[Congressional Record Volume 146, Number 34 (Thursday, March 23, 2000)]
[Extensions of Remarks]
[Page E411]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 INTRODUCTION OF THE SAVE MONEY FOR PRESCRIPTION DRUG RESEARCH ACT OF 
                                  2000

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Thursday, March 23, 2000

  Mr. STARK. Mr. Speaker, I introduce the Save Money for Prescription 
Drug Research Act of 2000, a bill to deny tax deductions to drug 
companies for certain gifts and benefits, but not product samples, 
provided to physicians and to encourage use of such funds for 
pharmaceutical research and development.
  In its January 19, 2000 issue, the Journal of the American Medical 
Association (JAMA) published a critical examination of the extent to 
which physicians interact with the pharmaceutical industry. The study 
found that U.S. drug companies spend more than $11 billion per year on 
drug promotion and marketing that is, an estimated $8,000 to $13,000 
per physician is spent on drug company gifts every year. These 
promotions include ``gifts'' such as free meals, travel subsidies, 
sponsored teachings, drug samples, and recreational benefits such as 
sporting event tickets and golfing fees, to name just a few. According 
to JAMA's analysis, physician-industry interactions appear to affect 
prescribing and professional behavior and should be further addressed 
at policy and education levels.
  Over the years, I have personally received numerous examples of 
outlandish drug company gifts to physicians. One memorable example came 
from a physician who sent me a sample of perks he received over the 
course of one week. The week started with an invitation to the horse 
races--including a private suite, lunch and open bar from noon to 3:00 
pm. Only a day later, he was offered free dinner at a fine restaurant 
where meals averaged $25/plate, and on the next day he received major 
league baseball tickets for the entire family.
  As yet another example of industry-physician interaction. I would 
like to insert in the Record, a March 9, 2000 USA Today article. This 
article describes a growing trend among advertising and marketing firms 
to sponsor physician continuing medical education courses that doctors 
in 34 states need to keep their licenses. These marketing firms are 
paid by drug companies and often hire faculty to teach these courses 
and educate medical professionals about their sponsors' products. This 
provides drug companies with another opportunity to impact physician 
prescribing practice and attitudes while increasing their company 
profits.
  At my request, the Congressional Research Service (CRS) last December 
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. For this reason, I introduced the Prescription Price Equity Act 
of 2000 to deny research tax credits to pharmaceutical companies that 
sell their products a significantly higher prices in the U.S. as 
compared to their sales in other industrialized countries. The U.S. 
government already provides lucrative tax credits to the pharmaceutical 
industry in this country, making additional tax deductions seem 
particularly unnecessary.
  The pharmaceutical industry reaps billions in profits every year and 
certainly does not need excessive tax breaks. Fortune magazine rates 
the pharmaceutical industry as the most profitable business in America. 
The average compensation for 12 drug company CEOs was $22 million in 
1998. Likewise, CRS reported that after-tax profits for the 
pharmaceutical industry averaged 17%--three times higher than the 5% 
profit margin of other industries.
  Although U.S. drug companies claim their exorbitant profits are 
justified by the high cost of research and development, pharmaceutical 
companies generally spend twice as much on marketing and administration 
as they do on research and development. In fact, some companies are 
guilty of spending even more than twice as much on advertising/
administration expenses. For example, Merck & Pfizer spent only 11% of 
revenues on R&D in 1997, and spent more than twice that amount (28%) on 
administration and marketing making available an abundance of funds for 
generous drug company ``gifts.''
  Research and development is a much more important pharmaceutical 
expenditure than the billions of dollars wasted on drug company gifts 
to physicians. Our nation has reaped great rewards as a result of 
pharmaceutical research; pharmaceutical and biotech research have 
discovered life-saving cures and treatments for ailments that afflict 
our society. But drug companies can do more. If the pharmaceutical 
industry would stop wasteful spending on promotions and spend instead 
on R&D, think of all the additional lives that could be saved.
  Currently, one third of Medicare beneficiaries have no coverage for 
prescription drugs and two-thirds of beneficiaries have no coverage or 
unreliable drug coverage. Over half of our most vulnerable are above 
the poverty level. That's why I've introduced H.R. 1495, Access to 
Prescription Medications in Medicare Act. This bill provides a 
universal, comprehensive Medicare drug benefit with a $200 deductible 
and 20% coinsurance for seniors up to $1,700 per year. Seniors with 
very high drug expenses get 100% of their drug costs paid by Medicare 
(i.e., stop-loss) after $3,000 in annual out-of-pocket spending.
  The need for this bill is clear. Denying the pharmaceutical industry 
the ability to deduct expenditures for certain gifts and benefits to 
physicians is a critical step in providing Americans with access to 
more life-saving drugs. By redirecting drug company promotional 
expenditures to their R&D budgets, the American public should reap the 
benefit of increased medical breakthroughs. To the extent the companies 
do not redirect these expenditures to R&D, the denial of the tax 
deduction will help finance a Medicare prescription drug benefit to 
ensure that our nation's seniors and disabled have access to the 
medications they need.

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