[Congressional Record Volume 144, Number 39 (Tuesday, March 31, 1998)]
[Senate]
[Pages S2851-S2862]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. ROBERTS:
  S. 1884. A bill to amend the Commodity Exchange Act to remove the 
prohibition on agricultural trade options outside contract markets; to 
the Committee on Agriculture, Nutrition, and Forestry.


             THE TRADE OPTIONS FOR FARMERS AND RANCHERS ACT

  Mr. ROBERTS. Mr. President, today I am pleased to introduce the Trade 
Options for Farmers and Ranchers Act (TOFRA). This legislation will 
provide farmers and ranchers across the United States with new, 
improved and affordable risk management products to help producers 
succeed in the 21st century.
  This bill fulfills a promise we made to America's farmers and 
ranchers during the 1996 farm bill debate. The far-reaching, market-
oriented reforms contained in the Freedom to Farm Act have provided 
substantial financial benefits to agriculture producers throughout the 
country. At the same time, this policy must be buttressed by proper 
risk management tools, regulatory relief, tax changes and a consistent, 
strong export policy. As a result, while leading the fight to get the 
federal government out of producers' daily lives and pocket-books, I 
promised to fight for better tools to help manage the tremendous 
financial risk that is inherent in life on the farm today.
  The TOFRA would repeal the Commodity Futures Trading Commission's 
prohibition on the sale of over-the-counter agriculture trade options. 
The CFTC ban dates to the Great Depression. It was put in place during 
a time when financial and commodity markets were viewed with both 
suspicion and fear. Today, we live in a time of mutual funds, 
computerized financial transactions and round-the-clock, global 
commodity trading. While we should never forget the important lessons 
of the Great Depression, we must not let the troubling memories of the 
past hold back our nation's farmers and ranchers when there is so much 
promise in the future.
  The CFTC's agriculture option ban created a monopoly. Today, if a 
farmer or rancher wants to hedge his price risk with an agriculture 
option, he must purchase the option from a commodity exchange. Over the 
years, the exchanges have performed a valuable service to farmers and 
ranchers by giving them the opportunity to manage their price risk in a 
regulated environment. Despite their best efforts, organized 
exchanges--primarily as a result of excessive regulation--have not been 
able to keep up with the tremendous demand in Farm Country for newer, 
better alternatives to existing risk management tools.
  I will continue to support legislative efforts to allow all 
interested parties--commodities exchanges included--to sell a wider 
variety of financial products. In fact, I continue to be frustrated 
with the CFTC's unwillingness to provide organized exchanges with the 
same basic business opportunities available to over-the-counter 
brokers. This bias is unfortunate and counterproductive to both buyers 
and sellers of commodities.
  At the same time, overly restrictive regulations are preventing 
America's farmers and ranchers from receiving the new, innovative 
products they need. The CFTC ban on over-the-counter agriculture 
options has been maintained in order to ``save farmers from 
themselves.'' The argument here is that farmers, grain elevators and 
others in rural America don't understand how options work. Therefore, 
the federal government has seen fit to limit severely the development 
of, and competition in, financial instruments that would provide 
substantial benefits to producers who understand commodity marketing in 
order to protect the few remaining producers who have no interest in 
managing price risk. Basically, current federal policy in this area is 
targeted towards the 1930s instead of the 2030s.
  Agriculture options are complex, expensive financial instruments. In 
order to use them properly, producers must have specialized knowledge 
of commodity marketing and the risks associated with participating in 
them. As a result, many producers may choose not to use the additional 
financial products made possible through this legislation. However, 
agriculture options should be readily available to those producers with 
the skill, knowledge and desire to use them.
  It is important that agriculture options--whether sold on an 
organized commodity exchange or through an over-the-counter broker--be 
sufficiently regulated. This legislation will simply make agriculture 
options just like all other options. If you purchase an option on 
wheat, natural gas or common stock, the bookkeeping, registration and 
disclosure requirements should be the same. Similarly, strong 
protections against fraud and manipulation are included to help prevent 
and punish fly-by-night operations and bucket-shops. In short, this 
bill establishes a simple formula: provide business opportunity with 
limited, but vigorously enforced rules. With proper oversight, this 
bill will be good for producers, brokers, businesses and consumers 
alike.
  I do want to thank the CFTC for recently submitting a proposed rule 
that would begin to lift its long-held ban on over-the-counter 
agriculture trade options. They have taken the initial step toward 
removing the ban on off-exchange agriculture options trading. 
Unfortunately, the CFTC's proposal is so limited, so burdened with red-
tape and reporting requirements, that significant benefit is doubtful. 
No new

[[Page S2852]]

products, no improved products and no more competition to drive down 
the price of risk management for America's farmers and ranchers.
  I am hopeful this legislation will renew CFTC interest in a workable 
regulation to govern agriculture option trading. I also urge the CFTC 
to act quickly to make these important tools available to America's 
farmers and ranchers. In conclusion, let me simply say this: if we give 
our producers a helping hand and appropriate safeguards, they will do 
the rest.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1884

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. AGRICULTURAL TRADE OPTIONS OUTSIDE CONTRACT 
                   MARKETS.

       The Commodity Exchange Act is amended by inserting after 
     section 4p (7 U.S.C. 6p) the following:

     ``SEC. 4Q. AGRICULTURAL TRADE OPTIONS OUTSIDE CONTRACT 
                   MARKETS.

       ``(a) Definitions.--In this section:
       ``(1) Agricultural trade option outside a contract 
     market.--The term `agricultural trade option outside a 
     contract market' means an agreement, contract, or transaction 
     (or class thereof) entered into on other than a contract 
     market for--
       ``(A) the purchase of an agricultural trade option 
     involving a commodity by a person who is a producer, 
     processor, commercial user, or merchant handler of the 
     commodity;
       ``(B) the sale or transfer of an agricultural trade option 
     involving a commodity; or
       ``(C) a purpose related to the business of a person 
     referred to in subparagraph (A).
       ``(2) Commodity.--The term `commodity' means an 
     agricultural commodity referred to in section 1a(3).
       ``(b) Authorization.--Subject to subsection (c), an 
     agricultural trade option outside a contract market shall be 
     permitted and shall be considered to be consistent with the 
     other provisions of this Act.
       ``(c) Regulation.--
       ``(1) Safeguards.--Subject to paragraph (2), an 
     agricultural trade option outside a contract market shall, to 
     the extent determined to be applicable by the Board, be 
     subject to--
       ``(A) sections 4b and 4o;
       ``(B) the provisions of sections 6(c) and 9(a)(2), to the 
     extent that the provisions prohibit manipulation of the 
     market price of any commodity in interstate commerce for 
     future delivery;
       ``(C) prohibitions against fraud or manipulation under 
     section 4c(b);
       ``(D) registration requirements of the Commission 
     administered by the National Futures Association;
       ``(E) a requirement that the person providing the option 
     has a net worth of at least $50,000;
       ``(F) requirements for full disclosure of risks and 
     responsibilities involved in the contract or agreement for 
     the option; and
       ``(G) recordkeeping and reporting requirements of the 
     Commission.
       ``(2) Limitations.--
       ``(A) Total assets.--Except for the fraud and manipulation 
     provisions of the provisions of law referred to in 
     subparagraphs (A), (B), and (C) of paragraph (1), paragraph 
     (1) shall not apply to an agricultural trade option outside a 
     contract market if the buyer and seller of the option each 
     have assets of a value of at least $10,000,000.
       ``(B) Physical delivery; structure and strategies.--An 
     agricultural trade option outside a contract market shall not 
     be subject to--
       ``(i) a requirement that the option, if exercised, be 
     physically delivered; or
       ``(ii) a limitation on the structure of the option or 
     trading strategies for the use of the option.
       ``(c) Termination of Effectiveness.--The authority provided 
     by this section terminates effective September 30, 2002.''.

     SEC. 2. CONFORMING AMENDMENTS.

       (a) Section 4(a) of the Commodity Exchange Act (7 U.S.C. 
     6(a)) is amended--
       (1) in paragraph (1), by inserting ``(A)'' after ``(1)'';
       (2) by redesignating paragraphs (2) and (3) as 
     subparagraphs (B) and (C), respectively;
       (3) in subparagraph (C) (as so redesignated), by striking 
     the period at the end and inserting ``; or''; and
       (4) by adding at the end the following:
       ``(2) the contract is an agricultural trade option outside 
     a contract market permitted under section 4q.''.
       (b) Section 4c(b) of the Commodity Exchange Act (7 U.S.C. 
     6c(b)) is amended in the first sentence by striking ``No'' 
     and inserting ``Except as provided in section 4q, no''.

     SEC. 3. REGULATIONS.

       Not later than 90 days after the date of enactment of this 
     Act, the Commodity Futures Trading Commission shall issue 
     such regulations as the Commission determines are necessary 
     to carry out this Act and the amendments made by this Act.
                                 ______
                                 
      By Mr. D'AMATO (for himself, Mr. Rockefeller, Mrs. Hutchison, 
        Mrs. Feinstein, and Mrs. Boxer):
  S. 1885. A bill to amend the Internal Revenue Code of 1986 to provide 
for a medical innovation tax credit for clinical testing research 
expenses attributable to academic medical centers and other qualified 
hospital research organizations; to the Committee on Finance.


             the medical innovation tax credit act of 1998

  Mr. D'AMATO.  Mr. President, I rise today to introduce legislation 
with my colleagues, Senators Rockefeller, Hutchison, Feinstein and 
Boxer, to create a new tax credit that will make it easier for medical 
schools, teaching hospitals, and non-for-profit research hospitals to 
invest in potentially life saving medical research. Our bill will add 
Section 41A to the Internal Revenue Code to establish a Medical 
Innovation Tax Credit. This new credit would apply to qualified medical 
innovation expenses for biopharmaceutical research activities, 
including clinical trials, at qualified academic institutions. The 
credit rate would be 20% of qualified expenses on research conducted in 
the United States. This tax incentive is necessary in order to assure 
that the United States maintains its position as the leading country 
for biomedical research.

  The Medical Innovation Tax Credit will supplement the current law 
Research and Experimental Tax Credit (R&E) which has allowed 
biopharmaceutical companies to invest hundreds of billions of dollars 
in research for new drug therapies. Clinical trials are conducted by 
these drug companies in order to obtain FDA approval. However, these 
initial studies are only a fraction of the applied research needed to 
follow patients and to discover possible combinations of drugs which 
provide the most effective therapy. These post-approval studies are 
performed by clinical investigators and major academic medical centers.
  Until recently, medical schools, teaching hospitals, and not-for-
profit hospitals were able to fund research from their operating 
profits. Many physicians chose to practice at these hospitals at a 
reduced salary based on the opportunity to engage in teaching and 
clinical research. With the profound changes in the health care 
industry over the last few years, this profit no longer exists. In the 
era of managed care, many insurance companies are reimbursing 
physicians and hospitals at the cost of services. Combined with cuts in 
Medicare payments and reduced subsidies for graduate medical education, 
teaching hospitals can barely afford to pay their medical staff's 
salary, let alone fund its research.
  These financing changes have had the largest impact on hospitals 
affiliated with academic medical centers. A recent study found a 22% 
decline in clinical research conducted at member hospitals of the 
Association of American Medical College's Council of Teaching 
Hospitals. This drop is alarming because it demonstrates that these 
hospitals no longer have the financial resources to contribute to the 
public's health. Traditionally, academic medical centers trained new 
doctors, supported applied biomedical research, and provided the bulk 
of uncompensated care for uninsured patients. Under this system medical 
residents had the opportunity to treat a wide spectrum of patients, 
regardless of their health insurance status. In addition, uninsured 
patients were able to receive the latest care within the scope of 
clinical trials performed at academic hospitals. With reductions in 
private and public funding these medical centers have been forced to 
reduce these social services to compete with for-profit-hospitals with 
no research agenda. This development promises only to stagnate the 
level of care and number of treatment options that the next generation 
of doctors can offer their patients.

  Mr. President, my state of New York has 12 medical schools and 40 
teaching hospitals, in addition to 8 designated cancer centers. Each of 
these institutions will be eligible for the Medical Innovation Tax 
Credit. Without continued funding of research at these institutions, 
many New Yorkers will recognize a profound effect upon the quality of 
their health care. Without the opportunity to conduct research many of 
the country's top doctors may leave to

[[Page S2853]]

practice in locations where they can earn more money. Such a move will 
also reduce the need for research specialists and their staffs. 
Patients will have to choose between hospitals that only recognize the 
bottom line while their children will not enjoy the same medical 
advances as they did. Many uninsured patients will not be able to 
receive uncompensated care and will not be able to receive the most 
advanced medicine possible.
  And these changes aren't just particular to my state. Almost every 
state has a medical school which serves as the epicenter for a network 
of teaching hospitals which employ thousands of physicians, nurses, 
research specialists, and support staff. A large percentage of each 
state's economy is based on these medical centers. Thus, we all stand 
to recognize two main benefits from the Medical Innovation Tax Credit, 
more jobs and better health. Only by encouraging private investment in 
medical research can our health care infrastructure develop new and 
innovative ways to deliver the most advanced care to all citizens of 
our country.
  We urge all of our colleagues to support this legislation that will 
restore to medical schools and teaching hospitals the ability to 
perform applied biomedical research to help treat and cure many of our 
pressing health needs such as cancer and heart disease. This is a 
targeted measure which has widespread benefits for all citizens.
  Mrs. FEINSTEIN. Mr. President, I rise today to join Senator D'Amato, 
Senator Boxer, Senator Rockefeller and others in support of legislation 
to create the Medical Innovation Tax Credit. The proposed tax credit 
can be an effective complement to the existing research and 
experimentation tax credit. The new proposal will support additional 
medical research at fine research universities, like the University of 
California and Stanford University, assisting in the development of new 
products to improve health and save lives. I am pleased to support 
Senator D'Amato's proposal.
  Under the legislation, the Medical Innovation Tax Credit would 
provide a pharmaceutical or biotechnology company with a tax credit 
equal to 20% of their expenditures for human drug clinical trials 
conducted at medical schools, university teaching hospitals or non-
profit research hospitals working in conjunction with the National 
Institutes of Health.
  The proposal will provide an important incentive to conduct the 
research trials in the university hospital setting, improving academic 
training, health care and the development of new research and bio-
medical products.
  The legislation will assist medical schools and research institutions 
leverage additional private sector support for medical schools and 
teaching hospitals. Teaching hospitals have historically been an 
important site of research activity. However, partially because of the 
universities' broad education mission, teaching hospitals face a cost-
disadvantage when compared to a ``for profit'' contract research 
organization. This new research credit will help level the playing 
field for medical schools and teaching hospitals.
  The proposal will help provide, in an indirect manner, additional 
resources for medical research. The administration and Congress both 
enthusiastically support increasing federal support for medical 
research through the National Institutes of Health. However, with our 
acute budget needs, Congress may face difficulty in meeting our goals. 
Congress can provide new sources of revenue for these research 
hospitals by encouraging them to serve as sites for clinical trials. 
Only clinical research activities conducted in the United States can 
qualify for the credit, decreasing the economic incentive to move the 
research activities to lower cost facilities off-shore.
  The support is appropriate because academic health centers address 
important societal priorities, accepting expenses other medical 
facilities may not have to incur.
  University-based teaching hospitals provide a disproportionate share 
of high-cost, critical services to low-income or uninsured individuals.
  University-based teaching hospitals carry a higher burden of 
necessary, but in many cases unprofitable, services, such as emergency 
trauma care and burn unit facilities. Academic health centers represent 
only 2% of all non-federal community hospitals, but have 33% of the 
trauma units and 50% of its burn units.
  The credit will help provide, in an indirect manner, additional funds 
for medical research by encouraging them to serve as clinical trial 
sites. The infusion of research dollars will support their vital 
missions.

  The proposal will help arrest the declining rate of clinical research 
trials conducted at these facilities.
  The American Association of Medical Colleges, which supports the 
legislation, reports a 22% drop in clinical research at member 
hospitals.
  A recent study of three pharmaceutical companies indicates that 
although pharmaceutical R&D is larger than the research funds of the 
National Institutes of Health, the level of university-based clinical 
trials has declined from 82% in 1989 to 68% in 1993.
  This proposal can help schools arrest the steady, five year decline 
and make the most of their research dollars.
  The credit will serve as an effective supplement to the current 
Research and Experimentation Credit and the Orphan Drug Tax Credit and 
provide a cost-effective incentive to encourage companies to pursue 
research in an academic setting. The credit will promote research at 
teaching hospitals, lead to the development of stronger research 
universities, contribute to new medical therapies and products and 
strengthen our world leadership in the important field of medical 
innovation. I am pleased to lend my support.
  Mrs. BOXER. Mr. President, I want to take a few minutes to talk about 
an important piece of legislation which is being introduced today, the 
``Medical Innovation Tax Credit.'' I am an original co-sponsor of this 
legislation.
  The Medical Innovation Tax Credit will establish a new, free-standing 
credit in the Internal Revenue Code. The credit, modeled after a law in 
my home state of California, provides a targeted tax incentive for 
companies to increase clinical trials at medical schools and teaching 
hospitals. The California law has been successful in encouraging 
biotechnology and pharmaceutical companies to expand their pioneering 
research activities at medical schools and teaching hospitals 
throughout the state. The Medical Innovation Tax Credit will encourage 
and stimulate such pioneering research in California and throughout the 
country.
  Many medical institutions today face significant financial pressures 
as a result of fundamental changes in the health care marketplace. With 
fewer funding sources available, medical schools, teaching hospitals, 
and charitable research hospitals designated as cancer centers by the 
National Cancer Institute (NCI), are having to cut back on their 
cutting-edge research activities.
  The Medical Innovation Tax Credit will help alleviate some of these 
financial pressures by encouraging more clinical trials to be conducted 
at medical schools, hospitals and NCI-designated cancer centers; thus 
providing these institutions additional private sector resources to 
fund cutting-edge medical research projects which otherwise may not 
have been funded. These extra resources will also enhance research and 
training opportunities, thereby ensuring our nation's continued 
leadership in innovative medical research.
  Moreover, the Medical Innovation Tax Credit encourages companies to 
conduct their research activities here in the United States since only 
domestic clinical trials are eligible for the credit. By decreasing the 
economic incentive to move such activities off-shore, more clinical 
research projects will be conducted in the U.S. Such domestic based 
research will ultimately lead to increased jobs, investments and 
productivity here at home.
  So, Mr. President, I am very proud to support this bill and I 
congratulate my colleague Senator D'Amato for his hard work on this 
legislation. The enactment of this legislation will provide important 
resources for our nation's leading medical schools, teaching hospitals 
and NCI-designated cancer centers and it will help ensure America's 
continued preeminence in innovative medical research. I encourage my 
colleagues to join in supporting the Medical Innovation Tax Credit.
                                 ______
                                 
      By Mr. Durbin (for himself and Ms. Moseley-Braun):
  S. 1886. A bill to designate the facility of the United States Postal 
Service

[[Page S2854]]

located at 3750 North Kedzie Avenue in Chicago, Illinois, as the 
``Daniel J. Doffyn Post Office Building''; to the Committee on 
Governmental Affairs.


   the daniel j. doffyn post office building designation act of 1998

  Mr. DURBIN. Mr. President, I rise today together with my 
distinguished colleague, Senator Carol Moseley-Braun, to introduce 
legislation to designate the United States Post Office facility at 3750 
North Kedzie Avenue in Chicago, Illinois, as the ``Daniel J. Doffyn 
Post Office Building.''
  This legislation honors the service and heroism of Daniel Doffyn, a 
40-year-old rookie officer with the Chicago Police Department, who was 
fatally shot in the line of duty two years ago.
  On the afternoon of March 8, 1995, Daniel Doffyn and his partner, 
Milan ``Mike'' Bubalo, who had just completed their regular shift, 
responded to a report of a burglary in progress. What they encountered, 
in broad daylight, just a few steps away from the Austin precinct house 
on Chicago's West Side, were three gun-wielding gang members hiding in 
an apartment. Believing the officers to be there to arrest them for 
their involvement in an earlier gang shooting, the trio panicked and 
tried to escape through a window.
  After capturing one suspect, Doffyn was shot in the head and chest by 
a second man, who opened fire with a TEC-DC9 semiautomatic pistol, one 
of the 19 assault weapons banned under the 1994 Federal law. Officer 
Doffyn died in surgery later that evening. In the barrage of gunfire, 
Officer Bubalo was seriously wounded in the thigh, and has an 
artificial left hip as a result of the shooting.
  Officer Doffyn tragically lost his life in the course of performing a 
job that he truly loved, less than a year after graduating from the 
Chicago Police Academy, following a three-year quest to fulfill a dream 
to protect and serve his community. If someone needed help, Danny 
Doffyn was the first one there. In the words of District Commander 
LeRoy O'Shield, ``he exemplified the very finest the police department 
has to offer. He was not assigned this job but responded to it.''
  The post office sought to be designated is in the neighborhood where 
Officer Doffyn, who was posthumously awarded the Medal of Valor for his 
ultimate sacrifice, resided with his parents, bicycled and roller 
skated with his eight-year-old daughter, Brittany, and donned his blue 
uniform and police star #14030 with pride.
  We trust our colleagues will agree that this designation is a worthy 
tribute to salute the life and courage of Daniel Doffyn, and to pay 
respect to the thousands of men and women in law enforcement careers 
who risk their lives every single day striving to keep our citizens, 
streets, and sidewalks safe.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1886

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. DESIGNATION OF DANIEL J. DOFFYN POST OFFICE 
                   BUILDING.

       (a) In General.--The facility of the United States Postal 
     Service located at 3750 North Kedzie Avenue in Chicago, 
     Illinois, shall be known and designated as the ``Daniel J. 
     Doffyn Post Office Building''.
       (b) References.--Any reference in a law, map, regulation, 
     document, paper, or other record of the United States to the 
     facility of the United States Postal Service referred to in 
     subsection (a) shall be deemed to be a reference to the 
     ``Daniel J. Doffyn Post Office Building''.
                                 ______
                                 
      By Mr. HARKIN (for himself, Mr. Chafee, and Mr. Graham):
  S. 1889. A bill to reduce tobacco use by children and others through 
an increase in the cost of tobacco products, the imposition of 
advertising and marketing limitations, assuring appropriate tobacco 
industry oversight, expanding the availability of tobacco use cessation 
programs, and implementing a strong public health prevention and 
education strategy that involves the private sector, schools, States, 
and local communities; read the first time.


           the kids deserve freedom from tobacco act of 1998

  Mr. HARKIN. Mr. President, today I am joined by my colleagues 
Senators John Chafee, Bob Graham in introducing the first bipartisan 
comprehensive proposal to cut youth smoking--The Kids Deserve Freedom 
From Tobacco Act, or simply, The KIDS Act. Today marks the turning 
point in the drive for tobacco reform this year.

  Before I go further, I want to thank my partners in this effort, John 
Chafee and Bob Graham. They are real heroes in the fight to save kids 
from tobacco. They've taken significant risks in joining this effort. 
And they have done a terrific job in putting our proposal together. 
This has truly been a bipartisan team effort.
  I also want thank the leaders of the public health community who have 
joined us to support our efforts. They will play a critical role in 
shaping the course of this historic tobacco reform effort in the coming 
months. And their support is vital to the success of The KIDS Act. 
Finally, I want to thank Dr. C. Everett Koop and Dr. David Kessler, for 
their help and counsel to us in crafting our proposal.
  We are introducing this bill because we face a public health crisis 
affecting our children. 3,000 kids start smoking every day and fully 
1,000 of them will die prematurely because of it. That's the equivalent 
of 3 jumbo jets packed with kids crashing every day. 400,000 Americans 
die every year of tobacco related illness at a cost of over $50 
billion. And the tobacco industry has been engaged in a systematic 
campaign of distortion and deceit to hook kids and hide the facts from 
the American people.
  Tobacco reform is the issue of 1998. It is the crown jewel of this 
Congress. And passing a tobacco bill like the KIDS Act is a once and a 
lifetime opportunity. Unfortunately, though, the tobacco debate so far 
has been largely partisan. That's why we've joined arms across party 
lines behind the KIDS Act. We hope and believe that the introduction of 
our bipartisan bill will change the debate and significantly increase 
the odds that reforms will be made.
  The KIDS Act would cut tobacco use by kids in half over the next 
three years through aggressive and comprehensive reforms. That's the 
sharpest and fastest reduction achieved by any bill proposed to date. 
Our goal is to cut it by at least 65 percent shortly after that. The 
Food and Drug Administration has found that reducing the use of tobacco 
by children by 50 percent could prevent well over 60,000 premature 
deaths every year, and will save up to $43 billion annually in reduced 
medical costs and improved productivity.
  Now is not the time for anything but the strongest, most effective 
bill possible.
  Experts agree that a substantial price hike over a very short period 
of time is key to changing teen smoking behavior. If left unchanged, 
the Commerce Committee draft bill, which spreads a $1.10 price increase 
over 5 years will do little to impact teen smoking. In contrast, the 
KIDS Act increases the price by $1.50 in just two years, achieving a 
50% reduction in just three years. That's the bottom line and anything 
less is just smoke and mirrors.
  In addition, our bill gets tough on the individual companies that 
addict the most kids by imposing tough penalties if the company doesn't 
meet teen smoking reduction targets. I'm very concerned that the 
Commerce Committee proposes no company-specific penalty. Without a 
profit-based deterrent, the penalty will just be passed through to 
consumers, giving companies no incentive to cut youth smoking.
  Finally, our bill caps the annual liability of the tobacco industry 
as part of a tough, comprehensive bill that dramatically reduces youth 
smoking. Without a tough public health bill, the annual liability cap 
is not acceptable.
  As Drs. Koop and Kessler say in their letter, our bill is ``tough 
medicine for a tough problem.'' Our proposal sends a simple message to 
the tobacco industry: Keep away from our kids. Our plan will be a very, 
very bitter pill for the industry. And no doubt they will criticize us. 
But in the end, I believe they are going to have to swallow it.
  Creating a more sensible policy toward tobacco has been a goal of 
mine for many years. It was in 1977, over 21

[[Page S2855]]

years ago, that I first introduced legislation calling for repeal of 
the tax deductibility of tobacco advertising and marketing.
  Unfortunately, victories in the tobacco wars have come few and far 
between. In 1988, we finally changed federal law on smoking in 
airplanes. It was a full ten years later, and after failing one time, 
the Senate took its next step last September by passing the Harkin-
Chafee plan to fully fund enforcement of the FDA youth ID check.
  But I am more hopeful now than ever that we can pass a comprehensive 
plan that would once and for all change how this nation deals with 
tobacco and dramatically cut the number of our kids addicted to this 
deadly product. Mr. President, our goal is to be on the Senate floor 
three years from now announcing that indeed, child smoking has been cut 
in half. We're going to put all our energies into making that happen.
  We urge our colleagues to review our proposal and join us in 
sponsoring it. We look forward to working with all our colleagues on a 
bicameral, bipartisan basis to make good on the historic opportunity we 
have this year.
  Mr. President, I ask unanimous consent that a summary of the KIDS 
Act, letters of endorsement of our bill and copies of several 
editorials in support our the KIDS Act be included in the Record.
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

     Kid Deserve Freedom From Tobacco Act of 1998 ``The KIDS Act''

     Principles
       Congress has an historic opportunity to enact legislation 
     this year which will significantly reduce tobacco use--
     especially among children. Nearly one in five deaths in 
     America today is attributable to tobacco use, making it the 
     single most preventable cause of premature death, disease and 
     disability facing this country. These facts compel us to act 
     now. However, to ensure the most effective result, 
     legislation must embody the following principles:
       It must be bipartisan and comprehensive--not piecemeal--to 
     ensure a fundamental and lasting change in the way tobacco 
     products are marketed and sold in this country.
       It must attack the youth smoking epidemic as rapidly as 
     possible by forcing the price of cigarettes to increase by 
     $1.50 per pack within the first two years, and providing for 
     comparable increases in other tobacco products.
       It must preserve the rights of individuals and groups to 
     sue tobacco manufacturers for the damages they have caused, 
     while at the same time establishing a framework to ensure 
     that funds are available to cover awards and settlements 
     secured by successful claimants.
       It must provide incentives to states, local communities, 
     schools, research institutions, health professionals and 
     other stakeholders to develop innovative strategies to 
     discourage youth smoking, and to assist adult smokers in 
     kicking the habit.
       It must have as its primary purpose the promotion of 
     aggressive anti-tobacco initiatives and public health 
     improvements, including the provision of significant new 
     resources for medical research.
     Summary
       The Kids Deserve Freedom From Tobacco Act of 1998 (``The 
     KIDS Act'') significantly improves upon and strengthens the 
     June 1997 Attorneys General Tobacco Settlement Agreement 
     (``June 1997 Tobacco Agreement''). The legislation would 
     substantially reduce youth tobacco use through a 
     comprehensive set of policy changes. These include increasing 
     the cost of tobacco products, curtailing advertising and 
     marketing to children, assuring appropriate industry 
     oversight, expanding the availability of smoking cessation 
     programs, and implementing a strong public health prevention 
     and education strategy involving the private sector, schools, 
     states and local communities.


                         i. economic incentives

       Price Increase. Public health experts agree that the single 
     most important component of a comprehensive plan to reduce 
     youth tobacco use is to significantly increase the price of 
     tobacco products over a short period of time. A gradual 
     increase, phased in over 5 or more years, will not 
     significantly reduce teen tobacco use. Therefore, our 
     proposal would increase the price of a pack of cigarettes by 
     $1.50 within two years ($1.00 the first year; $0.50 the 
     second year). The price of other tobacco products with 
     significant market shares would be increased by a comparable 
     amount. These increases would be achieved through annual 
     industry payments totaling $20 billion the first year and $25 
     billion per year thereafter (indexed to inflation).
       Annual Youth Reduction Targets. There is clear and abundant 
     evidence that the tobacco industry has tailored its marketing 
     and advertising programs to attract and encourage children to 
     smoke. Largely because of the industry's success in this 
     regard, 3,000 children start smoking every day in America. 
     Accordingly, the KIDS Act would make the tobacco industry 
     accountable for promoting and achieving a significant 
     reduction in tobacco use among children. Our proposal would 
     set an ambitious, but realistic schedule for reducing the 
     rate of youth smoking by 65 percent over the next ten years.
       The schedule would follow the recommendations of the Final 
     Report of the Advisory Committee on Tobacco Policy and Public 
     Health, chaired by Dr. C. Everett Koop and Dr. David Kessler. 
     The following targets would be set:


                                                   Percent of reduction
Year:
    2................................................................15
    3................................................................20
    4................................................................25
    5................................................................30
    6................................................................40
    7................................................................50
    8................................................................55
    9................................................................60
    10...............................................................65
    Beyond...........................................................65

(youth prevalence measured by monthly use)

       Tough Look-back Penalties. The KIDS Act would impose up to 
     an additional $10 billion per year in non tax-deductible 
     penalties (indexed to inflation) on the tobacco industry for 
     failure to meet these targets. First, and most importantly, 
     company-specific penalties would be imposed to prevent 
     individual manufacturers from achieving any financial reward 
     from addicting children to their products. Second, industry-
     wide penalties would be assessed for failure to meet the 
     above targets. Finally, unlike the June 1997 Tobacco 
     Agreement, the KIDS Act would provide no abatement or rebate 
     relief to tobacco companies.
       Company-specific Penalties: The KIDS Act would impose the 
     strongest possible incentives for individual tobacco 
     companies to stop recruiting and addicting children. It sets 
     up a system of tough and escalating penalties for those 
     companies that miss youth reduction targets. This is crucial 
     because, unlike industry-wide penalties which can be passed 
     on to consumers equally by all companies without affecting 
     market share, company-specific penalties directly tie company 
     profits to reducing teen smoking.
       Under the KIDS Act, for each percentage point a company 
     misses between 0 and 10 percent, a penalty of 1 cent per pack 
     is imposed. The penalty doubles for each percentage point 
     missed between 11 and 20 percent and triples for each 
     percentage point missed over 21 percent. For those companies 
     that miss the targets by 20 percent or more for 3 consecutive 
     years, this portion of the penalty is doubled to 6 cents per 
     pack.
       Industry-wide Penalties: The KIDS Act imposes a similarly 
     tough penalty structure industry-wide if it fails to meet the 
     youth reduction targets. In addition, if the industry fails 
     to meet the targets for 3 consecutive years, the penalties 
     are doubled.
       No Anti-trust Immunity. Anti-trust laws are the most 
     important safeguard we have against anti-competitive actions 
     which hurt consumers and undermine the free market. As such, 
     exceptions to these laws should be made only in rare 
     circumstances, where important policy objectives outweigh the 
     benefit of free market protections. The tobacco industry has 
     not made a persuasive case for the grant of immunity it 
     seeks. Therefore, unlike the June 1997 Tobacco Agreement, the 
     KIDS Act would not extend any anti-trust exemptions to 
     tobacco manufacturers.
       State Performance Bonus Pool. The June 1997 Tobacco 
     Agreement and pending legislative initiatives fail to provide 
     strong economic incentives for states and communities to help 
     decrease tobacco use among children. The KIDS Act would 
     address this shortcoming by establishing a $500 million 
     annual ``Performance Bonus Pool'' for states that meet or 
     exceed the reduction targets within their own borders.
       This would serve as an important incentive for states and 
     localities to develop aggressive and innovative anti-smoking 
     strategies suited to their own individual needs. State-
     specific baselines and targets would be developed using a 
     standardized methodology determined by the Centers for 
     Disease Control and Prevention. Furthermore, the KIDS Act 
     would clarify the authority of states and local governments 
     to encourage the enactment of stronger anti-tobacco policies.


               II. changing how tobacco products are sold

       Marketing and Advertising Reforms. The tobacco industry 
     spends an estimated $5 billion per year on marketing and 
     promotional activities--much of it targeted to children. The 
     KIDS Act would fundamentally alter tobacco marketing and 
     advertising practices to eliminate this reprehensible 
     practice.
       Health Warning Labeling Reforms. Evidence suggests that the 
     current warning label regime for tobacco product packaging 
     fails to adequately convey to children the risks associated 
     with tobacco use. For example, nearly half of the 8th graders 
     in a 1993 study denied any great risk associated with pack-a-
     day smoking, despite the presence of health warnings on 
     cigarette packaging. Moreover, consumer research indicates 
     that alterations in format, composition and warning label 
     content would make them far more effective in reaching 
     children. Thus, the KIDS Act proposes to significantly 
     strengthen warning labels on all tobacco products to improve 
     their impact on the behavior of children. These messages 
     would be regularly reviewed and updated by the Secretary of 
     Health and Human Services to reflect

[[Page S2856]]

     changes in public awareness and attitudes about tobacco use.
       Minors' Access Reforms. Illegal sales to minors and 
     shoplifting are the primary means by which children obtain 
     tobacco products. An estimated 516 million packs of 
     cigarettes per year are consumed by minors, of which at least 
     half are obtained through direct, illegal sales to minors. 
     Shoplifting is another serious concern. In Iowa alone, more 
     than 4 million packs of cigarettes are shoplifted every year.
       The KIDS Act would address these problems by banning self-
     service displays in stores that sell tobacco products, 
     prohibiting vending machine sales in places children 
     frequent, requiring retailers to verify age, and fining those 
     vendors caught selling to children. In addition, the KIDS Act 
     would require states to conduct spot checks of tobacco 
     retailers to ensure compliance with minors' access 
     provisions. If a retailer repeatedly violates the law, it 
     could face suspension or revocation of their registration to 
     sell tobacco products. These reforms would build upon those 
     developed by the U.S. Food and Drug Administration (FDA), and 
     those contained in the June 1997 Tobacco Agreement.
       Importantly, the tobacco companies would be bound by 
     enforceable consent decrees precluding them from challenging 
     such restrictions in the courts, or providing any means of 
     support to third parties for this purpose.
       State Preemption. The KIDS Act would clarify the authority 
     of states and local governments to regulate the sale and use 
     of tobacco products by repealing the preemption clause in 
     existing federal law. However, it would preserve the national 
     requirement for uniform packaging and labeling standards to 
     ensure the free flow of interstate commerce.

          At-A-Glance: Changing How Tobacco Products Are Sold


                              advertising

       B&W text only (except in adult-only facilities and 
     publications).
       No human images or cartoon characters.\1\
---------------------------------------------------------------------------
     \1\ Contained in consent decrees.
---------------------------------------------------------------------------
       No outdoor advertising.\1\
       No advertising on the Internet.\1\
       No self-service displays.


                               marketing

       No ``trinkets & trash'' (caps, jackets, bags, etc.) or 
     proof-of-purchase clubs.
       No sponsorship of sporting events or other forms of 
     entertainment.
       No paid product placement in movies, TV shows, on Internet 
     or video games.\1\
       No free samples.


                                labeling

       Improved and updated warnings.
       Increased size.
       Rotating messages.
       Statements of intended use.
       Regularly reviewed and updated by HHS.


                             minors' access

       No distribution or sales to minors under age 18.
       Photo id required up to age 27.
       Face-to-face sales required.
       No single cigarettes sales.
       No vending machines sales (except in adult-only 
     facilities).
       No self-service sales (except in adult-only facilities).


                     iii. oversight and enforcement

       FDA Authority. Given the addictive, disease-causing nature 
     of tobacco products, full and appropriate regulation is 
     needed. Therefore, in addition to establishing new 
     advertising and marketing restrictions, the KIDS Act would 
     assure that FDA has the authority to effectively monitor and 
     regulate the manufacture and distribution of tobacco 
     products, promote the development of safer alternatives, and 
     to conduct research. For these purposes, the KIDS Act would 
     allocate $300 million over and above those provided in the 
     annual appropriations process. Importantly, FDA would not be 
     required to overcome special burdens or procedural hurdles in 
     its regulatory activities--a major flaw of the June 1997 
     Tobacco Agreement. The KIDS Act would classify ``nicotine'' 
     as a drug, and ``tobacco products'' as drug delivery 
     devices (to include cigars, pipes and loose tobacco). In 
     addition, our legislation would authorize FDA to implement 
     a ``public health'' standard in its review of tobacco 
     products.
       The FDA's authority over tobacco products would be no more 
     and no less than its authority over other drugs and devices. 
     However, because of the addictive nature of tobacco products, 
     and the high prevalence of their use, the KIDS Act would 
     specifically prohibit the FDA from banning the sale of 
     tobacco products to adults. Finally, the KIDS Act would 
     ensure that FDA has adequate financial resources and 
     appropriate access to tobacco industry documents to carry out 
     its responsibilities.
       Ingredient Disclosure. Evidence strongly suggests that 
     tobacco companies design and manufacture their products to 
     satisfy and enhance nicotine dependence. Therefore, increased 
     information about the role and function of tobacco additives 
     is essential to the effective regulation of such products. 
     The KIDS Act would substantially strengthen current 
     ingredient disclosure requirements for tobacco manufacturers. 
     For example, each company would be required, by brand and 
     content, to submit lists of all tobacco additives. Further, 
     if the Secretary of Health and Human Services determines that 
     any of these additives pose a particular risk to smokers or 
     others exposed to tobacco smoke, this information will be 
     fully and promptly disclosed to the public.
       Reduced Risk. Much remains unknown about the feasibility 
     and effectiveness of developing a less hazardous tobacco 
     product. However, it is clear that tobacco manufacturers have 
     the ability and knowledge to modify their products. Indeed, 
     various forms of ``reduced risk'' nicotine delivery devices 
     already have been introduced into the market. The KIDS Act 
     would require tobacco companies to come forward with 
     information in their possession about reduced risk products, 
     and provide increased monitoring of new technologies. It 
     would also stop tobacco companies from making misleading 
     claims about these products.
       Licensing. There are approximately one million tobacco 
     outlets in the United States, and as recently as 1994, nearly 
     three-fourths sold tobacco products to minors. These include 
     supermarkets, newsstands, hotels, gas stations, convenience 
     stores, and other types of vendors. Additionally, each year 
     interstate cigarette smuggling costs states millions of 
     dollars in lost excise tax revenues. To address these 
     problems, the KIDS Act would establish minimum federal 
     licensing standards for tobacco manufacturers, importers, 
     exporters and distributors, and the registration of tobacco 
     retail establishments. States could continue to impose 
     additional licensing requirements, and would work closely 
     with federal officials to enforce licensing and registration 
     policies, just as they do with the distribution and sales of 
     alcoholic beverages. By providing for the permanent 
     revocation of tobacco licenses and registration permits for 
     repeated violations of any provision of our law. The KIDS Act 
     will put the worst offenders out of the business of making or 
     selling tobacco products.


          IV. Stopping Children from Smoking Before They Start

       Prevention in Communities and Schools. In addition to 
     economic incentives, changes in tobacco product advertising 
     and marketing, and improved oversight of enforcement, experts 
     agree that a comprehensive slate of public health activities 
     is needed to stop children from taking up this deadly habit. 
     For example, research-tested school programs have proven to 
     consistently and significantly reduce adolescent smoking. 
     Therefore, the KIDS Act would provide $1.25 billion to states 
     for community and school-based prevention activities. These 
     initiatives would be designed and implemented at the local 
     level to ensure their effectiveness.
       Because minority and low-income populations suffer a 
     disproportionate burden of tobacco-related disease, and are 
     among the greatest users of tobacco products, the KIDS Act 
     would allocate a portion of the funding for community-based 
     prevention activities to address their special needs. Funding 
     also would be provided to assist Native American populations 
     in their efforts to prevent and reduce youth smoking.
       Counter Advertising. Research findings show that well-
     designed counter advertising initiatives do help to reduce 
     teen smoking. Thus, an intensive, sustained media campaign at 
     the state and federal level is needed to ``deglamorize'' 
     tobacco use among young people. Accordingly, the KIDS Act 
     would provide $650 million annually to fund a nationwide 
     campaign with national, state, and local components. 
     Preeminent advertising firms with proven expertise in the 
     formulation of messages aimed at children would be charged 
     with the development and implementation of 
     ``deglamorization'' campaigns.


               V. Helping Current Smokers Kick the Habit

       Smoking Cessation. While the primary emphasis of our 
     proposal is to reduce tobacco use among children, the more 
     than 48 million adult Americans who currently smoke deserve 
     and need help in kicking the habit. The KIDS Act would 
     establish a coordinated federal and state-based initiative to 
     increase access to, and awareness of, effective programs. 
     When fully implemented, the legislation would provide $1.5 
     billion annually for programs designed to enhance existing 
     employer-based initiatives, and those which target uninsured 
     and underserved populations.


                         VI. Expanding Research

       National Fund for Health Research. Tobacco products kill 
     more than 400,000 Americans every year--more death than from 
     AIDS, alcohol and drug abuse, car accidents, murders, 
     suicides, and fires combined. To stop this epidemic, we must 
     strengthen our national commitment to finding preventive 
     measures and cures for diseases--especially those related to 
     tobacco use, including cancer, heart disease, emphysema and 
     stroke. Therefore, the KIDS Act would establish a National 
     Fund for Health Research to allocate resources over and 
     above those provided to the National Institutes of Health 
     (NIH) in the annual appropriations process. The KIDS Act 
     would allot $3.225 billion per year to the Fund.
       Prevention and Cessation Research. While we know a great 
     deal about reducing tobacco use, much remains unknown. 
     Therefore, a significant expansion of prevention and 
     cessation research is critical to the success of any 
     comprehensive effort to reduce tobacco use. In particular, 
     more information is needed on why people use tobacco and on 
     what program interventions are most effective. Efforts must 
     also be undertaken to increase our understanding of the 
     health effects of tobacco use and exposure to second-hand

[[Page S2857]]

     smoke. The KIDS Act would provide $600 million per year for a 
     major new research effort.


          vii. helping the victims of tobacco-related diseases

       The KIDS Act would fully preserve the rights of individuals 
     and groups to utilize the civil justice system to recover 
     tobacco-related damages. Unlike the June 1997 Tobacco 
     Agreement and some of the legislation currently pending in 
     Congress, the KIDS Act would not ban class action lawsuits or 
     punitive damage awards, as the tobacco industry has sought.
       Simply put, it would provide no immunity to the tobacco 
     industry. Given the industry's behavior, such liability 
     protections cannot be justified or condoned. Furthermore, our 
     legislation would provide no protections from, or limitations 
     on criminal prosecution of the tobacco industry.
       National Victims' Compensation Fund. To ensure that 
     resources are readily available for the victims of tobacco-
     related diseases, the KIDS Act would provide for the 
     establishment of a prefunded National Victims' Compensation 
     Fund (the ``Fund''), from which court awards and settlements 
     would be paid. Furthermore, given the uncertainty of the 
     legal environment surrounding tobacco litigation, an 
     additional Contingency Reserve Account would be established 
     within the Fund. The Fund and the annual cap would be indexed 
     to medical inflation.
       Annual Base Payment: At the beginning of each year, the 
     tobacco industry would make a Base Payment of $4 billion into 
     the Fund; awards and settlements would be paid from this base 
     amount. At the end of every year, any unobligated funds from 
     the Base Payments would be deposited into an interest-bearing 
     Contingency Reserve Account.
       Out-of-Pocket Supplement and Annual Cap: If awards and 
     settlements exceed the Base Payment during any year, the 
     industry would be liable for an additional $4 billion in out-
     of-pocket payments to cover the excess, for a total potential 
     annual liability payment by the tobacco industry of $8 
     billion. This cap would not include payments made to states 
     in settlement of existing Attorneys General suits, and would 
     apply only to civil claims against past wrongdoing by the 
     industry.
       Contingency Reserve Account: As a further protection for 
     claimants, the KIDS Act would establish a Contingency Reserve 
     Account (the ``Account'') within the Victims' Compensation 
     Fund. Any unobligated funds from the $4 billion Base Payment 
     would be placed in the Account. For example, if awards and 
     settlements paid in the first year amounted to $1 billion, 
     the remaining $3 billion would be deposited into the account. 
     Funds in the account would build up substantially in the 
     early years as settlements and awards during this period are 
     expected to be relatively small. For any year in which 
     liability awards and settlements exceed $8 billion, the 
     Account would be drawn down to make the excess payments. In 
     the unlikely event that awards and settlements ever deplete 
     the Account in any year, unpaid claims would be rolled over 
     and paid from the Base Payment at the beginning of the 
     following year.
       If the Account accumulates a balance of $20 billion, the 
     Attorney General, in conjunction with the Secretary of Health 
     and Human Services, would determine whether to continue to 
     deposit excess funds therein, or to redirect those funds to 
     anti-smoking and other public health activities authorized 
     under the legislation.
       Small Claimant Protection: Under the KIDS Act, individuals 
     and smaller classes of individuals would be given priority in 
     disbursements from the Fund to ensure that large awards or 
     settlements, paid to 3rd parties for example, would not deny 
     smaller claimants timely payment of their claims.
       Settlement of State Suits and Castano Class Action: Forty 
     state Attorneys Generals have brought suits against the 
     tobacco industry to recover costs incurred for tobacco-
     related illnesses and other damages. The KIDS Act would 
     provide states the opportunity to settle their suits in 
     exchange for funding from the National Tobacco Trust Fund 
     established under this Act. In addition, the Castano Class 
     Action lawsuits would be settled in return for the 
     establishment of smoking cessation programs.


                 VIII. ENDING TOBACCO INDUSTRY SECRECY

       For decades, to the severe detriment of the public health, 
     the tobacco industry has concealed evidence of the 
     consequences of tobacco use and deliberately misled the 
     public. Moreover, tobacco manufacturers have broadly misused 
     the doctrine of attorney-client privilege to cloak industry 
     documents and research in a veil of secrecy.
       Therefore, the KIDS Act would require tobacco companies to 
     submit key documents relating to the health effects, safety, 
     and marketing of products to children to a Tobacco Document 
     Depository. Trade secret and attorney-client privilege claims 
     would be scrutinized by a professional Tobacco Document 
     Review Board. This reform would assist the victims of 
     tobacco-related diseases in securing judgments against 
     tobacco companies, and out-of-court settlements, without the 
     traditional barriers and costs associated with document 
     discovery. Manufacturers who make claims in bad faith will be 
     subject to fines of up to $5 million per violation. Moreover, 
     failure to comply with this section would result in license 
     revocation and the waiver of the annual liability cap.
       FDA to Obtain Needed Documents. Tobacco companies would be 
     required to turn over to the FDA all documents the agency 
     deemed necessary to carry out its regulatory 
     responsibilities--including assessing the health effects of 
     nicotine and other tobacco ingredients, the design and 
     development of ``less hazardous'' or ``safer'' tobacco 
     products, as well as the advertising, marketing and promotion 
     of such products.


                  ix. transition assistance to farmers

       Changes in national policy regarding tobacco products, and 
     the expected decline in their consumption, will have 
     ramifications for farming families, workers and communities 
     in tobacco growing regions. The KIDS Act would provide $13.5 
     billion for compensation, income support and transitional 
     assistance to tobacco farming families, and for economic 
     development and related assistance in tobacco-dependent 
     communities.


                      x. assuring clean indoor air

       Our knowledge is growing daily on the deleterious effects 
     of exposure to Environmental Tobacco Smoke (ETS) in the home, 
     the workplace and other public facilities. Annually, 3,000 
     Americans die of lung cancer caused by second-hand smoke, and 
     15,000 children under 18 months of age are hospitalized with 
     respiratory infections related to ETS exposure.
       While the ETS components of the KIDS Act are still a work 
     in progress, our bill would place significant emphasis on 
     reducing ETS exposure in the home--including such measures as 
     pediatric outreach, public service announcements, and 
     comprehensive media campaigns; $100 million from the counter 
     advertising funds would be directed towards this purpose. The 
     bill would also provide $100 million to help reduce exposure 
     to ETS in workplaces and public facilities.
       The KIDS Act would also require Congress to comply with the 
     ``no smoking'' policies already in place throughout the 
     Executive Branch. Furthermore, legislation would not preempt 
     states and local governments from establishing even more 
     stringent policies to protect individuals from ETS.


          xi. stopping smuggling and showing world leadership

       In some countries, significant increases in cigarette 
     prices have resulted in large-scale smuggling operations. 
     Contraband cigarette trafficking can occur both at national 
     borders and between states with wide disparities in tobacco 
     excise taxes. Since 1992, this criminal activity has 
     increased by more than 500% in the United States. Each year, 
     interstate cigarette smuggling costs some states more than 
     $100 million in lost excise tax revenue. As the price of 
     cigarettes increases as a result of tobacco settlement 
     legislation, actions must be taken to prevent the wide 
     availability of contraband cigarettes.
       Tough Anti-Smuggling Initiative. In addition to licensing 
     all tobacco product sellers in the stream of commerce, the 
     KIDS Act would allocate $100 million per year to implement 
     an aggressive, well-coordinated anti-smuggling program 
     aimed at stopping contraband tobacco products from 
     entering or being sold in the United States. The bill 
     would facilitate substantial coordination of 
     international, federal and state law enforcement 
     activities, as well as providing new resources to expedite 
     the deployment of innovative anti-smuggling technologies.
       Harsh New Penalties to Stop Smuggling. To further deter 
     contraband trafficking in tobacco products, the KIDS Act 
     would also establish harsh new criminal and monetary 
     penalties for individuals convicted of such offenses. 
     Violations by manufacturers, importers, exporters, or 
     distributor or retailers could result in permanent revocation 
     of their license or registration.
       World Leadership. The World Health Organization (WHO) 
     currently estimates that tobacco use causes three million 
     deaths per year worldwide--a number which is expected to 
     increase exponentially as the U.S.-based tobacco industry 
     intensifies its global marketing and promotional activities. 
     By the year 2023, WHO projects tobacco-related mortalities 
     will jump to ten million, with nearly 70 percent occurring in 
     developing countries. This troubling trend is expected to 
     accelerate with the enactment of strong anti-tobacco policies 
     in the United States.
       Unlike the June 1997 Tobacco Agreement, our bill would 
     provide clear leadership on international efforts to curb 
     tobacco use. The KIDS Act would terminate all support for 
     tobacco promotion overseas by the United States Government, 
     provide $100 million per year to fund global education 
     efforts, and encourage America's participation with other 
     nations in efforts to harmonize tobacco policies worldwide.


                     xii. industry consent decrees

       Voluntary, but legally-binding consent decrees--signed by 
     the federal government, state governments and tobacco 
     manufacturers--are critical to the success of any 
     comprehensive tobacco legislation aimed at significantly 
     reducing tobacco use by children. Without these decrees, key 
     provisions of such a law could be delayed by lengthy legal 
     challenges. To help avoid this problem, the KIDS Act would 
     require tobacco companies to sign legally-binding consent 
     decrees in order to receive the benefits of the annual 
     liability cap established under the legislation. Violation of 
     any of the terms of the consent decrees would result in 
     exclusion of that company from the annual liability cap. 
     Among other things, the consent decrees--which would be 
     enforceable by the U.S. Attorney General or State Attorneys 
     General through federal and state courts--would

[[Page S2858]]

     commit the companies to abide by the following agreements:
       Not to directly or indirectly bring or support legal 
     challenges to the implementation of any aspect of the KIDS 
     Act, including existing or future FDA regulatory authority, 
     document disclosure, youth look-back survey methodology and 
     penalties, and advertising and marketing restrictions;
       To pay and fully pass through the cost of annual industry 
     payments and industry-wide look-back penalties, assuring that 
     the price of cigarettes would increase by at least $1.50 per 
     pack over 2 years, with comparable increases for other 
     tobacco products;
       All reforms related to the labeling, sale, advertising and 
     promotion of tobacco products intended by this Act;
       Not to directly, or through contractors, lobby federal, 
     state or local governments against any provision of this Act;
       To only do business with those retailers and distributors 
     in full compliance with all provisions of this Act;
       To dissolve the Tobacco Institute and other existing trade 
     associations;
       Not to advertise over the Internet; and,
       To comply also with all of the marketing and advertising 
     restrictions in both the FDA regulation and the proposed June 
     1997 Tobacco Agreement.


               xiii. annual tobacco payments and spending

       Industry Payments: The KIDS Act would require a non-
     deductible industry payment of $10 billion immediately upon 
     enactment. That payment would be used by states and local 
     communities, as well as the federal government, to begin 
     implementation of the strong anti-tobacco measures authorized 
     under the Act.
       One year after enactment the industry would make a payment 
     of $20 billion to the National Tobacco Trust Fund. Each year 
     thereafter the industry payment would be $25 billion, indexed 
     to inflation. These payments would be assessed based upon 
     each company's share of the overall tobacco market. Twenty-
     five percent of the payments would be deemed punitive, and 
     therefore non-deductible.
       Payments to States: As under the June 1997 Tobacco 
     Agreement, $193.5 billion over the 25 year period would be 
     reserved for state use. Of those funds, fifty percent would 
     be distributed to the states to use at their discretion. The 
     remaining fifty percent would be allocated to the states in 
     the form of a Health, Human Services and Education block 
     grant to be used to meet each State's particular needs in 
     these areas.
       Additionally, $500 million annually would be made available 
     to states meeting or exceeding youth tobacco reduction 
     targets.
       Payments for National Programs: Under the KIDS Act, $4 
     billion of the industry's yearly payment would be directed to 
     the National Victim's Compensation Fund as the Annual Base 
     Payment. Remaining industry payments would be used 
     exclusively for national anti-tobacco and public health 
     purposes. These include funding for smoking cessation, 
     counteradvertising, and community and school-based prevention 
     programs, international education, health research, and other 
     activities outlined in this summary.
                                                                    ____

                                                    March 11, 1998
     Hon. Tom Harkin,
     Hon. John Chafee,
     Hon. Bob Graham,
     U.S. Senate,
     Washington, DC.
       Dear Senators Harkin, Chafee and Graham: We are sorry we 
     are not able to be with you in person as you introduce your 
     bill, but we wanted to offer our congratulations to you for 
     crafting a very strong, comprehensive package of tobacco 
     reforms.
       We have carefully reviewed a detailed summary of your plan 
     and strongly support its major features, with the exception 
     of the concept of liability caps. While we await actual 
     legislative language, it appears to us that if enacted, we 
     believe your proposal includes many measures that would 
     significantly reduce tobacco use and fundamentally alter the 
     way America deals with tobacco. It is tough medicine for a 
     tough problem. It would set national tobacco policy on to a 
     course that would bring down nicotine addiction and the 
     terrible health consequences of using tobacco.
       You are to be especially commended for forging a bipartisan 
     consensus on this difficult and complex issue. For a proposal 
     to be successful in Congress, it must have bipartisan 
     support. Yours is the first to meet that crucial test.
       Your plan correctly deals with this public health crisis in 
     a comprehensive manner, seeking to come as close as possible 
     at this time to the ideals expressed last July in the report 
     of the Advisory Committee on Tobacco Policy and Public 
     Health. A piecemeal approach clearly won't work. We are 
     especially pleased that you specify an increase in the cost 
     of tobacco products within two years. This is vitally 
     important for reducing tobacco use by young people. 
     Protecting the FDA's authority, protecting a State's ability 
     to develop and enforce stronger public health measures, and 
     other such provisions make this proposal very attractive. We 
     understand that you will address environmental tobacco smoke 
     and we will be pleased to work with you on that. You are also 
     to be commended for recognizing that the United States must 
     play an enhanced role in promoting enlightened policies 
     toward tobacco in other countries. We have a moral imperative 
     to lead in this area as well as protecting the public health 
     within the United States.
       We look forward to continuing to work with you as you 
     finalize this very promising proposal. There is much to be 
     done this year, but the announcement of your bipartisan 
     effort is a major step forward in our long battle for a 
     tobacco policy.
           Sincerely,
     C. Everett Koop, M.D., Sc.D.
     David A. Kessler, M.D.
                                                                    ____


              The KIDS Act Allocation of Industry Payments

       The following amounts represent the annual maximum spending 
     for each of the activities, assuming a 25% excise tax offset.

                        [In billions of dollars]

States--no strings...............................................$3.000
States--Human Services Block Grant................................3.000
States--bonus pool................................................0.500
                                                             __________
                                                             
    States--total.................................................6.500
                                                               ==========
_______________________________________________________________________

Smoking Cessation.................................................1.500
Counteradvertising................................................0.550
Community-based Prevention........................................1.000
School-based Prevention...........................................0.300
Youth Database/Evaluation.........................................0.175
Event Sponsorship Replacement.....................................0.075
Tobacco Prevention Research.......................................0.600
International Education...........................................0.100
Native American Programs..........................................0.200
Environmental Tobacco Smoke.......................................0.200
FDA...............................................................0.300
Anti-Smuggling Efforts............................................0.100
                                                             __________
                                                             
    Anti-Tobacco Program Total....................................5.100
NIH Research......................................................3.225
Victim's Compensation Fund........................................4.000

       Additionally, the KIDS Act would provide a total of $13.5 
     billion for transition assistance to farmers.
                                                                    ____


  Statement of the ENACT Coalition Regarding the Introduction of KIDS 
                    Deserve Freedom From Tobacco Act

       (March 12, 1998)--The ENACT coalition of major public 
     health organizations applauds today's introduction of the 
     KIDS Deserve Freedom From Tobacco Act by Senators Harkin, 
     Chafee and Graham. These Senators have exhibited courageous 
     leadership in crafting a strong, comprehensive, bipartisan 
     solution to the urgent problem of tobacco use.
       This is the first bipartisan proposal which, based on the 
     summary being released today, encompasses the key public 
     health policies that ENACT has stated must be included in any 
     effective tobacco control legislation. We support the public 
     health features of this proposal because of their potential 
     to save millions of lives and, therefore, welcome it as an 
     important step forward.
       The proposal contains strong and effective provisions 
     regarding FDA authority over tobacco sales, manufacturing and 
     advertising; significant price increases to deter use by 
     kids; ``look-back'' penalties if sales to youth do not 
     decrease; a vigorous crackdown on the illegal sale of tobacco 
     to minors; protections from secondhand smoke; disclosure of 
     tobacco industry documents; funding for tobacco-related 
     health and cessation research; assistance to tobacco farmers; 
     and support for efforts to reduce tobacco use 
     internationally.
       The KIDS Act also addresses issues relating to the tobacco 
     industry's liability. It would make the internal documents 
     the tobacco industry has been forced to produce available to 
     plaintiffs and the general public. It would also require the 
     tobacco industry to make a minimum annual tort-related 
     payment of $4 billion a year, no matter what happens in the 
     courts. It contains no limitations on class action or the 
     rights of individuals to collect full compensatory or 
     punitive awards from the industry, nor does it protect the 
     industry from being held accountable for future misconduct. 
     However, it does contain an annual cap of $8 billion a year 
     on civil liability payments for the tobacco industry in suits 
     based on past action.
       While we await the receipt of the actual legislative 
     language, we believe that this proposal would significantly 
     reduce tobacco use, particularly among children, and would 
     rein in the tobacco industry. We strongly support this 
     proposal's major features with the exception of the liability 
     cap. ENACT believes that only a comprehensive bill that meets 
     our minimum criteria can adequately address the complex 
     problem of tobacco use and reduce the number of kids who 
     start using tobacco, and the number of adults who die each 
     year. ENACT is committed to working with Senators Harkin, 
     Chafee and Graham, as well as all Members of Congress from 
     both parties, to enact a comprehensive, bipartisan, well-
     funded and sustainable tobacco control policy.

                    [From USA Today, Mar. 20, 1998]

           Billion-Dollar Blinders Hide Tobacco Deal's Flaws

       Big Tobacco has a politically enticing offer for lawmakers. 
     Give us some legal protection against our past sins, and 
     we'll pony up billions of dollars every year to fund your pet 
     programs.
       The offer proved too much for state attorneys general.
       They signed a loophole-ridden settlement deal last June 
     that gave a slap on the wrist to the industry and threw new 
     roadblocks in front of the regulation of nicotine by the Food 
     and Drug Administration (FDA)

[[Page S2859]]

       Next week, Senate Commerce Committee Chairman John McCain 
     will try to do better as his panel marks up a settlement 
     plan. He's hoping to put together a tougher deal--one that 
     will win the backing of health groups and members of both 
     parties, and still secure the industry's consent. A delicate 
     balancing act, to be sure, and one that comes amid fierce 
     partisan wrangling, turf wars and general election-year 
     money-grubbing.
       Until last week, no proposals fit the bill. Either they 
     were winners for the tobacco industry or they couldn't get 
     support from across the aisle. Sens. Tom Harkin, John Chafee 
     and Bob Graham broke the pattern with a bipartisan bill that 
     has won over key health advocates.
       Among their plan's virtues:
       It would impose annual industry payments of $25 billion--
     two-thirds higher than the settlement. That would push up the 
     price of a pack of cigarettes by $1.50, deterring smoking by 
     children--the most important objective of any settlement.
       Better yet, the deal would severely punish individual firms 
     if they failed to meet company-specific teen smoking 
     reduction targets--a clear incentive for each to join the 
     effort to cut teen smoking. The industry as a whole could be 
     fined up to $10 billion a year if teen smoking rates aren't 
     cut by 65% within 10 years.
       The measure preserves the FDA's ability to regulate 
     tobacco. The industry had snookered the attorneys general by 
     requiring the FDA to meet absurd burdens of proof.
       Finally, there's no offer of blanket immunity on class-
     action suits, as the attorneys general allowed. People harmed 
     by the industry could recover up to $8 billion a year from an 
     industry-financed liability fund.
       The offer to industry: Your total costs will be capped at 
     $39 billion a year. Put in perspective, domestic cigarette 
     sales are about $50 billion a year.
       The two most prominent tobacco industry foes of recent 
     years--former surgeon general C. Everett Koop and former FDA 
     head David Kessler--both endorsed the Harkin-Chafee bill, 
     calling it ``tough medicine for a tough problem.''
       Whatever its merits, this is the minimum acceptable. Yet 
     the risk that Congress will gut it and pass a flimsy 
     substitute is enormously high. The industry is sure to throw 
     its weight behind weaker bills; and with everyone in 
     Washington salivating over the prospect of all that money to 
     spend on pet programs in an election year, priorities easily 
     will be warped.
       There are already so many meat hooks in the funds that it 
     would take several deals to appease all interests. President 
     Clinton wants to fund everything from child care to Medicare 
     with the money. Some Republicans want to use the tobacco 
     funds to pay for tax cuts, others to pay for reforming the 
     IRS. Advocacy groups see the chance to fund their cherished 
     programs.
       As the prospect of billions of dollars draws closer, even 
     ardent health advocates might be tempted to dispense with 
     sweating the details.
       But the point of this exercise isn't to raise lots of 
     money, boost the size of the federal government, or enrich a 
     bunch of trial lawyers. The goal is to cut the horrendous 
     human toll smoking imposes on society. The only effective way 
     to do that is to stop the supply of new addicts.
       That for the most part means keeping teens from taking up 
     the habit. More than nine in 10 regular smokers started 
     smoking before celebrating their 19th birthday. The Harkin 
     proposal would give industry a strong push to help curb this 
     trend despite the long-term consequences for the industry.
       In the end, however, lawmakers must be willing to chuck a 
     bad deal, even if that means killing the golden tobacco 
     goose.


                       comparing the settlements

       The so-called KIDS Act toughens the June 1997 attorneys 
     general settlement on several key fronts.
     Annual payments
       Settlement: Maximum of $15 billion a year for a total of 
     $368.5 billion over the next 25 years.
       KIDS Act: Maximum of $25 billion a year for a total of $630 
     billion over next 25 years.
     Teen smoking
       Settlement: 60% cut in smoking rates within 10 years.
       KIDS Act: 65% cut in smoking rates within 10 years.
     Failure to reduce teen smoking
       Settlement penalty: Maximum of $2 billion a year.
       KIDS Act: No; but does put an $8 billion annual cap on 
     total damages.
     Class-action lawsuit immuity
       Settlement: Yes, but individuals could still sue.
       KIDS Act: No; but does put an $8 billion annual cap on 
     total damages.
     FDA regulations
       Settlement: Imposes new restrictions on FDA tobacco 
     regulations.
       KIDS Act: Preserves FDA authority.
     Advertising
       Settlement: Tough restrictions, including ban on human 
     forms, Internet ads.
       KIDS Act: Similar changes.
       Source: USA Today research.
                                                                    ____


            [From the Portland Press Herald, Mar. 28, 1998]

                Senate Should Pass a Better Tobacco Deal

       Legislation settling claims against the tobacco industry is 
     now before the Senate Commerce Committee. The committee's 
     chairman, Sen. John McCain, R-Ariz., is trying to forge a 
     compromise among Democrats, Republicans and opponents and 
     supporters of the tobacco lobby.
       The starting point in this process is a settlement 
     agreement negotiated last year between the tobacco companies 
     and the attorneys general from 40 states. It is a deeply 
     flawed document that gives up too much to big tobacco.
       What that agreement lacks--and what any final agreement 
     should have--is the approval of two men who have fought hard 
     to reduce tobacco's deadly toll on the American people. C. 
     Everett Koop, the former surgeon general, and David Kessler, 
     former head of the Food and Drug Administration, have opposed 
     the tobacco settlement as it is now.
       Much of what Koop and Kessler seek is in a bipartisan 
     proposal sponsored by Sens. Tom Harkin, D-Iowa, John Chafee, 
     R-R.I. and Bob Graham, D-Fla. Maine Sens. Susan Collins, who 
     sits on the commerce committee, and Olympia Snowe should back 
     it or legislation that has the same basic elements.
       The proposal would raise the price of cigarettes by $1.50 a 
     pack, extracting $25 billion a year from the tobacco 
     companies as payment for the huge costs imposed by these 
     products on the government. Unlike the settlement negotiated 
     with the states, it gives the FDA unfettered control over 
     tobacco. It also has strong proposals for reducing youth 
     smoking and sets up a system for processing claims against 
     the tobacco companies without granting them immunity from 
     future lawsuits.
       In return, the tobacco companies would see their 
     liabilities in civil suits capped at $8 billion a year. This 
     is a far better approach than the blanket protection from 
     future lawsuits contained in the agreement negotiated by the 
     attorneys general.
       Already, other ideas are surfacing. The committee seems 
     settled on a $1.10-per-pack price increase for cigarettes and 
     is discussing an annual liability cap ranging from $5 billion 
     to $8 billion. FDA authority over tobacco, meanwhile, remains 
     a sticking point.
       The principles of the bipartisan bill are central to 
     reaching a fair accord with the big tobacco companies over 
     the immense harm they have caused the American people. As 
     such, the bill should be taken seriously by Collins, Snowe 
     and their Senate colleagues.

  Mr. CHAFEE. Mr. President, over the course of the next month or two, 
the Senate will have the opportunity to debate how best to address the 
most significant, preventable public health problem confronting this 
nation today: the scourge of tobacco use by our young people. The 
Senate will face some difficult choices in this regard. The grim 
statistics about this epidemic, coupled with almost daily revelations 
of tobacco industry misdeeds, underscore the need for our earnest 
action.
  We can all agree, where adults are concerned personal responsibility 
must be the rule; tobacco is a legal product and adults are free to 
make that choice. However, the same level of independent judgment 
cannot be said where fourteen year-olds are concerned. Bear in mind, 
only one in ten smokers takes up smoking after the age of eighteen; the 
remainder start well before that stage.
  All of us--Democrats and Republicans--share a deep and abiding 
concern about this problem, and a recognition that now is the time for 
action. However, each of us has different thoughts on how best to 
attack this problem. The Commerce Committee draft bill offers a good 
beginning, but it must be strengthened. Senators Harkin, Graham and I 
believe that an aggressive, but responsible approach is essential if we 
are to be successful in reducing teen tobacco use.
  This is why the KIDS Act would force the price of cigarettes up by 
$1.50 over the course of two--not four, five or six--years. The price 
hike must be significant and rapid in order to affect the purchasing 
behavior of children; the evidence solidly favors that position. Simply 
put, a smaller increase of only $1.10 over a longer period of time--in 
effect 20 cents per year in the Commerce Committee draft--will not 
achieve the desired result. As a result of our aggressive approach on 
price, the KIDS Act would halve teen smoking within just three years!
  That is also why the KIDS Act contains very stiff so-called look-
back'' penalties if the industry fails to meet the annual youth 
reduction targets specified in our bill. Unlike the Commerce Committee 
draft, the KIDS Act emphasizes company-specific penalties to ensure 
that the companies who do the addicting take the hit. Additionally, our 
annual penalties are capped at $10 billion per year, as opposed to $3.5 
billion in the Commerce Committee draft. These look-back penalties are 
the very heart of our efforts to curb

[[Page S2860]]

youth tobacco use; if they miss the mark, the whole program is the 
weaker for it.
  This is also why the KIDS Act provides roughly $5.1 billion per year 
for anti-tobacco programs, including counteradvertising, school and 
community-based prevention and education programs, cessation and other 
initiatives. For those who think this is too much spending, we spend a 
lot more money on addressing other ills which kill far fewer than 
400,000 Americans per year.
  Recognizing that the needs of each state are very different, the KIDS 
Act hands back $6 billion per year to the states in recognition of the 
costs and damages they have incurred in treating tobacco-related 
illnesses. Importantly, this funding could be used to meet the 
particular needs of  each state; flexibility is the key with respect to 
the use of this funding. One pool of $3 billion per year could be used 
to meet any need; the other pool of $3 billion takes the form of a 
health, human services and education block grant to meet virtually any 
human need.

  Our bill also includes a State Performance Bonus Pool to help incent 
and enlist states in the war against teen tobacco use, and we need all 
the stakeholders we can get! As a consequence of these provisions, the 
National Governors Association supports the state payment mechanism 
contained in the KIDS Act.
  Some have pointed out that the draft Commerce Committee bill 
incorporates the cap on annual liability payments included in our 
bill--although at $6.5 billion, not $8 billion. My response is that the 
cap cannot be examined in isolation from the other parts of the 
legislation. If, for example, the youth smoking provisions are not as 
tough as they should be, than I question the appropriateness of a 
liability cap.
  Now, some people have said our bill is too tough and could bankrupt 
the tobacco industry. Says who? The tobacco companies? I'm not sure we 
can rely upon their representations if past history is any judge. What 
about the securities analysts who understand the financial workings of 
the tobacco industry? Can we rely upon these individuals and firms when 
many of these same companies manage pension and mutual fund portfolios 
with significant investments in tobacco stocks? Frankly, I think the 
only reliable measure of what the industry can truly afford would be an 
independent audit--not an illogical request of an industry which seeks 
a virtually unprecedented deal with the federal government, the several 
states and the American people.
  The KIDS Act would require the industry to pass along in the price of 
its products an annual payment of $25 billion. Given discussions we 
have had with a variety of experts, both inside and outside the 
government, we do not believe the payment requirements in our bill 
would jeopardize the profitability or future viability of the tobacco 
industry.
  In closing, I urge my colleagues to examine the KIDS Act and to join 
with us in working to pass a strong, responsible tobacco bill as 
quickly as possible. We look forward to working with our respective 
Leaders, Senator McCain, and our colleagues toward that end.
  Mr. GRAHAM. Mr. President, I rise today with my colleagues, Senator 
John Chafee and Senator Tom Harkin, to introduce the Kids Deserve 
Freedom from Tobacco Act of 1998, legislation which if passed will have 
a monumental effect on the number one public health problem facing 
America's youth: underage smoking.
  This legislation is the first bipartisan, comprehensive piece of 
legislation which has the support of the Administration and the public 
health community. Since the beginning of this school year, more than 
half a million kids have started smoking. If we don't act soon, another 
half million children will take up the habit by the start of the next 
school year. And by its inaction, Congress will have signed their death 
warrants.
  In Florida alone, where minors purchase more than 12 million packs of 
cigarettes each year, 28% of high school students currently smoke 
cigarettes. Nationally, the number is closer to 35%. The KIDS Act takes 
a number of strong actions--all of which would be funded by the 
industry's annual $25 billion payment--to lower the rate of youth and 
teenage smoking. These include:


                             price increase

  Because public health experts agree that substantially increasing the 
cost of cigarettes is the most effective way of keeping adolescents 
from buying them, the KIDS Act would force the tobacco industry to 
raise the price-per-pack of cigarettes and other tobacco products by 
$1.50 over the next two years.
  In addition to raising the price of tobacco products, the KIDS Act 
would establish ambitious goals for the reduction of teenage tobacco 
use. The bill would mandate that the tobacco industry reduce youth 
smoking by 65 percent over the next ten years--or face as much as $10 
billion in annual penalties. States, on the other hand, would be 
rewarded for reducing teen tobacco use. The KIDS Act would set aside 
$500 million of bonus money each year for states that meet or exceed 
annual smoking reduction targets.


                           marketing reforms

  For decades, the tobacco industry has pushed its products on young 
Americans both overtly--on billboards and through the prominent 
sponsorship of sports like auto racing--and subtly, through characters 
like Joe Camel. Their efforts have been helped by the shockingly easy 
access that many minors have to tobacco products. Nationally, more than 
62 percent of 12-to-17 year-old smokers report that they buy their own 
cigarettes. Nearly half of those minors were never asked to show proof 
of age.
  The KIDS Act would dramatically change the rules governing tobacco 
advertising and sales. It would limit tobacco companies to black-and-
white text advertisements--no more human images, cartoon characters, 
outdoor displays, sports and entertainment sponsorships, or product 
giveaways. It would also encourage illegal tobacco purchases by banning 
vending machines sales of cigarettes and requiring state licensing of 
tobacco retailers. Stores caught selling to minors would face severe 
financial penalties.


                           payments to states

  In addition to the federal money it channels to states through bonus 
payments, incentives, grants, and federal programs, the KIDS Act would 
directly distribute almost $200 billion over 25 years--a third of the 
settlement money--to individual states to spend on a broad array of 
health and anti-tobacco programs.
  As a former Governor, I strongly believe that states deserve to be 
recognized for their efforts to bring the tobacco industry to the 
table. Without state's efforts, Congress would not be in the position 
to introduce this bill today. Any legislation contemplated by this 
Congress must recognize the State crucial role in this process.


                    cap on annual industry payments

  Unlike last year's national settlement, the KIDS Act would not 
safeguard the tobacco industry from future lawsuits. It ensures 
reliable industry payments, so that the industry cannot use the excuse 
of financial woes to avoid its annual $25 billion commitment. As such, 
it would require that tobacco firms deposit $4 billion/year into a 
``National Victims Compensation Fund.'' Money from that fund would be 
used to pay victims who settle claims or win judgments against the 
industry. The industry would also have to pay up to $4 billion/year in 
any additional claims--a maximum total of $8 billion/year.
  I want to stress that my colleagues, Senators Chafee and Harkin, and 
I believe that this is our best and possibly our only chance to get 
this historic legislation passed. We cannot let this opportunity slip 
away. A half-hearted, piecemeal effort simply won't do.
                                 ______
                                 
      By Mr. DASCHLE (for himself, Mr. Kennedy, Mrs. Boxer, Mr. Dodd, 
        Ms. Mikulski, Mrs. Feinstein, Mr. Durbin, Mr. Reed, Mr. Inouye, 
        Mr. Torricelli, Mr. Kerry, Ms. Moseley-Braun, Mr. Wyden, Mr. 
        Lautenberg, Mr. Rockefeller, Mr. Cleland, Mr. Leahy, Mrs. 
        Murray, Mr. Wellstone, Mr. Sarbanes, Mr. Akaka, and Mr. 
        Bingaman):
  S. 1891. A bill to amend the Internal Revenue Code of 1986 to protect 
consumers in managed care plans and other health coverage; to the 
Committee on Finance.

[[Page S2861]]

                the patients' bill of rights act of 1998

  Mr. DASCHLE. Mr. President, I join my colleagues in introducing the 
Patients' Bill of Rights Act of 1998. This legislation has been 
developed cooperatively with Democrats in the House and Senate to 
address a growing concern of the American public, the quality of care 
delivered by health plans and insurance companies. Today, three of 
every four working, insured Americans are in managed care plans, and 
far too many have experienced serious problems with their coverage. We 
all know someone with a horror story in that regard.
  Today, David Garvey of Illinois told us the tragic story of his wife, 
who had taken a ``dream'' vacation to Hawaii with a few of her friends. 
When she arrived in Hawaii, she noticed some bruises on her body. She 
went to a clinic and was quickly admitted to the hospital. She was 
diagnosed with aplastic anemia. Her doctor in Hawaii began a course of 
treatment, and said that she would likely need a bone marrow transplant 
to save her life.
  Several days into the treatment, her HMO called from Chicago and said 
she had to return to Chicago for the treatment and transplant. They 
insisted that she return, even over the strong objections of the doctor 
in Hawaii who said that she was not stable enough to travel and that 
her immune system could not fight infection. Mr. Garvey tried to talk 
to the decisionmakers in the plan, but they insisted that she return to 
Chicago or forego coverage. As the medical bills were adding up, Mrs. 
Garvey had no choice but to fly back to Chicago. During that flight, 
Mrs. Garvey had a stroke, and within days of her return, she developed 
a fungal infection. Ten days later, she died.
  Mr. President, I am outraged by what happened to the Garveys and 
believe we need legislation to protect patients against medically 
inappropriate decisions by health plans that too often put the 
financial bottom line before patients' health care needs.
  The bill I am introducing today would provide enforceable protections 
for millions of patients. It would ensure access to medically needed 
care, including coverage at emergency rooms. It would allow patients 
with serious conditions to see their specialist without asking 
permission each time and would allow women direct access to their ob/
gyn.
  The bill would allow patients denied benefits to appeal decisions 
both within the plan and to an independent, external reviewer. When a 
plan says no to a treatment that your doctor says you need, you should 
be able to appeal to an independent body that has no financial stake in 
the decision. This bill gives every patient that right and says the 
decision has to be made in a time frame that will not put the patient 
at risk.
  The Patients' Bill of Rights provides protection for the provider-
patient relationship by banning gag clauses and limiting inappropriate 
financial incentives to deny care. It also would put a stop to 
arbitrary decisions by plans to limit care, such as decisions to 
discharge mastectomy patients from the hospital before it is medically 
appropriate.
  Finally, the bill would hold plans legally accountable for decisions 
to deny or delay care that result in harm to patients. Today, 125 
million Americans who get their health care through their employer have 
little recourse if their plans' decisions harm them, even when the 
decisions lead to death. Doctors and hospitals are held accountable for 
their decisions, but health plans are not, and that is something that 
needs to change.
  The Patients' Bill of Rights is an important proposal that has the 
backing of the American Medical Association, Consumers Union, Families 
USA, the National Association of Children's Hospitals and numerous 
other organizations that advocate for quality patient care.
  I hope we can engage in productive debate on this issue in the coming 
months and pass legislation to improve the quality of health care for 
the American people.
  Mr. KENNEDY. Mr. President, the time for action to protect patients 
and curb insurance company abuse has come. We face a crisis of 
confidence in health care. A recent survey found that an astonishing 80 
percent of Americans now believe that their quality of care is often 
compromised by their insurance plan to save money. One reason for this 
concern is the explosive growth in managed care. In 1987, only 13 
percent of privately insured Americans were enrolled in HMOs. Today 75 
percent are in some form of managed care.
  At its best, managed care offers the opportunity to achieve both 
greater efficiency and higher quality in health care. In too many 
cases, however, the priority has become higher profits, not better 
health. Conventional insurance companies, too, have abused the system 
by denying coverage for treatments that their customers need and that 
their faithful payment of premiums should have guaranteed.
  And the issue is not just confidence. It goes to the heart of the 
issue of quality care and to the fundamental doctor-patient 
relationship. In California, a Kaiser Foundation study found that 
almost half of all consumers reported a problem with their health 
plan--and substantial proportions reported that the plan's misbehavior 
caused unnecessary pain and suffering, delayed their recovery, or even 
resulted in permanent disabilities. Projected to the national level, 
these results indicate that 30 million Americans actually developed 
additional health problems because of their plan's treatment of them, 
and a shocking 11 million developed permanent disabilities.
  The list of those victimized by insurance company abuse grows every 
day.
  A baby loses his hands and feet because his parents believe they have 
to take him to a distant emergency room rather than the one close to 
their home.
  A Senate aide suffers a devastating stroke which might have been far 
milder if her HMO had not refused to send her to an emergency room--the 
HMO now refuses to pay for her wheelchair.
  A doctor is denied future referrals because he tells a patient about 
an expensive treatment that could save her life.
  A child suffering from a rare cancer is told that life-saving surgery 
should be performed by an unqualified doctor who happens to be on the 
plan's list, rather than by the nearby cancer specialty center equipped 
to provide quality care.
  A San Diego paraplegic asks for referral to a rehabilitation 
specialist. Her HMO refuses, and she develops a severe pressure wound 
that a rehabilitation specialist would have routinely checked and 
treated. She is forced to undergo surgery, and has to be hospitalized 
for a year with round-the-clock nursing care.
  A woman is forced to undergo a ``drive-by'' mastectomy and is sent 
home in pain, with tubes still dangling from her body.
  The list goes on and on.
  The opponents of action are already waging a calculated and well-
financed campaign of disinformation arguing that protecting patient's 
rights is the same as massive government mandates and vastly increased 
costs. But the American people know better.
  Opponents of the legislation try to create a false dichotomy between 
relying on competitive market forces and relying on regulatory 
standards. In fact, this amendment helps competition by establishing a 
level playing field between those who compete by providing quality care 
at a reasonable cost and those who try to compete by attracting only 
healthy enrollees and denying those who fall ill the care they have 
promised.
  This legislation guarantees people the rights that every scrupulous 
insurance company already provides. These rights are common-sense 
statement of components of quality care that every family believes they 
have been promised when they signed up for coverage and faithfully paid 
their premiums.
  Let me cite a few of these common-sense rights specified in our 
legislation. They include access to an appropriate specialist when your 
condition requires specialty care. They allow people with chronic 
illnesses or disabilities to have standing referrals to the specialists 
they need to see on a regular basis. They assure that patients who need 
a prescription drug to save their life or their health can have access 
to it even if it is not included in their plan's formulary.
  They assure that a person suffering from serious symptoms can go to 
the nearest emergency room without worrying that their plan will deny 
coverage. No patient with the symptoms of a heart attack should be 
forced to

[[Page S2862]]

put their life at risk by driving past the emergency room down the 
street to the network provider an hour or more away. No patient with 
symptoms of stroke should be forced to delay the treatment to the point 
where paralysis and disability is permanent, because a clerk two 
thousand miles away does not respond promptly and appropriately. And no 
patient who goes to an emergency room with symptoms of a heart attack 
that proves to be a false alarm should suffer a real heart attack when 
a bill for thousands of dollars arrives that the health insurer has 
refused to pay.
  This amendment also says that any reform worthy of the name 
must guarantee that insurance plans meet the special needs of women and 
children. Women should have access to gynecologists for needed 
services. No women with breast cancer should be forced to endure a 
``drive-by'' mastectomy against the advice of her doctor.

  No child with a rare childhood cancer should be told that the 
urologist who happens to be in the plan's network will treat him--even 
if that urologist has no experience or expertise with children or with 
that rare cancer.
  Too many desperate patients--especially cancer patients--know that 
their only hope for survival is participation in a clinical trial. Such 
trials not only offer hope to patients, they also advance our knowledge 
and lead to better treatments for dread diseases. Many insurers have 
routinely paid for the medical costs associated with clinical trials, 
because they knew they offered benefits for patients and because the 
patients would incur medical costs in any event, even if they were not 
part of the trial. But today, many insurers are backing away from that 
constructive policy. Managed care plans, in particular, have often 
denied their patients the ability to participate in such trials.
  Our legislation provides patients a right to participate in such 
trials if stringent conditions are met. There must be no standard 
treatment that is effective for the patient, and the patient must be 
suffering from a serious or life-threatening illness. The trial must be 
funded by the NIH or another government agency meeting NIH standards. 
And the trial must offer the patient a realistic hope for clinical 
benefit.
  Patients need the right to appeal decisions on their plans to 
independent third parties. Today, if a health plan breaks its promise, 
the only recourse for most patients is to go to court--a time-consuming 
and costly process that may not provide relief in time to save a life 
or prevent a disability.
  Independent review was recommended unanimously by the President's 
Commission. It has worked successfully in Medicare for four decades. 
Working families deserve the basic fairness that only an impartial 
appeal can provide. Without such a mechanism, any ``rights'' guaranteed 
to patients exist on paper only--and they are scarcely worth the paper 
on which they are written. When the issues are sickness and health--and 
often as serious as life and death--no health insurance company should 
be allowed to be both judge and jury.
  When health plan misconduct results in serious injury or death, 
patients and their families should be able to obtain accountability. 
Every other industry in America can be held responsible for its 
actions. Why should health plans, whose decisions truly can mean life 
or death, enjoy this unique immunity?
  Reforms must protect the integrity of the doctor-patient 
relationship. ``Gag clauses'' and improper incentive arrangements 
should have no place in American medicine.
  And finally, everyone should agree that noncontroversial steps to 
improve quality and provide greater patient information should be part 
of reform.
  This amendment should not be controversial for any member of the 
Senate who is serious about protecting patients from insurance company 
abuse. Its basic provisions were included in legislation introduced by 
Democrats in the House and Senate. That legislation is supported by the 
American Medical Association, the Consortium of Citizens with 
Disabilities, the National Alliance for the Mentally Ill, the National 
Partnership for Women and Families, the National Association of 
Children's Hospitals, the AFL-CIO, and many other groups representing 
physicians and other health care providers, children, women, families, 
consumers, persons with disabilities, Americans with serious illnesses, 
and working families.
  It is rare for such a broad and diverse coalition to be assembled in 
support of any legislation. But ending these flagrant abuses will help 
every American family.
  The choice is clear. The Senate should stand with patients, families, 
and physicians. We must not stand with the well-heeled special 
interests that put profits ahead of patients.
                                 ______
                                 
      By Mr. DeWINE (for himself, Mr. Hatch, Mr. Leahy, and Mr. 
        Specter):
  S. 1893. A Bill to establish a law enforcement block grant program; 
to the Committee on the Judiciary.


           the local law enforcement block grant act of 1998

  Mr. DeWINE. Mr. President, today I rise to introduce the Local Law 
Enforcement Block Grants Act of 1998, which reauthorizes the very 
successful Local Law Enforcement Grant Program. This program gives 
local governments the resources to fight crime, without the 
``Washington knows best'' strings attached. I believe it is a mistake 
for Washington to try to micromanage how local communities spend their 
law enforcement dollars. Instead Washington should play the role of 
partner with local law enforcement to improve the tools they use to 
fight crime.
  My views on this issue are based on more than 20 years of experience 
in the criminal justice system: as a prosecutor in Greene County, Ohio; 
in the Ohio State Senate; as a United States Congressman on the 
Judiciary Committee; as Lieutenant Governor overseeing anti-crime and 
anti-drug efforts; and now, as a member on the Senate Judiciary 
Committee. I have had an opportunity to work on criminal justice issues 
from the local, state, and federal levels, and have been fortunate to 
see firsthand what Congress can do to help local communities be victors 
in the war on crime.
  Because 90 percent of all criminal prosecution is local, the fight 
against crime will be won or lost by local law enforcement, local 
prosecutors and courts, and concerned citizens in every community. I 
believe the best way for the federal government to help local 
communities fight crime is to return more money to those communities, 
because in the final analysis, it is they who will get the job done. 
For too long the Federal Government has had all the money--and local 
communities all the crime. Local communities know what works--and they 
should have the resources.
  From 1999-2003, this Act authorizes $750 million each year for direct 
grants to local law enforcement to reduce crime and improve public 
safety. Distributions are made by the Bureau of Justice Assistance on a 
formula basis, directly to local governments. Grants may include, but 
are not limited to, equipment and law enforcement personnel, enhancing 
school security measures, violent offender adjudication, drug courts, 
crime prevention programs and youth intervention programs.
  One of the most frequent uses of this grant money in Ohio, and by 
local law enforcement across the country, has been for crime fighting 
technology. I believe there is a critical need to modernize the crime 
fighting tools used by local law enforcement, who have been fighting 
increasingly sophisticated criminals with outmoded tools. That's why I 
am expressly providing that funds may also be used for information and 
identification technology, such as criminal history information, 
fingerprint dissemination, and DNA and ballistics tests.
  Let me underscore here that this Act leaves to local governments the 
decision regarding what their funding priorities should be, while at 
the same time requiring accountability as to how funds are ultimately 
used. Local advisory boards also have an opportunity to recommend how 
monies are spent as well. These funds will help local law enforcement 
meet the critical local needs, by letting them put the resources where 
they are needed most.

                          ____________________