Ogden Mills Phipps: Problems relating to illegal medication have plagued the Thoroughbred industry for ages. And it's really impossible to measure what they have cost us in terms of owners, breeders and fans, not to mention television contracts, sponsorship opportunities or pari-mutuel handle.

Frankly, I'm not sure which is worse: the fact that so many outsiders believe that illegal medication is used routinely, or the fact that so many of us inside the industry believe the same thing.

If there is a lack of consumer confidence in the product we're offering, our fans will quit playing or turn to other gaming options.

In a recent NTRA survey of 1,250 fans who attend the races or wager on a weekly basis, one-third of them said Thoroughbred racing had serious integrity issues that will damage the sport.

By far, the number one integrity issue, according to the fans, was the use of illegal, performance-enhancing drugs.

Andy Beyer of The Washington Post has also spoken out against the use of illegal medication in this sport for many years, and on National Public Radio recently, he said, and I quote:

"The use of illegal drugs is so widespread and so out of control that these are not assorted brush fires that have to be put out. This is like a raging forest fire."

Diligent efforts are being made to fight that fire, especially by the Racing Medication and Testing Consortium and by the Equine Drug Research Institute. Scot Waterman and Nick Nicholson will update us on the progress of these two groups. Scot...

Dr. Scot Waterman: Thank you, Mr. Chairman, and good morning.

I would like to spend just a few minutes to update you on several consortium initiatives that I presented at the Round Table Conference last year and then share some perspectives I have gained over the past few years on the issue of drugs in racing.

First, our push toward uniformity continues to move in a positive direction. Our initial edition of model rules has now been adopted by 31 of the 38 racing jurisdictions. Of the remaining seven jurisdictions, two are initiating the adoption process this month and the RMTC is actively targeting the remaining five for adoption by the end of the year.

Our second edition of the model rules, which will transform the process by which penalties are determined, has now been adopted by California and Kentucky and is being reviewed by at least eight other jurisdictions.

Progress has been slow due to statutory restrictions that cap the maximum penalties at the steward and commission level, and the necessary involvement of other state agencies beyond the racing commission, because this language involves the individual state legal process. It is frustrating but we will get the job done and the industry will benefit substantially because the implementation of this penalty language will result in a more uniform and transparent system for all stakeholders.

The adoption of this language will also help us achieve one of the recommendations of the 1991 McKinsey Report by expanding the responsibilities for drug violations to other licensees beyond the trainer.

I'm sure many of you were here when the McKinsey Report was unveiled at the 1991 Round Table Conference.

One particular quote from that report says it best:

"A clear understanding of responsibilities for drug infractions and a nationally consistent penalty schedule - if implemented - will dramatically improve industry drug detection effectiveness with virtually no new costs."

The implementation of this penalty language, along with language recently approved establishing out-of-competition testing and restrictions on the use of anabolic steroids that Dr. Arthur mentioned, is our primary regulatory mission this year and next.

Our push toward a system of uniform withdrawal times began in earnest last year and will continue over the next few years. We have identified for study this year eight drugs that are responsible for a substantial number of rule violations annually. We are now administering these medications to 20 horses as opposed to the typical five- or six-horse studies we have been dependant on in the past. Furthermore, we are using statistical procedures that are based on those used by the United States Food and Drug Administration for determining drug withdrawal times in food-producing animals.

The project is unprecedented in its scope and will capture more data on these medications than has ever existed. More data leads to better decisions as to where to set a withdrawal time and what the concentration of drug is which regulates that withdrawal time. These are important decisions and we need a statistically relevant amount of data to make them.

The consortium is also continuing its security and research programs, which are focused currently on increasing the presence and training of backstretch security personnel and acquiring and identifying the active ingredients in unknown contraband being marketed as performance-enhancing on backstretches throughout the country.

Despite our successes in a relatively short period of time, the RMTC faces constant criticism. I have been told over the years that the RMTC moves too slow, that we are too bureaucratic, that we aren't inclusive enough, that we are trying to do too many things, and that we aren't doing enough things. Despite the tangible progress we've made over the years, there is a perception among some that the problem of drugs in racing is no better than it was before the RMTC existed.

As the one person in this industry who has studied, observed and wrestled with this issue nationally on a full-time basis for the past six years, I understand the criticisms.

Unfortunately, some very basic structural problems that were identified as far back as the McKinsey Report must be solved before the perception of the drug issue can change.

Quite simply, no single organization in racing has the ability to mandate change nationally and the consequences of the solutions to these problems are difficult - politically, philosophically and financially - when brought down to the local level.

What are these structural problems? I'll talk about two that I personally think are the highest priorities to solve.

First, our racing laboratories are understaffed and underfunded. This seems like a ridiculous statement given that, as an industry, approximately $30 million is spent on post-race testing annually.

This figure dwarfs the amount spent on drug detection and control by the major professional sports leagues and even most other racing countries.

But when you look at that $30 million figure a little closer it becomes clear why it is an insufficient amount. First, that figure is split among 38 racing jurisdictions so the average expenditure per state is less than $1 million annually. That would still be okay if that money was concentrated at a small number of laboratories, but unfortunately, it is divided among 18 different testing laboratories at present.

The second problem with that figure is that, as noted in the McKinsey Report, the industry's expenditure on testing in 1989 was estimated to be $27.6 million. So in 17 years, the amount this industry spends on testing has grown by an anemic $3 million, yet we expect our labs to be equipped with cutting-edge technology and be the research and development arms in the fight against prohibited substances.

Frankly, given those numbers, it is amazing that the industry has done as well as it has to stay current, and in large part, credit needs to be given to the scientists who have figured out ways to do more with less.

One of the frequent sayings I've heard over the years is that the chemists have held the industry hostage because they don't all get along. I would submit to you that the opposite is true - that the industry has held the chemists hostage by expecting so much but not providing the resources necessary to meet those expectations.

As we look into the future, this problem will only get worse. The RMTC is asking states to now test for anabolic steroids but there is no incremental funding to accomplish this.

Horsemen clamor for uniform withdrawal times but the quantitative methods necessary to regulate withdrawal times come with a higher price tag and there is no incremental funding to accomplish this.

The RMTC will make new methods to detect prohibited substances developed by our funded research available for free, but they do not come with incremental funding for laboratories to implement or even purchase the necessary instruments to perform these methods.

For anyone who has followed this issue, my words this morning should not be a revelation. Many of these inefficiencies were identified in the McKinsey Report.

So what are some possible solutions to this problem?

The most obvious solution would be to regionalize or consolidate racing laboratories in order to maximize testing efficiencies. At the time, McKinsey recommended that the minimum economic lab size be 12,000-15,000 animals tested with an annual budget of $750,000 to $1 million. Remember this is in 1991 dollars and technology so these figures would need to be reassessed.

In reality, this will be difficult to accomplish politically due to the statutory protection of many of the state labs and the bidding process mandated by states when contracts are requested and awarded.

Second, we need to increase the amount of money devoted to post-race testing, and that means the industry lobbying state legislatures and supporting commissions when they push state governments for budget increases. Just adjusting for inflation alone, the $27.6 million identified for testing costs by McKinsey in 1989 is equal to $45 million today so there is at minimum a $15 million deficit that needs to be bridged.

Third, we need dedicated resources for research and development, whether it be with an outside lab, an industry-owned reference and research lab, or by designating and funding an existing racing lab as a "center of excellence," the latter of which was also recommended in the McKinsey Report.

It is critically important to remember though, that even under perfect circumstances, our laboratories will never be able to detect everything and they certainly cannot detect substances they don't know exist.

The second structural problem I would like to address this morning is the lack of any coordinated security and investigatory capabilities in the United States. I don't say this to denigrate those investigators out there who are doing the best they can. But the simple fact of the matter is that there aren't enough of them.

Our racetracks have replaced skilled TRPB agents with minimum-wage contract security guards. As recently as 2004 there was only one state investigator in Kentucky for the eight Thoroughbred and Standardbred tracks in the state. The Kentucky Horse Racing Authority recently tried to increase personnel but had a $4 million budget request turned down in the last legislative session. Unfortunately that is all too typical.

This is all happening despite the fact that we live in an era in which access to pharmaceutical products through non-traditional channels is reaching unprecedented levels.

There are thousands of websites offering drugs without a prescription. There are thousands of formulas available on the Internet that allow people with no advanced education to make pharmacologically active compounds. There are rogue compounding pharmacies out there that have the capabilities to create new molecules in a matter of minutes.

While federal agencies and even some state agencies could be tremendously helpful in solving these problems, their focus is squarely on homeland security and threats to human health; we cannot expect the kind of consistent support from them that we need.

As an industry, we need to take control and create an investigatory arm dedicated exclusively to tracking down products and distribution pipelines and collecting the type of evidence that will force federal and state agencies into action. There needs to be criminal prosecution by these agencies for people trying to win races by illegally drugging horses, but we can't sit idly by and expect them to do the work for us.

There are opportunities for the RMTC, RCI and TRPB to do this but none of these organizations currently has the money or the manpower to pull it off.

Since I've referred to it so much already, I may as well close with a pertinent quote from the McKinsey Report, which The Jockey Club commissioned in 1991:

"We believe that at this point it is reasonable to ask all racing industry participants to take responsibility for implementing an improved, industry-wide drug testing system, especially if the industry wants a truly world-class system."

After six years of doing this, I believe with all my heart that the industry wants a world-class system so it is time to ask all racing industry participants, including the state legislatures that have chosen to tightly regulate our sport, to help us solve the problems I identified this morning. They are not insurmountable but we can't do it without your support. Thank you.

Ogden Mills Phipps: Thank you, Scot.