[Congressional Record Volume 144, Number 143 (Sunday, October 11, 1998)]
[Extensions of Remarks]
[Pages E2060-E2061]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       PRESCRIPTION DRUG PRICING

                                 ______
                                 

                          HON. THOMAS H. ALLEN

                                of maine

                    in the house of representatives

                        Friday, October 9, 1998

  Mr. ALLEN. Mr. Speaker, I am pleased to join my colleagues to address 
a very serious problem, the high price of prescription drugs. We only 
have a few remaining days left in this Congress. I would like to spend 
this time discussing the issues which matter to the American people 
such as HMO reform, reducing class size, and yes, improving the health 
and well being of our seniors.
  As I travel throughout the first district of Maine, people, 
particularly seniors, share their experiences regarding the high cost 
of prescription drugs.
  The high cost of prescription drugs is particularly difficult for 
seniors, who use one third of all prescriptions. While the average 
American under 65 uses only four prescriptions a year, the average 
senior uses 14 prescriptions a year. Furthermore, most older Americans 
suffer from more than one chronic condition, such as hypertension, 
diabetes, arthritis, glaucoma and circulatory problems.
  Medicare does not provide prescription drug coverage, so many seniors 
do not have prescription drug coverage and must incur these 
expenditures out-of-pocket.
  To bring attention to some of the above mentioned problems, and to 
consider appropriate action, I have joined my colleagues, 
Representative Marion Berry and Representative Jim Turner in 
establishing the Prescription Drug Task Force.
  Last June I requested that the Government Reform and Oversight 
Committee investigate whether pharmaceutical companies are taking 
advantage of older Americans through price discrimination, and, if so, 
whether this is part of the explanation for the high drug prices being 
paid by older Americans.
  According to a recent Standard & Poor's report on the pharmaceutical 
industry, ``drugmakers have historically raised prices to private 
customers to compensate for the discounts they grant to managed care 
companies. This practice is known as `cost shifting.' '' I understand 
that this is the first study which attempts to quantify the extent of 
price discrimination and how it affects seniors.

[[Page E2061]]

  The study investigated the prices of the 10 brand name drugs with the 
highest sales to the elderly (Zocor, Prilosec, Fosamax, Norvasc, 
Relafen, Procardia XL, Cardizem CD, Zoloft, Vasotec & Ticlid).
  The study estimates the differential between the price charged to the 
drug companies' most favored customers, such as large insurance 
companies and HMOs, and the price charged to seniors. The results are 
based on a survey of retail prescription drug prices in chain and 
independently owned drug stores in the first district of Maine.
  These prices are compared to the prices paid by the drug companies 
most favored customers. Then, for comparison purposes, the study 
estimates the differential between retail prices and prices for favored 
customers for other consumer items.
  This study has since been conducted in a number of congressional 
districts across the country. This is clearly a problem not only in 
Maine--but nationwide. A national report summarizing the investigations 
in our districts has been completed. I would like to take a few moments 
to share some of the findings of the national report.
  Older Americans and others who pay for their own drugs are charged 
far more for their prescription drugs than are the drug companies' most 
favored customers, such as large insurance companies and health 
maintenance organizations.
  A senior paying for his or her own prescription drugs must pay, on 
average, almost twice as much for the drugs as the drug companies' 
favored customers. This unusually large price differential is 
approximately four times greater than the average price differential 
for other consumer goods. The average price differential for the ten 
prescription drugs used in this study was 86 percent, while the average 
price differential for the other items was only 22 percent.
  Other drugs commonly used by seniors that are not among the top ten 
have even higher price differentials. For example, an equivalent dose 
of Synthroid, a commonly used hormone treatment, would cost the favored 
customers only $1.75, but would cost the average senior almost $30.00! 
This is a price differential of 1,603 percent!
  The high price of prescription drugs is not the fault of our 
pharmacists. Pharmacies have relatively small markups for prescription 
drugs--somewhere between 3-22 percent. Large pharmaceutical companies 
drive up the prices. Drug manufacturers make six times more profit on 
prescriptions than retail pharmacies.
  A recent lawsuit alleged that pharmaceutical companies have created a 
dual price system of drug distribution. Drug companies give discounts 
to the big managed care companies and HMOs, while charging higher 
prices to independent drugstores and pharmacy chains. Four of the 
pharmaceutical companies chose to settle for $350 million. Other cases 
are still pending.
  Drug companies make unusually high profits compared to other 
companies. The average manufacturer of brand name consumer goods, such 
as Proctor & Gamble of Colgate-Palmalive, has an operating profit 
margin of 10.5 percent. Drug manufacturers, however, have an operating 
profit margin of 28.7 percent--nearly three times greater.
  Unquestionably, pharmaceuticals have improved the lives of millions 
of people with very serious illnesses and chronic disabilities. Each 
year, drug companies introduce new drugs that restore the health, 
extend the life expectancy and improve the quality of life for people. 
However, these contributions are not a license for profiteering and 
price gouging.
  The problems outlined in these reports, are not simply a series of 
numbers and charts and dollar amounts. These problems affect real 
people, everyday, in Maine and throughout the nation.
  Recently, I joined several of my colleagues to introduce H.R. 4627, 
the Prescription Drug Fairness for Seniors Act. When we introduced the 
bill we were joined by one of my constituents, Vi Quirion.
  Vi traveled from Maine to Washington to speak not only of her 
difficulties, but also of those of her friends and neighbors. Vi has 
arthritis and stomach troubles. She lives on about $900 per month from 
Social Security and cannot afford supplemental coverage for her 
prescriptions.
  Vi, like many seniors, cuts back on her medication or does not take 
it at all. As she said: ``I can't afford to pay my prescriptions and 
gas and eat too. If I don't take Relafen it won't kill me, but it will 
certainly change my life. I won't be able to walk. We should not have 
to live like that.''
  It was for Vi and those like her that we introduced the Prescription 
Drug Fairness for Seniors Act. No older American should ever again have 
to choose between buying the drugs prescribed by their doctors and 
buying food for their tables or heat for their homes.
  The legislation achieves these goals by allowing pharmacies that 
serve Medicare beneficiaries to purchase prescription drugs at the low 
price available under the federal supply schedule through the Secretary 
of the Department of Health and Human Services. The legislation has 
been estimated to reduce prescription drug prices for seniors by over 
40 percent.
  I understand that Pharmaceutical Research and Manufacturers of 
America President Alan Homer recently said: ``the well-meaning efforts 
of the bill's sponsors unfortunately are likely to backfire on 
America's seniors. In a very real sense, this bill is a dagger pointed 
at the hearts of America's senior citizens.''
  This quote comes from an industry whose annual profits of the top ten 
drug companies is nearly $20 billion. Pharmaceuticals rank as the 
number one industry in return in revenues and return on assets. Yes, 
pharmaceuticals rate well above the telecommunications and computer 
industries.
  It is time to level the playing field and stop this price 
discrimination. It is time to put seniors' lives ahead of 
pharmaceutical profits. Support the Prescription Drug Fairness for 
Seniors Act.

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