment.

I serve as co-chair of FDA's recently reconvened Counterfeit Drug Task Force. My colleague Maggie Glavin, FDA's Associate Commissioner for Regulatory Affairs, also serves as co-chair.

The Task Force was reconvened last fall by Acting Commissioner Dr. von Eschenbach because progress has been made towards adoption of RFID and implementation of an electronic drug pedigree across the U.S. drug supply chain, but more slowly than FDA had earlier anticipated.

Acting Commissioner Dr. von Eschenbach asked the Task Force to assess the progress that has been made in adopting electronic track and trace technologies, and to look at the obstacles that have been encountered and what measures should be taken to quickly overcome these obstacles. He also asked the Task Force to address what, if anything, the Agency should do upon the expiration in December 2006 of the stay of certain provisions in the regulation related to the Prescription Drug Marketing Act.

The Task Force organized a public meeting in Bethesda, Maryland on February 8th and 9th to address issues that may slow or impede the adoption of electronic track and trace technologies such as RFID. The Task Force is preparing a report based on what it learned at the public meeting and from comments placed in a public docket open to comments post-marked on or before last Friday. Its report is scheduled to be made public in May 2006.

Today I would like to review with you some of the work of the Task Force, and how it relates to FDA's general efforts to fight counterfeit drugs. In these remarks I will talk about

  • FDA's recent experience in fighting counterfeit pharmaceuticals,
  • Progress to date of the Counterfeit Drug Task Force, and
  • Future actions to look for regarding electronic track and trace technologies to fight fake medicines.

I. FDA's Recent Experience Fighting Counterfeit Drugs

Before discussing steps to improve the integrity of the U.S. drug supply it is important to note how good it already is. Counterfeit drugs in the U.S. are quite rare.

While we have no direct quantitative evidence about the prevalence of counterfeit drugs, because they so successfully mimic genuine products and by all accounts are rare, we are confident that the overwhelming majority of prescription drugs sold in the U.S. are products genuinely approved by FDA. In contrast, in some countries with less effective regulatory systems, fake medicines may be a significant share of all medications so that getting them unwittingly is a major concern of patients and doctors.
The high confidence that we and the public have about the integrity of the distribution system for U.S. drug products stems from an intricate web of federal and state laws.
Despite this high confidence, FDA has been concerned that the drug supply is under increasing threat of attack from ever more sophisticated counterfeiters. There have been increased efforts to introduce counterfeit drugs into the U.S. market.
The Agency has witnessed an increase in counterfeiting activities and a greater capacity to introduce finished dosage form counterfeits into legitimate drug distribution channels. Illicit wholesale drug diverters and others in the supply chain provide the window through which most counterfeit drugs have historically entered legitimate distribution channels.

The number of newly initiated counterfeit drug cases has risen sharply from just a few years ago, although still preliminary data from fiscal year 2005 suggest a decline relative to the peak reported for fiscal year 2004. In fiscal year 2004, FDA's Office of Criminal Investigations (OCI) initiated 58 counterfeit drug cases, a significant increase from the 30 cases initiated in FY 2003 and from an average of less than 10 in the 4 years before 2001.
Let me stress that these are estimates of the number of newly initiated counterfeit drug cases being investigated. And since these are ongoing cases, we have no estimate of the volume of counterfeit drugs involved in each case--it could vary from dozens to thousands of prescriptions.
We believe that the unusually high number of cases in FY2004 is in part due to an increased awareness and vigilance at all levels of the drug distribution chain. We believe that one factor contributing to this increased awareness and vigilance is the Counterfeit Drug Report that FDA issued in February 2004. A second is increased referrals from, and coordination with other state and federal law-enforcement agencies, such as the DEA and the FBI, and communications with drug manufacturers.
The decline from 58 cases in 2004 to 32 new cases in 2005 may be due partly to a positive deterrent effect of the new 2004 cases on the level of counterfeiting in 2005. But the decline may also exist because some new cases, after further research, are found to relate to the large number of existing ones. In reality we can not identify the exact causes of changes in the number of new counterfeit drug cases opened each year.
Fortunately, most of the counterfeit drugs at issue did not reach consumers because we focused our resources and developed proactive investigations. We believe that this strategy enabled us to identify components of counterfeit products and interdict finished counterfeit drug products before they entered retail distribution.
It is important to note that the number of cases that OCI has opened is NOT an indication of the prevalence of drug counterfeiting in the U.S. Nearly 4 billion prescriptions were filled last year. That means a very large volume of drugs is moving through the supply chain. The sophistication and precision of some counterfeit copies of legitimate drugs make a reliable estimate of the number of counterfeits impossible. However, we believe that existing regulations and the commitments by most supply chain stakeholders to comply with these rules keep the prevalence of drug counterfeiting in the U.S. very low.
Unfortunately, not everyone abides by the rules. Counterfeit, stolen, and otherwise fraudulently obtained pharmaceutical drugs can enter legitimate channels through pre-existing illicit diversion networks. Enforcement efforts by FDA's Office of Criminal Investigations against these diverters have resulted in detection and dismantling of counterfeit schemes.
In February 2004, FDA released a report entitled "Combating Counterfeit Drugs." This comprehensive report highlighted several measures to better protect Americans from counterfeit drugs. Of particular interest to us today are measures to secure the movement of the product as it travels through the U.S. drug distribution chain. In the February 2004 report, we said:

  • Radio Frequency Identification (RFID) is the most promising approach to provide reliable and timely track and trace information.


  • Adoption and common use of reliable track and trace technology would be feasible in 2007, and would help secure the integrity of the drug supply chain by providing an accurate drug "pedigree".


  • Electronic track and trace, including RFID, alone is not the solution to combating counterfeit drugs. A multi-layer approach, using other technologies to secure the product and packaging, such as holograms, color shifting inks, etc., increased vigilance and awareness, increased penalties and State efforts, just to name a few, are also important in this effort.


  • Adoption of electronic track and trace technology would help stakeholders meet and surpass the goals of the Prescription Drug Marketing Act.


For those of you who are not familiar with the Prescription Drug Marketing Act, it is a law passed in 1987 in response to a number of counterfeit drug incidents in the U.S. where patients received counterfeit drugs.

PDMA requires minimum standards for State licensing of wholesale distributors of prescription drugs and requires unauthorized wholesale distributors to provide purchasers a statement (also called a pedigree) identifying each prior sale of the drug.
In 1999, FDA issued final regulations related to the PDMA -- these defined the authorized distributor of record as wholesalers with written agreements with the manufacturer.
Shortly thereafter, the agency received comments raising a number of concerns related to the pedigree provisions. Many of the concerns suggested that there would be an adverse economic impact on wholesalers who have to provide pedigrees.
As a result, FDA stayed certain provisions of the final rule, and has continued to stay these provisions. The current stay, which expires in December 2006, was issued in part to give stakeholders time to adopt an electronic track and trace technology.

II. Recent Activities of the Counterfeit Drug Task Force

FDA's public meeting on the Counterfeit Drug Task Force workshop and vendor display took place on February 8 and 9 and attracted 400 registrants. They heard both Acting Commissioner Dr. von Eschenbach and Assistant Secretary for Health Dr. Agwunobi discuss RFID as a way of fighting counterfeit drugs. The agenda, slides of many speakers' presentations and the entire transcript are available at FDA.gov in the counterfeit drug section.
We were pleased to have senior representatives of some of the biggest stakeholders in the manufacturer and distribution of pharmaceutical products, as well as EPC Global.
During the public meeting we heard vendors, wholesalers, and some manufacturers agree that the RFID pilot projects conducted to date showed that providing real-time electronic pedigrees is already feasible in a production environment with single wholesalers. But no pilot projects were presented that provided an RFID based pedigree for a drug product sold by one wholesaler to another before being sold to a retail pharmacy.
We heard some vendors describe hybrid technologies, such as two-dimensional bar codes combined with RFID that might provide both identification and electronic pedigrees even without RFID being universally adopted.
At this point we are reviewing comments to the docket and drafting a report to meet the Acting Commissioner's May deadline.
While we are working on that report we continue to believe that electronic track and trace technologies like RFID could offer substantial advantages both to FDA in its effort to ensure the protection of the drug supply and to industry.
RFID, along with software solutions, could create a chain of custody for FDA-approved products and could thwart efforts by would-be peddlers of diverted or fake medicines, leaving them unable to sell to unsuspecting U.S. wholesalers, pharmacists and, most importantly, patients.
Pharmacists at drug stores and hospitals could be more certain of the safety and efficacy of drugs they are dispensing.
This certainty could come not merely because the label conveys FDA approval but because an up-to-date electronic database confirms that the particular package was tracked at each stage of the distribution chain, from the FDA-approved manufacturing facility, to the dispensing pharmacist.
Further, the electronic track and trace system that will provide this certainty could offer such savings to private firms that the benefits of greater certainty about safety and efficacy are realized without any untoward increase in the costs of medications at a retail level.
This final point is important. While fighting counterfeit drugs is a key part of FDA's mission to ensure drug safety, we acknowledge important public concerns about the cost of medications and the implications of high costs for access to drugs. Based on discussions with some drug companies and retailers, we believe that RFID could offer significant savings to manufacturers, wholesalers and retailers alike from better inventory management.

III. RFID Outlook

Stakeholders interested in watching the development of RFID technology for medicines generally have a lot of activities to look forward to. They should

Look for our report to appear in May. It will review obstacles to faster adoption and measures that might be taken to overcome such obstacles.
They should also look for an FDA announcement about the stay of the PDMA pedigree rule later this year.
Finally, they should look for additional more extensive pilot projects by drug companies and distributors that wish to reduce counterfeiting.
More generally, stakeholders should look for additional actions by industry to adopt electronic track and trace. A confluence of two separate interests, both safety concerns and business concerns, will carry forward these actions.

As stated so well by Assistant Secretary Dr. John Agwunobi 2 weeks ago, our interest in electronic track and trace technologies is primarily about safety. My family, like yours, walks into a pharmacy to get a prescription filled and then takes it home and gives it to the kids. My family like yours does not worry about whether the drugs are fake and we are grateful that we do not have to worry. But we at FDA worry whether we will have done enough to avert a tragedy that might grab headlines and TV time.
But apart from this safety concern, which some businesses share, adopting RFID may simply be very good business for drug makers and distributors alike. It is entirely possible that one day we will all wake up and we will open the newspaper and splashed across the headline of that newspaper will be tragic event affecting a friend or member of our community. This person will have ingested something they thought was a legitimate medication but in fact was counterfeit and dangerous and toxic. On that day, as CNN is running the story, some companies will be able to stand and say that the tragedy didn't occur for their drugs because they were protected throughout the distribution chain. A brand will stand out while others will be tainted. Manufacturers ought to think about this eventuality at least as hard as we consider the risks to safety posed by failure to adopt appropriate measures to fight counterfeits.
Thanks again for giving me this opportunity to speak. I have a few minutes for questions.