[Congressional Record Volume 141, Number 78 (Thursday, May 11, 1995)]
[Senate]
[Pages S6494-S6497]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
GATT AND GENERIC DRUGS
Mr. PRYOR. Mr. President, when we in Congress voted on the GATT
treaty recently, we all knew that we were breaking down trade barriers
and leveling the playing field in international trade.
Make no mistake, I believe that Americans will benefit from this
agreement when it is implemented in June. But never, Mr. President, in
our wildest dreams or imagination, would we have ever thought we were
voting to give special treatment and a $6 billion windfall to the
prescription drug industry on one hand and higher drug prices to
American consumers on the other. Yet that is exactly what is happening.
Mr. President, here is what has happened to bring us to this point
today. Last year, the United States agreed under GATT to a new patent
law, good for 20 years from filing. Our old patents were for 17 years,
the effective date from their date of issue.
We also agreed under GATT to give existing patents the longer of the
two patent terms. This extension applies to all industries.
At the same time, we knew that generic companies of all kinds all
over America had already made significant investments based upon old
patent expiration dates. These companies were prepared to introduce
their competitively priced drug products just as the brand-name
monopolies end.
We did not want to jeopardize the jobs and the factories which were
at stake. So we decided under GATT to adopt a formula under which these
generic companies could proceed with the introduction of their products
if they paid the patent holders ``equitable remuneration'' for the
period of time left on their patents.
Mr. President, here is where this story really begins. It just so
happens that over 100 prescription drugs now protected by patents will
be getting extra patent life under GATT.
For example, Glaxo's patent for the world's best selling drug,
Zantac, would have run out December 5, 1995, but will now last until
1997. Generic drug companies have already spent millions of dollars to
prepare to market lower cost, equivalent drugs on that date, giving
consumers of America a tremendous price break.
But a small handful of brand-name pharmaceutical companies have
objected. They are saying, ``Thank you for the extra patent life. We
really appreciate that part of GATT. But you should know there is an
obscure provision in U.S. drug law which we think protects us from the
rest of the GATT treaty. We are sorry our generic competitors have
invested heavily in their business, but they do not deserve the
protections that are rightfully theirs under GATT. So we guess we will
not have any competition for quite some time.''
[[Page S6495]] This is what they have told the Food and Drug
Administration. The pharmaceutical manufacturers have even threatened
litigation against the Food and Drug Administration.
I am deeply concerned, Mr. President, because if they get their way
at this time, they gain a multibillion dollar windfall--alone among the
dozens of other industries and thousands of other companies complying
rigidly with the GATT treaty.
Even worse, consumers now are going to have to pay double for these
drugs. They will have to pay twice, Mr. President, as consumers and as
taxpayers. The Federal Government and the State governments are going
to pay an extra $1.25 billion for prescription drugs for older
Americans under Medicare, veterans, low-income families and children,
as well as the active duty military.
That will come out of our tax dollars. The American taxpayers will
thus be paying more taxes so that a few brand-name drug companies can
make more profits and block competition in the marketplace--
forcing the American consumer to continue paying the highest drug
prices in the world today.
Most important, I think, will be the effect on older Americans,
Americans on fixed incomes, and Americans without adequate health
insurance. They will feel the hurt of these soaring drug prices even
more.
Mr. President, this chart is fascinating because it demonstrates very
clearly that two of our best-selling drugs on the market are about to
run out of patent protection, and should have generic competition by
the end of this year.
Zantac, for example, is the leading drug for ulcers. It is
manufactured by Glaxo. For a typical 2-month supply, the brand-name is
$180. For a generic supply of 2 months, the cost is about $90. What we
are going to see is, under GATT, an unintended consequence. Glaxo is
going to receive a 19-month extension on their patent. This drug's
price is not going to go down. There will be no generic competition
with Zantac. We will see Zantac continue to soar in price. In fact,
Glaxo is anticipating over a $1 billion windfall, because of this
unintended consequence in GATT.
Do you think this brand-name drug, Zantac, is going to go down in
price? Last year, Zantac's price grew 1\1/2\ times faster than
inflation. The price for Zantac since 1989, only 6 short years ago, has
increased 40 percent. What do you suppose is going to happen to that
price if Zantac gains more than a year and a half of additional
uncontested market exclusivity?
Mr. President, the intent of GATT, of course, was not to harm
American consumers. The goal was to improve their standing in the world
economy. The prescription drug marketplace today is one area where the
American consumer has been particularly exploited as we have
historically paid the highest price for drugs while subsidizing lower
drug prices for consumers around the world.
This is why five of my colleagues and I have written to the Food and
Drug Administration, asking the Food and Drug Administration to make
the right decision--and that right decision is to allow generic drugs
to come to the marketplace, offering competition to brand-named drugs
which are about to receive an enormous unexpected and undeserved
windfall.
This is a textbook case of a loophole resulting in an unwarranted
windfall. No single industry deserves special treatment under GATT and
today the pharmaceutical manufacturers of brand-name products are
getting that special treatment at the expense of the American consumer.
Should the Food and Drug Administration fail to provide the proper
solution to this problem, I will immediately proceed with legislation
to remedy this economic and this moral wrong. And I am hopeful my
colleagues will join me.
Mr. President, I ask unanimous consent that an article appearing in
Business Week magazine dated May 15, 1995, be printed in the Record, as
well as letters to Dr. David Kessler, Commissioner of the Food and Drug
Administration, from consumer, patient, health care, and trade groups
supporting our concerns. These groups include the National Organization
for Rare Disorders; Families USA and the Gray Panthers; AmeriNet, of
St. Louis, MO, and Premier Health Alliance, of Westchester, IL; the
National Association of Chain Drug Stores and the National
Pharmaceutical Alliance.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From Business Week, May 15, 1995]
A Patient Medicine Called GATT--For Makers of Branded Drugs, it Could
Prove a Powerful Tonic
(By John Carey)
It wouldn't be surprising if Robert J. Gunter took a dose
of his own medicine. President of generic drugmaker Novopharm
USA Inc., he has spent five years gearing up to produce a
generic version of Glaxo Holdings PLC's blockbuster ulcer
drug, Zantac. He even invested $40 million in a plant in
Wilson, NC., built to pump out the low-cost version as soon
as Glaxo's first patent expired in December.
Now, Gunter finds himself in the middle of stomach-churning
patent battle. Glaxo and other brand name pharmaceutical
giants are claiming that the General Agreement on Tariffs &
Trade (GATT), signed by President Clinton in December,
extends many of their patents, Zantac's among them. More
important, they argue, the extended patent term gives them
extra months--even years--of protection from competing
generics.
While the case relies on complicated legal arguments, it
boils down to whether provisions in GATT supersede a 1984 law
that prevents the Food & Drug Administration from approving
generics until the patent on a name brand expires. If the
arguments prevail, more than 100 brand-name products will win
an average of 12 months each of extra patent protection
(table). A new study from the University of Minnesota
estimates that the extra protection could give the drugmakers
a windfall of $6 billion over the next 20 years. ``That's
obscene,'' fumes Senator David H. Pryor (D-Ark.). ``American
consumers are going to pay the bill.''
``eureka'' moment
Pryor, a handful of other lawmakers, and the generics
companies are fighting back. On Apr. 27, Pryor and five other
senators asked the FDA to reject the brand-name companies'
interpretation of GATT. Vows Novopharm's Gunter: ``If the
pharmaceutical industry thinks generics will roll over and
play dead on this, they have another think coming.'' The
FDA's decision is expected within weeks, but the wrangling
won't end then. FDA officials and executives on both sides
predict that whatever the FDA decision, the loser will take
the issue to court.
The high-stakes controversy wasn't anticipated when GATT
was approved late last year. The agreement harmonized U.S.
law with the rest of the world's by changing patent terms to
20 years from the initial filing instead of 17 years after
being granted. Most companies thought the change applied only
to new patents, but soon after passage, Glaxo's lawyers had a
``eureka'' moment. Poring over the legislation, ``we realized
that for many of our existing products, patent life would be
extended,'' says associate general counsel Marc Shapiro.
As a result, any patent that took under three years to win
approval would have longer protection. Since the U.S. Patent
Office took only 17 months to grant the first of two key
patents on Zantac, the change would give the company an
additional 19 months of protection for its top-selling drug.
But even as GATT changed patent terms, Congress tried to
prevent harm to rivals that had been counting on the original
expiration dates. Lawmakers inserted a clause permitting a
company to introduce a competing product on the original
patent expiration date if the company had made significant
prior investments and if it paid the patent holder a royalty
or some other form of ``equitable remuneration.'' While
Jeremiah McIntyre, counsel for generic drugmaker Geneva
Pharmaceuticals Inc., calls that ``a fair balance,'' on the
theory that it's better to pay a royalty than not be allowed
into the market at all, the provision would squeeze generic
drugmakers' already thin profit margins.
oversight?
Meanwhile, Glaxo, Bristol-Myers Squibb Co., and other
brand-name companies are arguing that this escape clause
shouldn't even apply to the drug industry. The reason, they
say, is that it clashes with provisions in a 1984 U.S.
generic-drug law that prevents the FDA from approving a
generic drug until the brand-name patent expires. Unlike
other instances where Congress amended existing laws to
conform with GATT, it failed to resolve this conflict--
implying an intent to keep existing law intact, says Glaxo's
Shapiro. Pryor and others plead simple oversight. But the big
drugmakers insist on claiming what they see as theirs.
In the coming fight, generic drugmakers face an uphill
struggle. ``We have to be better organized, and spend more
money to get our message across,'' says Bruce Downey, CEO of
Barr Laboratories Inc., a generic drugmaker in Pomona, N.Y.
As policymakers focus once again on rising health-care costs,
the generic companies do have one potent message: If the
brand-name companies win, Americans will pay billions more
for drugs. Faced with the prospect of dramatically higher
costs, ``I can't believe the [FDA] won't make the right
choice,'' says Lewis A. Engman, president of the Generic
Pharmaceutical Industry Assn. Robert Gunter can only hope
he's right.
[[Page S6496]] a windfall in the making
Pharmaceutical makers are seeking an average of 12 months'
extra protection from generic competitors for more than 100
drugs.
------------------------------------------------------------------------
Potential extra
Months of revenues because
Drug Company/Use added of lack of
protection generic
alternative
------------------------------------------------------------------------
ZANTAC--Glaxo/ulcers..................... 19 $1,000
MEVACOR--Merck/cholesterol-lowering...... 19 448
DIFLUCAN--Pfizer/antifungal agent........ 20 410
PRILOSEC--Merck/ulcers................... 17 586
CAPOTEN--Bristol-Myers Squibb/
hypertension............................ 6 101
------------------------------------------------------------------------
Data: Prime Institute, University of Minnesota.
National Organization for
Rare Disorders, Inc.,
New Fairfield, CT, April 13, 1995.
Hon. David Kessler,
Commissioner, Food and Drug Administration, Rockville, MD.
Dear Dr. Kessler: The National Organization for Rare
Disorders, Inc. (NORD) is deeply concerned with the FDA's
pending interpretation of the General Agreements on Tariffs
and Trade (GATT) implementing legislation as it applies to
pharmaceutical drug patents.
The branded pharmaceutical industry (represented by PhRMA)
is seeking an extension of patents solely based on their
desire to maximize profits. If these companies succeed in
their attempt to limit consumer access to more affordable
``generic'' products, then millions of Americans will have no
choice but to pay more for already over-priced drugs. NORD
believes that Congress never intended to force American
consumers to pay even higher prices for their prescription
drugs.
While such patent extensions would significantly increase
the cost of our Medicaid program, please consider the even
greater burden this would place upon the millions of
Americans who are refused health insurance--and in turn
prescription drug coverage--because they are afflicted with a
rare ``orphan'' disease.
GATT was intended to improve the welfare of American
consumers through international trade--including the needs of
patients who desperately rely on access to more affordable
drugs. GATT was never intended to provide special treatment
to any segment of the pharmaceutical industry.
Sincerely,
Abbey S. Meyers,
President.
____
Families USA Foundation,
Washington, DC, April 10, 1995.
Dear Senator/Representative:
We understand that the FDA is currently reviewing its
position on GATT language as it applies to the extension
period on drug patents. If GATT rules are retrospectively
applied to previously filed or issued patents, the average
patent extension for currently marketed drugs would be more
than 12 months. The FDA is considering regulations that would
withhold approval of generic drugs covered by ``GATT-
extended'' patents until the extension period has ended. This
would force the American public to pay higher prescription
drug prices.
Families USA recently studied price increases in the top-
selling drugs used by Americans. In our report, Worthless
Promises: Drug Companies Keep Boosting Price, we found that
the prices consumers pay for the most commonly purchased
drugs continue to increase faster than general inflation.
Drug price increases are particularly harmful to senior
citizens who have the greatest needs for drugs and are most
likely to pay for them out of pocket.
Several of the brand-name drugs that could receive patent
extensions are among the top-selling drugs used by Americans.
Among the drugs whose patents would be extended are: Zantac,
the top-selling drug used by Americans, which increased in
price 38% from 1989 to 1994; Capoten, a blood pressure
medicine which increased in price 65.3% from 1989 to 1994 and
4.9% last year; Pepcid, an ulcer medicine that increased in
price 31.3% from 1989 to 1994; Mevacor, a cholesterol
medicine which increased in price 27.8% from 1989 to 1994;
and Prilosec, an ulcer medicine that increased in price 4.2%
last year, and increased in price 7.5% (2.4 times as fast as
inflation) in the year 1991 to 1992.
Generic drug products typically enter the market at prices
25% less than patented brand, and their prices are even less
compared to the brand-name drug as generics further penetrate
the market. Consumers desperately need relief from high drug
prices.
A recent study by PRIME institute found that the extension
would cost Medicaid about $1 billion. Federal and state
governments will face more than $1.25 billion in added costs
without generic drugs entering the marketplace.
We ask you to examine this issue and encourage the FDA to
delay any ruling until the problem is fully investigated.
Sincerely,
Judith G. Waxman,
Director, Government Affairs.
____
Gray Panthers Project Fund,
Washington, DC, April 20, 1995.
Hon. David Kessler,
Commissioner, Food and Drug Administration, Rockville, MD.
Dear Dr. Kessler: I am writing to you because we understand
the FDA is reviewing its position on the language in GATT as
it applied to extension periods on prescription drug patents.
We understand that FDA is considering regulations that would
prohibit the entry of generic drugs in the marketplace during
this GATT extension period.
It is our position that this action would force the
American public to pay higher prices for prescription drugs.
It also seems to us, that the primary purpose of GATT is to
create level playing fields and the best product at the
lowest price to consumers. This action is contrary to that
principle.
Many of the brand-name drugs that could receive extended
patent protection are some of the most widely prescribed
drugs used by Americans--especially the senior population.
And these drugs continue to cost more and more each year. In
a recent study by PRIME Institute of the University of
Minnesota found that Medicare alone would incur about 1
billion added costs without the availability of generic
drugs.
A generic prescription drug usually enters the marketplace
at up to 25 percent less than the branded drug. To those
individuals living on fixed incomes who already faced with
rising health costs, the option to choose generic is very
important.
Dr. Kessler, I trust that you will further investigate this
issue and seriously consider the negative impact that
prohibiting the availability of generic drugs on the American
consumer.
Sincerely,
Dixie Horning,
Executive Director.
____
AmeriVet,
St. Louis, MO, April 25, 1995.
Hon. David Kessler,
Commissioner, Food and Drug Administration, Rockville, MD.
Dear Dr. Kessler: The FDA is currently deliberating on an
important issue that could force the American public to pay
millions of dollars in higher prescription drug costs. The
debate is over the interpretation of GATT legislation
language as it pertains to patents on prescription drugs.
This language extends the life of patents on a number of the
country's most widely prescribed drugs, potentially
generating a windfall to pharmaceutical companies at the
expense of the American public.
As a group purchasing organization, the economic impact of
the GATT patent extension and the projected cost to consumers
is of great concern to us. We strongly urge you to do all you
can to make available to consumers the generic drugs that may
be delayed in reaching the market if the patents on brand-
name drugs are extended.
As you realize, if a provider has a generic equivalent to
substitute, the patient receives a cost savings over the
brand-name drug. The cost to consumers for the currently
marketed brand-name drugs is substantial, projected to be as
high as $6,000,000, over potential generic equivalents. The
cost will be incurred by the American public as well as
Medicare, federal and state governments, employers, private
insurers, and managed care firms.
We request that you seriously consider the enormous
financial burden to the American public that would result
from legislature preventing generic drugs from entering the
marketplace during the GATT extension. We fully support your
efforts in persuading the FDA to make lower-cost generic
drugs available to consumers upon existing brand patent
expiration.
Sincerely,
Joseph W. Mulroy,
President.
____
Premier Health Alliance, Inc.,
Westchester, IL, April 14, 1995.
Hon. David Kessler,
Commissioner, Food and Drug Administration, Rockville, MD.
Re GATT Extension Period and Drug Patents
Dear Honorable Kessler: It has been brought to my attention
that certain language in the recently approved GATT
legislation may have a negative impact on the price Americans
will pay for prescription drugs in the near future. It is
also my understanding that the branded pharmaceutical
industry is currently pressuring FDA to make a ruling that
would prevent generic drugs from entering the marketplace
during this extension period--a decision that would place an
enormous financial burden on the American health care system
and public through higher priced drugs.
It is my firm belief that Congress did not intend for brand
name pharmaceutical companies to be the recipient of a $6
billion financial windfall during this GATT extension period
to be subsidized by health care providers and the American
public.
This ``unintended consequence'' of the GATT language should
not be passed on to hospitals and physicians that already are
aggressively seeking ways to reduce healthcare costs, as well
as private citizens.
I am personally asking you to seriously consider the
negative implications that would result from legislation
preventing generic drugs from entering the marketplace during
the GATT extension. The access to generic drugs is vital to
those Americans who need them the most and I trust you will
[[Page S6497]] delay any ruling until further investigation
into this matter has been made.
Yours truly,
Bill Magruder,
Vice President, Pharmacy Program.
____
National Association of
Chain Drug Stores,
Alexandria, VA, April 26, 1995.
Hon. David Kessler,
Commissioner, Food and Drug Administration, Rockville, MD.
Dear Dr. Kessler: On behalf of the National Association of
Chain Drug Stores (NACDS), I am writing to strongly urge that
the Food and Drug Administration (FDA) recognize pre-GATT
patent expiration dates for pharmaceuticals, and allow the
approval of ANDAs for generic prescription pharmaceutical
preparations where the sponsor of such application has made a
``substantial investment'' in the product prior to June 8,
1995, the date of implementation of the General Agreement on
Tariffs and Trade (GATT). We understand that the FDA is
currently considering whether GATT's implementing legislation
provides such statutory authority. NACDS believes that it
does.
NACDS represents America's chain drug store industry, and
includes more than 160 chain companies in an industry that
operates 30,000 retail community pharmacies. Chain pharmacy
is the largest component of retail pharmacy practice,
providing practice settings for more than 66,000 pharmacists.
Our membership base fills over 60 percent of the more than
two billion prescriptions dispensed annually in the United
States.
We understand and support the importance of having generic
prescription drugs available to consumers as soon as
possible. Everyday, the availability of generic drugs enables
the pharmacists who practice in our stores to help reduce
overall prescription medication costs for populations that do
not have prescription drug insurance. Among those who benefit
from access to generic drugs are millions of older Americans
and working poor, publicly-funded prescription drug programs
such as Medicaid, and other third party prescription drug
plans.
The impact that a misapplication of the GATT implementing
legislation could have on the American public is significant.
A recent study by the PRIME Institute at the University of
Minnesota found that GATT provisions could result in an
additional $6 billion in prescription drug expenditures in
the United States because of the additional patent
protections granted to brand name products, and the relative
unavailability of lower-cost generic versions.
In summary, NACDS believes that the GATT agreement should
not preclude the manufacturers of generic prescription drugs
from bringing their products to market during the period of
extended patent protection provided by GATT for brand name
prescription drug products.
Sincerely,
Ronald L. Ziegler,
President and Chief Executive Officer.
____
National Pharmaceutical Alliance,
Alexandria, VA, April 26, 1995.
Hon. David Pryor,
U.S. Senate, Washington, DC.
Dear Senator Pryor: The National Pharmaceutical Alliance
(NPA) is an association of over 165 manufacturers and
distributors of pharmaceutical preparations for human and
veterinary use. Our members are dedicated to providing safe
and affordable alternatives to the American public whenever
health needs dictate the use of pharmaceutical products.
In December of last year, the congress ratified the Uruguay
Round Agreements Act [P.L. 103-465] (URAA) of the General
Agreement on Trade and Tariffs (GATT). This agreement created
some fundamental changes to be made in U.S. patent law. The
new law provides for patents to be in force 20 years from the
date of application as opposed to the historical law of the
United States which provided for patents to be in force for
17 years from date of approval. Congress, realizing that such
a change would cause a financial hardship on companies that
expected to enter the marketplace at the expiration of the
old patent date, provided a remedy to allow competing
products on the market.
Under H.R. 5110, the implementing language of GATT,
companies that could show that a substantial investment had
been made in a product could enter the marketplace at the
pre-GATT expiry date. The respective companies then would
work out an ``equitable remuneration'' during the life of the
patent extension. This remedy will work for every industry
except the generic pharmaceutical industry due to its
regulation by the Food and Drug Administration. Since
approvals for Abbreviated New Drug Applications (ANDAs) are
governed by the Drug Price Competition and Patent Term
Restoration Act of 1984, known as Hatch/Waxman, failure to
change its provisions could prevent the FDA from granting
approvals until after the patent extension has expired. We do
not believe that Congress intended to treat the drug industry
differently that other industries.
If the 109 generic pharmaceutical products inversely
affected by GATT are kept off the market, the result could be
an increased cost to the American consumer of over $6 billion
and a cost of over $1.2 billion to Federal and State
governments in higher Medicare and Medicaid costs. In 1995
alone, drugs such as alclometrasone dipr. (Alclovate),
captopril (Capoten), and ranitidine HC1 (Zantac) could be
unavailable to consumers in a generic version. Zantac alone
could represent an additional cost to the consumers in excess
of $1 billion during the time of the patent extension. At a
time when both healthcare costs and government budgets are
strained to the limit, it makes no sense for government to
take any action that would fuel the growth in these
expenditures.
In the ten years since its passage, the Hatch/Waxman
legislation has done remarkably well at balancing the
interests of proprietary drug companies and the generic drug
industry. The public also has come to not only expect, but to
rely upon, timely access to high quality, low cost
alternatives to monopolistic priced name brand drugs.
NPA is pleased to see that members of Congress, such as
yourself, are taking steps to correct this inequity in the
law. Your actions are to be applauded and your decision to
stand up for the American consumer is appreciated.
Sincerely,
Christine Sizemore,
Executive Director.
____________________