[Congressional Record Volume 146, Number 14 (Tuesday, February 15, 2000)]
[Extensions of Remarks]
[Page E148]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




       INTRODUCTION OF THE PRESCRIPTION PRICE EQUITY ACT OF 2000

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                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                       Tuesday, February 15, 2000

  Mr. STARK. Mr. Speaker, I rise today to introduce the Prescription 
Price Equity Act of 2000, a bill to deny research tax credits to 
pharmaceutical companies that sell their products at significantly 
higher prices in the U.S. as compared to their sales in other 
industrialized countries.
  At my request, the Congressional Research Service recently completed 
an analysis of the tax treatment of the pharmaceutical industry. The 
conclusion of that report is that tax credits contributed powerfully to 
lowering the average effective tax rate for drug companies by nearly 
40% relative to other major industries from 1990 to 1996. Specifically, 
it finds that while similar industries pay a tax rate of 27.3%, the 
pharmaceutical industry is paying a rate of only 16.2%. At the same 
time, after-tax profits for the drug industry averaged 17%--three times 
higher than the 5% profit margin of other industries.
  The need for this bill is clear. The U.S. Government provides 
lucrative tax credits to the pharmaceutical industry in this country in 
order to promote research and development of lifesaving new 
pharmaceutical products. Yet, in return for these government subsidies, 
the drug companies charge uninsured Americans the highest prices for 
drugs paid by anyone in the world.
  Numerous studies have shown that uninsured seniors pay exorbitant 
prices for pharmaceuticals. I recently asked the House Government 
Reform Committee to compare the prices of prescription drugs in the 
district I represent in Congress with the prices of prescription drugs 
in Canada. The report found that seniors in Alameda and Santa Clara 
counties who lack insurance coverage for prescription drugs pay far 
more than consumers in Canada for the exact same medications.
  The study compared the 1997 prices of the five brand name drugs with 
the highest '97 sales to the elderly--Zocor (a cholesterol reducing 
medication), Prilosec (an ulcer and heartburn medication), Procardia XL 
(a heart medication), Zoloft (a medication used to treat depression), 
and Norvasc (a blood pressure medication). On average, seniors in the 
13th District are paying prices that are 100% higher than the prices 
Canadian consumers pay. For example, for a one-month supply of 
Prilosec, the average uninsured senior living in our District pays over 
$70 more than a consumer in Canada.
  This price discrimination against seniors is happening across the 
country. Yet, America's seniors are the least likely to be able to 
afford these higher costs. Nearly half of Medicare beneficiaries live 
on yearly incomes of less than $15,000 a year and a third live on less 
than $10,000. While some Medicare beneficiaries have prescription drug 
coverage through employer retirement packages, Medicare HMOs (which are 
lowering their prescription drug coverage each year), and Medigap 
policies, about 35% of Medicare beneficiaries have no coverage at all 
and must pay inflated prices for their needed medications. It is also 
estimated that nearly two-thirds of Medicare beneficiaries are at risk 
for being without prescription drug
  Yet, at the same time that seniors are being asked to pay these 
outrageous prices, the drug companies are reaping the benefit of 
generous governmental subsidies. There's something wrong with a system 
that gives drug companies huge tax breaks while allowing them to price-
gouge seniors. My bill attempts to correct this glaring inequity in a 
very even-handed approach. So long as your company gives U.S. consumers 
a fair deal on drug prices as measured against their same products sold 
in other OECD countries, you will continue to qualify for all available 
research tax credits. But if your company is found to be fleecing 
American taxpayers with prices higher than those charged for the same 
product sold in Japan, Germany, Switzerland, or Canada, then you become 
ineligible for those tax credits.
  I know that the Pharmaceutical Research and Manufacturers of America 
will strongly oppose the Prescription Price Equity Act. PhRMA will say 
that this bill spells the end of pharmaceutical R&D. That is complete 
nonsense. As shown by CRS, drug industry profits are already threefold 
higher than all other major industries. This legislation doesn't change 
the current system of research tax credits at all unless companies 
refuse to fairly price their U.S. products. The intent of my bill is by 
no means to reduce the U.S. Government's role in promoting research and 
development. It is simply to say that in return for such significant 
government contributions to their industry, drug companies must treat 
American consumers fairly. Why should U.S. tax dollars be used to allow 
drug prices to be reduced in other highly developed countries, but not 
here at home as well?
  Again, this bill simply tells PhRMA that U.S. taxpayers will no 
longer subsidize low prices in the OECD countries with our tax code. 
Research and development is important and that is why we give these 
huge tax breaks, but they do consumers little good if they can't afford 
the product.
  The Prescription Price Equity Act is not the solution to the problems 
facing America's seniors' abilities to purchase prescription drugs. 
That problem will only be addressed by improving Medicare to include a 
prescription drug benefit. I have introduced separate legislation to 
achieve that goal and look forward to working with my colleagues to 
achieve that vital Medicare improvement this year.
  The Prescription Drug Equity Act is important because it would end 
the abuse of the U.S. tax code to subsidize an industry that has so far 
refused to treat American consumers fairly. I urge my colleagues to 
join with me in support of this legislation to end pharmaceutical 
companies' abilities to profit at the expense of American taxpayers.

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