By Patrick M. Schmidt, President and CEO of FFF Enterprises

Welcome Ladies and Gentlemen.

I am Patrick M. Schmidt, President and CEO of FFF Enterprises Inc., located in Temecula, California. We specialize in the management and distribution of fractionated human plasma products, clinical data management and consumer health services. We are best known in our market for FFF's long-term commitment to defining a safe and responsible channel for the distribution of biopharmaceuticals.

When FFF first entered the biopharmaceuticals marketplace in 1988, the distribution channel was rampant with unstable pricing, ill-managed shortages, and unpredictable product allocation. In response, we have vigorously pursued our goal to define a responsible distribution channel, to assure availability, safety and cost containment — and a secure pedigree for every vial of every drug.

While we've made great strides in promoting a defined, responsible channel, there is clearly much more work to be done: Recent cases of pharmaceutical tampering and counterfeiting are compelling examples, examples that have brought us together today.

The proposed technological, regulatory and legislative solutions we are learning about can provide important hurdles to counterfeiting. But such solutions are treating the symptoms of a larger, more fundamental problem. If I do nothing else with my time today, I hope I am able to convince at least some of you that drug counterfeiting is a symptom of the source problem: Ill-defined, irresponsible distribution.

We must address the fundamental problem, because it is irresponsible distribution that opens the supply channel to illicit behaviors such as counterfeiting.

Irresponsible distribution is the result of two things: the gray marketplace and bad intentions.

There is indeed a gray market for pharmaceuticals, as much as some might like to dismiss it or diminish its impact — and, frankly, calling it gray is generous. You may be surprised, though, that the gray market is perpetuated by both bad guys and good guys, all of whom engage in purchasing practices that directly create opportunities for counterfeiting, tampering, drug diversion and theft of drugs.

When manufacturers must move inventory quickly and will sell to anyone who can pay; when hospitals and physicians sell over-stocked drugs back into the marketplace; when wholesalers and distributors see a chance to make a quick buck by selling product to each other; when these transactions occur, the affected drugs have entered the gray market.

And, when safe drugs are diverted into the gray marketplace for whatever reason, the result is inevitable: These drugs are no longer safe, because, in the shadowy landscape of the gray market — where lot numbers aren't tracked, prices are irrational, and safety is not a consideration — these drugs are now vulnerable to mishandling, tampering, counterfeiting, and unfair pricing.

Most important, they are now putting patients' lives at risk. And, as we have seen in Florida and across the country, counterfeiters do not care about patient risk. They are just waiting with open arms for those drugs to cross the line into gray.

Unfortunately, there is no anti-counterfeiting measure that will eliminate their bad intentions — criminals always seem to find a way to overcome the hurdles put in their way. But there is a way to eliminate the gray market.

If every entity along the distribution channel — manufacturers, wholesalers, distributors, hospitals, pharmacies and physicians — if we all adhere to a safe and reasonable standard of distribution, there cannot be a gray market.

This standard is simple. It is the standard my company defined and has been practicing for years.

We call it the Responsible Distribution Channel.

Drugs in the Responsible Distribution Channel move only from the manufacturer to a sole distributor to the healthcare provider — with no gray in between. If manufacturers sell only to distributors who honor this standard; if distributors buy only from manufacturers and not each other; if pharmacies buy only from distributors who honor this standard; then channel integrity is guaranteed. And, when channel integrity is guaranteed, drug pedigree remains intact — and patient safety is secured.

Clearly, the battle against counterfeit drugs must be waged on multiple fronts, but the ultimate weapon is integrity: Distribution Channel Integrity.

This solution is achieved in three low-tech but high-concept steps:

Manufacturers, distributors and customers must embrace and honor this highest standard of channel integrity.

They must be formally recognized for this commitment.

And the FDA must endorse this standard.

When we take these steps, we will restrict the flow of drugs into the gray market, and keep them out of the hands of counterfeiters — before they have a chance to undermine a tamperproof device, disable a drug authenticator or counterfeit a barcode.

Thank you for your time, and thank you for your efforts to promote responsible distribution.