[Congressional Record Volume 146, Number 47 (Thursday, April 13, 2000)]
[Extensions of Remarks]
[Page E586]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          DRUG PRICE COMPETITION IN THE WHOLESALE MARKETPLACE

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                          HON. JO ANN EMERSON

                              of missouri

                    in the house of representatives

                        Thursday, April 13, 2000

  Mrs. EMERSON. Mr. Speaker, today I am introducing legislation that 
will preserve drug price competition in the wholesale marketplace, 
prevent the destruction of thousands of small businesses across America 
and avoid a possible disruption in the national distribution of 
prescription drugs to nursing homes, doctors offices, rural clinics, 
veterinary practices and other pharmaceutical end users. As befitting 
such legislation, I am pleased to note that this bill has cosponsors 
from both political parties, a number of different committees and many 
different areas of the country.
  Our objective is to prevent and correct the unintended consequences 
to prescription drug wholesalers of a Final Rule on the Prescription 
Drug Marketing Act (PDMA) issued by the Food and Drug Administration in 
December, 1999. This regulation will require all wholesalers who do not 
purchase drugs directly from a manufacturer to provide their customers 
with a complete and very detailed history of all prior sales of the 
products all the way back to the original manufacturer. Absent such 
sales history, it will be illegal for wholesalers to resell such drugs. 
But in a true ``Catch 22'' fashion, the regulation does not require 
either the manufacturer or the wholesaler who buys directly from the 
manufacturer to provide this sales history to the subsequent 
wholesaler. In addition, the wholesaler who does not purchase directly 
from a manufacturer has no practical way of obtaining all the FDA 
required information needed to legally resell RX drugs. The result of 
this rule will be that most small wholesalers will be driven out of 
business. The FDA has estimated that there are about 4,000 such 
secondary wholesalers who are small businesses.
  The FDA's Final Rule will also upset the competitive balance between 
drug manufacturers on the one hand and wholesalers and retailers on the 
other by granting the manufacturers the right to designate which 
resellers are ``authorized'' and which are not, quite apart from 
whether the reseller buys directly from the manufacturer or not. The 
original intent of the PDMA was that wholesalers who purchase directly 
from manufacturers be authorized distributors, exempt from the 
requirement to provide the sales history information to their 
customers. However, the FDA's regulation has separated the designation 
of an authorized distributor from actual sales of product, and will 
allow manufacturers to charge higher prices to wholesalers in exchange 
for designating them as authorized distributors. Drug price competition 
will also be significantly reduced if thousands of secondary 
wholesalers are driven out of business. The result of the FDA's 
regulation will be that consumers and taxpayers will pay even higher 
prices for prescription drugs.
  Seems to me that the FDA is protecting the drug companies at the 
expense of the American public at a time when these companies must be 
encouraged to lower their outrageous prices so that our seniors and 
others in need can afford to pay for their medicine.
  Thus, while the Congress wrestles with difficult questions regarding 
drug pricing for seniors, expanded insurance coverage for prescription 
drugs and the like, the PDMA Rules is a drug pricing issue that is 
relatively uncomplicated, easy to solve and not expensive.
  The bill would make minor changes in existing language to correct the 
two problems described above. First, the bill would define an 
authorized distributor as a wholesaler who purchases directly from a 
manufacturer, making the definition self-implementing and removing the 
unfair advantage given to the manufacturer by the regulation. Secondly, 
the bill will add language to the statute which will greatly simplify 
the detailed sales history requirement for most wholesalers. If 
prescription drugs are first sold to or through an authorized 
distributor, subsequent unauthorized resellers will have to provide 
written certifications of this fact to their customers, but will not 
have to provide the very detailed and unobtainable sales history. For 
any product not first sold to or through an authorized distributor, a 
reseller would have to provide the detailed and complete sales history 
required by the FDA Rule. This would protect consumers against foreign 
counterfeits or any drugs which did not enter the national distribution 
system directly from the manufacturer, while eliminating a burdensome 
and expensive paperwork requirement on thousands of small businesses 
which has no real health or safety benefit in today's system of drug 
distribution.
  My cosponsors and I invite and encourage Members to add their names 
to this bill and look forward to its prompt enactment this year. Unless 
the FDA regulation is reopened and significantly modified by the 
agency, overturned in court or, as I hope, corrected by this bill, 
wholesalers will have to start selling off their existing inventories 
as early as May because the products will be unsalable when the 
regulation goes into effect in December 2000. This forced inventory 
liquidation will be accompanied by an absence of new orders by 
thousands of wholesalers, and the result could easily be disruptions in 
the supply of prescription drugs to many providers and end users. Let 
us then move quickly to fix this problem and save consumers, taxpayers 
and thousands of small business men and women across the land from 
higher drug prices, potential health problems due to supply 
interruptions and significant economic loss and unemployment.

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