- AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 2014

[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]

AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2014

_______________________________________________________________________

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
________
SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG
ADMINISTRATION, AND RELATED AGENCIES
ROBERT B. ADERHOLT, Alabama, Chairman
TOM LATHAM, Iowa
ALAN NUNNELEE, Mississippi
KEVIN YODER, Kansas
JEFF FORTENBERRY, Nebraska
THOMAS J. ROONEY, Florida
DAVID G. VALADAO, California SAM FARR, California
ROSA L. DeLAURO, Connecticut
SANFORD D. BISHOP, Jr., Georgia
CHELLIE PINGREE, Maine

NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full
Committee, and Mrs. Lowey, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
Martin Delgado, Tom O'Brien, Betsy Bina,
Pam Miller, and Andrew Cooper,
Staff Assistants
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PART 5
Page
USDA Farm and Foreign Agricultural Services...................... 1
Food and Drug Administration..................................... 177

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Printed for the use of the Committee on Appropriations
PART 5--AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION,

AND RELATED AGENCIES APPROPRIATIONS FOR 2014
?

AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2014

_______________________________________________________________________

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

HOUSE OF REPRESENTATIVES

________

Printed for the use of the Committee on Appropriations

U.S. GOVERNMENT PRINTING OFFICE
82-639 WASHINGTON : 2013

COMMITTEE ON APPROPRIATIONS

HAROLD ROGERS, Kentucky, Chairman

C. W. BILL YOUNG, Florida \1\ NITA M. LOWEY, New York
FRANK R. WOLF, Virginia MARCY KAPTUR, Ohio
JACK KINGSTON, Georgia PETER J. VISCLOSKY, Indiana
RODNEY P. FRELINGHUYSEN, New JerseyJOSE E. SERRANO, New York
TOM LATHAM, Iowa ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama JAMES P. MORAN, Virginia
KAY GRANGER, Texas ED PASTOR, Arizona
MICHAEL K. SIMPSON, Idaho DAVID E. PRICE, North Carolina
JOHN ABNEY CULBERSON, Texas LUCILLE ROYBAL-ALLARD, California
ANDER CRENSHAW, Florida SAM FARR, California
JOHN R. CARTER, Texas CHAKA FATTAH, Pennsylvania
RODNEY ALEXANDER, Louisiana SANFORD D. BISHOP, Jr., Georgia
KEN CALVERT, California BARBARA LEE, California
JO BONNER, Alabama ADAM B. SCHIFF, California
TOM COLE, Oklahoma MICHAEL M. HONDA, California
MARIO DIAZ-BALART, Florida BETTY McCOLLUM, Minnesota
CHARLES W. DENT, Pennsylvania TIM RYAN, Ohio
TOM GRAVES, Georgia DEBBIE WASSERMAN SCHULTZ, Florida
KEVIN YODER, Kansas HENRY CUELLAR, Texas
STEVE WOMACK, Arkansas CHELLIE PINGREE, Maine
ALAN NUNNELEE, Mississippi MIKE QUIGLEY, Illinois
JEFF FORTENBERRY, Nebraska WILLIAM L. OWENS, New York
THOMAS J. ROONEY, Florida
CHARLES J. FLEISCHMANN, Tennessee
JAIME HERRERA BEUTLER, Washington
DAVID P. JOYCE, Ohio
DAVID G. VALADAO, California
ANDY HARRIS, Maryland

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^1}}Chairman Emeritus

William E. Smith, Clerk and Staff Director

(ii)

AGRICULTURAL, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2014

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Thursday, April 25, 2013.

U.S. DEPARTMENT OF AGRICULTURE FARM AND FOREIGN AGRICULTURAL SERVICES

WITNESSES

MICHAEL SCUSE, UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL SERVICES
JUAN GARCIA, ADMINISTRATOR, FARM SERVICE AGENCY
SUZANNE HEINEN, ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE
BRANDON WILLIS, ADMINISTRATOR, RISK MANAGEMENT AGENCY
MICHAEL YOUNG, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

Introduction of Witnesses

Mr. Aderholt. Good morning. Our subcommittee will come to
order. We appreciate everyone being here this morning for your
testimony before the Subcommittee.
We will begin our review of the fiscal year 2014 budget
request from the agencies of USDA's Farm and Foreign
Agricultural mission area.
While the FDA appropriation hearing is tomorrow and it will
be our last regularly scheduled appropriation hearing, today is
our last of nine USDA budget hearings for fiscal year 2014.
I want to welcome Mr. Michael Scuse, USDA Under Secretary
for Farm and Foreign Agricultural Services; Mr. Juan Garcia,
Administrator, Farm Service Agency; Ms. Suzanne Heinen,
Administrator, Foreign Agricultural Service; Mr. Brandon
Willis, Administrator, Risk Management Agency; and last but not
least, Mr. Mike Young, USDA's Budget Director.

Opening Statement

Many of our fellow Americans do not see the behind the
scenes of this mission area, though the vital programs managed
by these agencies help farmers, ranchers and growers produce an
abundant supply of diverse foods for the United States and
people around the globe.
From the farm operating loans for beginning farmers to crop
insurance needed to manage financial risk to the agricultural
attache in foreign countries fighting for the U.S. market
share, we expect this mission area to provide many services
that are critical to the backbone of our agricultural economy.
The ongoing challenge for this Subcommittee is to provide
limited resources to the highest priority needs of agriculture
and often times the priority with the greatest return on
investment.
As your testimony points out, this mission area has made a
number of positive steps to control costs, one being the
closing of 125 field offices and two overseas offices,
condensing the number of reporting dates for reporting acreage
and crop data, and reducing staffing levels by using existing
authorities.
You also have a positive story to tell on trade. That being
said, there is always room for improvement in the way USDA
manages the American taxpayer dollar.
The fiscal year 2014 President's budget for Farm and
Foreign Agricultural Services mission area seeks total
discretionary funding of $2.032 billion, of which approximately
$1.59 billion is for the Farm Service Agency programs, and
$373.3 million is for the Foreign Agricultural Service
programs.
While there are smaller increases and decreases, the one
major change is on the discretionary side, a proposal to
fundamentally change the nearly 60 year old Food for Peace
program in this appropriation by transferring nearly $1.4
billion to USAID.
Additionally, with just a two percent increase in loan
support, the request estimates a 22 percent increase in loan
authorizations for farm ownership and operating loans. This
backing will help an additional 34,000 farmers and ranchers.
We look forward to getting answers to a number of questions
that we have on the President's request.
Before I recognize you, Mr. Scuse, for your opening
statement, I would like to ask the Ranking Member of the
Subcommittee, the gentleman from California, for any opening
comments he may have.
Mr. Farr. Mr. Chairman, I always look forward to these
hearings. We have essentially people who administer the ground
level in America, the most basic production of the lands that
produce our agriculture and carrying that agriculture all the
way to its furthest point on earth, in all the countries we
have international relations and offices with, so we really can
market our products abroad.
A lot of my questions are going to be about how you use
your authorities. I have been on this Committee a long time.
Every year we go through this.
What I think the Federal Government and Secretary Vilsack
is keen on is trying to build the capacities by building sort
of local capacity.
I want to focus on some of those issues, about how to use
your authorities as a carrot stick to kind of encourage local
capacity building, whether it be the local level or the foreign
level.
I appreciate you coming today and I appreciate your
testimony. Thank you, Mr. Chairman.
Mr. Aderholt. Thank you, Mr. Farr.
If anybody has any electronic devices, if they could put
those on mute during the hearing.
Also, let me just say not only to you, Under Secretary
Scuse, but also to all our panel, members are going to be
coming and going because we have 12 appropriation bills that we
are working on simultaneously.
Inevitably, there are going to be hearings that take place
at the same time, so if members come in and out, it is nothing
you said. It is just part of the process. Please understand
that.
Without objection, your entire written testimony will be
included in the record. I will now recognize you, Mr. Under
Secretary, for your opening comments, and then we will proceed
with the questioning.

Opening Statement

Mr. Scuse. Mr. Chairman, Ranking Member, I would like to
thank both of you for your opening comments this morning. It is
refreshing that we have those that understand what the Farm and
Foreign Agricultural Service does and the importance that it
plays in the lives of Americans.
I would like to thank all the members of the Subcommittee
for being here today, and I am pleased to be with you today to
present the 2014 budget and program proposals for the Farm and
Foreign Agricultural Services.
As you pointed out, Mr. Chairman, accompanying me today is
Brandon Willis, Administrator of the Risk Management Agency;
Suzanne Heinen, Administrator of the Foreign Agricultural
Service; Juan Garcia, Administrator of the Farm Service Agency.
Also with me today is Michael Young, Director of the
Department's Office of Budget and Program Analysis.
Mr. Chairman, we appreciate the difficulties of today's
budget environment and the need to reduce the Federal deficit.
We have reviewed our programs and developed proposals that
will streamline our operations, improve efficiency, and reduce
our administrative costs.
Turning to the Farm Service Agency, the budget request for
salaries and expenses of FSA is $1.6 billion, which is a
decrease of $179 million since 2012. The request reflects our
focus on streamlining processes, investing in more efficient
systems, and evaluating our internal costs to maximize
efficiency.
FSA provides a broad range of services for American
agriculture, disaster assistance, income support payments,
marketing assistance loans, and certain conservation programs.
FSA also plays a critical role in our nation's agricultural
production by providing a variety of direct loans and loan
guarantees to farm families who are temporarily unable to
obtain the credit they need.
For the Farm Credit Program, the budget proposes a program
level of about $5.6 billion, an increase of about $1 billion
from 2012, at a subsidy cost that is about $16 million less.
The request reflects the ongoing credit needs of beginning
and minority farmers.
For the 2012 crop year, the Risk Management Agency through
the Federal Crop Insurance Program provided a record $117
billion in protection, which is on a record 282 million acres
of farm land.
Due to the widespread drought and other natural disasters
that impacted agricultural producers during the crop year, the
program has paid out more than $16 billion in indemnities to
producers, which is also a record.
Our current projections for the 2013 crop year are
liabilities will decline to about $82 billion, largely the
result of lower commodity price projections.
For the salaries and expenses of RMA, the budget requests
$71 million to support 455 employees, compared to 2010's $80
million appropriation that supported 528 employees. It is a
reduction of about 11 percent and 14 percent, respectively.
The Foreign Agricultural Service leads the Department's
efforts to expand and preserve overseas markets and foster
global food security.
The budget is designed to ensure that FAS has the resources
needed to represent American agriculture and create new market
opportunities overseas.
The budget provides $179 million for FAS salaries and
expenses, about $7 million below 2011.
For trade expansion and promotion activities, the budget
does include $200 million for the market access program. Other
trade promotion activities such as foreign market development
are subject to re-authorization and their appropriation levels
will be set in the next Farm Bill.
For International Food Aid, the budget includes $185
million for McGovern-Dole and $255 million for Food for
Progress.
For P.L. 480, Title II, the budget provides $1.47 billion
in the accounts of USAID rather than USDA, consistent with the
Administration's food aid reform proposals.
I would like this morning to make two announcements, two
very important announcements, working with OMB, we have
received our Section 714 funding, and we will not be
furloughing any of the staff for the Farm Service Agency.
The second announcement is that we have been working for
several years on our modernization project for our Farm Service
Agency County Offices. I would like to announce before this
Committee today that program is live nationwide.
We now have this morning 3,300 users using the MIDAS
Program. By the end of the day, there will be another 2,200
added for a total of 5,500 users nationwide using our
modernization program, and within the next 30 days, we fully
expect to have everyone across the United States fully trained
and tested to use that program.
I want to thank this body and Members of Congress for their
support, financial and otherwise, in helping us reach this
major milestone on a project that was desperately needed to
help our County Office staff, and get rid of a system that was
antiquated, to say the very least.
Again, thank you.
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INTERNATIONAL FOOD AID REFORM

Mr. Aderholt. Thank you, Mr. Under Secretary, and for those
announcements, we appreciate your testimony here this morning
and for your work at your agency and what you do.
Let me go ahead and start with the questioning aspect for
the hearing today.
One thing that most people with agriculture have noted is
the Obama Administration is proposing to transfer funding for
the Public Law 480, Title II, Food for Peace Program in the
agricultural appropriations and move it into the state and
foreign operations appropriations under three separate accounts
at USAID.
We are still looking at these changes here at the
Subcommittee level and at the full Committee level of what it
would mean.
We do need to keep in mind that the unemployment rate is
7.6 percent, and 11.7 million people are without jobs.
The President's proposal would reduce the amount of food
provided and shipped by American farmers and ranchers to those
in need around the globe, from the current level of
approximately 80 percent of $1.12 billion to roughly 55 percent
or $605 million.
As noted in your testimony, USDA's Economic Research
Service estimates that for every billion of agricultural
exports, an estimated 6,800 jobs are supported, and an
additional $1.29 billion in economic activity is generated.
The way the program is currently structured almost doubles
the return on the American taxpayers' investment by supporting
jobs and farmers here at home, while still accomplishing the
goal of contributing to food security abroad.
With budget reductions in all sectors and millions of
Americans struggling to find work, is it a wise use of the
taxpayer money to maximize our investment at home while also
contributing to the needs of those overseas?
Mr. Scuse. Thank you, Mr. Chairman, for the question. If
you look at just the trade aspect, which you pointed out, we
have had the last four years record amounts of trade, and this
year, for another record year of $142 billion in agricultural
trade.
We are doing everything that we can to promote American
agricultural products throughout the world.
We support the Administration's position on this transfer.
If you look at what this will ultimately do, we are still going
to be sending 55 percent of the U.S. products overseas for food
assistance, we believe through the efficiencies and being able
to buy locally products, two things will be accomplished.
First, we are going to get aid to an additional two million
people a year by making this change. The second thing that
comes to mind is we are going to be able to get this emergency
food assistance to those that are in need much quicker.
If you look at how long it takes us today to get emergency
food assistance through our current program to those countries
that are truly in need, it is over 70 days. We can decrease
that time line substantially by taking some of the funding and
buying regionally the products needed in a very short period of
time.
Mr. Aderholt. How does USDA foresee its role changing in
providing the international food assistance given this reform
proposal?
Mr. Scuse. We are still going to be involved in the
procurement of that 55 percent of those products and the
shipping from the United States to those countries in need. We
are still going to have involvement in this program.

FOOD FOR PROGRESS PROGRAM

Mr. Aderholt. According to your testimony, USDA would still
obligate roughly $255 million out of the Commodity Credit
Corporation for the Food for Progress Program.
Do you think your Department can continue to effectively
and efficiently invest $255 million in the Food for Progress
Program on development projects?
Mr. Scuse. I believe so. Again, we are still going to be
doing the procurement for AID for the 55 percent, and then the
procurement for the $255 million for the other program. I think
we are going to be able to continue to provide the work at a
reasonable rate and still do it efficiently as well.
Mr. Aderholt. Why would you not recommend that the
Administration simply expand its ongoing program at USDA
instead of sending an additional $250 million over to USAID for
the same purpose under a new program?
Mr. Scuse. I do not know that we can. It may take
legislation to make the change. That would be something we
would have to look at with AID as well as the General Counsel's
Office from AID and USDA.
Mr. Aderholt. Mr. Farr.
Mr. Farr. Thank you, Mr. Chairman. I think the food we send
abroad is probably the most expensive food in the world, giving
to people who are the poorest in the world. It seems like there
is a better way to do it.
The problem is there is a lot of corruption at the local
level with distribution of food because you are in a country
where we do not control the distribution politics.
Even some good organizations, non-profit organizations,
have been known to be selling the food. We do not buy it for
people to sell it.
What I would hope is that USAID could design a better model
of implementation of aid to empower these countries--you are
not going to just be able to feed Sub-Saharan Africa with the
amount of poverty and the amount of migration, displaced folks,
just with U.S. food aid.
You are going to have to start empowering the rural areas
to grow their own agriculture and have their own markets and
things like that.
It does not seem like that is at all part of this formula.
I do not think we ought to just change it for change sake. We
ought to get a better bang for our buck.
I share your concerns about it.

FURLOUGHS

I want to ask, you indicated, and it is good news, that you
are not going to have to lay off anybody from FSA, but what
about RMA and FAS from sequestration? Are there layoff's there?
Mr. Scuse. No, sir. We had never planned to have any
furloughs with the Foreign Agricultural Service or RMA.

CONSERVATION RESERVE PROGRAM

Mr. Farr. Let me ask you a question. I was interested in
your resume and the fact that you served as Chairman of the
Kent County, Delaware Regional Planning Commission.
My question goes to the Conservation Reserve Program, which
we began in 1985. I come from a state that is very heavily
zoned. Every city and county has to have a master plan. The
master plan has to address certain elements, housing elements,
conservation, hazardous areas and things like that, and then
your zoning has to meet your master plan, as you know.
Why have we been sort of bailing out these states with CRP
when they do not take any initiative to essentially ban farming
on areas you should not farm?
If we have a riparian area or habitat that needs
protecting, regardless of if it is on private land, you cannot
go out and destroy it.
It seems what we have been doing is paying farmers not to
destroy it. Why do we not require--why do we not provide some
leadership, as you did when you were a regional planner, of
making communities kind of come up to the standards that were
set?
It does not seem like we have done that in this program. I
just wanted your reflection on it.
What it seems to me we are doing, and correct me if I am
wrong, but CRP assists farm owners to not do bad things. You
are essentially saying we will pay you not to do bad things,
where best management practice is do not do those anyway. You
cannot do them. In some states, you cannot do them.
If you had to pay for all the CRP assets that California
counties have protected, ag counties, you would take the entire
program.
We have just done it through our local zoning and
enforcement of our zoning practices. We do not pay people to do
it correctly. We tell them that is how you are going to have to
do it so you will not have soil erosion.
Mr. Scuse. Congressman, I appreciate your point. As you are
well aware, there are differences among the states. We have
some states that have very weak if any zoning regulations at
all. It would be very difficult for them to take the
appropriate action within their states.
Mr. Farr. How much money do those states get?
Mr. Scuse. It will vary from state to state, depending on
how much CRP is in the states. This money does not go to the
state, it actually goes to the land owner who is taking their
land out of production.
If I may point out, there is a tremendous environmental
benefit to what we are----
Mr. Farr. But it is a huge cost that I think is not
essentially best management practices. It is like sort of
paying people not to have child labor. We do not have child
labor because there are laws against it.
Mr. Scuse. In some instances, in most instances, in fact,
we are protecting environmentally sensitive land, land we have
been protecting since the inception of CRP, over eight billion
tons of top soil.
Mr. Farr. What about the EPA's regulations? What about on
the coastal areas, Marine Fisheries or Fish and Wildlife? They
have regulations that say you cannot disturb this.
Mr. Scuse. In some of those areas, we use the Conservation
Reserve Enhancement Program, which is part of CRP, in
coordination and cooperation with the states, with state
funding, to protect some of those areas that you have just
pointed out.
Mr. Farr. Could you for the record, in writing, just point
out what states or counties you have weaned off the program
because they have taken responsibilities to enforce what I call
``best management practices?''
Mr. Scuse. Sure.
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Mr. Farr. Thank you.
Mr. Aderholt. Mr. Valadao.

MIDAS

Mr. Valadao. Thank you, Mr. Chair. Mr. Under Secretary,
congratulations on the release of MIDAS. I am pretty excited to
follow it myself.
My question specifically is can you please expand a little
bit on how and when farmers will actually have access to it and
how they will be able to benefit from it?
Mr. Scuse. The farmers will have access to it immediately.
We are looking at being able--I say ``immediately.'' We need to
get our staff. That is one of the reasons why we started it in
phases, to get the staff fully comfortable with the use of it.
It will be in the next few weeks. We are going to be using this
product with our farms.
There are different phases for MIDAS. This is the first
phase for our farm records. We will be able to update our
producer records when they come into the office.
I think the biggest change that farmers and ranchers are
going to see is now we do not use two different systems when
they come in to do a crop report.
We are going to be able now to combine everything into a
single system, which will save not just staff time but save
reporting time by our farmers and ranchers.
We are still using a great deal of paper when a producer
comes in to do a crop report. This system will allow us to not
have to go actually do paper maps and draw lines on paper,
fields or portions of fields. That will all be able to be done
on the screen itself.
We are excited about this. I think where your question is
going is when will farmers actually be able to do this at home,
there is another initiative, the Acreage Crop Reporting
Streamlining Initiative that we started a year and a half ago,
which is one of the reasons why we consolidated all those crop
reporting dates down.
We are going to do a pilot project with that in the State
of Kansas, in four counties, this Spring.
Where we hope to go with that is to actually allow the
producers to do one stop shopping. As a producer yourself, if
you have crop insurance, you now have to give two reports, one
to FSA and one to your insurance agent. This will allow a
producer to do one and ultimately do a report right from their
farm office.

ACREAGE CROP REPORTING

Mr. Valadao. To follow up on that, there is quite a bit of
information when you go down to the Farm Service Agency that
they have and ask for.
When we wait for NASS reports, it is almost like they are
guessing. As much information as your Department has, why do we
not go off that instead of NASS?
Mr. Scuse. A good point. One of the things that we did when
we started to put together the Acreage Crop Reporting
Streamlining Initiative, we got multiple agencies into a room.
NASS was one of those agencies, and NRCS was one, the Risk
Management Agency and the Farm Service Agency that are under
me.
There were some issues because four different agencies
identified the same parcel of land four different ways. It was
very difficult to combine the information that you would ask
for.
What we were able to do was to get the four agencies to
agree on one common land identifier. They can still use their
own, but for purposes of cross reporting, there will be one
common land identifier.
This is one of the things that we also pointed out to NASS,
to your point, that with the MIDAS system, with the Acreage
Crop Reporting Streamlining Initiative, with those two in
place, we are going to be able to get data much faster and more
accurate to NASS for more accurate crop reporting.
Mr. Valadao. Thank you.
Mr. Aderholt. Ms. Pingree.

CROP INSURANCE FOR ORGANIC FARMERS

Ms. Pingree. Thank you, Mr. Chair. Thank you very much for
you all being here today and for your previous testimony.
Appreciate that.
I want to ask a couple of questions about Risk Management.
I was encouraged to see RMA's recent announcement on removal of
the five percent premium surcharge assessed against all organic
farmers seeking Federal crop insurance that starts in crop year
2014.
I appreciate this was in response to an earlier release by
the Inspector General Audit of Organic Crop Insurance. As you
know, the audit found that transitional crop yields for organic
farmers using organic crop insurance generally exceeded actual
production histories.
This arbitrary organic surcharge has been an issue I have
heard a lot about in Maine and from farmers across the country.
I am very pleased to see this progress.
I remain concerned that only about a quarter of organic
farmers are enrolled in Federal crop insurance. In addition to
eliminating the surcharge, are there other steps that RMA can
take to increase organic crop insurance participation?
I know it is something that would be of great benefit,
particularly with out unpredictable weather patterns. I think
more people would like to participate but they are not there
yet.
Can you talk a little bit about that?
Mr. Willis. I share your concern, approximately 25 percent
of the acres that could be enrolled in the crop insurance
program are enrolled.
You talked about eliminating the five percent surcharge.
That was the first step. The yield differences you also
referred to would be a second step.
Another complaint that organic producers often have about
the program is they often receive a premium in the marketplace
on production, and their crop insurance program, we are slowly
trying to get there.
Currently, we have eight crops where farmers can elect to
receive that organic price. What we are working on is kind of a
two pronged approach to increase the number of crops.
Last year we funded a NASS survey of organic prices, and we
are looking at that survey trying to determine which crops we
can expand in the near future.
We have a list of those crops. I think in the next month we
can announce some for 2014, some additional crops, almonds,
apples, blueberries, wheat, and some stone fruits.
The other thing we are looking at doing is trying to create
a policy where if producers have a contract with somebody to
purchase, and there is a price in that contract, see if there
is a way there to respect the contract they have within reason
so they can also have an organic price.
I think our focus now is implementing the changes you
discussed and also trying to have more crops receive the
organic price.
Ms. Pingree. Maybe just to drill down on that a little, it
is my understanding it has been six years getting to the few
crops that are defined, and I am heartened to hear you are
going to add some more.
Not fully understanding the process that you go through,
what makes it take so long, what is complicated about doing
this?
Mr. Willis. I think there is a strong desire to make sure
we have an accurate price because the last thing anybody wants
is for the price to be too high or too low and to somehow drive
production.
I think that is why a few years ago they contracted with
NASS to get more information. We have individuals at RMA that
look at all sorts of private sector information, NASS
information.
It is just trying to get enough price data that we are
confident enough we can offer that. It is really just getting
confidence in the data. Obviously, the data on organic crops is
thinner.
Ms. Pingree. It is increasing given the expansion of the
market and the more national sales that are going on on a lot
of varieties of things that people grow.
On this suggestion, which does seem like it would be useful
to look at a contract and then maybe use that as a determinant
if there was an insurance need, does that happen in other ways?
I am not that familiar with how crop insurance works.
Mr. Willis. Yes, we have used it for other policies in the
past, and we will kind of look at how we did it there, I think,
to kind of set the parameters for how we do it in this
situation as well.
Ms. Pingree. It is within the parameters of appropriate
insurance policy?
Mr. Willis. Yes, we have done it historically.
Ms. Pingree. It would seem to me if that was allowable,
then you could greatly expand the number of things you could
cover because it does not have to just be corn or almonds or
something that has a huge commodity market or big national
sales. You could do lots of things that people do get contracts
for every year, but we do not always think of it as prime
crops.
I hope you will keep me updated. I am very interested in
this. Thank you, Mr. Chair.
Mr. Aderholt. Thank you. Mr. Nunnelee.

SEQUESTRATION IMPLEMENTATION

Mr. Nunnelee. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, for being here. And I want to go back to that very
significant announcement you made in your testimony about your
agency's ability to avoid furloughs. I want to thank you for
the approach that you have taken, certainly my FSA agents in
Mississippi and communicating to them, getting us through this,
but I am curious about how did you plan for sequestration? How
did you get to the point where it was not necessary to have
furloughs in order to implement sequestration?
Mr. Scuse. Well, we have worked, the three agencies under
me, to make cuts and reductions since last fall, not knowing
what may happen. And I think that is why when I was asked
earlier about the impacts on RMA and the Foreign Agricultural
Service, there were no furloughs for those agencies. But just
the sheer size of the Farm Service Agency and the offices that
we have throughout the 50 states, it was very difficult for
them to make the same level of cuts that the other two agencies
were to avoid the furloughs.
We have the ability to use CCC funding, the Section 714
funding, to cover some of our operational costs. What we were
working with OMB on was that we felt that we have not received
the cost recovery for our conservation programs that we have
been doing. And we are permitted to recoup those costs under
the CCC language or under the 714 language.
So, we made a request for OMB to allow us to use the 714
language to cover operating costs for our conservation programs
and some of the other programs that are under CCC. They have
agreed to allow us to do that, but I do not want the committee
to believe for one minute that this is just money that fell
from the sky because we have to do an offset for that money.
And we were able to come up with an offset in order to receive
the 714 money. So we just were notified yesterday by OMB that
they did agree to allow us to use the 714 to cover our
operating expenses for our conservation programs with the
offset that we provided.
Mr. Nunnelee. I cannot tell you how refreshing it is to
hear you make the statement, ``We started planning for
sequestration in the fall.'' I cannot express my frustration at
the long line of witnesses that we have had in various
subcommittees that said, ``Oh, we did not start planning for
sequestration until two days before.'' So, thank you for your
stewardship of the taxpayer dollars and managing a very
difficult situation.

CROP INSURANCE

Let me move now to implementation of direct payments. I
think it is obvious to a lot people that whatever we work out
in the farm bill, direct payments are going to be a thing of
the past. But when I talk to agri-business owners, when I talk
to lenders, they have got to have some kind of certainty in
order to make the loans to put the crop in the ground. So, just
in general, where do you see us going in order to give farmers
and lenders the certainty necessary to plant their crop in
light of the fact that we are probably not going to have direct
payments in a long-term farm bill?
Mr. Scuse. I think that certainty can be provided through a
strong safety net. We have a very healthy and strong crop
insurance program. I think if you look at the banking industry
today, many will require their producers to be covered with
some sort of insurance for that certainty. If you look at the
programs that I believe are in the President's recommendation,
and I think were in the farm bills that the House and the
Senate version that did not pass last year, there are the four
programs. Three of those programs cover our livestock producers
with the LIP, ELAP and LFP programs. So those programs I think
will also provide some sort of certainty and insurance that if
there are weather-related events, that there will be some sort
of compensation. So, I think that certainty, sir, is in the
safety net that is provided to our farmers and ranchers.
Mr. Nunnelee. What about for those crops for which there is
no insurance?
Mr. Scuse. Well, we do have the NAP insurance through the
Farm Service Agency, and I think that there are proposals or
will be proposals in the coming farm bills that will allow us
to strengthen that NAP insurance for those products that we do
not currently offer crop insurance for.
Mr. Nunnelee. Alright, thank you, Mr. Chairman.
Mr. Scuse. You are welcome, sir.
Mr. Aderholt. Mr. Bishop.

MECHANICALLY-SEPARATED POULTRY

Mr. Bishop. Thank you very much. Let me welcome all of you
this morning. I am going to start off I think with Ms. Heinen.
We are aware that the Food Safety and Inspection Service has
decided to postpone a sampling of mechanically-separated
poultry until it can consider the stakeholder comments on their
proposed new rules, specifically, regarding that notice which
was entitled, ``The HACCP Plan Reassessment for Not Ready to
Eat Comminuted Poultry Products and Related Agency Verification
Procedures.'' Has the Foreign Agricultural Service evaluated
the economic implications of what might essentially be
destroying the export market of mechanically-separated poultry,
which has implications for flooding the domestic market and
reducing exports?
And the second part of that question is did FSIS discuss
this with FAS, the international trade implications of the
proposed new rules before they published the notice?
Ms. Heinen. Well, as you know, Mr. Bishop, the FSIS has the
mission to protect the safety of the U.S. public, and so I
think they are doing what they feel is necessary to do that. On
the export market, one of the things that is our biggest seller
overseas is the confidence that our traders or our partners
overseas, other countries, have in the safety and the quality
of the U.S. product, and the confidence they have in our
regulatory agencies. So, if this is the step that FSIS thinks
they need to take, we support their efforts to improve the
safety of our food.
Mr. Bishop. But my question was whether or not they had
discussed it with you, have you had any collaboration on it?
Did they ask or inquire about what implications there might be?
Mr. Scuse. Congressman, I personally have been involved in
a discussion that we had with the industry with Under Secretary
Hagen within the last month. We did have the conversation. The
industry did report their concerns to us. Under Secretary Hagen
expressed her concerns with not going forward with this, and
the implications that should something happen that they could
lose the market. I believe it is a $300 million market for the
mechanically-separated poultry. And the fear is that should
something happen in a foreign country, that not just a portion
of that would be lost but a great deal of that market may be
lost.
Mr. Bishop. So you have been involved in those discussions?
Mr. Scuse. Yes, sir.

BRAZILIAN COTTON

Mr. Bishop. Thank you very much. Ms. Heinen, as you know,
American agriculture has been openly criticized by
international operations and eminent academicians for
agricultural subsidy, which I call support, and other related
programs which support and strengthen our food production
capacity here in America. And we are not alone in this arena,
as both developed and developing countries are offering their
agriculture industries a wide variety of support and
protection-like programs. I am concerned about nations like
Brazil, which successfully brought the claim against the United
States through the WTO on cotton. And also they are providing
their key agricultural industries government support on their
own in a direct attempt to compete with United States
agriculture.
As such, our worldwide competitors on a number of levels
are doing this, and we need to treat them as such. Where are we
with the WTO Brazilian cotton issue? And are there any other
similar cases on the horizon, particularly on the part of
developing nations that could affect American agriculture?
Ms. Heinen. Well, on the first case with Brazil, of course
we still need to make changes in the cotton program.
Mr. Bishop. Is your microphone on?
Ms. Heinen. Is it on?
Mr. Bishop. There, that is better.
Ms. Heinen. We are still working with you to make
appropriate changes so that we can comply.
The United States agricultural system is well understood in
the WTO, and we are staying within our allowed rights within
the WTO. We share your concern that some countries may not be
doing this, and we have spent some time this year looking at
some other countries and whether or not they are living up to
their obligations. We are concerned in the case of Brazil about
their premium for product flow--PEP--program, which we think in
some cases may have been used inappropriately. So, we are
watching this. We are analyzing different approaches countries
are taking to ensure that they are living up to their WTO
commitments as well.
Mr. Bishop. Thank you. My time is up, and I will come back
to tomato dumping from Mexico on the next round.
Mr. Aderholt. Mr. Fortenberry.

FSA COUNTY OFFICE CONSOLIDATION

Mr. Fortenberry. Thank you, Mr. Chairman. Good morning,
everyone. Thank you for appearing today. A number of years ago,
I held a town hall meeting in Allen, Nebraska. It is a town of
about 350 people. And about 40 farmers showed up at noon. And I
determined quickly that I had inappropriately mis-timed that
town meeting because an hour before had been the meeting to
discuss the closure of the Farm Service Agency in that county.
And so when that was done, everybody came on over to talk about
it with me.
Now, we got through that, that county agency was saved, and
we actually were able to consolidate it with another nearby
county, which at first evaluation did not appear as an office
that would be necessary to close. Anyway, the point being that
we tried to work creatively through what was a consolidation
that is difficult to adjust to, made necessary because of the
tensions and difficulties that we all have in the budget. But
at the same time tried to creatively meet the need of the
constituent in the area that we are servicing.
And so I think that is the spirit in which we have to all
move forward here in terms of determining what is the highest
and best uses of the limited resources that we have, and what
needs to be transformed or renewed, we do so, and what needs to
be changed, we embrace it and work creatively through it.

FAS INFORMATION AND DATA COLLECTION

With that said, in that regard, I want to turn to the
Foreign Agricultural Service, a big portion of your work is
statistical gathering, or at least it used to be as I
understand that. Now, in this day and time in which we are
integrated globally and, by the way, agricultural exports is
essential to the well being of our nation. Let me point that
out. It is one of the few things that we make on a large scale
anymore, and it contributes significantly not only to our
economic well-being at home but our positive trade balance as
well.
So your integration throughout the world, working on the
ground, ensuring the robust nature of our export programs and
ensuring the quality of the delivery of our food overseas is
vitally important. A component of that is statistical gathering
but again in this day and time in which we are globalized, in a
previous time you were the only entity out there that could
possibly do this. Large major agricultural--international
agricultural organizations do their own statistical gathering.
Talk about the mission of that component of what you do, and
what possible changes could be made?
Mr. Heinen. Well, thank you and thank you for your kind
words about our efforts in regards to exports. Yes, one of the
things that our attaches overseas do is collect information
about production--productions and policies in their country.
And that information is sent back, analyzed in Washington and
contributes to our overall monthly publications of the WASDE
report, the supply and demand estimates.
You are absolutely right that many things have changed. I
know in my first posting overseas in China, I was the expert in
cotton. And I had London calling me and asking me about my
estimates at that time. And things have really changed. And I
would say we do not go out and do the kind of collections that
we might have done at one time, kind of field surveys and
things. We rely more on talking with others who have collected
information, be they the host governments or other agencies. We
use a lot more remote sensing, geo-spatial information. And we
try to accumulate that in a much more efficient way and use
other sources. But we still--there is still a great deal I
think of confidence in the numbers that USDA puts out.
Mr. Fortenberry. I guess that is the heart of my question.
Do you still occupy a central place for the larger
international agricultural community, trading, producers,
markets? Is it a centralized core place as it once was? I am
just not sure that is the case any longer.
Ms. Heinen. I think we do still play a central role. There
are other efforts going on that play other roles, but I think
we play a central role in getting that confidence of what the
situation is.

CONSERVATION RESERVE PROGRAM

Mr. Fortenberry. My time is running down so I do not mean
to cut you off, but just get to a couple of other things. The
CRP, I believe if I recall correctly, we topped out at about 39
million acres, and we have dropped down to about 28, is that
correct?
Mr. Scuse. Twenty seven, a little over 27.
Mr. Fortenberry. Is that number based upon your
trajectories, your predictions stabilizing there?
Mr. Scuse. We have about three million acres coming out
this year, so we may have a drop.
Mr. Fortenberry. Not in that 27?
Mr. Scuse. No, that is included in that 27. There will be
about three million acres coming out. A lot of it will depend
on, you know, where the commodity prices are, where the land
actually is, but we may see an additional reduction. But we are
going to start----
Mr. Fortenberry. What do your projections show over time as
to where that number is likely to land?
Mr. Scuse. Well, we have been seeing--I mean each year, we
have been seeing a decrease in our CRP acreage. The President's
proposal is 25 million acres. I think in the next two farm
bills, the House and Senate version, they are looking at 25
million acres. That is probably close to where we will
eventually be in the next couple of years.
Mr. Fortenberry. Thank you, Mr. Chairman.
Mr. Aderholt. Ms. DeLauro.

CROP INSURANCE REFORMS

Ms. DeLauro. Thank you very much, Mr. Chairman. My
apologies, Secretary Sebelius is at Labor/HHS, so we are all
kind of running back and forth here. So, I am going to use my
five minutes, and I am going to ask--make it question concise,
answers concise.
Mr. Willis, your testimony notes that a ``reasonable rate
of return for companies that provide crop insurance should be
around 12 percent.'' So it appears that the Administration's
proposal to establish this rate of return should not harm the
ability of companies to offer these insurance policies. Is that
correct? And I need a yes or a no.
Mr. Willis. Yes.
Ms. DeLauro. And your testimony indicates that the same is
true for lowering the cap on federal dollars for the
administrative costs of these companies?
Mr. Willis. Yes.
Ms. DeLauro. Is that accurate? Okay. I certainly hope that
we can enact these kinds of commonsense savings in this effort.
It is a program that has--estimated cost is about almost $59
billion, in any case.

CROP INSURANCE OVERSIGHT

Now, the GAO continues to find inadequate oversight of the
Federal Crop Insurance Program. Crop insurance was one of the
programs in GAO's ``Cost-savings and Revenue-Enhancement
Opportunities Report.'' Your fiscal year 2014 budget request
includes the lowest staff level ever. As a matter of fact, the
level of your budget is the same amount that goes back to 2004.
How will you implement the GAO recommendations to improve
oversight with fewer RMA staff? How will this staff level
affect your ability to strengthen oversight of the program?
What has been done to improve the completion of field
inspections after GAO's March 2012 report? How are RMA and FSA
working together so this does not continue to fall through the
cracks? How are you building on the existing data mining tools
to better prevent fraud and abuse in the program?
Mr. Willis. Anywhere you want me to start?
Ms. DeLauro. How will you implement--you have lowered your
staff numbers, I have talked about the size of your budget, the
number of employees drops, lowest level ever, how are you going
to implement the GAO recommendations to improve oversight with
fewer staff? I read through the questions. So, let's go down
the list.
Mr. Willis. Primarily, through technology. We are using
more data mining that singles out those areas, individuals who
are of the highest risk to the program. We identify those. We
do spot checks. One way we are leveraging the money we have is
we are not just having our sister agency, the Farm Service
Agency, do those spot checks. We are working with our
companies. They started out with a pool last year. They are
increasing that pool this year. So, we are leveraging those
individuals. We are also improving our IT system. That should
help reduce mistakes. It should have some edits in there where
if information comes in that is faulty, it is rejected. So, I
think a lot of it is going to have to happen through technology
improvements.
As far as the audit, I believe that is part of the new
producer audit. What we have had is we have had the companies
go back for I believe it is 2008 and 2009, and check 5,800 of
those producers who were found to perhaps not be eligible for
the new producer status. They should have finished that during
the month of May. After that, we will send a new list for 2010,
2011 and 2012. And any producer who received the new producer
status who should not, that will be corrected.
Ms. DeLauro. What I will do is--I wanted you to answer this
morning, but I am going to send each of these questions because
I truly do want to know what the specifics are in terms of
field inspections, et cetera, and the way in which we are going
to do that.
Let me ask you this question if I can. You have got 500
people and $75 million. I want your professional opinion. I
want your professional opinion. Do you believe that you can
adequately oversee this vast industry with that number of
people and at this budget level? I want your professional
opinion, and I do not know if your professional opinion
represents what is represented here in the budget?
Mr. Willis. We actually have 455 right now. Yes, I do, but
I believe we will have to change the way we do business in some
cases. We will have to use more technology to do that.
Ms. DeLauro. Do you need more money to be able to do that?
Mr. Willis. I think if we change the processes in certain
cases we can do it. I think some of the examples with the data
mining and leveraging resources, we have great private
partners, I think we have to leverage them more.
Ms. DeLauro. Let me just note for the record that the
budget for RMA was $75 million in 2012. It was $71 million in
2004. So, it has not grown very much. In 2014, you are asking
for $71.5 million for 2014, which actually puts you at about
the 2005 level. With the growth of technology, with the
increase in technology, and that--again, in order to deal with
the vastness of this effort and to be able to do what the GAO
has been asking to do is to take a look at waste, fraud and
abuse in this program. You are fine with this budget and with
the staff that you have, and that is adequate and that is your
professional opinion?
Mr. Willis. Yes.
Ms. DeLauro. Thank you, Mr. Chairman.

AGRICULTURAL EXPORTS

Mr. Aderholt. Let me switch over and focus a little bit on
the U.S. agriculture trade policy. It was talked about a little
bit earlier, but against the backdrop of the poor economy over
the last few years, we can take pride in the positive impact of
U.S. agriculture exports. I along with many of my other
colleagues believe there is far greater potential for growth of
U.S. exports simply because 95 percent of the world's consumers
live outside the United States of America.
This is the second year in a row when we have not seen any
new efforts, initiatives or plans by USDA to do more for
agriculture exports. Just last month, OIG released a report on
the matter of Foreign Agricultural Service reform, and said
that FAS performance measures were not outcome-based and do not
show how the U.S. is performing in given market compared to its
competitors.
My question would be does USDA have a recent comprehensive
plan or strategy for competing in the global marketplace
against the Chinese, Brazilians, Europeans or other countries
that focus on increasing greater market share on behalf of
their producers?
Mr. Scuse. Well, thank you for recognizing the exports and
the growth in the exports. As I pointed out earlier, the last
four years have been the strongest that we have ever had. We
have done almost a half a trillion dollars worth of exports the
last four years. And when you look at this year again, we are
looking at about $142 billion in trade, which would give us
another record year.
I think if you look at what the Administration has done, we
have the three FTAs that were passed. Congress passed the
Korea, Panama and Colombia FTA. We have already seen tremendous
growth in those three countries already. Our exports this past
year were about $7.6 billion.
We are in discussions right now with the TransPacific
Partnership. They are counting the United States, and I think
the letter was just received yesterday where we are planning to
engage Japan for inclusion in the TPP. There is a tremendous
potential, especially now with Japan as part of the TPP for
agricultural trade to get through some of the differences that
we have.
The President also announced that we were engaging in the
Trans-Atlantic Trade and Investment Partnership with the EU.
The EU collectively is our fifth largest trading partner. We
face many barriers today with the EU. And I think this is a
great opportunity to break down some of those barriers that we
currently are facing.
So there is a strategy within the Administration for us to
build on the trade, the successes that we have had the last
four years in trade. And we look forward to working with the
rest of the Administration, especially the United States Trade
Representative's office to get these agreements through so that
we can further agricultural exports for our farmers and
ranchers.

TRADE MISSIONS

Mr. Aderholt. Can you tell the subcommittee in particular
what USDA is doing in fiscal year 2013 and 2014 and beyond to
become more active on behalf of U.S. interests overseas and
beyond what your current technical analysis or assistance is
doing?
Mr. Scuse. Well, Mr. Chairman, I personally have led two
trade missions the last year. I led a trade mission to China in
March, which was the largest trade mission that we had ever
done. I had accompanying me several State Departments of
Agriculture. And in December, I led a trade mission to Russia.
Again, with 21 United States companies, and I believe five
State Departments of Agriculture. We have a trade mission lined
up for I believe the second week of June to Turkey. There has
been a great deal of interest with again the State Departments
of Agriculture, as well as other industry to participate in
this trade mission. We are also working very hard with
different groups on the trade shows, which is part of our MAP
program.
So, we are working very hard to further U.S. trade. And I
think if you look at what has happened the last several years,
that is the result of the work and cooperation between us and
the commodity groups, as well as others, to promote U.S.
agricultural products.

AGRICULTURAL IMPORTS

Mr. Aderholt. As we have here just in the last few minutes
talked a great deal about the growth and the overall success of
our agricultural exports, USDA's February ERS Report on
Agriculture and Trade predicts that U.S. agriculture imports
will also be at record levels. The report estimates that
agriculture trade balance will be the lowest since 2009. What
can USDA attribute this trend to? And should U.S. producers be
concerned about the loss of the domestic share?
Mr. Scuse. I do not think so. If you look at the types of
products that we are importing into the United States, and if
you look at the time of year that we are importing those
products, for the most part a lot of them are products that we
are not currently growing in the United States, especially
those particular times of year. So, I do not see where our
producers should be that concerned. Yes, there might be certain
areas, certain segments of agriculture where there will be
competition, but for the most part we are also exporting a
great deal of products that we are importing, but at a
different time of year.
Mr. Aderholt. What are some examples of the imports you are
talking about that would not compete with our growers?
Mr. Scuse. Well, if you look at from our South American
countries, if you would look at the grapes and the
strawberries, and the different types of fruits and vegetables
that would come from other countries but come during winter
months when our production would be at its very lowest, if at
all. So that is an example right there of where we are not
having the competition.
Mr. Aderholt. And you attribute that to we are doing that
more now than we used to?
Mr. Scuse. Yes, our demand for fruits and vegetables is
increasing in the United States. If you look at what we are
importing. Our demand from our consumers is also increasing
just like many of the countries throughout the world. Their
demand for our U.S. products is increasing.
Mr. Aderholt. Thank you. Mr. Farr.

IMPORTED FLOWERS

Mr. Farr. On that trade issue, I have a particular concern
about flowers because I represent a lot of flower growers. Do
you have flowers in the Department? Do you have flower
displays, floral displays in the Secretary's office or anything
like that? Your office?
Mr. Scuse. We did yesterday.
Mr. Farr. Are those flowers from the U.S.?
Mr. Scuse. Yes, sir.
Mr. Farr. Are you sure?
Mr. Scuse. I think the flowers that we had on display
yesterday were from----
Mr. Farr. Not just yesterday.
Mr. Scuse. Well, I cannot say forever or for last week or
the week before, but I think the flowers that we had yesterday
were.
Mr. Farr. Could you check on that policy because we are
trying to get--and the White House has a policy about serving
all the food and wines have to be American, but they have in
the past had at the expense of American flower growers, have
had all these imported flowers. I would like to see some
leadership on making sure that at least our government agencies
are using domestically-grown flowers because we produce a lot
of them.

INSURED CROPS

What crops are insured?
Mr. Willis. We have about I think it is--is it 300? About
300 crops are insured, sir.
Mr. Farr. Are insured?
Mr. Willis. Yes, sir.
Mr. Farr. Which ones are not? How many are not insured?
Mr. Willis. What we will find is a crop might be insured in
one county, like an apple, because you have a lot of apple
production. You have the data you need to create a policy. But
you might move to a different county, and the apples are not
covered because there is not the historical production data in
those counties. So, you will have a lot of fruits and
vegetables in particular that are covered in certain areas, but
not covered in certain areas because the data is not available.
So it is going to be where the crop is grown a lot.
Mr. Farr. Well, we grow 85 crops, and you can find anybody
who will tell you what crop they are going to grow. They are
going to grow three crops a year, they will not tell you what
they are going to grow, what their next crop will be. So you do
not have I mean those standard records. Why do we not have some
data that allows them still to be in an insurance program?
Mr. Willis. I am not sure I followed that question, sir?
Mr. Farr. Take raspberries. Well, raspberries are a more
permanent crop.
Mr. Willis. Yes, sir.
Mr. Farr. But lettuce?
Mr. Willis. If there is a county where there is a lot of
lettuce growing, and it----
Mr. Farr. There is, it is called Monterey County. It grows
80 percent of the lettuce in the United States.
Mr. Willis. I think if the producer--many counties, and
especially in California with lettuce, I actually visited there
a few months ago, they do not want crop insurance simply
because in the lettuce market in particular, they are more
concerned about the price fluctuations, and they often destroy
their crop when the price gets too low to keep the market in
balance. And they have actually not asked for crop insurance
for those crops. But where people ask for it, and there is
data, we want to expand. We do not want to have people who grow
a crop not have crop insurance available to them.
Mr. Farr. What about food safety insurance for
contamination for recall, like spinach?
Mr. Willis. As I understand it, we do not have the
legislative authority to do that right now, sir.
Mr. Farr. You need legislative authority for--to sell--but
the market will sell it or they only sell insurance that is
covered by--subsidized by USDA?
Mr. Willis. As I understand it, the Federal Crop Insurance
Act does not allow the Department of Agriculture to work with
our private partners and offer crop insurance that would help
in cases of a recall, I think is a common example, or those
types of situations.

NON-INSURED CROP ASSISTANCE PROGRAM

Mr. Farr. But if there is a natural disaster and something
gets wiped out, then they can get access to the non-insurance,
right?
Mr. Willis. If there is a natural disaster, we cover those
types of losses. And if the Crop Insurance Program does not
cover a crop in a county, as we talked about, the Non-Insured
Crop Assistance Program, administered by Farm Service Agency,
will step in and cover those crops.
Mr. Farr. What are the requirements for that?
Mr. Willis. For the Non-Insured Crop Assistance Program?
Mr. Farr. Yes, what are the requirements to trigger the
authority to use that insurance?
Mr. Willis. The primary requirement is that the
catastrophic level crop insurance policy that we would offer is
not available for that crop in that county.
Mr. Farr. And it does not have to be, for example, you
could not collect on the recall of the spinach?
Mr. Willis. It would again only be for losses from natural
disasters.
Mr. Farr. And natural disasters has to have enough loss to
trigger, it is a formula for declaring a natural disaster. It
is not just any time you want to declare it.
Mr. Willis. They use a formula.
Mr. Farr. They use a formula of loss, of value of loss or
life loss. The governor of the state has to declare it first,
meeting state standards. Those state standards have to meet
federal standards. And if they meet them, then there is a
federal declaration. And you need that before you can trigger
the insurance.
Mr. Scuse. No, sir, for the NAP insurance, you do not need
a declaration--a disaster declaration to be covered under that.
It is catastrophic insurance, so you have to have a 50 percent
loss or 55 percent reduction in the price.
Mr. Farr. Well, we had that with spinach, and there was no
way of getting any help.
Mr. Scuse. But the producers have to sign up for that
insurance.
Mr. Farr. But that insurance is not sold, he just told us.
Mr. Scuse. But through the county office, they could have
been insured through the NAP program.
Mr. Farr. I do not think they have the actuarial
information to provide that insurance, but I would like to look
into that. My time has expired.
Mr. Aderholt. Mr. Nunnelee.

MECHANICALLY-SEPARATED POULTRY

Mr. Nunnelee. Thank you, Mr. Chairman. I'd like to go back
to a lot of questions that Mr. Bishop started concerning the
HACCP Rule on poultry. I understand you answered Mr. Bishop's
question that it effects approximately $300 Million worth of
poultry exports. Do you believe there will be any retaliation
from countries that are importing this poultry, if this rule
were to be implemented?
Mr. Scuse. I don't believe so. I think this is just the way
we are trying to protect our trading partners as well as the
industry. So I don't know that there would be any sort of
retaliation for trying to protect our trading partners.

COMMUNICATIONS ON AGRICULTURAL EXPORTS

Mr. Nunnelee. And then Mr. Bishop asked about communication
between FSIS and your agency, specifically, as it related to
the HACCP plan. I am interested more in general communication
between the various agencies, you know, with USDA or outside
USDA as it relates to agricultural exports as they consider
regulations. Are you comfortable with the level of
communication that exists, or should there be changes made as
agencies are considering regulations affecting Ag exports?
Mr. Scuse. Yeah. I appreciate the question, and it's one
that we get often. I think we are working better together now
than we probably ever have. I know with the FSIS with Under
Secretary Hagen there, there's been a lot of involvement and
back and forth between her agency and mine on issues.
We are working very closely with the United States Trade
Representative's Office on all different areas, not just
exports, but some of the trade barriers that we have with some
of the other countries. So I think we have a really good
working relationships with our sister agencies right now in
trying to not just protect our consumers, but also make sure we
are furthering U.S. trade as well?

ACREAGE CROP REPORTING STREAMLINING INITIATIVE

Mr. Nunnelee. Then, let me shift gears. We have talked the
last couple of years about redundancy in various reporting
requirements. And we talked a bit last year about some
successes that we have had, even in areas we had four different
agencies giving different labels to the same parcel of land and
how farmers tell me they are sending the same data set to
numerous agencies, even within USDA. And I understand you are
working on that. Can you just tell me what progress we have
made since we met last year?
Mr. Scuse. Again, we have made tremendous progress. Just
the ability to get everybody to sit down in the room and come
to an agreement on the identifier as well as the reporting
dates, that was a big step. But, I mean, as I pointed out
earlier, the acreage crop reporting streamlining initiative, we
are starting a pilot program this year. If that pilot program
goes well, then we can incorporate it into our MIDAS program
where we are only going to have the one-stop shopping. As a
farmer, myself, I don't like the fact I have to go give a
report to the Farm Service Agency and my crop insurance agent.
So I understand the importance of one-stop shopping and
eliminating the redundancy in some of these areas, but we are
making progress. You know, I would hope that next year I could
tell you that we are beyond the pilot project, but a lot of
this also had to deal with getting the MIDAS project up and
functional so that we could go ahead and do the acreage crop-
reporting streamlining initiative and eventually incorporate
it. So I understand your concern.
Mr. Nunnelee. And I would just encourage you to continue to
work diligently in that area. Earlier this year, Secretary
Vilsack testified before this Subcommittee and talked about
categorical eligibility for Food Stamp recipients. And the
response was, well, we don't want these recipients to have to
go in and fill out the same information numerous times for
various benefits. And I understand that.
I would just encourage you that if we were going to do it
for the ones getting Food Stamps, let's make sure we tip to
eliminate that redundancy for the ones growing the food that
they are eating.
Mr. Scuse. You have my commitment.
Mr. Nunnelee. Thank you.
Mr. Aderholt. Ms. Pingree.

INSURED CROPS

Ms. Pingree. Thank you, Mr. Chair. Just one more thing on
crop insurance, and I appreciate there have been a lot of
interesting conversations. So this is about diversified crop
insurance. Certainly, a lot of farmers in Maine have gone to
more of a diversified crop, several acres of mixed vegetables
or different kinds of farm inputs, and it has been very
successful for them.
In the market, this means that a lot of farms don't look
like they used to where you just evaluate the value of soybeans
or cotton or something in particular, but what I found during
my brief tenure here in Congress is there are a lot of holes in
the coverage available to diversified farmers. It should not be
available to some farmers. It should be available to all types
of farms, and it shouldn't insure the whole farm.
I know that in some states RMA has made available the
adjusted gross revenue insurance, and the variation is called
AGR Lite. But these seem to be very undersubscribed programs,
very hard to use. So can you talk about some of the challenges
in developing and administrating these programs, and what other
work is being done since this is insurance that actually meets
a growing number of farmer's concerns.
Mr. Willis. Yeah. Consistent in a way with I think your
Local Foods Farm and Jobs Act that you have where you encourage
us to work on a whole farm type policy. We have actually met
with some of the stakeholders in that area, trying to determine
what they do not like about the current policy you mentioned:
Adjusted Gross Lite and AGR. In trying to figure out how we can
develop a policy that works for them, obviously, this is an
area where we have room to expand. We have room to improve our
programs there.
One of the things I think would be a first step there,
actually, was language in the House passed Farm Bill, the
buyout for the Non-insured Crop Assistance Program, where
producers would have better coverage under that. But what we
are going to do on our end instead of waiting for a Farm Bill
to pass, we have the authority to try to expand this and try to
improve this program as it is.
We are going to try to first identify what exactly the
problems are, because it's a growing segment, but they are all
very different too. They are not the same. See if there is a
way that we can address their needs.
Ms. Pingree. Great. Well, I hope you will keep me in the
loop. I am glad you are trying to make some progress, and it's
good that everything doesn't wait for the Farm Bill, since we
are all waiting for the Farm Bill.

FSA MICROLOAN PROGRAM

One other question is just on the micro loan program, the
FSA loan is just a micro lending program, as you know, and it's
been a great interest again in people in my area. My
understanding is that you made more than a thousand micro loans
in the first two months in the program. 30 of those were in
Maine. The design seems innovative. It reduces the paperwork.
It's great for new and beginning farmers who often have very
limited capital accessibility or resources.
So I see that the direct farm operating loans are increased
significantly by $200 Million in the President's budgets. What
portion of this is likely to go to the micro lending program
and how many farmers do you anticipated we might be able to
serve in FY '14 if it goes through at this level? And what else
can we be doing to support this?
I think it fills a very important need, and I am glad to
see we have been able to use it in my state.
Mr. Garcia. Thank you for your question, Congresswoman.
Yes, ma'am. The Microloan Program has been very successful
since we initiated the program here in January. To date, we
have been able to approve up to 1,800 microLoans for around $25
Million. About 90 percent of those loans have been issued to
beginning farmers, so it has been a very important program.
You mentioned some good aspects of the program: less
paperwork. The loans are up to $35,000, and one of the major
aspects of this program that producers were having difficulty
in obtaining the loan was the experience eligibility of these
loans. So, for beginning farmers, one aspect of the program is
that they can seek the assistance of a mentor, another farmer
that's been in business for a while to meet the eligibility.
The funding for this program comes out of the regular,
Direct Operating Loan funds. So it is just part of that funding
that we received for our direct loan programs. Of course, over
60 percent of the direct loan operating funds go to beginning
farmers and SDA producers. So we will continue working with our
Microloan Program. We have not set a cap. In other words, we
have not targeted X amount of dollars within our operating loan
budget for micro loans.
We have been making loans up to $35,000 in the past, but
with different requirements than this particular program. It
has been very successful for us.
Ms. Pingree. So, even though you don't have a cap, just to
clarify, if this number is expanded, there is a likelihood you
would be able to see far more of these loans if they continue
to be as popular as they are.
Mr. Garcia. Yes, ma'am. They continue to be very popular
within the first month. Gosh! We approved very many loans and
it is just consistently growing. And this has really helped our
small farmers and beginning farmers.
Ms. Pingree. Right. Thank you very much.
Mr. Garcia. So a successful program. Thank you.
Mr. Aderholt. Mr. Bishop.
Mr. Bishop. Thank you very much.

STACKED INCOME PROTECTION PLAN

Let me try to get in two, quick questions. And before I get
to tomato dumping issue, I want to talk about cotton and the
STAX program. The House Ag Committee and the Senate Ag
Committee in the version of the proposed Farm Bill included a
new proposed stacked income protection plan called STAX. And it
was designed to provide a fiscally responsible and effective
income safety net for cotton producers as well as address
issues raised about the Brazilian WTO case.
But it is not my understanding that wheat, corn, soybean
and possibly other commodity groups have expressed an interest
in being included in the STAX cotton proposal or similar
proposal rather than participating in the proposed House-Senate
commodity programs. Any thoughts about that?
Mr. Scuse. There is an issue with the STAX program as
drafted in the House in relationship to the reference price for
the program. If there is a reference price included, that would
cause us problems with our WTO commitments for Brazil. So the
reference price inclusion is an issue for that program.
Mr. Bishop. Thank you.

MEXICAN TOMATO ANTI-DUMPING CASE

Ms. Heinen, of course the Mexican tomato dumping issue and
the Department of Commerce's activities, I am sure you are
familiar with that. What has been USDA's role in the matter and
what is the Mexican Government's plan, if any, to stop tomatoes
from being illegally dumped in our country? And is this the
sort of issue that the U.S. could or should seek relief from
before the WTO and are there currently any cases, which we
brought against other nations pending at the WTO to protect
American farmers?
Ms. Heinen. Well, as you noted, this is in the hands of
Commerce. And we were pleased to see that they were able to
find an agreement to this antidumping case. There have been
developments in the tomato industry since the last agreement
was signed; and, so, I think it was appropriate that they
looked at some of those and came up with new ways of trying to
include more of the growers in Mexico, and as well as
increasing enforcement.
And the Mexican government has been a party to this in
coming up with ways that they will increase enforcement and
ensure that at least 85 percent, if not more people are signed
up. There is also use of some of our instruments here. So, all
in all, we hope that this agreement will bring a level playing
field to our growers in Florida as well as in your state of
Georgia.

CORN CROP

Mr. Bishop. Thank you. Let me talk about corn for a moment.
It has been estimated by some private analysts that planted
corn acreage could exceed 95 million acres this year. Much of
this increased acreage will likely come with expensive
soybeans, which is a critical crop for domestic livestock and
poultry, and for export.
Also, corn yields have stagnated, and if not in fact
declined in recent years, although weather has perhaps has had
some impact on that. As the Department developed contingency
plans, if there's a continued shortfall in the corn harvest of
this fall, for example, are there non-environmentally sensitive
acres in the CRP program that could be made available for crop
production, what can USDA do to make sure that the supervised
corn inventories and corn prices will return to a more normal,
more acceptable levels in the coming years.
Mr. Scuse. Congressman, we have one of the worst droughts
in the history of the nation last year, I think everyone would
agree. But we still ended up with the eighth largest corn crop
in the history of the United States. Technology has brought us
a long way, and if you will look at what the market has done in
the last few months, you have seen the corn price drop from its
high last summer of over eight dollars. So the market, I think,
is adjusting, especially to the supply, the latest supply side,
as well as those planning intentioned reports.
We believe that we will have an adequate supply as we
stated last summer. We thought that we would have an adequate
supply in spite of the drought. So we anticipate having
adequate supplies of corn and soybeans, again. Technology has
gone a long way to help us get to where we are today.
Mr. Bishop. We are looking--going years forward, though. I
mean, obviously, with 95 percent more acres planted that you
are going to have a bigger supply. But that is temporary, and
if land is being stagnated by over production of corn, what is
going to happen in out years?
Mr. Scuse. If you take away last year's drought and you
look at the trend line for corn yields, they skyrocket. We have
gone from 125 bushels to the acre just a few years ago to
before last year. I think it was over 160 bushels, so the
technology is boosting our yields at a tremendous rate, and we
anticipate that to continue.

CROP INSURANCE IMPROPER PAYMENTS

Mr. Aderholt. Let me switch over a little bit and talk
about in proper payments. Last month, USDA's OIG issued a
report entitled, ``U.S. Department of Agriculture Improper
Payments Elimination And Recovery Act 2010 Compliance Review
for FY 2012.'' According to this report, USDA delivers
approximately $144 billion in public services annually through
more than 300 programs. Of the 29 component agencies and
offices that operate base programs, seven component agencies,
including RMA and FSA, currently administer high risk programs
that are vulnerable to significant and improper payments.
USDA estimated in FY '12 that these agencies' 16 total high
risk programs made $5.5 billion in improper payments. That's a
5.11 percent error rate. Programs in this mission area don't
come close to the school lunch or school breakfast programs,
but it is imperative that we reduce or eliminate improper
payments across the board, regardless of what they are. In
regards to RMA, the report says, ``RMA reported that FCIC
improper payments were approximately $173 million, which was a
4.08 percent error rate.''
However, because of RMA's sampling methods, OIG believes
this estimate has been understated. The question is what is RMA
doing to tackle this problem, and when do you expect to achieve
improvements in this particular area?
Mr. Willis. Well, first of all, when spending taxpayers'
dollar, one dollar improper payment is too much. So we take
this very seriously. As you mentioned, last year's improper
payment rate was 4.08. Some of the steps were taken to try to
improve that. The new database, we think, that this will keep
better track of yields, which will help us on that; but, also,
with edit checks, if something is reported that doesn't fit in
the system, it will get kicked out, and that will reduce our
improper payment rate as well.
Precision agriculture technology: We are trying to move to
where farmers who use that technology, yield monitors, acreage
reporting, can do that more and more. We feel that will kind of
eliminate opportunities when improper figures can be entered in
and help us to improve integrity of the program.
Finally, in cases when there is a widespread problem, we
have the ability to deny reinsurance to the companies if they
are responsible for those problems, which means that if there
is a loss, they are on the hook for that loss. So I think we
are trying a lot of different steps to try to reduce that rate,
but we share your concern. We would like to get that down from
where it is today.
Mr. Aderholt. Oh. Let me just mention this. There was a
Congressional Research Service Report from January that said
some agencies, including USDA, have indicated that statutory or
regulatory barriers have interfered with the ability to perform
recovery audits.
For FSA repayments, does the agency have difficulty
recuperating the funds?
Mr. Scuse. We identified, I believe, because of the
adjusted gross income--we identified approximately $135 million
worth of receivables. And we have recovered so far $110 million
of that money. So we are working and pursuing those accounts
that are owed.
Mr. Aderholt. Very good.

CRP ADMINISTRATIVE COSTS

The budget request proposes to tap $50 million from the
Environmental Quality Incentives Program, and that is to cover
FSA's salary and expense cost of operating the conservation
reserve program--the CRP. This is the first time that FSA has
proposed to do this. I wonder if you could tell the
subcommittee what's the background of wanting to do this.
Mr. Scuse. Well, in many instances we have been conducting
these programs and have not gotten the compensation from those
programs for the cost of running and administering them. And so
we're trying now in light of the budget situation to look at,
make sure that we are recovering the expenses that we are
incurring in some of these programs.
I mean we also do with the inspections with the Risk
Management Agency. So we are looking at ways that we can make
sure that when we go out and do those field audits, that we are
going to actually recover the cost for doing those audits. So
that is an example of where we wanted to make sure we are
recovering our expenses.
Mr. Aderholt. Okay. My time is up, but I may want to
follow-up a little bit later on that.
Mr. Farr.
Mr. Farr. Thank you, Mr. Chairman.
Mr. Bishop, I think if you want to stop the dumping of
tomatoes, just have the American tomato growers produce a
tasteful tomato. I think the first one that comes up with a
good tomato will sell a lot of them.
I am sad that Mr. Nunnelee left because one of the things I
was glad to hear was he took responsibility for the
sequestration, they have been trying to blame that on the
President and everyone else.
To think that sequestration had very little impact because
you did not have to lay off or furlough people is a misnomer,
because you point out in your testimony that the Secretary had
interchange authority, to transfer funds from direct payment
programs, the tobacco transition program, marketing access
loans, the loan deficiency payments, storage and handling, the
NAP and MILC, to back fill amounts sequestered.
You had authorities that other Secretaries did not have. I
am sure it had some impact because I know the five percent cut
in our own budget, our Congressional Office budget, had huge
impacts.
I think we are going to see as California did after living
with these furloughs, the voters got upset and just went to the
polls and then raised taxes. It was not done by the
legislature. It was done by the vote of the people.

CROP INSURANCE UNMET NEEDS

Mr. Willis, you have been a staff member on the Hill. You
know legislators are always looking for ideas for legislation.
I would be very interested if you could give me a letter of
your feelings about unmet crop insurance needs.
We are moving into a new era of food safety. I think the
recall of spinach that I saw, which was really a voluntary
recall. We had a county that probably lost $100 million.
Spinach growers, that is all they grow. Their insurance, if
they had it, would not cover it because it was voluntary.
Because it was not a disaster, we could not collect any of the
programs here.
You have these kinds of issues that are coming up,
incidents that are coming up where there is no insurance.
I am sure you know lots of those things. It would be
appreciated if you could give me your professional judgment on
what are the unmet needs in sort of the whole generic of crop
insurance, all crops.
[The information follows:]

RMA is researching information to give a proficient response on
unmet crop insurance needs. The information will be provided to the
Subcommittee as soon as it is available.

Mr. Bishop. Tasty tomatoes, too.
Mr. Farr. Insure a tasty tomato?

NUTRITIONAL QUALITY OF FOOD AID

I want to ask a question about food nutrition. I appreciate
all the work the USA does to help feed the poorest and most
vulnerable people in the world.
To make sure that we have the biggest impact, we need to
have a high quality and nutritional food included in our
donations to hungry families and children in emergency
situations.
I am sure you have seen the studies that both Tufts
University and GAO did looking into the cost effective ways to
better match the nutritional quality of U.S. food aid with
beneficiaries, and make sure that the food aid recipients are
actually getting their nutritional needs met by our food
assistance.
My question is what else can USDA do to improve the
nutritional quality of food aid to make sure that the most
vulnerable populations are getting the nutrition they need, to
not just survive, but to thrive?
I would be particularly interested in what can be done for
children, women, and expecting mothers.
Ms. Heinen. Thank you. Congressman, we could not agree
more, it is not just a matter of food but the type of food.
Currently, under our McGovern-Dole Program, we are doing
pilot projects in five countries with six new products to try
to meet those needs more precisely for those populations.
We are looking at supplements that will increase Vitamin A,
or Zinc, and some of these other things that are lacking from
their diet.
Mr. Farr. Are we just going to put vitamin pills in?
Mr. Heinen. No. They are different products. There is one
that is a peanut product. There is one that is a turkey spread
that is part of the diet for the school feeding.
All of these have different nutritional components that we
are trying to match to those specific problems that we see in
those areas, which might be stunting, anemia, lacking B-12,
different things they are missing.
We are trying to better match what the problems are within
the areas with different types of nutritional supplements in
the diets that we provide in the school feeding program.
We think some of these might be used more widely in some of
the other feeding programs as we see what kinds of effects they
might have.
Mr. Farr. I would be interested in that work, if you could
send us a memo on it.
Ms. Heinen. I would be happy to.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T2639A.041

[GRAPHIC] [TIFF OMITTED] T2639A.042

Mr. Farr. I would appreciate it. Thank you.
Mr. Aderholt. Mr. Bishop.

EXPORTATION OF U.S. PEANUTS

Mr. Bishop. Thank you very much. I was glad to hear you
mention the health benefits of peanuts. I was pleased to learn
that the Foreign Ag Service was a major impetus behind the re-
opening of the foreign market for U.S. peanuts in Poland. That
was a major coup.
On behalf of the peanut producers in the Southeast and
Southwest that produce the majority of peanuts, and of course,
in Southwest Georgia, Alabama and Mississippi, we all thank
you.
With that said, I am told there may be further
opportunities to expand the exportation of U.S. peanuts as well
as cotton to other former Communist countries in Eastern
Europe.
Are there any specific efforts underway in this regard and
has the MAP Program been an effective tool for you for product
expansion in Eastern Europe? Are there any efforts to expand
peanut exportation globally?
Ms. Heinen. Thank you for that. It was the hard work of our
attache, I think, in Poland, that really made the difference
there.
We do think the MAP Program has been highly effective in
matching what we as a Government can do with what the experts
in the industries can do.
We worked quite closely with the Peanut Association here to
find opportunities for them in whole peanuts or in products, in
food aid, in supplements.
I think Europe is still a good possible market, Eastern
Europe. I hope some of the barriers will come down that we see
in peanuts.
Mr. Bishop. Are you familiar with peanuts and China?
Ms. Heinen. China is a major producer of peanuts as well.
We often have problems with things in China, and it is just a
matter of working through the specifics of the commodities, the
regulations. We still have hopes for that market.
Mr. Bishop. I recently got some information that they were
doing quite a bit of acquisition, and then all of a sudden,
they stopped short. They have some delay, and the thought is it
has something to do with the peanuts being sent through
Vietnam, and they were having some issues with regard to the
origin of it.
Are you familiar with that issue?
Ms. Heinen. I am not but I would be happy to look into it
and get back to you with specific information.
Mr. Bishop. Thank you. This is something that is within the
last six weeks.

TEMPORARY WORKER PROGRAM

Mr. Aderholt. Let me turn just a minute to an issue that
has got a lot of attention on Capitol Hill over the last
several years but in the last few months, it has really been a
hot issue.
That has been the immigration issue. We are seeing signs
that the House and Senate could take up legislation to work on
some of these issues.
I know our Temporary Worker Program is very important to
agriculture. We do need policies in place to encourage the flow
of labor in and out of the country that is legal.
Any comprehensive immigration reform should allow an
increase in H-2A and H-2B Visa's that reflect the needs of our
industries and especially expediting the process during the
agricultural seasons.
The question that I want to focus on is the comments that
the Secretary supposedly made in a speech to the North American
Agricultural Journalists as he was quoted in the Hagstrom
Report saying USDA could partner with Labor and local USDA
offices, and they could track workers, once they entered the
United States.
Since your agencies would likely play a major role in that
effort, could you talk a little bit about what the Secretary
had in mind and what he envisioned?
Mr. Scuse. I think as you pointed out, immigration reform
is extremely important to the agricultural sector. We have
different sectors within agriculture that are heavily dependent
on a worker, guest worker workforce.
I think what the Secretary had in mind, when you look at
our farmers and ranchers across the United States and you look
at the comfort level they have in coming into the Farm Service
Agency Office, they would feel much more comfortable visiting
the County Farm Service Agency Office to do a reporting on the
workers that they need for their farms and ranches, rather than
going to another Federal agency office.
I think that is what the Secretary had in mind, to use our
offices because of the comfort level the agricultural community
has with it.
Mr. Aderholt. Is such a proposal possible under the make-up
of staff and other resources available in the field?
In other words, would additional tasks take a field office
away from their primary responsibility?
Mr. Scuse. I do not think so, Mr. Chairman. I think we
would be able to do that task with the current workforce that
we have, even though in the last ten years we have downsized
our workforce by 32 percent.
I still think with the workforce that we have and with the
technology that we now have in place, I believe we would be
able to do it.
I am going to take this opportunity to brag. The Farm
Service Agency, those county offices and those staff in those
county offices are second to none. They are truly outstanding
people who do a great job every day for our farmers and
ranchers.
Mr. Aderholt. Thank you. Mr. Fortenberry.
Mr. Fortenberry. Thank you, Mr. Chairman. I agree with that
last assessment. The Farm Service Agency personnel are very,
very dedicated, as are many of the various persons who are out
in the field.
They have an affinity for the community. They work hard. I
know any change is difficult a lot of times because these are
friends and neighbors of a lot of folks in particular counties.

FARMER TO FARMER PROGRAM

A more narrow question, it is my understanding it is not
directly under your jurisdiction, but if you have any input on
it, the Farmer to Farmer Program is an USAID administered
program, as I understand it.
Do you have any interaction with that particular program
and have seen the benefits of it?
Ms. Heinen. We do not have formal interaction in Washington
but I have in my experiences overseas worked with a number of
people who were part of that Farmer to Farmer Program, and
learned things about what they were doing out in the field and
worked with them to tell them what we see in the field.

OLD AND NEW OPPORTUNITIES

Mr. Fortenberry. Here is a broader point. I have asked
everyone who has been here, including the Secretary, throughout
these hearings, the same question. It is related to what I said
earlier.
We have got to be about the business of being
entrepreneurial and creative, letting go of what was old in
order to reform to meet the growing change in demands of that
which is new.
Sometimes when budgets are under stress or tension, it
forces creativity. One of the ideas, it seems to me, to be
important for a whole variety of reasons, not only in terms of
promotion of our own products, person to person exchange,
building of relationships that has national security
implications, has trade implications, but to take the farmer
who is interested in giving something to another person maybe
in an impoverished area of the world, perhaps consider that as
a component, if you would, of the Foreign Agricultural Service
or in some way integrated into your efforts.
I think it is one of those areas that we could look at that
meets multiple objectives of what agriculture is already doing,
not just in terms of trade policy and economic well being for
us and others, but also the building of relationships to the
transfer of real means of assistance to other people.
It builds out their capacity, it ensures that we have not
only communications but trust. That is essential to
international stability. That is essential to our national
security.
We have 12 Nebraska National Guard members, for instance,
right now who are farmers or have farm backgrounds in
Afghanistan, some of the last troops that were there trying to
build out economic capacity.
This is related in more ways than just to our trade. It is
related to the broader purposes of Government.
As we are all examining how we get away from stove piping
and silos and think about broader implications, here is what I
am submitting to you as an idea of a particular program that
has some history, that might be a way to think creatively to
achieve these other objectives as a component of the Foreign
Agricultural Service.
Mr. Scuse. We do have two other programs. We have the
Cochran Program where we bring Government officials from
foreign countries in here to train them on ways that we do
things here in the United States through our regulatory process
and others.
We also have the Borlaug Program where we will bring
scientists and researchers from other countries into the United
States to work with our scientists and researchers on projects.
I do not want you to think we are not working with the
other countries. I get your point. Farmer to Farmer would be
another very good way to do that. There are programs that we do
have where we do bring people in.
Mr. Fortenberry. Would you take that idea back and ruminate
on that? Let's see if we cannot develop something here that
makes sense for all the various objectives I laid out. Could we
do that?
Mr. Scuse. Yes.
Ms. Heinen. If I might add, I think our farmers are some of
our best envoys overseas.
Mr. Fortenberry. There you go, that is what I was looking
for.
Ms. Heinen. Many of our cooperator groups do take farmer
groups overseas.

INTERNATIONAL FOOD AID

Mr. Fortenberry. I recognize that and the benefits to that,
we do not measure them.
One more quick question, if I could, Mr. Chairman.
Regarding the food assistance changes that you were discussing
earlier in terms of delivery, changing the way in which we
deliver in emergency situations, I think it is important to
make sure that we still have an American brand on that.
Again, we are delivering emergency assistance for the
broader purposes of humanity, humanitarian reasons, trying to
help people who are in need. That is our fundamental purpose.
That is who we are as Americans.
It does help, I think, if other people know this is coming
from the generosity of the American taxpayer.
Mr. Aderholt. Mr. Fortenberry, we will let you have the
last word. Thank you. I appreciate the panel being here.
Under Secretary Scuse, thank you for your work and your
service along with each of you in your respective agencies and
what you do for agriculture for America and around the world.
Again, we thank you for being here, and we look forward to
working with you as we continue on with the fiscal year 2014
budget. Thank you.
Mr. Fortenberry. Mr. Chairman, I would like to thank you
and the members of the Committee for a very good hearing. Thank
you very much.
Mr. Aderholt. Thank you.

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Friday, April 26, 2013.

FOOD AND DRUG ADMINISTRATION

WITNESSES

MARGARET A. HAMBURG, M.D., COMMISSIONER, FOOD AND DRUG ADMINISTRATION,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
JAMES TYLER, CHIEF FINANCIAL OFFICER, FOOD AND DRUG ADMINISTRATION,
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES
NORRIS W. COCHRAN, DEPUTY ASSISTANT SECRETARY, U.S. DEPARTMENT OF
HEALTH AND HUMAN SERVICES
Mr. Aderholt. Good morning. I would like to welcome
everyone to the subcommittee today.
And I would like to welcome especially Dr. Margaret
Hamburg, Commissioner for Food and Drug Administration. Joining
the Commissioner today is Mr. Norris Cochran, the Deputy
Assistant Secretary for Budget of the U.S. Department of Health
and Human Services, and Jay Tyler, FDA's Chief Financial
Officer.
Welcome to all three of you.
The work that you and your colleagues at FDA perform
touches the lives of every American, and we appreciate the
dedicated service that each of you perform on a day-to-day
basis. With that said, there are many challenges that face FDA.
Compounding pharmacies, drug shortages, foodborne illnesses,
dietary supplements are just some of those challenges. From
where I sit, I see another challenge, and that is the pace at
which FDA moves guidance, rules, and regulations through the
process.
In addition to the budget request, I want to focus today on
this bureaucracy that just can't seem to produce crucial
guidance, even though the science is evident. For example,
USDA's dietary guidance for Americans on seafood consumption
for women who are pregnant have been in place since January of
2011. However, for the past 2 years, this subcommittee has
repeatedly asked the FDA to finalize its seafood consumption
guidance, with no indication of closure, because the issue is
tied up in bureaucratic infighting at the Department of Health
and Human Services. This type of delayed response causes
frustration with Congress as well as the millions of women who
need answers on this and other important matters.
Turning to the budget, I don't quite understand why the
budget was submitted so late, given the fact that the basis for
the request was the fiscal year 2013 continuing resolution that
was signed into law on September the 28th, 2012. The result is
a simple repeat of last year's budget. This budget could have
been submitted much earlier, and there would have been more
clarity regarding the President's request than there are
currently.
On Monday of this week, we asked the Food and Drug
Administration to provide something as simple as a table that
shows the proposed changes between the final fiscal year 2013
enacted levels and the fiscal year 2014 budget request level.
Other agencies within the subcommittee's jurisdiction provided
that to the committee more than 2 weeks ago without us even
asking them for it. Unfortunately, we just got the information
from the FDA well after the sun went down last night. This is
basic budgetary information that FDA should have provided to
the subcommittee without asking, and FDA should provide it upon
request without delay.
Overall, FDA is requesting $4.7 billion for fiscal year
2014, of which $2.6 billion is in discretionary budgetary
authority and $2.1 billion is in user fees. Once again, FDA is
requesting new user fee authority for food imports and food
facility registration and inspection. These particular fees
total $226 million. These fees do not appear to enjoy the same
level of industry support as the prescription drug or medical
device industries gave to their programs, because the food
industry believes this to be a food safety tax.
It seems that FDA has failed to communicate to the industry
what, if any, performance measures FDA would use in managing
this program. These fees are not currently authorized, and the
chance of Congress authorizing this, I would say, would be very
slim.
With that, I would like to turn it over to the gentleman
from California, our ranking member, Mr. Farr.
Mr. Farr. Thank you very much, Mr. Chairman.
I also welcome the Commissioner here and want to thank her
very much for coming out to the Salinas Valley to see how fresh
produce is grown and produced right in the field.
We are still talking about your visit and how you compared
the fact that you had to dress up in a suit and a hair net and
gloves in order to go into the fields, it was like going into
an operating room. That is how we are trying to keep our fields
very healthy and clean.
Mr. Chairman, I think we have all criticized the
administration for a late budget, but we also need to criticize
ourselves. Congress never even produced a budget. We haven't
had a bill out of this committee since 2012, and before that,
the only time we had had it was in 2010. So, you know, the
President is supposed to base his budget on what Congress
approves the year before. I hope we can remedy that.
I would also just suggest that I think we in this committee
ought to give the FDA the flexibility, the authority to use the
user fees. These user fees are being paid by the private sector
to get a job done, and they can't get the job done because we
have unintended consequences of budget cuts and sequestration.
This is money that is in the bank, it is sitting there, and we
ought to give it to FDA to use, as we have done for other
agencies. We did it for our parks to allow them to keep the
fees and use them. Look at the way we qualify to run for
Congress. You have to pay a fee at the local registrar, and
they get to keep that fee for running the elections department,
and so on.
This is a fee that has been collected. The private sector
is going to get really frustrated, really discouraged that the
government isn't being a fair partner. And I think, you know,
if you believe in private enterprise, they are coming up with
paying these fees because they want answers to their questions,
and we ought to allow the Department to use the fees they are
paying for that purpose.
So I look forward to this hearing, and I think that is
something we ought to try to work on as a committee.
Mr. Aderholt. Thank you, Mr. Farr.
Mr. Aderholt. We are fortunate to have the full committee
chairman, Mr. Rogers, with us today, and I would like to
recognize him for any opening remarks he may have.
Mr. Rogers. Thank you, Chairman, for recognizing me.
Good morning----
Dr. Hamburg. Good morning.
Mr. Rogers [continuing]. Commissioner, and thank you for
being with us today to discuss the fiscal 2014 budget request
for FDA.
In other subcommittee hearings, I have already lamented the
fact that this budget request is woefully late and won't get
our Nation back on solid financial footing. But we will
persevere.
Before I comment on your budget, let me hasten to thank you
for FDA's recent decision that prohibits generic crushable
OxyContin from coming to market without abuse-deterrent
technologies. Unfortunately, drugs misused are a recipe for
disaster. And advocates across the country salute you for your
leadership in shepherding this landmark decision on generic
painkillers. Thank you.
As you know, the abuse of prescription drugs, particularly
opioid pain pills, is our Nation's fastest-growing drug threat.
So great, in fact, that your colleagues at the Centers for
Disease Control have called this crisis an epidemic.
Just as FDA must responsibly address other epidemics like
H1N1 and public health threats like meningitis from tainted
steroid injections, you must also closely examine drugs
entering or on the market, including the prescribing patterns
and potential abuse. Last week's decision by your agency will
surely save lives, and I hope it is a sign of things to come as
it relates to our Nation's very serious pain pill addiction.
Undoubtedly, the FDA is a critical partner in getting this
multifaceted health, law enforcement, patient access, and
education issue under control. I am anxious to hear from you
today about how we can build on this success story and what
other steps FDA can take to beat back on the abuse of
prescription medications, like rescheduling our most widely
prescribed and abused painkillers--hydrocodone combination
drugs--and limiting the indication for prescribing these
powerful opioids to severe pain only.
Now to your budget, Commissioner. The FDA is seeking nearly
$4.7 billion, which is $622 million above the fiscal 2013
level. I should note, however, that this request assumes that
sequestration for fiscal 2014 is undone--far from a given,
considering the President's unwillingness to truly engage in
discussions to address our real cost drivers without talking
more about taxes.
Toward that end, this budget assumes the inclusion of six
new user fees, including one for registration of food
facilities, a fee likely to be passed on to consumers. As you
can imagine, this committee and the general public has little
appetite for food fees.
I am sure we will discuss this issue at length, as well as
your recent comments about the effects of sequestration on food
inspections and the recent court order for FDA to move forward
on the implementation of the Food Safety Modernization Act.
So we look forward to hearing from you this morning.
Dr. Hamburg. Thank you.
Mr. Aderholt. Thank you, Chairman Rogers.
Mr. Aderholt. Just bear in mind, we have votes today. I
don't expect votes to be called for close to another hour, so
we should get well into the hearing and make a big dent into
the hearing. And we will just see how long we go. Sometimes the
floor schedule is very unpredictable, so it may be even later
before we have votes.
So, with that, your, of course, statement is entered into
the record, but at this time we would like to recognize you for
your opening statement and comments before we go into the
questioning aspect of the hearing.
Dr. Hamburg. Well, thank you very much. And good morning,
Chairman Aderholt, Ranking Member Farr, and certainly Chairman
Rogers, and all the members of the subcommittee.
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I do want to congratulate you, Congressman Aderholt, on
your new position as chairman.
And I also do want to thank the subcommittee for your past
investments in FDA, which have helped reduce the gap between
our budget and the demands of our increasingly complex mission.
Congress has given FDA the responsibility for a vast range
of products that are central to the health, safety, and
wellbeing of every American. From spinach and breakfast
cereals, to vaccinations that save millions of children's
lives, to new medicines to treat killers like cancer and heart
disease, Americans rely on products overseen by the FDA every
single day.
We also recognize that those who produce our Nation's food
and medical products are vital components of the U.S. economy,
as is a strong FDA. History shows that when the public trusts
FDA's oversight of the products we regulate, these industries
flourish. Conversely, when products cause serious harm, it can
result in severe economic damage across the industry involved,
to offenders and nonoffenders alike.
I want to mention some of our measurable accomplishments
this past year. In 2012, FDA approved 39 novel medicines, the
highest number in over a decade. And the majority of these
drugs were approved in the United States before anywhere else
in the world, some in as little as 3\1/2\ months. The number of
drug shortages were cut in half compared to 2011. We
successfully turned around a decade of lengthening medical
device reviews and backlogs. Working together with 45 State and
territorial partners, we have conducted more than 158,000
inspections of tobacco retailers to ensure that they are not
selling cigarettes or smokeless tobacco products to minors. And
we have published our first two food safety proposed rules as
part of the implementation of the historic Food Safety
Modernization Act.
And I might add that FDA is a smart investment and a
bargain. Consider that the products we regulate represent more
than 20 cents of every dollar that consumers spend on products
in the United States. But if you look at our budget, in terms
of the BA or public dollars, every American effectively pays
only about $8 a year for FDA services.
And while FDA continues to oversee a multitude of products
vitally significant to all of us, our job has become
increasingly demanding.
First, we are in the midst of dramatic changes in the way
that foods, drugs, biologics, and devices are produced and
reach the American public. We are witnessing revolutionary
advances in science and technology that hold such promise to
improve health and prevent disease, yet also bring new
scientific and regulatory complexities. And we are facing the
globalization of our food and medical product supplies,
demonstrated by a quadrupling of imports over the past decade.

FSMA

Second, Congress has continued to expand our
responsibilities with new laws, including FSMA, the most
sweeping reform of our food safety laws in some 70 years; the
Family Smoking Prevention and Tobacco Control Act, the landmark
legislation giving FDA the responsibility to regulate tobacco
products; and, most recently, the passage of the FDA Safety and
Innovation Act, FDASIA, which, among other things, creates two
new user fees to speed the review of more affordable versions
of drugs, essential to holding down healthcare costs, and new
regulatory strategies to increase our efficiency and
effectiveness.
As we look at our fiscal year 2014 budget needs, we must
respond to the demands of complex and increasing
responsibilities while recognizing the realities of a
constrained economic environment. Thus, we must focus on a set
of key mission-critical programs and activities and leverage
limited resources to the greatest degree possible.
The President's proposed fiscal year 2014 budget request is
for over $4.6 billion, which includes $2.5 billion in budget
authority and $2.1 billion in user fees. This represents an
$821 million increase over fiscal year 2012, $52 million of
which is budget authority and $769 million in user fees,
including two new user fee proposals for food safety and
cosmetics.
A central component of the budget request, as noted,
supports our efforts to implement FSMA and create a modern food
safety system based on prevention rather than responding after
a problem occurs. FDA is committed to working with industry and
our partners at all levels of government to put in place the
necessary risk-based, flexible system that recognizes and
respects the varying needs of different components of the food
enterprise.
I want to thank you for the $40 million in one-time, no-
year money that was part of the recent CR, which will help us
to continue our outreach and activities. For fiscal year 2014,
our budget request is $43 million and $225 million in proposed
user fees for food facility registration, inspection, and
imports.

FOOD SAFETY

As you know, Congress has long endorsed the use of fees to
help support government agency work, especially work that meets
specific industry needs as well as benefiting the American
public. A broad coalition of industry groups supported
enactment of FSMA because they knew they would benefit from a
food safety system that works effectively to prevent food
safety problems and strengthens consumer confidence in the food
supply.
We cannot build this modern food safety system, including
the new mandates for import oversight, without the funding laid
out in the President's budget. We look forward to dialogue with
Congress and all of our stakeholders to shape a fee proposal
that is fair, workable, and advances both industry and public
interests.
In addition, we must respond to and harness modern science
to enhance the pipeline of new and better, safer medicines and
vaccines. We are asking for $18 million to continue our efforts
to consolidate FDA scientists and other professionals in the
White Oak campus, including requirements to outfit FDA's three
bioscience labs and other facilities. Without these funds, the
labs cannot be used and the $300 million cost of constructing
them will be wasted.
We are eager to continue this and other important work. I
believe our fiscal year 2014 budget efficiently targets our
needs, focusing on programs that are essential to providing
Americans with safe food and effective medical products that
they expect and deserve. I look forward to answering your
questions today and working with you in the coming year.
Thank you very much.
Mr. Aderholt. Thank you, Dr. Hamburg, for your testimony
and, again, for being here this morning.
Let's jump right on in to the budget request for fiscal
year 2014. Your testimony says that you are asking for an
additional $10 million, which is above the fiscal year 2012,
for overseeing safety of products from China and that you will
add 16 new inspectors in China.
The question is, is that the same $10 million that was
provided in the current CR for those activities?
Dr. Hamburg. Yes. And I apologize for the confusion with
the budget. This process has been a complex one this year with
the work on developing fiscal year 2014 going forward, as there
was uncertainty about funding levels for fiscal year 2013.
But we are asking for a continuation of that $10 million to
continue our efforts to oversee food and drug safety in China,
imports from China. So we are asking for a continuation of the
base that was now established with an addition of $10 million
in the fiscal year 2013 budget, not an additional $10 million
on top of that.
Mr. Aderholt. There is $3.5 million in the request, again,
above the fiscal year 2012 for medical countermeasures.
Dr. Hamburg. Uh-huh.
Mr. Aderholt. Did the committee already provide this
funding as part of fiscal year 2013?
Dr. Hamburg. Again, that is a continuation of the base. We
do need that additional $3.5 million. We needed that $3.5
million in fiscal year 2013 to really round out the program
that we need to implement this important area, to advance
medical countermeasures availability for the American public.
We need to continue that money in the base in fiscal year 2014.
Mr. Aderholt. Okay.

FSMA

According to your testimony, FDA is seeking an additional
$43 million to carry out responsibilities under the Food Safety
Modernization Act, which you referred to in your opening
comments. The fiscal year 2013 CR provided FDA with an
additional $40 million for food safety. Does this $40 million
request replace the one-time $40 million for food safety that
was provided in the current CR?
Dr. Hamburg. Well, I think in fiscal year 2013 the addition
of $40 million is vitally important. We want to continue that
in the base. And if that would be to occur, that there would be
$40 million and we could get an additional $3 million to make
$43 million in fiscal year 2014, that would be terrific.
I should note that the $40 million in fiscal year 2013 was
one-time, no-year money, and that is important in terms of our
ability to use it effectively. Because we do need those
resources, but because they came late in the budget cycle, we
would have a hard time spending all of it within the fiscal
year time frame. But we do need and are counting on those
resources.

WHITE OAK

Mr. Aderholt. You had mentioned the White Oak facility,
also, in your opening comments. FDA is seeking $17.7 million
for the White Oak facility.
Again, this committee provided these funds as part of the
fiscal year 2013 CR, continuing resolution. Furthermore, fiscal
year 2013 requests for these funds were described as a one-time
request that would complete the $300 million investment at
White Oak.
Again, is this the same $17.7 million that was provided in
fiscal year 2013? Because the reading of the budget
justification looks like the money is for the same thing that
was asked for and received in fiscal year 2013.
Dr. Hamburg. Unlike the other two issues we just discussed,
this would actually be a continuing need, an additional need in
fiscal year 2014. There are further requirements for fully
outfitting the laboratory, training the individuals, making
sure that we have certification, adding critical components to
make the laboratory work, such as the loading docks for
delivery and pickup of materials, hazardous material handling
services, et cetera.
So those are actually additional needs on top of what was
in the fiscal year 2013 funding.
Mr. Aderholt. Okay. Yeah, let me just clarify. It looks
like from the request that it is for the same thing, so we need
some additional justification----
Dr. Hamburg. We would be very pleased----
Mr. Aderholt [continuing]. To provide that----
Dr. Hamburg [continuing]. To work with you and your staff
to clarify. And, again, I apologize for the confusions that may
have arisen in the budget process.
[The information follows:]

The White Oak funding request is a continuing need, maintaining the
$17.7 million as a base in FY 2013 and providing additional funds in
fiscal year '14. The FY 2013 enacted funds provides resources to make
the Life Sciences complex operational. The FY 2014 request funds
further requirements to fully outfit the laboratories, make sure that
we have all necessary certifications, and add critical components to
make the laboratories work such as the loading docks for delivery and
pick up of materials. The fiscal year '14 requests are additional needs
on top of what was in the fiscal year '13 funding. Sustaining the
$17.7M provided in the fiscal year `13 appropriation will allow FDA to
fund these additional FY 14 needs.

Mr. Aderholt. Okay.
Let me recognize Mr. Farr.

USER FEES

Mr. Farr. Thank you very much, Mr. Chairman.
I want to follow up on the comment I made about the fee
structure. You are collecting fees, but you are not allowed to
spend them. What kind of a backlog do you have with not being
able to spend those fees?
Dr. Hamburg. Well, you know, of course, we are just
beginning to implement the sequestration cuts, but it creates a
very serious concern for us.
We carefully negotiated with industry around a set of
critical program goals and priority areas for work and
performance measures to track our progress toward achieving
those goals. And without the full funding that was evaluated as
necessary to achieve those goals, we obviously will fall
behind. And it will have implications for a number of important
activities, in terms of medical product reviews, training and
recruitment of critical staff----
Mr. Farr. What will that do to the private sector who is
seeking the approvals?
Dr. Hamburg. Well, I think it is troubling to them and to
us that there were agreements made, including starting two
critical new user fee programs in generics and biologics that
will make a real difference to the American people, and those
moneys are being collected from industry, but they are going
into a bank, in essence, Treasury Department, I guess. And they
can't be used to support our programs and activities; at the
same time, they can't be used to offset the debt, as I
understand it.
So I think it is a troubling situation that compromises our
ability to move forward in critical areas of mutual importance
to industry and FDA and, of course, to all of our stakeholders
that depend on our products.
Mr. Farr. Mr. Chairman, I would hope that we might be able
to look at that, just like we are looking at giving some
flexibility to air traffic controllers, like we gave
flexibility to the Department of Defense, plus a lot more money
to the Department of Defense. And we ought to give the
flexibility in these fee structures to the FDA to be used for
the purposes for which they are collected.
Let me ask you about the countermeasures that the chairman
asked you about. It is 3 years since you began the
countermeasure initiative, and Congress is always looking for
ways to measure the success of these Federal programs.
Has the FDA approved any drugs, biologics, or diagnostics
to treat chemical, biological, radiological, or nuclear threats
since establishing the MCMI?
Dr. Hamburg. Yes, we actually have made enormous progress
going forward in some key areas of activity. We have had a
number of important new drug approvals: antibiotics for the
treatment and prophylaxis of plague; a monoclonal antibody to
treat inhalational anthrax and to prevent it under certain
circumstances; a botulism antitoxin, which can make a real
difference both in response to a potential biological threat
and also naturally occurring disease; a number of important
influenza diagnostics to help us address the potential of a
pandemic threat as well as seasonal flu.
We have also readied a number of products for use in an
emergency. They are not fully approved but can be used as part
of an emergency use authorization when there is a public health
crisis, including a drug to treat smallpox and a smallpox
vaccine. So these are very important advances.
And with respect to the three new drug approvals that I
mentioned, they have actually all included a pediatric
indication, which has been a serious gap in some of the public
health preparedness and medical countermeasure availability
opportunities in the past.
So it is an area of, I think, real progress that will make
a difference to the American people.
Mr. Farr. My question was going to be geared toward
children, and you have answered that. I am pleased to see that
we are moving forward with that, and hopefully we can strongly
support you in that.
One of the questions that comes up is the backlog on
sunscreen. My brother-in-law, a surfer, very active guy who got
melanoma and died in our house from melanoma, and we went
through all the suffering that families go through. It just
shocks me that we haven't done any new sunscreen approvals for
a number of years, decades.
I hear there are eight pending sunscreen applications, and
none of them have yet been approved, none of them. So what is
taking so long?
Dr. Hamburg. Well, we have made some forward progress on
issues of labeling and some other aspects of assessing safety
and indications for an appropriate use of sunscreens.
This issue that you describe is a priority for us, and, you
know, we are trying to move forward with respect to both
availability and safety of sunscreen products and their
ingredients.
With respect to the individual applications that you are
mentioning, I actually am not aware of the particulars, but I
am happy to follow up with you.
Mr. Farr. Do you think something will be done this year?
Dr. Hamburg. You know, I really don't want to speak to that
since I don't know the specifics, but, as I said, I would like
to follow up with you.
But this is an area--sunscreens are regulated under the
monograph framework. And the sunscreen monograph is, you know,
one of the highest priorities. And a process is in place to try
to move forward, I know, with respect to the overall regulation
of sunscreens and to enable us to really apply the best
possible science with respect to safety and ingredients and
also issues around using data that has been collected in other
settings, as well, including overseas.
But we will follow up with your office.
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T2639A.154

[GRAPHIC] [TIFF OMITTED] T2639A.155

Mr. Aderholt. Mr. Rogers.

OXYCONTIN

Mr. Rogers. Thank you, Mr. Chairman.
Commissioner Hamburg, as we discussed last week on the
phone and other times, I am thrilled by the FDA's decision to
keep crushable generic OxyContin off the market. Young people,
especially, were crushing those time-released pills, the 12-
hour pill, crushing it, injecting it, and getting the immediate
high from the 12-hour dose all at once. So I salute you for
that. That will keep very dangerous drugs off of the street and
out of our kids' hands.
From a legal perspective, FDA determined that the
reformulated OxyContin, the noncrushable one, did, in fact,
possess abuse-deterrent characteristics and that the original
crushable formulation was indeed removed for reasons of
``safety or effectiveness,'' end of quote.
Dr. Hamburg. Uh-huh.
Mr. Rogers. Now, that decision dealt with OxyContin, the
Purdue Pharma product. How many other drug manufacturers
currently have applications for abuse-deterrent formulations?
Dr. Hamburg. You know, there is another product that is
being looked at in that context, not in terms of a specific new
application but in terms of whether or not it, in fact, meets
the criteria for abuse deterrence.
This is an important area, and one of our hopes is that we
can better incentivize industry to work with us to develop
models of abuse deterrence, to strengthen the existing
approaches, such as the one used by Purdue in their product,
but also develop new approaches, because we think this needs to
be dynamic, as unfortunately abusers will no doubt figure out
ways to overcome some of the abuse-deterrent strategies.
So we put out a guidance, as I think you know, about how we
think about criteria for meaningful abuse deterrence, and we
are continuing to really try to work with industry to encourage
more innovation in this area. We would like to see more product
applications before us.
Mr. Rogers. What standards will you apply in deciding
whether these drugs will be approved and labeled for abuse
deterrence?
[The information follows:]

As explained in the draft guidance entitled Evaluation and Labeling
of Abuse-Deterrent Opioids (issued in January 2013), FDA generally will
approve labeling describing a product's purportedly abuse-deterrent
properties if, based on its review of all the available data, FDA
concludes that those properties can be expected to, or actually do,
result in a significant reduction in the product's abuse potential. If
that standard is met, then the relevant data, together with a clear and
accurate characterization of those data, should be included in product
labeling. The draft guidance discusses the four categories of abuse
potential studies FDA will examine to make its assessment, as well as
examples of language that may be appropriate for inclusion in product
labeling based on those data. FDA has received comments and will hold a
public meeting on this draft guidance planned for September 30 to
October 1, 2013. After that FDA will develop a final guidance.

Dr. Hamburg. Well, it is outlined in the guidance. And I
regret to say there are four criteria, as I recall, but I don't
think I can reproduce them for you here.
But the critical issue is whether, in fact, it can be
demonstrated that they do what they say they do, that, in fact,
they behave in ways that will significantly reduce the ability
to crush and inhale or crush, melt, or otherwise liquify for
injection these products. And we need to sort of see it
scientifically in the laboratory context and also, you know,
some evidence in terms of actual clinical experience.
Mr. Rogers. Well, we want to be sure that the same
standards are applied to generics and others as was applied to
OxyContin.
Dr. Hamburg. Absolutely.
Mr. Rogers. And I am sure you are agreeable with that.
Dr. Hamburg. I am.
Can I just underscore, though, it is also very important
that just because a company claims it is abuse-deterrent, it
doesn't mean it is. So it is really in everybody's best
interest that we try to have standards so that we can really
achieve the goal. We don't want the standards to be so high
that nobody can actually meet them.
Mr. Rogers. Right.
Dr. Hamburg. We want to incentivize industry to work on
these kind of products.
Mr. Rogers. Well, you are doing good work in this regard,
because the Centers for Disease Control calls prescription drug
abuse an epidemic. It is killing more people than car wrecks,
especially young people. So your decisions so far, I think,
will save lives.
Let me ask you quickly about rescheduling hydrocodone
combination drugs. In late January, the FDA Drug Safety and
Risk Management Advisory Committee voted almost two to one to
tighten restrictions for prescribing hydrocodone combination
drugs. You don't have to follow their recommendation, but I am
trying to figure out whether or not you will. I hope you do.
Emergency room visits involving hydrocodone rose from
38,000 in 2004 to 115,000 in 2010. These drugs are often taken
in combination with other drugs and/or alcohol, one of the most
popular being what is called the holy trinity, a combination of
hydrocodone with a sedative like Valium and a muscle relaxant.
The current Schedule III classification for hydrocodone
projects a false sense among some patients and doctors that
Vicodin or Lortab are less potent or less habit-forming and,
therefore, less dangerous than oxycodone painkillers, which are
Schedule II.
Prescriptions for Schedule II drugs can't be called in. You
need to see a doctor to get a new prescription for each refill
after 90 days, no automatic refill. As a result, while almost
every opioid painkiller is considered a Schedule II drug and
more carefully regulated, the most abused narcotic,
hydrocodone, is missing from that list.
So we have made pleas by letter to you. And I am wondering
when you will decide this issue and where you think it is
going.
Dr. Hamburg. Well, it is an ongoing process, as you know.
We did have an advisory committee, and, of course, you know,
important information was discussed and they made a
recommendation to us. We are looking at the information
presented in that committee and other information that has come
in to us from a range of stakeholders with, you know, frankly,
differing perspectives on this issue, and trying to address the
important issue of balance of access to critical medicines for
legitimate medical needs and, you know, the potential, as you
note, for abuse and misuse.
We will be making a recommendation soon. I can't really
speak to the direction that we are going or the specifics of
timing. But I can assure you, Congressman Rogers, that when a
decision is made, as I did with the other abuse-deterrent
issue, I will reach out to you and let you know.
Mr. Rogers. Well, I thank you. And I thank you for reaching
out to me when you made the ruling on OxyContin.
Finally, Mr. Chairman, on the matter of the labeling of the
opioid narcotics, which up until now has said can be used for
moderate to severe pain, I think it has misled doctors and
patients that it is not as addictive a drug as it really is.
And we have been pleading with FDA, I have for now 10 years, to
restrict the labeling on OxyContin drugs and similar to just
severe pain, which it was intended for, I think, in the first
place.
It is a great drug, a 12-hour release, for people who have
horrible pain, terminally ill patients. But it has been thrown
out there for toe aches and toothaches and everything else,
misleading people that it is not as habit-forming and difficult
to kick as it really is.
Can you tell me when we might get some sort of indication
of what may happen on changing the labeling to strike
``moderate''?
Dr. Hamburg. Well, again, Congressman, as you know, we are
in a process of consideration of these important issues and
what is the appropriate management of acute and chronic pain
with respect to this class of drugs. And we had a public
meeting to hear presentations and get expert and public comment
on these issues. We are reviewing that.
We take the issue very, very seriously. We believe that FDA
labeling and indications for use is an important component of
what needs to be, of course, a multifaceted strategy to address
this really critical and urgent public health problem. And we,
you know, are actively engaged.
I want to commend you for the leadership that you have
taken on this issue and others, in terms of really making sure
that adequate attention is paid and there is a sense of
urgency. We do feel that and are working hard to really address
it in a meaningful, scientifically based way.
Mr. Rogers. Well, it shouldn't be a very difficult
decision. I can't imagine why we would want to keep ``moderate
pain'' labeling for such a dangerous drug that has proven a
killer around the country.
Congressman Frank Wolf and I, 10 years ago, came up to FDA
and testified about this very issue of removing ``moderate'' on
the label, which invites doctors and patients to use it for
less than severe pain, and nothing happened. That was 10 years
ago. So we have been sort of a lone wolf out there in the
forest crying for help, but now we have some help. We are not
alone anymore.
A citizens' petition submitted to the FDA this summer,
clinicians, researchers, health officials, all of them asking
FDA to change the way opioid narcotics may be prescribed. They
argue that, with the proper labels on prescription painkillers,
physicians would be more aware of the safety concerns and
effectiveness of certain opioids before unnecessarily
prescribing highly addictive narcotics to patients for minor
pain.
So there is a growing consensus, I think, out there to do
this and do it now.
Dr. Hamburg. Well, we have heard you and your concerns, and
we take them very seriously, and those of other stakeholders as
well.
As you know, we have taken steps with respect to some
aspects of the labeling of opioids, the REMS that have been
applied to the class of opioid drugs; voluntary requirements,
as part of that, on physician education, which I think is
absolutely key.
We are hoping that there will be legislation that will
actually include mandatory training as part of the DEA
licensing for physicians who use these products because they
are so powerful, both in effective treatment when indicated but
also the potential for abuse.
And we will be coming forward with a specific response to
your question very soon.
Mr. Rogers. Well, I thank you. Thank you for being here.
Dr. Hamburg. Thank you.
Mr. Rogers. I yield back.
Mr. Aderholt. Thank you, Mr. Rogers.
We have been joined by the ranking member of the full
Appropriations Committee, Mrs. Lowey.
And I will recognize you for any opening statement and also
any questions that you may have at this time.
Mrs. Lowey. Thank you, Mr. Chairman.
And welcome, Commissioner Hamburg. We are indeed fortunate
to have a person of your caliber in this position. Thank you
very much.
This week, there has been a lot of attention paid to the
damaging effects of the sequester on the FAA and commercial air
travel. While flight delays are an inconvenience and represent
real economic losses to individuals, families, and businesses
in New York and across the country, we can't ignore the real
and dangerous effects of the sequester in other areas of our
budget, especially when they have a profound consequence for
public health.
From frozen TV dinners to medical countermeasures, to
addressing nuclear threats, to new drugs that treat major
causes of death like cancer and heart disease, the American
people rely on FDA and its expertise to review and approve
products they use every single day.
The repercussions of congressional inaction to replace the
sequester are clear at the FDA. The agency will undertake 2,100
fewer inspections, which is at an 18 percent decline compared
to last year. The implementation of the 2011 Food Safety
Modernization Act will be further delayed, meaning we can
continue to expect an estimated cost of $75 billion annually in
lost productivity and medical expenses. And new drugs that
reduce pain and sustain life will take longer to review and
approve, robbing sick Americans of improved quality of life and
more time with their loved ones.
By cutting services and decreasing investments critical to
our economic competitiveness, these across-the-board budget
cuts are having a severe impact across all sectors of our
economy. We must replace reckless, indiscriminate cuts with a
renewed focus on jobs, economic growth, and a balanced fiscal
package that creates long-term deficit reduction.
And I just want to say, I look forward to a day soon when
Chairman Rogers and I can work together in a bipartisan way and
really address the serious issues as a result of sequestration,
bring about regular order and do a budget that makes sense for
the American people. We know that the discretionary budget is
at its lowest level in the last 45 years as a percent of GDP.
That is unacceptable.
So I guess I made my message clear. Let me ask you a few
questions.

CELIAC DISEASE

First of all, millions of Americans with celiac disease or
gluten intolerance have been waiting for the FDA to finalize a
standard for gluten-free labeling. Of course, it took me 5
years to get bipartisan support for just labels on food, which
is food allergies, celiac disease, et cetera.

GLUTEN-FREE LABELING

In 2004, the Food Allergen Labeling and Consumer Protection
Act that I authored became law. One of the provisions required
the FDA to create a gluten-free labeling standard by August
2008. Nearly 5 years past the deadline and 9 years since the
law was signed, I am still waiting for the administration to
finalize the rule.
I know that the rulemaking process is complicated. FDA must
work with OMB and others. But when will a rule be finalized
which will give those with celiac disease the peace of mind
that the foods they purchase are truly gluten-free?
By the way, no matter who I speak to, everyone seems to be
going on a gluten-free diet. So it would be really helpful if
we could be assured that what is declared gluten-free really is
gluten-free.
Dr. Hamburg. Well, you are right, this is a really
important problem. And it does turn out, as we learn more about
the nature of celiac disease and also broader nutritional
concerns, that a gluten-free diet is benefiting more and more
Americans. And it is critical that people have that information
about the nature of their products and what is gluten-free.
I had hoped I might have been able at a hearing at this
moment in time to have been able to speak to the rule actually
having been issued. It is in the final stages of administrative
review, and I really do believe that you will see it soon. And
as I promised Congressman Rogers on another matter, the first
call I make will be to you.
Mrs. Lowey. I hope it is soon. I think it is really very
important.

DRUG COMPOUNDING

Another area that I have been particularly concerned with,
as we all have, is drug compounding. The safety of products
sold by compound pharmacies, particularly following last year's
deadly meningitis outbreak, is a serious concern.
In an effort to crack down on unsafe facilities, the FDA
has recently conducted a number of inspections of these
pharmacies. Could you share with us your findings?
Dr. Hamburg. Yes. Well, we did recently undertake a fairly
aggressive effort to do about 31 surveillance inspections of
facilities that we considered potentially high-risk because
they were making sterile injectable products. And we knew about
them either because of past problems because of States telling
us that they thought they should be on the high-risk list or,
in some cases, what we learned, you know, from public and the
media. And we also did another set of for-cause inspections in
relation to reports that we were getting of actual concerns
about products.
I would have to say that those inspections were very
concerning, because we did find real sterility concerns at many
of the sites. I would underscore that these are facilities
that, for the most part, aren't required to register with the
FDA because they are compounding pharmacies, so they are not
routinely inspected by us. But when we went in and looked at
their standards for sterile processing, there were very real
reasons for concern.
We actually undertook a number of recalls of products that
we thought represented a more imminent risk. And we certainly
believe that it underscores the importance of a stronger,
clearer regulatory and legal framework for oversight of these
kinds of facilities.
I think it is also really striking that, even in light of
recent events, we had real trouble with a number of these
inspections going in, having our authorities questioned. In two
cases, we actually had to go to the courts to get
administrative warrants so that we could do the full
inspections and have access to the records that we needed to
both assess what they were making and their business practices
and really understand the risk.
So we have indicated a very serious and urgent desire to
work with Congress to create new, stronger, clearer legislation
to provide the oversight of these facilities that I think the
American people deserve and expect.
Mrs. Lowey. Well, I certainly hope, Mr. Chairman, we can
continue to work together to resolve this huge challenge.
I have been told in talking with some people, since last
year's deadly outbreak, there have been recalls, reports of
additional serious infections, cases of reported blindness,
loss of the eye associated with the use of repackaged Avastin
for off-label treatment of wet age-related macular
degeneration.
So, as a clinician, I would assume you would agree that
certain areas of the body, such as the eye, the brain, the
spinal column, are least able to defend against infections and,
thus, that any repackaged or compounded products which are
injected into these areas, if they have compromised sterility,
have a higher likelihood of causing injury or even death.
So I would hope--and I will conclude, Mr. Chairman--that
the FDA would consider prioritizing its oversight, while we are
working on regulations, and enforcement activities to focus on
those compounded or repackaged products that pose the most
significant risk patients based on such risk factors.
And would all patients benefit from a single quality
standard relating to sterile injectables?
Dr. Hamburg. We definitely believe that there needs to be
clear, explicit standards for sterile practices that apply in a
uniform way.
In terms of FDA regulatory oversight, we think we can
provide the greatest benefit in terms of where the risks are by
really addressing, as you note, sterile injectable products.
Those facilities that are making sterile injectables in advance
of or without a prescription and selling across State lines, we
think, represent the category that really presents the highest
risk to the American public, though we think that, you know,
clearly, any sterile product should be made in accordance with
sterile procedures.
Mrs. Lowey. Well, thank you, Mr. Chairman. It seems so
obvious, it is shocking to me that this is a such a huge issue
out there. And it is costing people their eyes, in some cases
their life, and enormous expenses in trying to treat it.
Thank you very much.
And thank you, Mr. Chairman.
Mr. Aderholt. Thank you, Ms. Lowey.
Mr. Yoder.
Mr. Yoder. Thank you, Mr. Chairman.
Commissioner, thanks for being here today.

BUDGET REDUCTIONS

You know, as we have this discussion about how to properly
handle the sequester and how to resolve the budget reductions
that you are facing, you know, it is interesting to note that
the Federal Government continues to grow at pretty significant
rates. This year, the Federal Government will have more tax
dollars from the American people than at any other time in
history. Yet we are still running record deficits.
And so I think we all know that, as you endeavor to try to
figure out how to do more with less, and you are getting
greater and greater requirements put upon you based upon
implementation of the Obama healthcare bill, new laws passed by
Congress--those are additional requirements that your agency
didn't have some time ago--that that is what the private sector
has had to deal with.
And so, I know you get that. But just in context, while we
have this debate and think about how we have to handle these
reductions, for most of the American people, they have had to
deal with much more than this. Folks have lost their jobs. They
have had, you know, hours cut, salaries cut. I talked to a
constituent yesterday who is having her hours cut because her
employer doesn't want to have her have over 30 hours to qualify
under the healthcare bill.
And so, huge problems in the economy, some of which have
been created by policies that have been pursued by Congress
over the past few years that increase mandates on businesses,
increase the cost of doing business. And I want to talk about a
couple in particular of those, and then I have a few questions
for you.
One of the impacts on the economy have been billions of
dollars in unfunded mandates, trillion in taxes, the healthcare
law. We just raised taxes on January 1. And so, if those
burdens weren't enough, we now have Federal food labeling
mandates, which I know your agency is engaged in, on local
grocers and convenience store owners. All of this is obviously,
of course, bad for the economy, job creation, drives up the
cost of doing business.

FOOD LABELING

And so, I know one of the mandates on the FDA was to try to
help those requirements coming from the healthcare law have the
most affordable way to be implemented. And so I guess I would
ask, where are we on those food labeling requirements? Are we
working hand-in-hand with our grocers and convenience store
owners to ensure that these healthcare mandates that are
required by law to come down the pike that you have to create
rules for can be done in the most cost-beneficial manner as
possible?
And do we know what the impact is in terms of the outputs
that these convenience store and grocery store owners are going
to have to pay?
Dr. Hamburg. Well, the healthcare reform act did include
menu labeling, as you note, for chains of 20 or more and also
for vending machines when there are 20 or more by the same
owner. And we have been doing rulemaking on that, and it has
been an extended process with proposed rules, you know, notice
and comment. And we are now working through all of the comments
that we have gotten in that process to put forward the final
rule.
One of the challenges of this, you know, to be frank, has
been really defining what is a restaurant-like establishment.
You know, what a restaurant is seems very straightforward, and
I initially thought that implementing this was going to be, you
know, one of the easier tasks before the FDA, but it has been
actually enormously complicated. And, you know, some of the
issues about convenience stores, box stores, movie theaters,
different kinds of facilities that sell prepared food have all
been, you know, part of the discussions and considerations.
And we have attempted to look at both the public health
impact and, of course, you know, the economic analyses required
to look at the requirements for implementation, trying not to
make an excessively burdensome rule but one that will have
meaning and reflect the spirit of the legislation.
So we will be, by the end of the calendar year, I think,
putting out the final rule on menu labeling.
Mr. Yoder. Do we know what the cost to comply is? I have
seen some reports saying that it would be up to a billion
dollars on grocers and convenience stores, and I have seen
reports showing less. Does your agency have an idea of what
this will cost these----
Dr. Hamburg. Well, the final----
Mr. Yoder [continuing]. Small-business owners? And how can
the FDA help reduce those costs?
Dr. Hamburg. Well, I think there have been various
estimates out there, as people have sort of thought about
different models for how the contours might be defined in terms
of the broad array of restaurant-like establishments.
You know, the final determinations have not been made in
terms of which kinds of facilities will be in and which won't
be. But we are looking at economic analyses as well as public
health implications with respect to the overall consideration
of the appropriate regulatory----
Mr. Yoder. And I have one question regarding the PDUFA user
fees. When those fees are sequestered, do those fees go back to
the paying entities, or are they allowed to be spent at a later
date by the FDA? Is this a delay in expenditures, or is it
actually a cut? And if it is a cut, then do the fees go back to
the paying entities?
Dr. Hamburg. You know, I think that is a question that is
still being resolved at higher levels than I. The user fees are
being subject to the same levels of cut in sequester as budget
authority dollars. Those fees are still being collected from
industry----
Mr. Yoder. Right.
Dr. Hamburg [continuing]. But they are not going to support
the FDA programs that were negotiated with industry as part of
the collection of those user fees.
Do you want to speak to----
Mr. Cochran. I guess the only other thing I would have to
add is that FDA and the user fees, with regard to
sequestration, follows guidance under OMB. And our
understanding is that those dollars are held basically in FDA's
account, and the only way that FDA would have the authority to
spend them would be if Congress took action to effectively
reappropriate them.
Mr. Yoder. So, essentially, the money is still there. It is
not necessarily a cut, it is a delay in spending; that FDA may
get those dollars at a later if Congress gave them that
permission.
And I have to yield back.
Dr. Hamburg. I don't know that for sure, but that would
be----
Mr. Aderholt. Ms. DeLauro.
Ms. DeLauro. Thank you very much, Mr. Chairman.
And welcome, Commissioner. Thank you for the great job that
you do with an amazing portfolio, which includes foods, drugs,
devices, tobacco. It really is pretty extraordinary.
And to that, I want to make a note about user fees, if I
can quickly, so I can get to my questions. The FDA budget
without user fees is $2.5 billion for 2014. Contrast, the
request for NASA is $17 billion for 2014. Move back to 2013,
you got $2.3 billion, NASA got $17 billion. It is 7.3 times
larger than the FDA.
Again, review the portfolio of this agency and what it
does. We are not talking about hardware. We are not talking
about--we are talking about life and death at the Food and Drug
Administration. If we are serious, let us provide the FDA with
the budget authority that it needs commensurate with the job
that it does. And let's start, in fact, putting our money and
our dollars where our mouths are. And I would rather have
budget authority than user fees any day of the week and am
willing to vote to give this agency the money it needs to get
there.
Before I start the questions, I am glad to hear that the
FDA has moved forward on reclassifying tanning beds to their
appropriate risk category, and long overdue. We will wait to
see where we are.
I hope to see, as the author of the--I would just say to my
colleague, I authored the menu labeling rule, and it became
part of the ACA, and it was to include movie theaters, chains--
we are talking about chains--chain grocery stores, and all
similar retail establishments.
I just want you to know--and this is about the movie
industry, who claims that they are not in the food business. I
take pictures when I go. This is chicken tenders, a chicken
tender combo, hot dog and fries, cheese fries, a curly fry
cone, mozzarella sticks, and funnel cake. We are not talking
popcorn and soda any longer at movie theaters. We are talking
about hot and cheesy and a kid's pack here, pretzel bites. Go
to the movie theater, take pictures, and find out what business
our movie theaters are in these days.
So this is a key part of their marketing and their profit.
And they ought to be required to label in the same way that the
Restaurant Association agreed--and we worked very, very closely
with the Restaurant Association to agree to put the calories up
on the board.
Dr. Hamburg, let me talk about--the question I really want
to ask here is, the Trans-Pacific Partnership, that trade
agreement, those negotiations are under way. I understand that
some segments of the food industry are strongly advocating for
a binding dispute resolution. What are your perspectives for
making the SPS provisions subject to binding dispute
settlement?
Dr. Hamburg. Well, as you know, these are ongoing
discussions and involve very important issues. We are a partner
across government in these discussions. Our role is obviously
to make sure that important issues of public health and public
safety are adequately addressed in the agreements that are
ultimately reached.
We do think that there is a very clear role for
incorporating technical consultative cooperation as part of a
dispute resolution mechanism. Our concern, of course, is that
we want decisions about the safety of imported products, the
appropriateness of bringing certain kinds of products in for
the American people, that those questions are adjudicated with
the right subject-matter experts based on the best possible
science and knowledge about the public health and medical
implications.
And so I think the issue of, you know, whether it is a
binding dispute mechanism is one that needs further discussion
and exploration. Because we would never want to be in a
position where critical decisions would be locked into that
might not reflect the best possible science, the subject-matter
expertise necessary to best serve the health of the American
people. And, you know, one needs to really think through what
are the unintended consequences of various approaches that
could be undertaken.
Ms. DeLauro. There is a danger, in my view, about the
integrity of the standards that are imperative to consumers and
confidence in our food safety. I will just say the substance,
ranging from the inspection process to specific microbiological
standards, our zero tolerance for some of the most dangerous
pathogens, can be put in harm's way if we move in this
direction.
I will continue to follow this with you. And I am hopeful.
And maybe at another point, I want to know about your seat at
the table in those trade negotiations and the weight of your
voice in that effort.
Thank you, Mr. Chairman.
Mr. Aderholt. Thank you.
And let me just say, we are going to try to stay to the 5-
minute rule as close as possible because votes are coming up.
So, at this time, I would like to recognize Mr. Valadao.

FOLIC ACID PETITION

Mr. Valadao. Thank you, Mr. Chair, Commissioner.
Hispanic women are 20 percent more likely to have a child
with neural tube defect, a devastating birth defect that can be
permanently disabling or deadly. Up to 70 percent of these
defects can be prevented if women of childbearing age had
adequate levels of folic acid, B vitamin, before and in early
pregnancy. For over a decade, our Nation has mandated that
folic acid be added to enriched cereal grain products.
Unfortunately, this does not include corn masa flour, a staple
of many Hispanic women's diets.
I understand that a petition was filed with the FDA over a
year ago that proposes to allow the addition of folic acid to
corn masa flour in products such as corn tortillas and tacos.
What is the status of FDA's review of this petition?
And I would urge you to ensure an expedient and reasonable
review of the petition and be mindful that neural tube defects
continue to occur while the FDA deliberates.
Dr. Hamburg. This is a very important public health issue,
and I have, you know, been briefed on it and am aware of the
citizens' petition.
I am not up to speed on the timing of that review, and, if
I may, I would like to get back to you with the specific
information on that. But it is certainly an issue that is on
our radar screen and being worked on. And I will give you some
more specific information, if I may.
Mr. Valadao. All right. Thank you.
Mr. Aderholt. Ms. Pingree.
Ms. Pingree. Thank you, Mr. Chair.
Thank you very much for being with us here today. It has
been fascinating to hear the wide-ranging level of information
that you have to cover. And I know there is a tremendous amount
of responsibility that rests with your Agency. So thank you so
much for your very hard work.
I hear about the FDA from my constituents in a variety of
ways. And I just want to take on one of the issues right now
that you have talked a little bit about, and that is the Food
Safety Modernization Act and the rule implementation that you
are going through.
I want to start by saying we all want our food to be safe,
and every day we hear about a concern that people have about
making sure our food is safe. I represent a lot of farmers, and
I know I can say that I have never met a farmer who does not
take very seriously their responsibility to produce good, safe
food for consumers.
I also want to commend my colleague, Rosa DeLauro. I know
she worked so carefully to produce a bill that produced and
ensured food safety for consumers. So I know that she also,
from the consumer side, has been working extremely hard, as so
many other Members of Congress have.
During the debate on the Food Safety Modernization Act,
Congress had a healthy discussion about one-size-fits-all
regulations and how best to assess where risk actually comes
from. I was encouraged the other day in the Senate hearings
when Senator Tester was successful in reminding everyone that
he had included a provision in the final food safety bill that
works toward making regulations more workable for small and
midsize farms involved in low-risk supply chains. And while I
am encouraged that that is in there, I remain very concerned
about the impact of the final rules on diversified small food
producers.
Unfortunately, for my first 4 years in Congress, I have
heard almost nothing from the farmers in my district but fear,
frustration, confusion about how the food safety rules are
going to be implemented. They want to know how the rules will
impact them and how they will fit into the system. They are
very concerned about the cost and administrative burden that it
will put on them and whether or not they will be able to stay
in business.
I have often talked frequently in front of this committee
about the growing role of local foods and agriculture and how
people are very interested in buying food from small retail
outlets, from local foods, from CSAs, farmers markets.
So I just want to make sure--and I know you have a lot of
work left to do, and this is kind of long, but it is a deep
concern of mine. I really want to make sure that you are
looking at diversified operations, that you have those farmers
in mind as you work to improve the proposed rule, and that you
are scaling the regulation to the size of the farm and the
amount of risk.
The fact that different supply chains pose different levels
of risk in our food supply must be part of the guiding
principle that the FDA works with. I don't think that we want
something that looks like a repeat of what happened with HACCP
in the meat-processing rule a long time ago, which had the
unintended consequence of shutting down hundreds of small meat
processors, because they could no longer afford to do business.
And it, in my opinion, hasn't provided the consumer with
necessarily all safe or all perfect food.
Some of the FDA estimates have said that the cost to comply
with this proposed produce rule for farms with less than
$250,000 of annual revenue will face over $22,000 in compliance
costs. For many farmers who are just getting a start or are
starting to grow or small farmers in my district, that is their
profit for the year.
So I hope you are looking carefully at how these rules will
be imposed, really understanding some of the aggregation, food
hubs, things that the Department of Agriculture on the one hand
is promoting and we are finding great success with, and making
sure that, as you look through how these rules are implemented,
that there isn't an onerous burden and, in fact, it makes our
food safer, but doesn't cut out the small and medium-size
farmer.

PROPOSED RULES--FSMA

Dr. Hamburg. Well, I could give you a very quick answer to
a very important question, which is that we are very mindful,
we take this very seriously.
We have tried, as we were shaping the proposed rules, to
really do a lot of outreach, meet with the diverse grower
community and actually, you know, go on to many of these
different kinds of farms to get a better understanding of their
issues and concerns.
Of course, the original Food Safety Modernization Act did
have the Tester amendment that excluded certain size farms and
with limited distribution areas altogether. But as we think
about the rules going forward and, of course, as we get
feedback on the proposed rules that are out there for comment,
you know, we are very much recognizing this set of issues.
I think no matter who is growing and producing the food,
you know, at the end of the day, everybody wants safe food. But
we do need to recognize that the approaches need to be tailored
to unique and differing needs, including both some of the
approaches and also the phase-in to enable and support farmers
who are trying to make a living and trying to produce safe,
high-quality food.
Ms. Pingree. Well, thank you very much. I am out of time,
but I just want to say I am looking forward to working closely
with the FDA. This is, as I said, an issue that I have heard
probably as much about as anything else since I have been in
Congress from the farmers and food processors in my area. And I
hope we can continue to have a conversation about this. Thank
you.
Thanks, Mr. Chair.
Mr. Aderholt. Mr. Fortenberry.
Mr. Fortenberry. Thank you, Mr. Chairman.
Thank you, Dr. Hamburg, for appearing today.
Is our imported food safe?

IMPORTED FOOD SAFETY

Dr. Hamburg. You know, we are very fortunate in this
country to have one of the safest food supplies in the world,
but as the world has become more globalized, the volume of
imported food has increased dramatically, and many of the foods
that are being imported into this country are coming from
places with much less sophisticated regulatory oversight and
are commodities that are vulnerable intrinsically.
And, you know, I did see a survey recently that showed that
61 percent of the American people are very concerned about the
safety of imported food, and it is a concern that I share.
And we are really making aggressive efforts at the FDA to
respond to the growing volume of food safety imports, doing it
in a number of different ways. But we feel that we have to
strengthen oversight of these products in order to assure that
the food Americans get in the grocery store and in other
settings is as safe as it can possibly be, whether it comes
from an imported source or a domestic source.
Mr. Fortenberry. This is an interesting article, in The New
York Times last year, ``China's Corrupt Food Chain,'' talking
about how there is a significant lack of business ethics as
well as distrust among Chinese people of their own food supply.
Now, I don't know what the percent of food that we import
comes from China. On medical devices, another category, I think
you have pointed out that 80 percent of it comes from either
China or India. So I don't know how that correlates to food
imports----
Dr. Hamburg. Right.
Mr. Fortenberry [continuing]. But I assume it is a
significant percentage. And then 80 percent of our seafood is
coming from overseas. And, again, I don't know how that
correlates to China. But the larger generality here is that,
given the aggressive expansion of food imports, there is real
reason to be concerned here.

CHINA FOOD SAFETY

Dr. Hamburg. Yes. And, you know, we are very focused on a
set of critical products and our working relationships with
critical regions of the world that are importing products to
us.
China is a major partner in our efforts to improve food
safety. We now have----
Mr. Fortenberry. Well, could you unpack that statement?
Explain what that means, precisely.
Dr. Hamburg. It means that we do get a large volume of
products, food and medical products, from China, including
active pharmaceutical ingredients in drugs used here. It means
that we do need to really have a robust regulatory framework to
address concerns, both known, existing concerns and also ones
that we can anticipate possibly in the future.
We now have three offices in China--Beijing, Shanghai, and
Guangzhou--to strengthen our ability to be on the ground
working with both industry and regulators in China----
Mr. Fortenberry. What percent of the----
Dr. Hamburg [continuing]. Doing more inspections. We have
asked----
Mr. Fortenberry. What percent do we inspect?
Dr. Hamburg. The percentage of facilities overseas that we
are able to actually inspect is not very large. I don't know
what the number is.
We are doing many more foreign inspections than we have
ever done in the past, but we are not going to be able to
inspect our way out of the realities of the modern world and
the challenges that we face. We also have to put in place new
systems that involve new cooperative arrangements with
regulatory authorities, more sharing of information, sharing of
the workload in terms of inspections. We need more
sophisticated screening methodologies that are based on risk.
And we need industry to work with us to put in place the kinds
of supply chain protections that are----
Mr. Fortenberry. My time is running short. I am sorry to
interrupt you. But does the American taxpayer subsidize the
inspection of food imports? In other words, what is the
mechanism here by which those are paid for?
Dr. Hamburg. Our inspectional program, whether it is
domestic or imported, comes out of our budget. We in this
budget are asking for user fees to also help to support some of
our important import oversight activities and inspection
activities. But, yes, our activities, whether domestic or
international, for food safety come from our available budget.
Mr. Fortenberry. Thank you, Mr. Chairman.
Thank you.
Mr. Aderholt. Mr. Bishop.
Mr. Bishop. Thank you very much, Mr. Chairman.
And thank you very much, Dr. Hamburg, for being here with
your team.

ANTIBIOTICS LIVESTOCK

I have some questions I would like to explore with regard
to antibiotics and livestock and poultry. I have consistently
tried to look out for industry as well as the consumer and try
to balance when it comes to regulations. And my thoughts have
always been that regulations should be based in sound science,
that they should be subjected to a cost-benefit analysis, and
they should make common sense.
And I appreciate very much, and this committee does, the
FDA's efforts to examine the sales data of antibiotics. But
some are saying that the data that you are collecting is flawed
because of two things: One is that the data includes
antibiotics that may be used on non-livestock species, and also
because the data includes tracking ionophores.

IONOPHORES

Given that the mode of action for ionophores is extremely
different from that of antibiotics and that, to the best of my
knowledge, the use of ionophores in livestock does not pose any
risk to humans, why does the FDA still classify ionophores as
antibiotics?
And I am going to ask my second question since we are
running short on time. The fact that you monitor antimicrobial
resistance and you keep track of trends in both the grocery
store and on the farm, we have heard that the NARM program is
currently undergoing some changes. And so I would like for you,
after you answer the first question, to share with us why the
program is being changed, what changes you are proposing, and
particularly what changes with regard to home farm monitoring.
Dr. Hamburg. Well, you have asked a lot of questions
embedded in one and on very important public health issues.
The problem with antibiotic resistance for both humans and
animals is a very serious one, and we need to protect our
ability to have antibiotics that really work against important
infections.
The use of antibiotics in animal populations is certainly a
contributor, a major contributor, to some of the resistance
that we have seen evolve over the years. And, you know, we are
making very concerted efforts both to really understand the
nature and scope of the problem and to address it.
Importantly, you know, we are taking actions, as I am sure
you know, to really achieve judicious use of the antibiotics
that we have in both animal and human populations, but, with
respect to animal husbandry, to make sure that antibiotics are
not inappropriately used for growth promotion but are used to
treat infections----
Mr. Bishop. I appreciate that very much.
Dr. Hamburg [continuing]. Under the guidance of
veterinarians.
We do feel that our NARM system is very important, but that
leaves----
Mr. Bishop. Excuse me. Before you get to the NARM system,
the part of ionophores, which are different from antibiotics
and which, from my understanding, has not proven to contribute
to any resistance in humans.
Dr. Hamburg. You know, I think that I can give you the best
possible answer if we get back to you as part of the record,
because I am not directly familiar with the data on ionophores.
Mr. Bishop. Okay. And make sure that when you do get back,
that it is based in sound science.
Dr. Hamburg. Well, I will do my best. That is a guiding
principle.
[The information follows:]

FDA clasifies ionophores as ``antimicrobials'' because they are
used to treat infections in animals caused by certain non-bacterial
microorganisms called coccidia. Section 512(1)(3) of the Federal Food
and Drug and Cosmetic Act requires sponsors of antimicrobial new animal
drugs to submit to FDA on an annual basis a report specifying ``the
amount of each antimicrobial active ingredient in the drug that is sold
or distributed for use in food-producing animals.'' This section also
requires FDA to publicly report annual summaries of this antimicrobial
sales and distribution data, which includes ionophores.

But with respect to NARMS, you know, we are looking at it.
We put out an ANPRM to get input from the public and
stakeholders about how we could, you know, really effect some
enhancements to our data collection systems to better inform
our decision-making and make sure that we have good, solid
data.
Mr. Bishop. Thank you for that answer.
But I was struck to find out that it appears that FDA is
categorizing as antibiotics ionophores, which are quite
different and have a different way of working in terms of being
mixed with the feed for our livestock and our poultry. And, of
course, that, again, as a proposed regulation--and I understand
that you are looking at the anti-resistance developments--could
have a great impact on the meat industry and the poultry
industry as they process and grow the food that we eat.
And, of course, it has to be balanced, but when you
regulate, make sure that it is based in sound science, that it
is subjected to a cost-benefit analysis, and that it makes good
common sense.
Thank you.
Mr. Aderholt. Mr. Nunnelee.
Mr. Nunnelee. Thank you, Mr. Chairman.
Dr. Hamburg, thank you for being here.

USER FEES--PHARMACEUTICALS

Mr. Yoder had asked questions about the user fees paid for
approval and analysis of pharmaceuticals. I will summarize what
I thought I heard the answer is, that the users are still
paying those fees, but some of them are being set aside in some
kind of expense account that is not being used to evaluate the
drugs. Is that right?
Dr. Hamburg. Yeah. I mean, let me be clear, this is not an
FDA policy. This is a decision or a determination based on the
way in which the user fee dollars are appropriated, that they
are treated like budget authority dollars.
In terms of the impact on FDA, you are absolutely right.
The user fees are being collected from the industries that we
negotiated for those fees with, but they are not available for
us to use as we stand up the new user fee programs or as we
implement the ongoing ones. Of course, we have access to some
of the user fees, but the total dollars available is being cut
at the same level as the budget authority with respect to
sequester.
Mr. Nunnelee. All right, so what effect on approving
potentially lifesaving drugs is this expense account that is
sitting over to the side having on the FDA?
Dr. Hamburg. Well, you know, of course, we are going to try
to do as much as we can with what we have to achieve the
important goals of these user fee programs. However, the dollar
amounts in the user fee agreements reflected a very careful
calculation of what were the critical needs, what were the
goals, what would it take to achieve them. And when those
dollars are cut, it means that we aren't going to be able to
fully achieve the goals and the performance targets that were
set in conjunction with industry in the user fee process.
So we are worried that it will slow our ability to put out
important guidances, to review applications that come before
us, to do a set of important new hires, to stand up new
programs and expand others, to improve business processes, to
make our regulatory pathways more effective and efficient, and,
importantly, to continue to do some of the work to develop the
new regulatory tools that will make our regulatory system, you
know, really appropriate for the sophistication and complexity
of the products that are coming before us.
And the other thing is that we know that the system works
better when we can work more closely with the companies, the
sponsors of the products to identify what kinds of data are
going to be needed, the kinds of studies that would be most
important for them to do, and have ongoing communication. And
this will certainly limit the staff and flexibility to engage
in those activities.
Mr. Nunnelee. You said this is not of FDA's making. And in
response to Mr. Yoder's question, you said, this was made at a
higher level than I. Who made the decision?
Dr. Hamburg. Well, I might turn to my colleague from the
Department of Health and Human Services, who is a budget
expert, but I believe it----
Mr. Cochran. Yeah, so the implementation or the execution
of the sequester government-wide is determined or led by the
Office of Management and Budget. And so the counsel at OMB has
determined what the appropriate application of that sequester
would be for user fees in this fiscal year.
Mr. Nunnelee. So a lawyer at the Office of Management and
Budget made the decision that we are going to take money that
has already been paid, set it aside, and not do anything with
it. And your testimony is that it is slowing the approval of
potentially lifesaving drugs.
Dr. Hamburg. My testimony is that we are concerned that the
user fees were negotiated and specified with respect to a set
of program activities and what they would cost to achieve, and
if we have cuts in the available dollars, it will likely have
meaningful impacts.
Mr. Cochran. If I could just add, I think OMB's view is
that this isn't an elective decision. This is their
interpretation of the statute as it stands.
Mr. Nunnelee. All right.
Thank you, Mr. Chair.
Mr. Aderholt. Okay. We are approaching a vote, and in
consideration of--we have a series of votes. We will be on the
floor for quite some time, so I don't anticipate that we could
get back before 30 to 40 minutes. So we are going to wrap up.
Several of us do have questions that we want to submit for
the record, but we would ask, considering that we are going
ahead and adjourning early, so that you are not left out here,
and so that we can consolidate our schedules as well, that we
could get expedited answers to these questions that will be for
the record?
Mr. Aderholt. But I think Ms. DeLauro has another question
before we adjourn.
Ms. DeLauro. Thank you very much, Mr. Chairman. I
appreciate your indulgence.
Just for the record, because my colleague, Mrs. Lowey,
dealt with the compounded drugs and medical products, I would
just very much like to have a--get back to me, you know,
directly to my office about the authorities that you need, the
specific authorities that you need in order to be able to
address this issue. And I would ask you to take a look at the
safe legislation that has been introduced in this area to tell
us whether or not it helps to meet your concerns in how we can
really mitigate against what is happening there.
Food safety. The CDC is investigating an outbreak of
salmonella, 18 States. That is associated with imported
cucumbers. It takes up to 3 years to fully train a food safety
inspector. FDA is not going to meet the target for foreign
inspections this year or next, with only 1,200 planned
inspections. 2016, FDA is supposed to inspect 19,000 foreign
facilities.
Tell us, if you are to meet FSMA's requirements for
domestic and foreign inspections, will the FDA need more
inspectors? If it does, when do they need to be hired? What
does this budget do to meet the requirement?
[The information follows:]

[GRAPHIC] [TIFF OMITTED] T2639A.156

And then what I would like--again, I would like you to
submit--I want you to answer those questions, but I would like
you to submit for the record, also directly to my office, a
detailed breakdown of your food inspection personnel, noting
the number of personnel for domestic inspections and the number
for international inspection.
Thank you.
[The information follows:]

To respond to your question, we are providing the following
document which details the breakdown of FDA foods inspection
personnel. Please note, these numbers are the Full-Time
Equivalent hours only for the inspections. This does not
include support FTE, or FTE related to other Foods activities
such as investigations, domestic or import sample collections
or analysis, field exams/tests, import field exams or other
operations. This also does not include inspections conducted
through state contracts or partnerships.

FDA FOODS INSPECTION PERSONNEL
----------------------------------------------------------------------------------------------------------------
FY2012 FY2012 FY2013 FY2014
Food Inspection Personnel * Estimate Actuals Estimate Estimate
----------------------------------------------------------------------------------------------------------------
Domestic.................................................... 331 323 348 348
Foreign..................................................... 44 56 44 44
---------------------------------------------------
Total................................................... 375 379 392 392
----------------------------------------------------------------------------------------------------------------

Dr. Hamburg. Okay. Well, just a quick answer to your
question, and then we will get back to you with more detail.
But I do want to underscore that, actually, last year, we did
meet our FSMA target for--in fact, exceeded it, I believe, for
foreign inspections. But, of course, the numbers, as you know,
in the legislation ramp up very quickly.
Ms. DeLauro. 19,000 for 2016.
Dr. Hamburg. And I do think that, you know, as we think
about the real world that we live in and what is going to be
required, we need to think about not just the role of
inspections but other important activities as part of our
overall program, many of which are reflected in new authorities
in the Food Safety Modernization Act in terms of information-
sharing, strengthening regulatory capacity in other countries,
doing training, technical assistance.
The Foreign Supplier Verification Program and third-party
audit is going to be very, very important, as well, to our
overall program that will address food safety. And, of course,
the new rules, the produce safety and the preventive controls
will apply whether you are a domestic or a foreign manufacturer
or grower.
So I think there are a number of things beyond inspections
alone that will help to strengthen the security of the supply
chain in our food imports.
Ms. DeLauro. I would only add, Commissioner, that, in fact,
if there is going to be a Trans-Pacific Partnership agreement,
that the influx of imported seafood from Vietnam, from Thailand
and Malaysia will be extraordinary. As my colleague, Mr.
Fortenberry, pointed out, 80 percent of our seafood now comes--
it is imported. And we know, we know now, the rate of
contamination and the import alerts that have occurred. That
will make your job harder.
We need to know on this committee what is required to
ensure the public health of this country domestically,
internationally, and how overwhelmed your agency may be if this
committee doesn't do something about the resources that it
supplies to you.
Thank you very, very much, Mr. Chairman.
Mr. Aderholt. Thank you, Ms. DeLauro.
Again, this wraps up our last hearing for the budget for
fiscal year 2014. I want to thank all the staff on both sides
of the aisle for their work during this hearing process.
And, again, we thank you for being here and look forward
to----
Dr. Hamburg. Thank you.
Mr. Aderholt [continuing]. Working with you as we proceed
on with the fiscal year 2014 budget.
Thank you.
Dr. Hamburg. Thank you.

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W I T N E S S E S

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Page
Cochran, N. W.................................................... 177
Garcia, Juan..................................................... 1
Hamburg, M. A.................................................... 177
Heinen, Suzanne.................................................. 1
Scuse, Michael................................................... 1
Tyler, James..................................................... 177
Willis, Brandon.................................................. 1
Young, Michael................................................... 1