[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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