[Congressional Record Volume 146, Number 121 (Tuesday, October 3, 2000)]
[House]
[Pages H8728-H8734]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              THE STATE OF AMERICA'S AGRICULTURAL ECONOMY

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 6, 1999, the gentleman from Iowa (Mr. Ganske) is recognized for 
60 minutes as the designee of the majority leader.
  Mr. GANSKE. Mr. Speaker, I first want to thank the Speaker for the 
hours that he has spent in the chair for these special orders. The 
gentleman has gone above and beyond the call of duty to be present to 
enable Members to address the House for these special orders, and I 
want to personally thank the Chair.
  Mr. Speaker, my colleague, the gentleman from Minnesota (Mr. 
Gutknecht), and I will be talking about an important issue for the 
agricultural community. I rise today to address an issue that should 
concern all Americans, the state of our agricultural economy.
  Our farmers and livestock producers are faced with another year of 
daunting economic prospects. Just yesterday, Mr. Speaker, Agriculture 
Secretary Glickman reported the U.S. had distributed a record $28 
billion in direct financial assistance to American farmers and ranchers 
during fiscal year 2000, $28 billion. This represents up to 50 percent 
of on-farm cash income. This is significant and should open our eyes to 
what is happening to American agriculture.
  When I listen to farmers in my district, I hear several messages as 
they try to explain the causes of the economic situation. Many say that 
we need to address the issue of additional export markets, and I fully 
agree, and I applaud this Congress for passing monumental trade 
legislation and opening the door to the potential represented by over 1 
billion China citizens when we passed in this Congress permanent normal 
trade relations with China.
  But I also hear from my farmers fears that they are being squeezed 
out of business by large agricultural corporations. Over the past 
several years, we have watched as agribusiness after agribusiness has 
consolidated its operations, merged with its competitors, and created 
yet an even larger company, dramatically tilting the playing field to 
the potential disadvantage of the family farmer.
  The meat industry may be the best example of concentration run 
rampant, with concentration and vertical integration in the packing 
industry making it difficult for small producers to get a fair shake.
  In today's livestock markets, four companies, four companies, 
slaughter

[[Page H8729]]

80 percent of the Nation's steers and heifers. In 1998, four companies 
slaughtered 56 percent of the Nation's hogs, up from 32 percent in 
1985.
  Complicating matters further is the increased vertical integration of 
the industry. The most visible was the recent merger of Smithfield 
Foods, one of the largest packers and owners of hogs, with Murphy 
Farms, perhaps its greatest competitor in live hog production.
  So what has this done to the markets? Well, maybe it has negatively 
affected competition. Maybe the increased concentration has reduced the 
marketability of hogs and cattle raised by independent producers in 
Iowa and other States, like Minnesota. Maybe it has given these large 
agribusinesses an unfair competitive advantage and allowed them to 
manipulate prices, and forced smaller companies out of business. We 
just do not know.
  Who will provide answers to these questions? The farmers and 
livestock producers in my district are looking for help from their 
government, their only available ally. Some advocate new laws to 
protect their interests, claiming the existing ones are not doing the 
job.
  But I am not sure that new laws are necessary. We already have some 
pretty strong laws on the books. The problem is, this administration 
has not enforced the laws that are already on the books.
  I think that increased concentration in the agricultural markets has 
negatively affected competition and put farmers and producers in Iowa 
and elsewhere at a disadvantage. But in recent years, the USDA's Grain 
Inspection and Packers and Stockyard Administration, known as GIPSA, 
has found relatively few incidents of illegal business practices in 
livestock markets.
  This should provide some reassurance, should it not? Unfortunately, 
it does not, because last month the General Accounting Office released 
this report, ``Packers and Stockyards Programs, Actions Needed to 
Improve Investigations of Competitive Practices.''
  In this report, the GAO says, ``USDA has authority under the Packers 
and Stockyards Act which has been delegated to the Grain Inspection and 
Packers and Stockyards Administration to initiate administrative 
actions to halt unfair and anticompetitive practices by packers and 
livestock marketing and meatpacking.''
  The authority is already there, but USDA, under this administration, 
has not done its job. It is not that GIPSA does not investigate alleged 
anticompetitive behavior. It does. In fact, between October, 1997, and 
December, 1999, it conducted 74 investigations. The problem is, GIPSA's 
investigative procedures are inadequate for determining anti-
competition investigations.

                              {time}  2115

  Despite repeated recommendations to improve its practices, GIPSA 
continues in its failed attempt to protect the interest of small 
producers. The GAO found that GIPSA's ability to investigate and 
enforce allegations of unfair and anti-competitive practices was 
insufficient because its investigations are lead by economists without 
the formal involvement of the USDA's Office of General Counsel.
  The GAO wrote, ``As a result, a legal perspective that focuses on 
assessing potential violations is generally absent.'' The GAO 
recommended that investigation should be based upon the model followed 
by the Department of Justice and the Federal Trade Commission. These 
agencies ``emphasize establishing the theory of each case and the 
elements that will prove a case. At each stage of the investigation, 
there are reviews by senior officials who are attorneys and economists 
which focus on developing sound cases.''
  Under these procedures, violations of the Packers and Stockyards Act 
would be much easier to identify. However, at GIPSA, legal reviews are 
generally not performed until an investigation is completed. In fact, 
between 1994 and 1996, only 4 of 84 investigations had been submitted 
to the general counsel for review because investigations were conducted 
by staff with inappropriate qualifications, inadequate input from 
attorneys, and apparent lack of cooperation among GIPSA branches. That, 
in my mind, is unacceptable.
  In addition to developing investigative procedures based on 
Department of Justice and FTC models, the GAO recommends that the USDA, 
A, develop a teamwork approach for investigations with GIPSA's 
economists and USDA's attorneys working together to identify violations 
of the law; B, determine the number of attorneys that are needed for 
USDA's general counsel to participate in and, where appropriate, lead 
GIPSA's investigations; C, provide senior GIPSA and general counsel 
officials to review the progress of investigations at main decision 
points; and, D, ensure that legal specialists are used effectively by 
providing them with leadership and supervision by USDA's attorneys and 
ensure that GIPSA has the economic talents that it needs.
  Mr. Speaker, the Department of Agriculture accepts and agrees with 
the GAO recommendations. In their official letter of comment, 
Undersecretary of Marketing and Regulatory Affairs, Michael Dunn, said, 
``Overall, GIPSA and the OGC concur with the recommendations provided 
in this report. The Department finds that GAO's recommendations are 
within GIPSA's existing reorganization, reengineering, training, and 
long-term planning and implementation strategies.''
  But reform has not been coming from the agency. In 1997, GIPSA's own 
Inspector General recommended similar changes. That report highlighted 
the importance of having attorneys participate in GIPSA's 
investigations. The office of Inspector General recommended then that 
GIPSA should follow the FTC and Department of Justice models and 
recommended several reforms that would greatly improve GIPSA's ability 
to enforce the Packers and Stockyards Act. At that time, like now, 
GIPSA agreed; but this new GAO report shows that the reforms taken by 
GIPSA in response to its office of Inspector General's recommendations 
are insufficient to properly enforce the law.
  In addition, in 1991, the GAO recommended USDA implement a more 
feasible approach for monitoring activity in livestock markets. So we 
are looking at an agency which was told 9 years ago it needed to 
improve its performance with respect to anticompetitive activity in the 
livestock markets. The agency was again told by its Inspector General 3 
years ago what specifically needed to be done to improve its 
investigative procedures, and they have not done so.
  Obviously, USDA needs some Congressional pressure to implement the 
necessary reforms. That is why today I joined the gentleman from 
Minnesota (Mr. Gutknecht), who is with me here tonight, and our 
colleagues in the Senate, Senator Grassley from Iowa and Senator Grams 
from Minnesota, in introducing the Packers and Stockyards Enforcement 
Improvement Act of 2000.
  This bill requires USDA to implement within 1 year the 
recommendations of the GAO to improve its investigations into alleged 
anti-competitive activity. In addition, the bill requires USDA to 
develop and implement a training program for competition, 
investigations, and to provide an annual report to Congress on the 
State of the cattle and hog industries, identifying business activities 
that represent possible violations of the Packers and Stockyards Act.
  Mr. Speaker, this is an important issue. Farmers and producers rely 
on the USDA to protect them from anticompetitive practices. If GIPSA 
cannot do this, who can they turn to? We should implement this bill 
this year. Our farmers deserve a department and an agency which are 
properly prepared to address their concerns.
  Mr. Speaker, I yield to the gentleman from Minnesota (Mr. Gutknecht), 
a cosponsor of this bill, and I want to express my appreciation to him.
  Mr. GUTKNECHT. Mr. Speaker, I thank the gentleman from Iowa for 
yielding to me. I thank him for this special order, and I thank him for 
this bill.
  I want to say a special thank you to our colleagues in the Senate, 
particularly Senator Grassley for his hearing in September, on 
September 25, where he highlighted this report.
  I want to point out to people who may be watching who the General 
Accounting Office is. The General Accounting Office is basically our 
auditors; and many times, they file reports. We send them out to 
investigate different agencies to find out if they are really doing 
their jobs. Altogether too

[[Page H8730]]

often they do a beautiful job of coming back with a report and 
recommendations, and the reports wind up sitting on some desk somewhere 
and gathering dust.
  So I want to say a special thank you to our colleagues over on the 
other body for at least saying this time we are going to do something 
about it, this time we really mean it.
  I want to talk a little bit about the Packers and Stockyards Act. It 
goes back about 70 years, and it was designed to protect individual 
producers. It was not designed to protect the packers and the 
stockyards. As the gentleman from Iowa (Mr. Ganske) mentioned, and I do 
not want to become repetitive, but what we have seen in the last 10 
years especially is a tremendous change in what has happened in the 
livestock industry.
  Frankly, from my perspective, and listening to the gentleman from 
Iowa speak earlier, we came here together in 1994, and I have always 
thought in many respects we both come from what I thought was the Teddy 
Roosevelt wing of the Republican parties, whether it is fighting for 
open markets and more competition for prescription drugs, which I think 
we are winning, and I am not so certain. We seem to be waging a war, 
not only against the pharmaceutical industry, but the FDA itself, and 
sometimes our own leadership makes our job even more difficult. But the 
important point is we understand that markets are more powerful than 
armies and that competition is good.
  I was reading about Teddy Roosevelt this weekend; and the more one 
reads about him, the more interesting he is. But he really and deeply 
and fiercely believed that competition was a good thing, that it 
brought out the best, whether it was on the sporting fields or whether 
it was in business. He fought literally all of his life to make certain 
that there was adequate competition in every field.
  What we have seen in the last several years are really disturbing 
trends. Let me just share with the people who may be watching this what 
has happened relative to some of the large mergers. We have talked 
about this relative to pharmaceutical industry. It was not that long 
ago we had, well, let us see, there was Glaxo and there was Wellcome 
and Bristol-Myers. There was Squibb. There were four separate 
companies. If they have their way, by the end of this year, there will 
be one company. Now, all of those companies were big companies, and 
they had tremendous market power, but imagine what it is like now that 
there is one.
  We have talked about the oil industry, the same thing. People 
sometimes scratch their heads, and they wonder why is it we seem to be 
at the mercy of the large oil companies. Well, at one time we had Exxon 
and Mobile, and one was a $55 billion company, and the other was a $43 
billion company, and now they are one company.
  It was Teddy Roosevelt who was behind breaking up Standard Oil. Now 
we see all those big oil companies coming back together.
  Let us talk about concentration.
  Mr. GANSKE. Mr. Speaker, reclaiming my time for a moment, at the 
moment that we are speaking here on the floor, there is a Presidential 
debate going on. I hope that one of the questions that is asked Vice 
President Gore and Governor Bush is what would be their position on 
antitrust.
  I, too, feel like I am a member of the Teddy Roosevelt wing of the 
Republican Party, a progressive wing that felt that it was important 
for the little guy to have a chance to compete.
  To bring us back to this issue of meat packing, correct me if I am 
wrong, but I believe the gentleman from Minnesota (Mr. Gutknecht) has 
some personal experience in the business, does he not?
  Mr. GUTKNECHT. Mr. Speaker, my experience, I think the gentleman from 
Iowa is referring to, is that I am a licensed and bonded auctioneer. 
Yes, I can spit it out pretty fast.
  I would like to illustrate, 10 years ago, about 80 percent of the 
livestock in the United States was sold either in what we call a spot 
market or in some kind of an auction format. That has now changed that 
80 percent of livestock today is sold under some kind of a contract.

  Now, I am not totally opposed to contracts, but we have a number of 
problems with contracts. One is transparency. Many times one producer, 
independent producers living right across the road from each other, 
both could have contracts with the same packer, and neither may know 
what the other's contract really is.
  Mr. GANSKE. Mr. Speaker, reclaiming my time, many times, I think they 
may have clauses in those contracts that say they are not supposed to 
divulge the contents of that contract; is that not right?
  Mr. Speaker, I yield to the gentleman from Minnesota (Mr. Gutknecht).
  Mr. GUTKNECHT. Mr. Speaker, that is correct. But the interesting 
thing is, under the Packers and Stockyards Act, as I understand it, 
actually the USDA has access to that information. Now, I am not saying 
they ought to share the information from one neighbor to the other, but 
there ought to be a way that they can share more information about what 
actually is going on in the marketplace. Because as I have said, many 
times our independent producers, our farmers, it is like they go into 
the casino every day, and they make bets. They are betting against the 
big grain companies, they are betting with the big fertilizer 
companies, they are betting with the packers and the people who buy 
their products.
  The problem is the people that they are dealing with have enormous 
amounts of information. They know what is going on in China. They know 
what deals they may have going on in other parts of the world. They 
have much better information. So, in effect, they are going in and they 
are betting against the house, and the house always wins.
  We are not saying that the packers or the stockyards are necessarily 
evil. But there is something wrong with the system where they have a 
lot more information, they know what the prices are actually being 
paid, and the producers do not.
  What we are saying is it is time for the USDA to, at least, do what 
the General Accounting Office is telling us and what they have told us 
in the past needs to be done to more aggressively enforce the act.
  Let me go back to this issue of concentration, because I want to 
share these numbers with the gentleman from Iowa and some of the people 
who may be watching.
  Since 1993, which coincidentally was when Mr. Gore and Mr. Clinton 
came into office, since 1993, there have been in the United States 
46,571 mergers in the United States that were approved by the 
Department of Justice. Those deals totaled more than $5 trillion. Now, 
that is just a big number to most of us, but let us compare that to the 
previous 8 years. During the previous 8 years, there were only 19,518 
mergers, and they totaled a little more than $1 trillion in value.
  What we have seen in the last several years is just an enormous 
amount of concentration, and we are seeing it particularly in 
agriculture, whether it is on the seed and fertilizer side of the 
farmer's ledger or whether it is on the side of the ledger where he is 
selling what he is producing, whether it is grain, or whether it is 
livestock.
  As an auctioneer, I know this. If you have an auction and you only 
have two bidders, you are not going to get as good a price as if you 
have five or six bidders.
  Now, we cannot always force the situation relative to how many people 
are going to be in the meat packing business. Again, I am not saying 
they are particularly evil, but I think there is a system beginning to 
develop that looks incredibly sinister to those independent producers, 
and it looks an awful lot like that there is potential for manipulation 
of some of these prices.
  So all we are really saying is we do not need to rewrite the Packers 
and Stockyards Act. That is what this report says. What we have to do 
is a better job of enforcing those laws. This is true throughout so 
much of what we do.
  A lot of our more liberal friends says we need more laws, whether it 
is campaign finance laws or other laws. Some of us say, yes, maybe we 
do need some changes in the law, but first and foremost, let us enforce 
the laws that are on the books today. That is what this audit says. 
That is what this bill says. In effect, this says to the USDA, this 
time we really mean it.

[[Page H8731]]

                              {time}  2130

  Mr. GANSKE. Mr. Speaker, I appreciate the gentleman's comments on the 
meat packing situation. In talking to farmers across the Fourth 
Congressional District in Iowa, they are very frustrated. We in the 
State of Iowa have been trying to put together a deal which would 
create a new beef packing plant in the State of Iowa. I do not know 
that there has been a modern beef packing plant done in the United 
States in the last 15 to 20 years.
  It is clear that there are a number of reasons why there needs to be 
more modern packing plants in terms of, I think, the water quality 
issues and things like that, but also packing facilities that are at a 
reasonable distance from the producer and an option for them to use. 
There would be farmers that would have cattle, producers that would 
have an option then of going to one of the established packers or 
coming, for instance, to central Iowa. They would then be able to make 
that judgment based on some competition for the price between those two 
cattle packers. That does not exist right now.
  As the gentleman has pointed out, the number of mergers not just in 
this industry but in the entire economy is just accelerating beyond 
belief. And I am glad that the gentleman mentioned the instance of the 
pharmaceuticals, because we can talk about prescription drugs in a few 
minutes, but before we leave this issue of enforcement, I think it is 
important to go over again what we are talking about, and that is that 
there already is what is called the Grain Inspection and Packers and 
Stockyards Administration. This administration is charged with finding 
out whether or not there are anti-competitive practices. Unfortunately, 
as this GAO report has shown, and others in the past have shown, 
because of the way the investigations are done by GIPSA, they are not 
taking advantage of counsel along the way that will help their 
inspectors determine whether in fact anti-competitive behavior has 
occurred.
  There needs to be counsel giving advice on that. That is one of the 
recommendations in this report. And it is unfortunate that the USDA and 
GIPSA has not followed the recommendations of the report in the past. 
Nine years ago a similar report was made to this, and still nothing has 
happened. So that is the reason why the gentleman and I have introduced 
our bill, and Senator Grassley and Senator Grams in the Senate have 
introduced our bill, The Packer and Stockyards Enforcement Improvement 
Act of 2000.
  We are calling on our colleagues, both Republicans and Democrats, 
particularly in areas that are rural and where they have constituents 
who are meat producers, to sign on to our bill. As my colleague from 
Minnesota said, this bill does not write new language in terms of the 
law, it seeks to affect a more efficient and effective implementation 
of the prior law.
  Mr. GUTKNECHT. And I just want to point out that one of the things 
that many times people inside the bureaucracy will say is, well, we do 
not have enough staff or we do not have enough money. But the General 
Accounting Office does not say that in their report. We currently 
allocate 153 people and about $16 million, and over the last 2 years 
they have conducted a grand total of 74 investigations.
  Now, I do not know how many is the right number, whether it is staff 
or whether it is the appropriation or how many investigations that they 
should conduct, but I do know this; that there is enormous distrust out 
in farm country among our independent producers out there of the way 
this law is being enforced. There is a lot of concern. And I think the 
way to allay that concern is to make certain that at least the 
recommendations of our own General Accounting Office, as it relates to 
the investigative methodology that is used, is implemented, to make 
certain we get to the bottom of this.
  We cannot completely solve this problem of concentration. I think 
that is sort of a function of the way the economy seems to be moving 
today. On the other hand, I think we can do all within this law that is 
possible to make certain that if there is only going to be four major 
packers that are involved in beef packing, that at least there is 
adequate competition.
  Personally, I would love to see moving back to more of an auction 
format. Frankly, I think that is the fairest way to sell almost 
anything. And I say that as a licensed and bonded auctioneer. But the 
real key about the auction was that a person could go to the auction 
ring and sit there and see what cattle or hogs were actually selling 
for. If they paid close enough attention, they could tell who was 
buying them; whether they were going to Armour or Swift or Hormel, 
wherever they were going. If someone paid attention, they could know 
who was buying and how much was being paid.
  In today's market, that is next to impossible. They publish some 
prices in the paper, but, in fact, I have to tell my colleague that 
when we went through that period when hogs dropped to $8 per hundred, 
the truth of the matter was that many of the hogs being slaughtered in 
our facilities in Iowa and Minnesota were not selling for $8 a hog, 
they were selling for substantially more than that because they were on 
some form of contract. Even today, when we look at the cash market, 
that may or may not be the price that hogs are actually being sold for 
on that given day.

  The USDA has enormous power under the Packers and Stockyards Act, and 
what we are saying as part of this is that they need to do a better job 
of sharing the information they have with those independent producers.
  And let me just say finally about the independent producers that 
anybody who has spent any amount of time with these people who raise 
livestock, farmers in general but livestock producers in particular, 
these are the salt of the earth people. The truth of the matter is they 
do not ask for much from government. Matter of fact, if any of my 
colleagues were to go to the National Cattlemen's Association, if there 
is any group in America who says get the government out of our 
business, it is the Nation's cattlemen. I admire them so much.
  All they really ask for is a level playing field and a set of rules 
that are fair so that they have a chance to compete and take care of 
their families, perhaps grow their farms and their ranches for their 
families and future generations. They do not ask for much. And so I 
think the very minimum that we can do in this Congress is to make 
certain that we at least implement the recommendations of our own 
General Accounting Office.
  So I congratulate the gentleman for bringing this bill forward. I 
congratulate the Senate sponsors as well. Hopefully, we can get this 
bill passed, perhaps in the next 10 days. But I will promise the 
gentleman that if we do not get it passed before we are able to go home 
and this Congress adjourns, we will be back next year and I will be 
prodding my colleagues on the Committee on Agriculture, and I know the 
gentleman will be prodding his colleagues in the Committee on Commerce 
to make certain that we do follow through on this and that something 
happens for these great people out there working their tails off every 
day.
  Mr. GANSKE. Well, Teddy Roosevelt was known as the trust buster, and 
what we were dealing with at that time was the big oil and the 
railroads. Probably one of the great books in American literature on 
capitalism is a book by the name of the ``Octopus,'' and I would 
encourage all our colleagues to read that book because that book dealt 
with the iron grip that the railroads had over our agricultural 
communities at that time. The average farmer there was the victim of a 
monopoly most of the time in those areas. Take it or leave it; this is 
our freight rate, and they had no choice. It required the hand of 
government to come in and act as an equalizing force so that, in 
effect, competition could flourish and that we could see some justice 
in the economic markets.
  I am afraid that we are heading, with the continued concentration in 
the food industry, and particularly the meat packing industry, in that 
same direction. I think it would be better to implement the current 
laws now effectively rather than at some time in the future be faced 
with a more draconian type of legislation. And strange things can 
happen in a democracy. I think that it would behoove the meat packing 
industry itself to have an interest in the effective application by 
GIPSA of the Packers and Stockyards Act. So I thank my colleague for 
joining me on this issue.

[[Page H8732]]

  I think that we also could speak for a few minutes on a very 
important issue to our constituents, and that is the high cost of 
prescription drugs. This is an issue that is important not just for 
senior citizens but for everyone in the country. We are seeing health 
insurance premiums rise at 10, 11, 12 percent per year now, largely due 
to the fact that prescription drug costs are rising at 18 to 20 percent 
per year, and so employers are being hit with increased costs of 
premiums and they are passing part of that on to the employees, which 
is making health care much more expensive.
  We are seeing prescription drug prices in this country at four times 
the cost for the same medicine than it would cost in Mexico; at twice 
the cost for the same medicine as someone can get the medicine from 
Canada or the European Union.
  I got a letter from a constituent who said that he had been in a 
clinical trial for a new arthritis medicine. It worked great. He was a 
volunteer at a hospital, so he went to the hospital pharmacy where, 
with his volunteer discount, he could get that pill for $2.50 per pill. 
He got on the Internet that night and he found he would be able to get 
that pill for about half price from Canada or Europe, Geneva, 
Switzerland, and a quarter price from Mexico.
  And yet, if he does that, he is likely to get a threatening letter 
from the Food and Drug Administration saying that he is breaking a law 
that was passed in 1980 that prevents the reimportation of prescription 
drugs; drugs that are made in this country, safely packaged in this 
country, and sent overseas. In 1980, they passed a law that said we 
could not reimport those drugs back into the United States.

  It was part of an FDA reform bill. It was a small part, but Ronald 
Reagan, who was the President at that time, signed the bill in general 
but gave a warning about that particular part. He said he was really 
concerned about that special protection for the pharmaceutical 
industry, because he thought that not allowing reimportation could 
result in the increase of prescription drugs in the United States. And 
Ronald Reagan was right, because we are now seeing these high costs.
  The gentleman from Minnesota and I, and the gentlewoman from Missouri 
(Mrs. Emerson), and a couple of our other colleagues, the gentleman 
from Oklahoma (Mr. Coburn), including some of our colleagues on the 
Democratic side of the aisle, the gentleman from Vermont (Mr. Sanders) 
and the gentleman from Maine (Mr. Baldacci) and others, have worked 
hard to try to fix that law that was passed in 1980 so that we can 
reimport prescription drugs. If we allowed drugs to come back into the 
United States at a lower cost, I guaranty the competition in the market 
would lower the cost for everyone, not just for senior citizens.
  I would be happy to yield to the gentleman to give us an update on 
where that bill is at this point in time.
  Mr. GUTKNECHT. Well, the gentleman has done a great job of setting 
the stage. In this case, I should say Dr. Ganske. The gentleman 
probably understands this issue as well as anybody. I sort of fell into 
it at some of my town hall meetings.
  Several years ago, seniors started to talk about bus trips to Canada 
to buy prescription drugs. And, to be honest, the first couple of times 
it came up, I just sort of dismissed it. If people want to go to 
Canada, they can go to Canada. But then I began to learn that the FDA 
actually sent these threatening letters to seniors if they attempted to 
reorder. Generally speaking, they will allow people to go across the 
border with a legal prescription and go into a pharmacy in Canada or 
Mexico, or, frankly, around the rest of the world.
  But I want to take a moment to talk about the differentials. Let us 
take one drug. The purple pill; Prilosec. The average price in the 
United States now is about $139 for a 30-day supply. And one of the 
aspects of many of these drugs is that once a patient begins to take 
these, they tend to be on them for very long periods of time.

                              {time}  2145

  Prilosec is a wonderful drug. It is for acid reflux disease and for 
ulcers. It is a wonderful drug. I really do not want to bash the makers 
of it. But the problem is this. In the United States that 30-day supply 
is about $139 now. That same 30-day supply of exactly the same drug 
made in the same plant under the same FDA approval sells in Canada for 
about $55. But in Mexico I am told you can buy the same drug for 
$17.50. In Europe the average price is about $39.
  I think Americans want to pay their fair share. But what is really 
happening right now is the pharmaceutical industry is shifting much of 
their cost for research and development and most of their profits are 
coming at the expense of American consumers. That is just wrong. When 
we talk about Teddy Roosevelt, we talk about competition and how 
competition makes things stronger. Competition in sports, competition 
in business. What we are saying is you have got to have competition in 
the drug industry. Right now they hide behind the protection of the 
FDA. We are saying that that has to stop.
  I will give the gentleman one more example. My 83-year-old father, 
unlike some of the politicians' stories, really does take Coumadin. It 
is a blood thinner. The average price here in the United States for a 
30-day supply is about $28. That same drug in Switzerland sells for 
$2.85. The President and the Vice President and a lot of people on both 
sides of the aisle say, ``We've got to have prescription drug coverage 
for seniors.'' But one of the seniors at my town hall meetings said it 
so well. He said, ``If you think drugs are expensive today, just wait 
till the government provides them for free.'' If we do not solve this 
price side of this problem, we will never be able to solve the coverage 
side. I support the coverage side. I think it is time to have a benefit 
as part of Medicare that includes prescription drugs. I think that is 
the right thing to do. But you will never get there, you will never be 
able to afford that benefit if we do not create some competition in the 
United States so that Americans have access to world market prices. It 
is the only area I know of where the world's best customers pay far and 
away the world's highest prices.
  We are making progress. The President has now embraced our bill. 
Congressional leaders on both sides have embraced our bill. But the FDA 
and the drug companies are not exactly embracing our bill. As we speak, 
they are trying to throw more and more grit into the gears to try and 
slow this thing down. I do believe that ultimately, because we are in 
the Information Age, this is going to happen. You cannot hold back 
markets. Shortly after the Soviet flag came down for the last time over 
the Kremlin, a headline was written and it was so powerful, because 
what it said was, markets are more powerful than armies. If you think 
about it, the Soviet experiment was 70 years of the government trying 
to hold back markets. It cannot be done, particularly in the 
Information Age. We are going to win this fight. We are going to see 
prescription drug prices in the United States come down by at least 30 
percent. And with those savings, and the estimates are next year we are 
going to spend $150 billion in this country on prescription drugs, a 30 
percent savings, I am not good in math but that works out to $45 
billion in savings for American consumers. With some of those savings 
we can begin to create a better safety net, a better program, some kind 
of a benefit that will take care of those seniors that currently fall 
through the cracks.
  I want to thank the gentleman for all his help. It has been 
bipartisan. We have the gentleman from Vermont (Mr. Sanders), we have 
got a lot of Democrats who have joined us, the gentleman from Maine 
(Mr. Baldacci), lots of Democrats have helped us on this. It is not a 
partisan issue. I always tell people this is not a debate between the 
right and the left. This is a debate between right and wrong and it is 
wrong to make American consumers pay the world's highest prices.
  Mr. GANSKE. I would point out that on the House appropriations bill, 
we have passed an amendment in a bipartisan fashion, 375-12, to allow 
the reimportation of prescription drugs back into the United States. 
And on the Senate side, the vote was about 75 for allowing 
reimportation. Here is where we are on the specifics of the legislation 
as I understand it today in talks that are ongoing with the White House 
and between congressional leadership

[[Page H8733]]

and, that is, that there is an issue on labeling. The prescription drug 
companies want to try to get a provision into this bill that would say 
that if the label is at all different, then you cannot bring the drug 
back in. Those labels frequently will be written in the foreign 
language of the country that they are in, not necessarily the 
instructions inside the box, the instructions inside the box could 
easily be just like the instructions inside the box of a DVD that you 
would buy. In other words, they would be written in English, German, 
Spanish, French, so that you would have the same information, but the 
drug companies are trying to prevent the reimportation by saying that 
if there is anything different on the label, then it cannot come back 
in. We need to make sure that that type of loophole is not allowed into 
it.

  Then the drug companies are looking at ways where they can write 
contracts with wholesalers and retailers overseas, restrictive 
contracts that would say that they cannot send those drugs back into 
the United States. That would be totally gutting the bill if they were 
allowed to do that. We cannot allow the pharmaceutical companies to put 
a provision into a bill saying that they can write contracts that would 
be exclusive contracts and not allow for the reimportation.
  On the safety issue, honestly I believe that prescription drugs that 
are made in the United States, shipped overseas, can safely be 
reimported. The Secretary of Health and Human Services Donna Shalala 
says that we think that the FDA can monitor the safety of drugs coming 
back into the United States. Just give us about $24 million more to 
beef up our inspection service in the FDA and we think we can do it 
safely and effectively. $24 million is a drop in the bucket compared to 
the billions of dollars that consumers in this country would save by 
having increased competition.
  I just have to reinforce what my colleague has said. We are talking 
about increased competition. We are not talking about price controls. 
We are talking about really letting the market work, whereas right now 
there is a special protection for those products that almost no other 
industry has. Do our farmers have that kind of protection? We are 
dealing with a global market. Our farmers when they sell their corn and 
beans, that sale price is determined by how many acres are planted in 
Brazil. They are dealing with a global market. So are our appliance 
makers. So is our entire economy if we are selling financial services. 
It is a global market. There is no reason why one industry should have 
such a special protection when we can safely and effectively administer 
the reimportation.
  Finally, I just want to point out, the negotiations with the White 
House are primarily going on about whether to allow wholesalers and 
retailers to reimport prescription drugs. I think the gentleman from 
Minnesota would agree with me 100 percent, this should not be just for 
wholesalers and retailers. This should be for individuals as well. And 
at a bare minimum we ought to delete that law that says that the 
Customs Department and the Food and Drug Administration can send 
threatening letters to citizens from this country if they would 
purchase prescription drugs overseas.
  Mr. GUTKNECHT. The gentleman is exactly right. I think that it has to 
be about allowing the local pharmacies and other groups to import, but 
most importantly, if nothing else happens this year, we ought to make 
it very clear to the FDA that as long as it is an FDA-approved drug, 
made in an FDA-approved facility, they should stop threatening American 
seniors for trying to save a few bucks on prescription drugs. It is 
immoral for them to send threatening letters to 87-year-old widows 
trying to save $15 on a prescription or $20 or maybe $100, whatever it 
happens to be. For our own FDA to be the bully in this whole debate, it 
seems to me is outrageous. Now, if it is an illegal drug, then 
absolutely it ought to be stopped at the border. But if it clearly is 
an FDA-approved drug made in an FDA-approved facility, for them to be 
allowed to send threatening letters to our seniors ought to stop and it 
ought to stop the day the President signs that bill. I feel very 
strongly about this. Yes, we want to do it for everybody.
  Let me come back just real briefly to the whole issue of safety. One 
of the arguments and we have seen ads, in fact I think the 
pharmaceutical industry spent something like $400 million this year 
lobbying and advertising on this issue, it is the Henny Penny, the sky 
will fall. People just have to think what we can do today with today's 
technology. There is a software company in Minneapolis that was one of 
the people who developed the bar coding technology that is now being 
used in almost every hospital, where they bar code the pharmaceuticals 
and they put a bar-coded bracelet on everybody. They know exactly when 
you got your Prilosec or whatever drug was given to you. That 
technology is there today, could be modified and we can make certain 
that every product that comes off the line, whether the plant is in 
Switzerland or Indianapolis, that that is in fact what it says and that 
it was made on such and such a date at such and such a time, we can 
check that instantly with today's technology. Not only that, we have 
got tamperproof containers today that we did not have in 1980. Finally, 
we can bar code boxes. I do not know when the last time you got a 
package from Fed Ex or UPS or the post office but almost all of them 
now have bar coding technology. They know where that package is almost 
at any moment from the time you deliver it to the parcel delivery 
service to the time it is electronically signed for. The idea that we 
cannot protect this commodity when it is going from Great Britain or 
Geneva to the United States is just outrageous. That is not true. We 
have the technology.

  Finally, let me say, how safe is safe? The truth of the matter is, 
sometimes people here in the United States get the wrong prescription, 
or even when they get the right prescription in the right dosage, some 
people will have adverse reactions. The gentleman mentioned our 
farmers. Every day hundreds of thousands of pounds of food go across 
our borders with very, very little inspection by the Food and Drug 
Administration. But somehow we have to build a wall a mile high to keep 
out pharmaceuticals. That is just not good common sense. That is all we 
are really asking for, is some competition and some common sense.
  I do not like price controls. The way to break the backs of price 
controls in other parts of the world is open up the markets. But what 
will happen is American consumers on a net basis will see their costs 
go down while the rest of the world starts to pay their fair share.
  Mr. GANSKE. I think that this is a very important issue. There are 
competing plans for more comprehensive pharmaceutical benefits in 
Medicare. They are caught up right now in presidential politics as well 
as partisan politics with the elections coming up. But this is 
something that we have been able to already vote on in both the House 
and in the Senate in a very bipartisan manner. Would this solve the 
total problem? No. But it would be an important step forward. I do 
think that it would result in more competitive and lower priced 
prescription drugs in this country. It would take a little while for 
the implementation of the rules that the FDA would make in terms of 
being able to inspect periodically reimported drugs. So I do not think 
it would be an immediate benefit. We might not see it in the first 6 
months or maybe even year after the implementation, but very shortly I 
think it could be implemented. And I think that the administration has 
come to the conclusion that this can be done safely, too. Otherwise, 
Secretary Shalala would not have said we think that with some small 
amount of additional funding for the FDA, we can adequately protect 
American consumers on the reimportation of drugs.
  I would point out that as the gentleman already has that food passes 
back and forth across our borders rather freely. It is inspected 
periodically. But there are pathogens that can appear on food that can 
be life-threatening, too. Yet we do not say that there can be no 
international trade on food. And so this is something that we ought to 
get done before we finish up. I truly encourage our leadership and the 
administration to work together in good faith and not to be unduly 
swayed by attempts by the pharmaceutical industry to put in provisions 
that would in essence continue this practice of protectionism.

[[Page H8734]]

  Mr. GUTKNECHT. I would just thank the gentleman again for this 
special order. If I could just say that the two of us came in 1994 and 
hopefully, with the blessing of our voters in our district, we are 
going to be back next year to continue to fight in that Teddy Roosevelt 
tradition, to create more competition, whether it is in the 
pharmaceutical industry, whether it is with packers and stockyards, 
because at the end of the day one of the rules of the Federal 
Government is to ensure that there will be adequate competition, that 
there will be a level playing field, and that everybody has a chance to 
succeed in this marketplace.

                              {time}  1000

  So we are going to be back next year, regardless of what happens on 
either of these issues. We are going to continue to press the envelope, 
and the spirit of Teddy Roosevelt is still alive and well here in 
Washington.

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