[Congressional Record Volume 146, Number 49 (Wednesday, April 26, 2000)]
[Senate]
[Pages S2943-S2944]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. WELLSTONE:
  S. 2465. A bill to amend the Internal Revenue Code of 1986 to deny 
tax benefits for research conducted by pharmaceutical companies where 
United States consumers pay higher prices for the products of that 
research than consumers in certain other countries; to the Committee on 
Finance.


                 prescription price equity act of 2000

  Mr. WELLSTONE. Mr. President, I rise to introduce legislation today, 
the Prescription Drug Price Equity Act of 2000. My colleague, Pete 
Stark, a Representative for the State of California in the House of 
Representatives--I want to give him full credit for having introduced 
this legislation in the House. I am proud to be a partner with him.
  The long and the short of it is this bill amends the Internal Revenue 
Code of 1986 to deny tax benefits for research conducted by 
pharmaceutical companies where U.S. consumers pay higher prices for the 
products of that research than consumers in certain other countries, 
such as Canada. I could go into this in great detail, but I think the 
operational definition is of 5 percent more.
  I tell you right now, in my State of Minnesota, seniors and others 
are in a state of outrage by the fact they can go and buy the same 
drug--produced in this country, FDA approved--for half the price in 
another country.
  If we are going to be giving these tax benefits to these 
pharmaceutical companies, I think they are going to have to be more 
concerned about the very public that gives them these benefits. So I 
introduce this legislation and look forward to support from my 
colleagues.
  Mr. President, like the rest of my colleagues I have just returned 
from a week in my home State of Minnesota. I met with many 
constituents, but none with more compelling stories than senior 
citizens struggling to make ends meet because of the high cost of 
prescription drugs--life-saving drugs that are not covered under the 
Medicare program. Ten or 20 years ago these same senior citizens were 
going to work everyday--in the stores, and factories, and mines in 
Minnesota--earning an honest paycheck, and paying their taxes without 
protest. Now they wonder, how can this Government--their Government--
stand by, when the medicines they need are out of reach.
  The unfairness which Minnesotans feel is exacerbated of course by the 
high cost of prescription drugs here in the United States--the same 
drugs that can be purchased for frequently half the price in Canada or 
Mexico or Europe. These are the exact same drugs, manufactured in the 
exact same facilities with the exact same safety precautions. A year 
ago, most Americans did not know that the exact same drugs are for sale 
at half the price in Canada. Today, you can bet the pharmaceutical 
industry wishes no one knew it. But the cat is out of the bag--and it 
is time for Congress to right the inequities that are rife in the way 
the United States government interacts with the pharmaceutical 
industry.
  Today, I want to focus on one of those inequities--the subsidies that 
the United States Government offers to pharmaceutical manufacturers to 
develop drugs which these same companies proceed to sell to the 
American people at up to twice the price they charge in other 
countries. To combat that problem I am introducing today 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 other 
industrialized countries.
  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 new lifesaving 
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.
  The Congressional Research Service recently completed an analysis of 
the tax treatment of the pharmaceutical industry. That analysis 
concluded that tax credits were a major contribution to lowering the 
average effective tax rate for drug companies by nearly 40 percent 
relative to other major industries from 1990 to 1996. Specifically, the 
report found that while similar industries pay a tax rate of 27.3 
percent, the pharmaceutical industry is paying a rate of only 16.2 
percent. At the same time, after-tax profits for the drug industry 
averaged 17 percent--three times higher than the 5 percent profit 
margin of other industries.
  It is time for the pharmaceutical industry to earn these tax 
benefits--by offering their life saving drugs to America's seniors at 
the same prices they charge in other countries.
  Numerous studies have shown that uninsured seniors pay exorbitant 
prices for pharmaceuticals. Surveys done by the Minnesota Senior 
Federation on the prices of the most commonly used drugs by Medicare 
beneficiaries found that in Minnesota, seniors pay on average about 
twice the price that Canadian seniors just across the border pay for 
the exact same medication. I know that the House Government Reform 
Committee compared prices of prescription drugs in the numerous 
districts around the country with the prices of prescription drugs in 
Canada. Those comparisons found price differentials in the exact same 
ballpark that we found in Minnesota. It is no wonder that Minnesota 
seniors are willing to spend their time and money to go across the 
border to buy their prescription medications. And the same is happening 
all over New England, in the Dakotas, in Montana, in Washington state, 
and elsewhere.

  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. The Prescription Price Equity Act of 2000 attempts to 
correct this glaring inequity in a very even-handed approach. The 
message to pharmaceutical companies is this: So long as your company 
gives U.S. consumers a fair deal on drug prices as measured against the 
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 other industrialized countries, 
like Japan, Germany, Switzerland, or Canada, then you become ineligible 
for those tax credits.
  I know that the pharmaceutical industry, through its trade 
association, PhRMA, will oppose the Prescription Price Equity Act and 
will claim that the bill means the end of pharmaceutical research and 
development. That is complete nonsense. As shown by Congressional 
Research Service, drug industry profits are already three times higher 
than all other major industries. This legislation doesn't change the 
current system of research tax credits at all unless drug companies 
refuse to fairly price their U.S. products. This bills intent is by no 
means to reduce the U.S. Government's role in promoting research and 
development. It is simply to make clear that in return for such 
significant government contributions to their industry, drug companies 
must treat American consumers fairly. Is there any reason why U.S. tax 
dollars should be used to allow drug prices to be reduced in other 
highly developed countries, but not here at home as well? Of course 
there is no good reason for that.
  That is why 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 that research and development does little good for 
U.S. consumers who can't afford to buy the products of that research.
  This bill does not solve the biggest underlying problem that 
America's senior citizens face. Only a comprehensive, prescription drug 
benefit, available to and affordable by all Medicare beneficiaries will 
do that. I have introduced and cosponsored legislation that can make 
that happen. But this bill, the Prescription Price Equity Act, 
nonetheless, sends an important message. It makes clear that the 
priority of the Federal Government in subsidizing research and 
development is to make sure that the miracles of modern medicine that 
result are at least equally available to American citizens as

[[Page S2944]]

they are to those in the rest of the industrialized world.
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