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Counterfeit Bulk Drugs

Statement of

Jane E. Henney, M.D.
Food and Drug Administration
Department of Health and Human Services


the Subcommittee on Oversight and Investigations
House Committee on Commerce

October 3, 2000


Mr. Chairman and Members of the Committee, I am Jane E. Henney, M.D., Commissioner of Food and Drugs, Food and Drug Administration (FDA or the Agency). I appreciate the opportunity to be here today to discuss our efforts to detect and prevent the introduction of counterfeit bulk drugs into the drug supply of the United States (U.S.), and specifically, to report on our actions since your hearing on this matter in June.

As we stated in our testimony at your June 8 hearing, FDA believes that the authenticity and quality of drugs in this country is high, but we must take very seriously any allegations regarding the counterfeiting or adulteration of drug products. The Agency agrees with the Committee's assessment that more can and should be done to help ensure that imported bulk drugs or Active Pharmaceutical Ingredients (APIs) and finished drug products meet the requirements of the Federal Food, Drug, and Cosmetic (FD&C) Act. Since June 8, the Agency has been developing and implementing additional strategies for assessing the scope of the threat of imported counterfeit APIs to U.S. consumers and responding appropriately to that threat.

The growth in international trade over the past few decades has had a substantial impact on the ability of FDA to cope with the volume of regulated products, including APIs. Despite an increase in overall Agency funding in recent years, those increases have been allocated to new initiatives, and the Agency's core operations have not received commensurate increases. Field personnel and resources have been stretched so thin that FDA has been struggling to fulfill many of our program mandates. The increasing number of APIs from overseas makes policing the global drug marketplace to deter or interdict imported substandard drugs a daunting task. We have looked for additional ways in which we can use our own resources wisely, as well as leverage with others to increase our effectiveness.

On June 8, you asked FDA for a plan to improve our ability to detect and interdict imported counterfeit and substandard APIs. We forwarded a preliminary report to you, Mr. Chairman, on August 10, 2000, which outlined the Agency's plans and additional ideas under consideration for better handling imported counterfeit and substandard APIs and finished drugs.

Let me begin by providing the Committee with an update on the five initiatives FDA announced at the June hearing.

In February 2000, additional funds were allocated to the Forensic Chemistry Center (FCC) by the Office of Regulatory Affairs for sampling, analytical work and assessments of APIs gathered through targeted inspections of importers.

With these funding increases, the FCC has conducted 20 targeted API inspections, including nine at importers of foreign APIs, ten at domestic finished dosage manufacturers and one at a domestic animal drug manufacturer. The FCC inspectors are now reviewing imported API documents and samples of product, labeling, packaging schemes and certificates of analyses obtained during these inspections. Information derived by these analyses will be used to help determine whether additional follow-up by district office investigators or the Office of Criminal Investigations is needed and to support any enforcement actions that may be warranted. At each of these inspections, the FCC worked with local FDA district drug investigators to detect suspect API shipments through product and records examinations. This activity also provided an opportunity for FCC staff to train field investigators and raise the awareness of District Investigation Branches to the problem of counterfeit API's. Additional hands-on training is planned for investigators in other strategic locations.

Make the FCC API database available electronically to all field inspectors by January 2001.

This database currently contains information or "fingerprints" on 330 API's that have been collected and chemically analyzed by FCC. This information is one important tool which FDA can use to more quickly identify whether or not a product is authentic or counterfeit. The technology necessary to make FCC's API database available electronically on a real-time, searchable basis to field import and drug inspectors is being developed, and training for field personnel is being planned. We expect to have this system in place by January 2001.

Expand the Philadelphia pilot nationwide by the end of 2000.

A pilot program was begun in the Philadelphia District office in 1997, to evaluate the value of providing drug approval information to import field personnel. The pilot provided import inspectors in the Philadelphia District with access to information contained in the Establishment Evaluation System (EES) database maintained by the Center for Drug Evaluation and Research (CDER). EES tracks information related to the approval process for drug applications. The program allows inspectors to retrieve additional important data in about three to four minutes on any API entry, which increases the probability of confirming authentic sourcing of APIs.

In light of this success, access to the EES system has been expanded to the three FDA Districts handling the vast majority of APIs - New York, New Orleans and San Juan District Offices. Training for these inspectors has been completed and accounts have been established. The system has been up and running for approximately two months, and our inspectors in these districts report that the EES information is very useful in helping to assure that the declared destinations of imported APIs are appropriate. Currently, we are completing plans for the additional technology upgrades and training for field personnel necessary to expand the program to the rest of our districts, which we plan to complete early next year.

Put all importers on notice that they are required to provide the name of the foreign manufacturer upon entry into the U.S., and that the entry of their products into the U.S. will be contingent upon it.

The Agency has placed the import industry on notice regarding the existing requirement to provide FDA with accurate data regarding the identity and location of the manufacturer of imported drugs. These requirements were previously made clear to importers and brokers through notices issued on January 29, 1999, and March 24, 2000. However, this requirement was not being fully met. Therefore, on July 20, 2000, the Agency again posted an updated version of its requirements on the Internet with links to and from FDA's import operations pages. On July 28, 2000, a U.S. Customs Service (Customs) Automated Broker Interface (ABI) system administrative message was issued to all filers with a reference to the Internet site containing these requirements and a physical mailing address where a filer may request a hard copy from the Agency. A copy of the July 28, ABI notification was provided in FDA's August 10, letter to the Subcommittee.

Compliance with this requirement is assessed as the Agency carries out routine filer evaluations and is one of the factors considered in providing continued electronic filing privileges on Operational and Administrative System for Import Support (OASIS). Customs has informed FDA that these types of reporting failure may be the basis for Customs civil actions. This information will be useful to the Agency in better defining and identifying the universe of foreign manufacturers shipping to the U.S.

Require domestic manufacturers to provide information to FDA when they discover that the bulk materials they receive are substandard, ineffective, or appear not to be from the approved source.

As you know, the Committee proposed this idea to the Agency last year. We stated in June that we agreed this is a promising approach, and FDA is examining what would be required to develop a proposed regulation that would establish this requirement.


Immediately following the June 8 hearing, FDA established a Counterfeit Drug Working Group (Working Group) which has spent the past three months exploring the full range of issues concerning imported counterfeit and substandard drugs. The Working Group has looked carefully at FDA's import operations and our foreign drug inspection program, and has been developing a plan to better assess the extent of the counterfeit drug problem in the U.S. The Working Group also has been examining ways the Agency can more readily detect these products to better ensure that the public is protected from potentially hazardous drugs.

FDA's Counterfeit Drug Working Group consists of representatives from many Agency components, including: the Office of Criminal Investigations (OCI), the Division of Import Operations and Policy (DIOP), the Office of Enforcement, the Forensic Chemistry Center (FCC), the Division of Federal-State Relations (DFSR), the Division of Information Systems (DIS), and the Division of Emergency and Investigational Operations (DEIO), all of which are components of the Office of Regulatory Affairs (ORA), as well as the Offices of Compliance within the Center for Drug Evaluation and Research (CDER) and the Center for Veterinary Medicine (CVM), and the Office of Chief Counsel (OCC).

While FDA is still in the process of assessing the effectiveness of the regulatory tools, compliance programs, staffing and procedures that already exist within the current statutory construct to monitor imported APIs, the Agency already has implemented a number of program initiatives, including the following actions.

Foreign Registration

FDA has cleared and forwarded to the Office of Management and Budget (OMB) a final rule requiring foreign establishments whose products are imported or offered for import into the U.S. to register with FDA and to identify a U.S. agent. As you know, this requirement was mandated in the Food and Drug Administration Modernization Act of 1997. It will provide for the collection of information needed to establish an accurate Official Establishment Inventory for foreign drug firms.

Information Technology Needs Assessment (IT)

As you know, one of the issues of great concern at the June hearing was the Agency's lack of a well-integrated IT system for the regulation of drug imports. We acknowledged that FDA has been working with several independently developed databases of critical information that need to be integrated. We also understand the Committee's frustration that this problem has not yet been remedied.

In early July, FDA engaged the services of a private IT contractor to assess the Agency's IT needs for drug imports and to propose changes to accomplish the goals described below. The contractor was charged with determining what information FDA import inspectors need to fully assess the admissibility of all FDA regulated commodities. The contractor consulted with import inspectors and compliance officers with expertise in FDA and Customs laws and regulations, good manufacturing practices, and IT import applications. The contractors' report was recently received by the Agency, and we are currently reviewing both the recommendations and the estimated resource requirements.

Cross-Training With U.S. Customs Service

In June and July 2000, FDA conducted three Import Enforcement training courses for FDA import personnel including Compliance Officers, Consumer Safety Officers, and Consumer Safety Inspectors. A total of 120 students attended one-week courses representing in total about half of all persons assigned to field import operations. FDA and Customs jointly developed the curriculum and taught the course. The course included training in Strategic Problem Solving (SPS), a Customs training module developed specifically to facilitate the targeting, investigation and prosecution of willful violators. Each course included a facilitated workshop after the pattern of SPS. In each class, students analyzed and provided recommendations for specific imported API counterfeiting fact patterns. These facilitated brainstorming sessions by the field personnel focused on the imported counterfeit API threat and produced numerous ideas for strategies in detecting, preventing, and interdicting counterfeit imported APIs. The Working Group is assessing these proposals for viability.

This training course is being extended to additional field personnel in three sessions that began this week.

Other Cooperative Efforts With Customs

FDA's OCI has a close working relationship with Customs, including a Memorandum of Understanding providing for all OCI agents to be cross-designated as Customs Officers. OCI currently is working a number of on-going investigations with Customs involving unapproved and counterfeit finished human drugs, and adulterated and misbranded medical devices and foods.

OCI and Customs cooperated in a joint operation targeting the Internet sales of unapproved pharmaceuticals by Thailand-based organizations. In cooperation with Thai authorities, Customs arranged for the consolidation and diversion of international mail deliveries of these products to JFK Airport, where FDA personnel were assigned exclusively for review and processing of these entries. In the period February to August 2000, approximately 300 such shipments were reviewed, found to be non-admissible, and returned to Customs for forfeiture.

FDA has also had discussions with Customs' Applied Technology branch and we will be meeting with them this month to explore the use of countermeasure devices to detect counterfeits and track shipments where warranted.

International Collaboration

OCI, through liaison with their international law enforcement counterparts and other regulatory agencies, is a key Agency component in cooperative international efforts aimed at identifying, investigating and prosecuting drug crime. OCI participates in the Permanent Forum on International Pharmaceutical Crime (PFIPC), an international enforcement forum aimed at exchanging information and ideas on combating pharmaceutical crime. PFIPC works in conjunction with a Forensic Group that provides scientific expertise. OCI also maintains contact with their counterparts at the World Health Organization, the World Customs Organization, Interpol, and FDA's counterparts such countries as the United Kingdom, Germany, Spain and Australia. Additionally, the FCC participates in the International Laboratory Forum on Counterfeit Medicines.

Forensic Chemistry Center Initiatives

The FCC and Customs have agreed to explore methods to better leverage their respective resources in the investigation and analysis of suspect counterfeit products. The FCC hosted the first meeting in their forensic laboratory on August 10, 2000, and demonstrated FDA's current forensic capabilities and strategies. The two agencies will explore ways to grant access to analytical data and equipment and cross training in methodologies and emerging forensic techniques. The FCC will interface directly with Customs' laboratories to share information on analytical procedures FDA's forensic experts use to detect unapproved and counterfeit APIs. FDA has placed a high priority on developing with Customs a unified approach for interdicting counterfeit drugs.

Review of Data on Uninspected Firms

In response to a request from Chairman Bliley earlier this year, FDA produced a report based on unverified data from OASIS, which identified listings for approximately 4,600 firms that appeared to be non-inspected foreign drug manufacturers. It should be noted that the OASIS data was input by Customs house brokers at the time that drug entries were filed.

This number of 4,600 "uninspected firms" was the subject of great concern at the June hearing. As explained in our previous testimony, that number was the best estimate we were able to provide on short notice, and was derived by comparing raw data input by import brokers into OASIS with a known list of inspected firms. FDA has reviewed the OASIS data and manually cross-checked it with other information sources to weed out duplicates and incorrect entries and establish a much more accurate list of uninspected foreign drug manufacturers that appear to have exported to the U.S. an API that is normally used to manufacture a finished dosage form which requires an approved application. So far, the review of this data has enabled us to produce a much more reliable list of 242 foreign API manufacturers, in 36 countries, that appear to have exported to the U.S. in 1999, but have not been inspected, according to the EES database. The Agency is developing an import alert for these uninspected foreign drug establishments. The 242 identified firms include forty-six firms in China and Hong Kong and eleven firms in India.

The final phase of the analysis of the OASIS data will be to identify firms FDA has not inspected but which are referenced in approved human and animal drug applications. The human drug firms will be evaluated using a risk-based analysis stratified into one of four tiers, incorporated into FDA's surveillance list, and subsequently scheduled for inspection.


Joint Industry/Agency Efforts

Members of the Working Group conferred with the FDA's Field Drug Committee (FDC) on counterfeit API issues. The FDC historically has maintained networks with drug industry personnel and trade associations and has utilized these relationships for furthering the important message of health and safety through consistency in the Good Manufacturing Practice compliance. The FDC will assist in developing avenues through which industry could join forces with the Agency in combating counterfeits in the market place.

Beyond this initial approach through the FDC, the Agency is exploring additional routes for encouraging and receiving intelligence on counterfeit drugs in the world market. Historical experience in prior counterfeit API investigations has demonstrated that foreign API manufacturers whose products are being counterfeited can provide substantial assistance in developing tests for authenticity and intelligence regarding suspected counterfeiting operations. The Agency is aware that intelligence gathering from the trade is a critical element to successfully identifying suspect counterfeits in the market.

Foreign Inspection Component

When faced with the challenge of a steadily increasing volume of needed foreign inspections, coupled with limited resources, a risk-based approach to foreign drug inspection was developed. CDER established a four-tiered approach to prioritizing and performing surveillance inspections of firms that FDA had not previously been able to inspect. At the present resource level, however, FDA is only able to inspect firms in Tier I (Official Action Indicated, or OAI, inspection follow-up) and Tier II (sterile bulks, finished drugs and aerosols). It should be noted that pre-approval inspections are required by the Prescription Drug User Fee Act and most are conducted in accordance with the Act's mandate. Thus, resources are the primary factor limiting the Agency's ability to undertake additional inspections. As I am sure your Committee staff reported back to you after their trip to China and India to observe foreign inspections, foreign inspections are extremely resource intensive – requiring not only highly trained investigative and scientific personnel, but linguistically and culturally competent staff, as well. The time needed to conduct a foreign inspection is also magnified by travel requirements.

The Agency is reassessing these issues and discussing how to best utilize our current resources given current constraints. We hold fast to the belief that there is no substitute for an eyes and hands-on inspection.

Even with these limitations, I would hasten to note that since 1990, the Agency has shifted resources from domestic to foreign programs to increase our presence in the foreign drug manufacturing marketplace, recognizing the shift in global markets. The foreign drug inspection program for the current fiscal year is on track for accomplishing approximately 450 inspections in all foreign drug program areas. This represents more foreign inspections than the Agency has ever completed in a single year. The program continues to be primarily application driven, and the priorities associated with the product approval process do impact our ability to conduct drug surveillance inspections.

For fiscal year (FY) 2001, ORA is projecting approximately 550 foreign inspections associated with its foreign drug work plan in all program areas. The FY 2001 foreign work plan focuses on manufacturers that have not been inspected, as identified through the analysis of OASIS data discussed previously. This includes substantial increases in drug surveillance inspections, which would result in increased coverage of firms in Tiers III and IV. However, to accomplish this increase, a reallocation of existing resources would need to occur by reducing our domestic inspection program.

Import Operations Component

FDA's DIOP is responsible for providing policy guidance to the field relating to import procedures, overseeing the development and operation of the Agency's Import Alert system, and for maintaining the Agency's OASIS system. Customs has identified over 300 designated ports of entry. OASIS data indicates that approximately 175 ports have seen entries of APIs. FDA has a notable presence in over 40 ports. The ports where FDA conducts the bulk of its work represent those through which the vast majority of drugs enter. The Working Group is reviewing DIOP's procedural and system operations and is assessing the Agency's personnel and equipment needs to better monitor U.S. ports of entry.

Security Measures

FDA is engaged in discussions with the Customs' Applied Technology Division, which has considerable experience in tracking shipments within U.S. commerce to verify and document cargo diversion. We will evaluate the currently available technology in terms of levels of surveillance capabilities, cost of equipment and implementation. Additionally, we have asked the IT contractor to explore the possible use of low cost security devices by foreign manufacturers such as chemical taggants in labeling, glue, ink or packaging materials to detect suspect counterfeit drugs. Other possible solutions include radio frequency tags for detection during examinations at ports of entry.

The Agency is considering a wide array of available technology, including encrypted bar code technology in labeling and Certificates of Analysis containing manufacturing information already submitted by the foreign manufacturer through a secure web-based environment.

Mr. Chairman, in June you asked us what additional resources, personnel and funding may be necessary to fully carry out our responsibilities for inspecting foreign drug manufacturers and to increase the surveillance of foreign APIs and finished drugs. The Agency has long recognized that we need additional resources in the area of post-marketing surveillance, which would encompass many of the activities I have just discussed. In just the last two years – FY 1999 and FY 2000 – the President's budget included $25.8 million and $39.3 million, respectively, for post-marketing surveillance activities, none of which was funded. The lack of new funding, coupled with an absence of increases for core operations, reduces the number of FTEs available to perform the Agency's critical post-market activities.

At this time, only preliminary estimates have been made of these resource requirements, as the scope of this evaluation needs to encompass both the Agency's domestic and foreign operations, as well as the operations of various FDA Centers. We look forward to providing more specific information on our funding needs relating to personnel and technology in the future, once a complete assessment is made and appropriate review has occurred.

FDA will continue its assessment of the extent of the counterfeit drug problem in the U.S. Over the coming weeks, the strategies outlined above will be further developed and enhanced, and other potential strategies will be considered. While the Agency has already made a good deal of progress, we have much work remaining.


Mr. Chairman, I want to assure you that all of us at FDA remain strongly concerned about any possibility that counterfeit or otherwise unsafe drugs may find their way into the American drug supply. We will remain vigilant as we refine and improve the programs and procedures that we use to ensure the availability of safe medications for consumers.

We appreciate the continued interest of the Subcommittee in these important issues. Thank you again for the opportunity to discuss these issues with you, and I will be happy to answer any questions.

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