CONFERENCE OF WESTERN ATTORNEY GENERALS: “Transnational Crime in America”

1. CONFERENCE OF WESTERN ATTORNEY GENERALS:“Transnational Crime in America” Combating Illegally Imported Prescription Drugs and Devices Through State Attorney General Offices Bryan Smith Allergan Regulatory Counsel January 31, 2013

2. Agenda • Background of Issue • Federal Law & the FDA • Allergan’s Multi-Pronged Approach • State Laws • Questions & Answers

3. Importation v. Re-importation - Terms • Importation – bringing into U.S. from a foreign country • Considered unapproved product • Re-importation – U.S. to a foreign country and brought back into U.S. • Under PDMA, it is illegal for anyone other than the drug’s original manufacturer to re-import a prescription drug into the U.S. that was manufactured in the U.S.

4. 2 Problem Areas in the US • Illegal Actions of Wholesalers/Distributors • Federal law prohibition • Recent FDA action • Illegal Actions of Healthcare Provider/Purchaser • Providers either knowingly or unknowingly purchase drugs/devices from importers • Consumer fraud and patient safety concerns • Reimbursement/false claims issues

5. Federal Law • FDA regulations prohibit the interstate shipment (which includes importation) of unapproved new drugs (21 U.S.C. section 331) • Unapproved new drugs include foreign-made versions of U.S. approved drugs • FDA is sensitive to the issue • "We appreciate that there is a significant cost differential between drugs available here and those in other countries/areas. However, many drugs sold in foreign countries/areas as 'foreign versions' of approved prescription drugs sold in the United States are often of unknown quality with inadequate directions for use and may pose a risk to the patient's health."

6. Why would the government want to prohibit importation of drugs? • It is illegal to import drugs into the United States under the United States Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 331). • Concern for the safety of the people who take those imported drugs. • Allowing importation of drugs greatly increases the risk that more dangerous counterfeit drugs will be circulating through the United States. • No way to track these drugs from start to finish and ensure their quality. • No way to regulate what ingredients the drugs contain and in what amount. • Potential punishments for illegally importing drugs include imprisonment and fines. For example, anyone who violates the law against “reimporting” prescription drugs originally made in the United States shall be imprisoned for not more than 10 years or fined not more than $250,000, or both. (21 U.S.C. § 38).

7. Recent FDA Action – Dec. 2012 http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/ucm330610.htm#Text

8. FDA Statement re Illegal Imports – Dec. 2012 “FDA urges the health care community to examine its purchasing practices to make sure that products are purchased directly from the manufacturer or from state-licensed wholesale drug distributors in the United States. Health care professionals, pharmacies, and wholesalers/distributors are valuable partners to protect consumers from the risks of unsafe or ineffective products that may be stolen, counterfeit, contaminated, or improperly stored and transported. The receipt of suspicious or unsolicited offers from unknown suppliers should be questioned, and extra caution should be taken when considering them.” http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/ucm330610.htm#Text

9. Recent FDA Letter to Doctors re Illegal Importation (Nov. 2012) “Such products put patients at risk of exposure to ineffective or dangerous products. In virtually all cases, importing or causing the importation of unapproved prescription medications from foreign sources violates the Federal Food, Drug, and Cosmetic Act and is illegal.” http://www.fda.gov/Drugs/DrugSafety/DrugIntegrityandSupplyChainSecurity/ucm330610.htm#Text

10. Unlicensed & Foreign Suppliers EXAMPLES

11. Unlicensed & Foreign Suppliers -- Gallant Pharma

12. Unlicensed & Foreign Suppliers - PharmaFillers

13. Unlicensed & Foreign Suppliers -PharmaFillers

14. Unlicensed & Foreign Suppliers - PharmaFillers

15. Example of Purchasers

16. Example of Purchasers - Coupon/Discount Sites

17. In the News… FDA warns counterfeit botox may have been shipped to 350 US clinicsCBS NewsWASHINGTON Botox and other medications made by foreign suppliers may have been received by more than 350 U.S. medical practices, the Food and Drug Administration warned doctors. The FDA said in a letter sent last month, which was released publicly

18. Is importation of drugs into the United States a big problem? • Importation is increasingly becoming a more serious problem. • The FDA has tracked this increase and reported that in the past decade, the amount of importation of counterfeit drugs has increased significantly. • Each day, thousands of individual packages containing prescription drugs are imported illegally into the U.S. • Volume has grown to exceed the capability of FDA field personnel to properly process • In a typical  fiscal year, FDA's Office of Criminal Investigation (OCI) opens between 31 and 54 cases involving counterfeit drugs. Some cases could revolve around an individual, and others could involve multiple players and investigations. More information about criminal investigations by the FDA can be found at http://www.fda.gov/ICECI/CriminalInvestigations/ucm123067.htm

19. What are the consequences of using imported drugs? • Consumers often will not get the safety, therapeutic effects, or reliability of the drugs that they need • Legitimate manufacturers of pharmaceuticals suffer. Importers take advantage of all of the research, testing, and development that these US companies put into creating their products by simply copying the end product. This is done without FDA supervision and results in a lower-quality drug. • Health insurance providers are being defrauded when healthcare professionals use these imported drugs and file for reimbursement. • This violates state and federal law and exposes healthcare providers to False Claims Act and medical malpractice claims.

20. Why FDA Action Isn’t Enough • HCPs may still purchase drugs/devices • Tempted by “lower prices”/higher margins • Lack of knowledge/information on issue • Resources Issue • Coordinated, Multi-Pronged Approach • States have civil authority to address issue • Complaints are local • AG can coordinate with Medical/Pharmacy Boards

21. State Laws • State laws vary • Some address the wholesaler/illegal importer under the state’s Pharmacy Practice Act • Some address unprofessional conduct of healthcare practitioner under the state’s Medical Practice Act • Some states have no applicable law at all • State laws may be Criminal or Civil

22. What is the Role of the AG re Illegally Imported Drugs/Devices? • Understand state law or gap in state law that would govern control of illegally imported drugs • Many states have no law • May fall under “Unprofessional Conduct” provision in statue • What is the potential civil/criminal action that could be taken? • Do laws need to be clarified? • Understand which overseeing governing boards will handle a complaint should one be generated • Learn how the AG and its Consumer Protection Division may influence .

23. Case Study: Nevada • During the 2011 Legislative Session, NV updated their Medical Practice Act through AB 537 • Action taken against healthcare practitioner who purchases drug/devices • AB 537 written to create “criminal” offense 17. Knowingly procuring or administering a controlled substance or a dangerous drug as defined in chapter 454 of NRS that is not approved by the United States Food and Drug Administration, unless the unapproved controlled substance or dangerous drug: (a) Was procured through a retail pharmacy licensed pursuant to chapter 639 of NRS; (b) Was procured through a Canadian pharmacy which is licensed pursuant to chapter 639 of NRS and which has been recommended by the State Board of Pharmacy pursuant to subsection 4 of NRS 639.2328; or (c) Is marijuana being used for medical purposes in accordance with chapter 453A of NRS.

24. Nevada – Enforcement Action on Purchasing HCP • Good media attention and fines collected (http://www.lasvegassun.com/news/2012/sep/11/state-board-reprimands-doctors-including-one-whod-/) • Need to hit importers in the pocketbook to deter it • Policing of illegal imports occurs on regular basis when another doctor complains • Filing complaints and new centralized process • http://medboard.nv.gov/Forms/ComplaintInteractive.pdf

25. Questions? Please Feel Free to Contact Me Bryan E. Smith Allergan, Inc. 2525 Dupont Drive Irvine, CA 92612 Smith_Bryan@Allergan.com Tel: (714) 246-3735 Fax: (714) 246-4774