[Congressional Record Volume 148, Number 98 (Thursday, July 18, 2002)]
[Senate]
[Pages S6977-S7016]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




   GREATER ACCESS TO AFFORDABLE PHARMACEUTICALS ACT OF 2001--Resumed

  The PRESIDING OFFICER. The clerk will report the pending business.
  The legislative clerk read as follows:
       A bill (S. 812) to amend the Federal Food, Drug, and 
     Cosmetic Act to provide greater access to affordable 
     pharmaceuticals.

  Pending:

       Reid (for Dorgan) amendment No. 4299, to permit commercial 
     importation of prescription drugs from Canada.
       Reid (for Stabenow) amendment No. 4305 (to amendment No. 
     4299), to clarify that section 1927 of the Social Security 
     Act does not prohibit a State from entering into drug rebate 
     agreements in order to make outpatient prescription drugs 
     accessible and affordable for residents of the State who are 
     not otherwise eligible for medical assistance under the 
     Medicaid program.

  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Madam President, I am going to send a modification to the 
desk very shortly, but I want to comment briefly on the statements of 
my friend from Missouri that were just made. He talked about lunacy of 
what is going on here. I will use his exact term--lunacy. Talk about 
the death tax, that is, the estate tax, at the same time you are 
talking about Medicare prescription drugs, the vast majority of people, 
the vast, vast majority--over 98 percent--of the people on Medicare 
have no relevance to the estate tax. Why he would bring up the estate 
tax at the same time we are talking about Medicare prescription drugs 
is beyond my ability to comprehend.
  I would also say he talks about why we bring up some of these bills 
without going through the committee. We do not do that very often, but 
we have done it. When we were in the minority, it was done all the 
time. We have seen a number of these measures being brought up because 
of what has gone on after September 11.
  Take terrorism insurance. We passed that. It was really good 
legislation. The President told us how much it was needed. It took us a 
long time to get the bill up because they objected to it. Now they will 
not let us go to conference on this bill. It is interesting to note, 
the majority leader said we should have a 3-to-2 ratio and we had a 3-
to-2 ratio. They said no, we want 4-to-3 or we will not go to 
conference. We gave them 4-to-3, and they still won't go to conference. 
This is terrorism insurance. That is stopping construction

[[Page S6978]]

projects in Nevada, in New York, I am sure in Louisiana, all over the 
country.
  There are other examples, of course--the trade bill. The trade bill 
is something the President said he wanted. He wanted us to get it to 
the floor as quickly as we could. We did, and it passed. Only the last 
couple of days were we able to get conferees appointed.
  The farm bill, that is pretty important legislation--the President 
signed that into law. The energy bill, we finally got conferees there. 
The President said that was an important bill.
  I only mentioned a few of them--the trade bill, the farm bill, the 
energy bill, the terrorism bill. They couldn't be too bad. They passed 
the Senate by large margins in every case.
  I hope people will understand that we are doing the best we can to 
work our way through a difficult situation in this country. We are 
making progress. We passed legislation in spite of the obstinacy we 
have had--not the least of which is the legislation on which the Senate 
is now working. We spent all day yesterday on importation. I think we 
should have been able to do more. I agree about the fact that we 
finally passed our first appropriations bill.
  As I see down the hall, we are completing the very difficult 
conference on the supplemental. I should be there. I am a member of 
that committee. I hope to go there in a matter of a few minutes. 
Senators Byrd and Stevens, chairman and ranking member of that 
committee, indicated to me that they expect to complete that conference 
in the next hour and a half. That will be by 12:30.


                    Amendment No. 4305, As Modified

  Mr. REID. Madam President, I have a modification at the desk. I call 
it up.
  The PRESIDING OFFICER. Without objection, the amendment is so 
modified.
  The amendment (No. 4305), as modified, is as follows:

       At the end, add the following:

     SEC. __. CLARIFICATION OF STATE AUTHORITY RELATING TO 
                   MEDICAID DRUG REBATE AGREEMENTS.

       Section 1927 of the Social Security Act (42 U.S.C. 1396r-8) 
     is amended by adding at the end the following:
       ``(1) Rule of Construction.--Nothing in this section shall 
     be construed as prohibiting a State from--
       ``(1) directly entering into rebate agreements (on the 
     State's own initiative or under a section 1115 waiver 
     approved by the Secretary before, on, or after the date of 
     enactment of this subsection), that are similar to a rebate 
     agreement described in subsection (b) with a manufacturer for 
     purposes of ensuring the affordability of outpatient 
     prescription drugs in order to provide access to such drugs 
     by residents of a State who are not otherwise eligible for 
     medical assistance under this title; or
       ``(2) making prior authorization: (that satisfies the 
     requirements of subsection (d) and that does not violate any 
     requirements of this title that are designed to ensure access 
     to medically necessary prescribed drugs for individuals 
     enrolled in the State program under this title) a condition 
     of not participating in such a similar rebate agreement.''.

  The PRESIDING OFFICER. The Senator from Michigan is recognized.
  Ms. STABENOW. Madam President, I would like to speak to my amendment 
which is now before us.
  I ask unanimous consent that the following Senators be added as 
cosponsors to the amendment: Senators Dorgan, Schumer, Feingold, 
Torricelli, Carnahan, Levin, Johnson, Snowe, Jeffords and Durbin.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. STABENOW. Thank you very much, Madam President.
  Madam President, I am very pleased to offer this amendment which is a 
bipartisan amendment, and hopefully one that we will be able to pass, 
working together and moving forward on the issue of lowering prices of 
prescription drugs and also providing Medicare coverage for our seniors 
and the disabled.
  This amendment addresses an issue that our States are facing, the 
question of allowing States to have the right to have flexibility to 
lower prices.
  This is a simple amendment. It would give States the flexibility to 
set up programs to pass along negotiated Medicaid rebates and discounts 
to their citizens who do not have prescription drug coverage and are 
not covered by Medicaid. So the States will have the ability to 
negotiate and pass on those similar discounts to their citizens who are 
without coverage and who are not on Medicaid.
  This is critical. States should have the ability to provide similar 
discounts to all of their uninsured citizens. Since Medicaid only 
covers low-income people, and lower and middle-income citizens, they do 
not have the ability to get the same negotiated discount. Some States 
are setting up programs to do that.
  One of the biggest challenges, as you know, and as we all know--we 
will be debating it this week and next--is the challenge facing not 
only our citizens, our families, and our seniors but also the business 
community, which I have talked about frequently. Also, State 
governments are addressing this issue of the rising cost of 
prescription drugs and the implications to Medicaid.
  In fact, the National Governors Association is meeting right now. 
Earlier in the week, I shared a newspaper article where all of the 
Governors of the United States were speaking about their biggest 
challenge. Their biggest challenge, according to the article, is the 
rising price of prescription drugs and the rising cost of Medicaid to 
the State budgets. This is a critical issue for them.
  We know that from 2000 to 2001 prescription drug prices rose about 17 
percent. This is not unusual. It has been that way every year. This is 
causing health care expenditures and health insurance premiums to go up 
for business, for States, for individuals, and most certainly for those 
who do not have any insurance and don't have the clout to negotiate a 
discount. Those citizens are paying retail, which, in fact, is the 
highest price in the world right now.
  In an attempt to respond to the skyrocketing prices, 30 of our States 
have enacted laws with some type of prescription drug coverage for 
those without insurance. They are looking for ways to be innovative--to 
use what we often have heard on the floor from our colleagues--the 
innovations of the States, the laboratories of democracy, and the ideas 
that come from our States. About 30 of them are looking for ways to 
enact something that relates to prescription drug coverage--looking for 
ways to lower prices and expand coverage. That is according to the 
National Governors Association.
  However, unfortunately, the drug companies' trade association--
PhRMA--has mounted legal challenges against several of those States, 
including my own State of Michigan. They have been opposing State 
efforts to lower prescription drug prices and increase coverage for 
those without insurance.
  Specifically, they filed lawsuits against Maine and Vermont for their 
programs because the drug lobby does not want them to extend the 
Medicaid discounts to those without insurance who are hard-working 
citizens. In fact, we know that a majority of the people without 
insurance in this country work in small businesses. They are working. 
Their small business is trying to get health care coverage for 
themselves and their workers. Those individuals have no access now to 
any kind of group purchasing power or to any kind of discount. States 
are trying to use their group purchasing power for Medicaid and extend 
that same discount--usually 15 to 20 percent--to their employees. Many 
work in small businesses and don't have any insurance.

  While Maine's two programs have been upheld in court, Vermont's 
program has not. It was actually struck down by the courts. Both States 
are embroiled in a very lengthy appeals process.
  Specifically, the Maine Rx program is now pending before the Supreme 
Court. The current administration is supporting Maine's right to 
implement their program.
  I commend President Bush and the administration for siding with the 
State of Maine and their right to make decisions about their citizens 
and how to operate their businesses for their State.
  In fact, the Solicitor General, Ted Olsen, filed a brief on behalf of 
the Federal Government urging the Supreme Court to allow Maine's Rx 
program to go forward without further delay.
  I argue that this amendment, in fact, is supported by both parties, 
people on both sides, and that administration certainly has indicated--
I have not heard directly regarding the amendment, but they certainly 
have indicated support for the program on which this amendment is 
based. I appreciate their leadership on this issue.

[[Page S6979]]

  These legal challenges are very costly to taxpayers. They just deter 
other States from establishing other similar demonstration projects, 
such as the underlying generics bill. Unfortunately, the drug companies 
are trying to stop these kinds of innovations.
  This amendment would, in fact, try to stop the drug companies from 
using the legal system to keep their prices high. We all know that they 
will dispatch their high-priced attorneys whenever they can to, 
unfortunately, keep their profits as high as possible.
  Since the price of prescription drugs is soaring, States have the 
unfettered ability to pass on Medicaid rebates to their residents. They 
should have that ability to pass those rebates on to their residents.
  I hope we will agree to this amendment because even if Congress 
passes a Medicare prescription drug program this year, it will be 
several years before it is fully phased in.
  I hope and pray that we will come together and pass a Medicare 
prescription drug benefit. It is long overdue. But we know it will take 
several years to phase it in.
  In the meantime, our States are struggling to help their citizens. I 
believe they need our support.
  The Rx flexibility-for-States amendment would seek to remove the 
legal hurdles that are preventing States from providing lower priced 
prescription drugs to their citizens.
  Specifically, States would be able to extend their Medicaid rebates 
and discounts for prescription drugs to non-Medicaid-eligible persons.
  State governments are close to the people. I know our Presiding 
Officer was in the State government, as was I. We understand that 
States and local governments are on the front line hearing from people, 
and wanting to respond. We have States that are responding, and are 
being stopped through the legal system right now by the drug company 
lobby. The solution to higher prices, higher prescription drug prices, 
is not just in Washington. It is not just in the Senate, or in the 
House of Representatives. But it is in capitals all across the country 
where our Governors and our State legislators are working to respond to 
what is critically one of the most fundamental issues that families and 
seniors and businesses face to today, which is the explosion in health 
care costs, predominantly coming from the rising cost of prescription 
drugs.
  Today we have a chance to send a very important message to our 
colleagues and to States across the country.
  I ask my colleagues to join with us, on a bipartisan basis, as we 
have in this amendment, to adopt this amendment and to tell the States 
that we are standing with them as they fight to lower prices for their 
citizens and make lifesaving medicines available.
  If we fail to pass this amendment, many States could be faced with 
legal challenges from PhRMA as they try to come up with programs to 
lower prescription drug prices. Right now, we have the ability to stop 
the dollars going into the lawsuits and redirect those to lowering 
prices and making prescription drugs available.
  I invite and urge my colleagues to join with us. This is an 
opportunity for us to stand together in support of our State 
governments. Let the Governors know, this week, as they are meeting, 
that we understand what they are going through and we want to back them 
in their efforts to make sure that lifesaving medicines are available 
to their citizens.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Madam President, I commend my friend and colleague from 
Michigan for this absolutely excellent amendment. I am hopeful we can 
get strong support for this amendment because it is so compelling in 
its logic and reason, and the result will be so important to our fellow 
citizens across the country.
  Just to catch up to where we are, Madam President, the underlying 
bill, the Schumer-McCain legislation, tries to halt the gimmicking that 
the drug companies use to get around the Hatch-Waxman bill that was 
passed a number of years ago. They have gimmicked the rules, and they 
do it in ways that completely circumvent the spirit and the 
understanding of the law, in order to keep prices artificially high. 
And every family and every user of prescription drugs knows the 
challenges families are facing with high drug prices.
  Under the McCain-Schumer legislation, we have tried to deal with that 
issue. I think we have dealt with it effectively. That is the matter 
that is before the Senate.
  We had a good debate yesterday on different measures that continue to 
put downward pressure on the escalation of drug prices. I think we had 
a very good debate on that, both in support of the underlying 
legislation and in support of the Dorgan amendment, yesterday. Now we 
have the Stabenow amendment before us, which will, in a very important 
way, continue this effort to exert downward pressure on the prices of 
drugs in this country.
  I am amazed at the opposition to this amendment. For a good part of 
the afternoon yesterday, we listened to talk about the free market 
system that urged us to get away from price controls and use the free 
market system. But when the States use the free market system, in order 
to bargain for the lowering of the prices, what happens? What is the 
reaction of the drug companies? The drug companies go ahead and sue the 
States to try to restrain them from using the free market system.

  This isn't Government intervention, it is the States themselves, 
States that have Republican Governors and Democratic Governors. The 
States themselves are trying to use the States' power in order to get 
the best price for the neediest citizens in their States: the poorest 
individuals, the ones without insurance. And here comes PhRMA with 
their legal actions to make sure the States are not going to be able to 
do that.
  When does that greed stop? When does that greed stop? When do they 
stop wringing the final few cents out of the poorest individuals in 
this country? That is what this is all about.
  The States are trying to negotiate lower prices for the poorest 
individuals in these States, and PhRMA says no. They gimmick and 
circumvent the clear spirit and language of the Hatch-Waxman law in 
order to perpetrate billions and billions of dollars of additional 
profits.
  Then we hear a great deal of debate in this Chamber and much 
admonition from many of those who are opposed to the underlying 
legislation saying: Let's let the free market work.
  We had hours and hours of discussion about price controls in Canada. 
We are not for price controls, as in Canada. We want the free market to 
work. But what is happening when the free market works in the State of 
Maine, the State of Florida, the State of Michigan, and other States? 
In comes PhRMA, and they say: No, we are not going to let it work. We 
want to stop them from doing it.
  This is the same kind of action that is underlying the basic measure.
  So I want to review, very briefly, the situation. I understand the 
problem we are looking at.
  Under the terrible burden of skyrocketing drug prices, the State 
governments are trying to use their authority and bargaining power to 
help residents--and our constituents--obtain lower prices.
  Already, 30 States have passed laws to extend drug coverage or lower 
prices. But PhRMA has done it again, suing the States to stop our 
``laboratories of democracy'' from fighting the drug industry on behalf 
of American consumers.
  The drug industry has sued the State of Maine. They have sued 
Vermont, Michigan, Illinois, and Florida. The drug industry is waging 
war against our Governors and our State legislatures in the courts.
  The Stabenow amendment puts the question to the Senate: Will you 
stand with the States or will you stand with the drug industry for 
higher drug prices?
  Many of my colleagues are former Governors themselves. I hope they 
take particular note that just yesterday the Nation's Governors issued 
a statement of solidarity with the administration in its legal fight 
with PhRMA over the Michigan Medicaid waiver that reduces the State's 
drug costs.
  Let me read from the NGA statement of July 15, which quotes Michigan 
Governor Engler:


[[Page S6980]]


       The nation's governors are extremely disappointed with the 
     course of action chosen by PhRMA. It is unfortunate that 
     their organization feels compelled to use the court system to 
     manipulate public policy.

  That is a Republican Governor.
  The Governors, the administration, and consumers all support State 
efforts to reduce drug prices. Now, with the Stabenow amendment, it is 
the Senate's turn.

  The amendment is based on a simple but powerful idea: Extend the 
scope of an existing Federal law to help the States supplement the 
rebates we require under Medicaid.
  Medicaid already collects ``best price'' rebates from the drug 
industry, thanks to a 1990 law we passed under the leadership of 
Senator David Pryor from Arkansas, a champion of lower drug prices.
  I was always impressed by the work and the commitment of Dave Pryor 
and his strong desire for protecting the consumer. And this tradition 
follows with Mark Pryor in Arkansas today: they are strong protectors 
of consumers and lower drug prices.
  The Stabenow amendment simply permits States to negotiate similar 
State rebates to help lower-income residents afford their drugs. All 
this amendment does is let the States use the same negotiating tools 
used today by the private sector to lower their drug bills. I do not 
see why those who otherwise support the free market would oppose this 
amendment.
  We find out that large companies use their negotiating ability. HMOs 
use their ability. Why not permit the States to use their ability? But 
PhRMA says: No, we are not going to let them do that, particularly when 
they are using it for the lowest income citizens.
  The amendment empowers the States to use the same tools and 
negotiations used by the private sector to lower its drug costs. If a 
drug company refuses to negotiate with a State, its drugs would still 
be available but would be subject to ``prior authorization.'' This is 
precisely what the State of Michigan is doing. This is precisely why 
PhRMA is suing the administration. And this is precisely why the 
Stabenow amendment is needed.
  Here is what the drug industry did when the State of Maine and the 
State of Vermont enacted State laws to lower drug prices.
  Naturally, the industry sued the States. No surprise so far, given 
their abuses of the Hatch-Waxman Act. But then the drug industry 
instructed its front group, the so-called Citizens for Better Medicare, 
to run TV, radio, and print ads in Maine and Vermont attacking the 
laws. That is what the drug industry does to keep the prices sky high.
  They sue our State governments and waste taxpayer dollars defending 
against their frivolous lawsuits. And they run attack ads.
  Lest anyone question whether the so-called ``Citizens for Better 
Medicare'' is anything but a front group for the drug industry, let me 
quote the June 18 Wall Street Journal--

       [T]im Ryan, PhRMA's past marketing director, founded the 
     grass-roots-sounding ``Citizens for Better Medicare'' at the 
     behest and expense of major drug companies.

  There it is. Enough is enough. The American public is sick and tired 
of the drug industry's abuses. Let's support the Stabenow amendment, 
and help our States lower drug prices for all Americans.
  I see others who want to speak on this issue. I want to mention to 
our colleagues an excellent report being released today. It is a review 
of the impact of the three principal proposals that have been advanced 
on coverage. What this study does is take your State, the key features 
of each of the programs that have been advanced, the Republican House 
program, the Graham-Miller program, which I am proud to cosponsor, as 
well as the tripartite program. Then it takes the numbers of citizens 
who would be impacted, the number of elderly, senior citizens, and 
disabled on Medicare, and it runs through how each of these programs 
would impact the seniors in your State.
  It reviews for each of the programs who would be affected, what the 
impact would be on each of the seniors in the State, who would benefit 
the most, and who would benefit the least.
  We will be releasing this report this afternoon at 2 o'clock. We can 
say without question that in the review of all 50 States, their 
powerful, compelling, and overwhelming conclusion is that if you want 
to make drugs available, accessible, affordable, and dependable, there 
is one plan that stands out head and shoulders above all the others, 
and that is the one introduced by our friend from Florida, Senator 
Graham.
  There are others who wish to speak on this. I will come back and 
address it later.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Madam President, I ask unanimous consent that following 
my remarks, the following Members be recognized to speak: Senator Hatch 
and Senator Frist, in that order.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SCHUMER. Madam President, I rise in strong support and as a proud 
cosponsor of the Stabenow bill. It is worthy legislation. What I will 
do for a few minutes is talk about the underlying bill and the Stabenow 
bill and what they have in common.
  The Senator from Massachusetts outlined it. These are free market 
approaches to lowering drug prices. The one, the Schumer-McCain bill, 
allows more competition. What could be more all-American than more 
competition.
  The second, the Stabenow bill, allows people within the market to 
gather together in the form of their government and negotiate a lower 
price. We do this every day in America. That is what a corporation is 
in certain ways. That is what a union is in certain ways. Here we have 
the State doing the same thing.
  As the Senator from Massachusetts said, there were some yesterday who 
talked about the Canadian bill and price controls. These are not price 
controls, but we just saw yesterday or 2 days ago Pfizer and Pharmacia 
merge. What were they trying to do? Well, in a free market way, they 
were trying to aggregate to increase their bargaining power. Doesn't it 
make sense to say that the citizens of Maine or Vermont or 
Massachusetts or Utah or New York can aggregate to equal that--well, 
they will never equal it, but at least to gain a little leg up on that 
bargaining power and get some help?
  Both of these proposals are free market. There are some people whose 
view of the free market is to let big companies do whatever they want. 
I am a little worried that over at the FCC, the whole idea is, let us 
have one big communications empire. Actually, the free market needs 
some competition. But the free market has also said, as it has evolved 
since the Adam Smith days, that combinations to try and increase our 
bargaining power are legitimate, recognized ways that the free market 
works.
  I see that my colleague from Utah is in the Chamber. I first want to 
pay him some tribute. I said this in committee a year or 2 years ago. I 
think Hatch-Waxman has been one of the greatest consumer advances we 
have done in the last quarter of the last century. When I said it, it 
was still the previous century. But he has done a great job there.
  Our goal, in terms of the Schumer-McCain bill, is to restore the 
balance of Hatch-Waxman. The bottom line is a simple one: That in 1984, 
we had a very simple template. We said: God bless companies that come 
up with innovative drugs. They research them; they make a lot of 
mistakes. For every drug they bring to market, there are a lot of drugs 
that don't come to market. They need the help. They need a return. God 
bless them. Give them a return. They are creating a product that makes 
us all live better and longer.
  But we also said that rate of return, that patent, which is what the 
patent really is, can't be unlimited. And so we said, after a period of 
time, 20 years after the patent was filed, others could come and 
produce the drug. It worked. Innovation, from the date Hatch-Waxman 
passed to the present, in the field of pharmaceuticals has been 
unparalleled. Lives have been saved. The people are living longer and 
better and healthier. We see that in our parents and our grandparents. 
It is amazing.
  In the last 5 years, I believe Hatch-Waxman has steered off course. 
In fact, the whole pharmaceutical industry has steered off course. For 
people who make a wonderful product, they are evolving into an industry 
that is despised and hated.

[[Page S6981]]

  They could say to themselves: It is only because these drugs cost a 
lot, and we can't help it because it costs a lot to research them.
  I would say it is not that simple. I wish it were. They have evolved 
because, in a headlong rush to keep their profitability as high as it 
has been in the past, they are desperately clinging to extend patents 
longer than Hatch-Waxman ever intended. They end up hiring not just the 
best researchers anymore but the best lawyers.
  A drug company should go to Harvard Medical School, not Harvard Law 
School, as it continues its work. But they have been spending much of 
their time and effort in coming up with schemes--that is what they 
are--to extend the patent beyond the time it should be extended.
  What does that mean to the average citizen? It means a drug, instead 
of costing $25 a month, is going to cost $100 a month--vital drugs. If 
anything, they have pushed it further and further because so many of 
these blockbuster drugs, these wonderful drugs, are coming off patent 
shortly.
  I know my colleague from Utah has a lot invested in Hatch-Waxman. I 
very much appreciate it. The little changes that we make, Senator 
McCain and I, in our bill, just build on it and readjust it. But I 
think the view that Hatch-Waxman is just fine as it was in 1984 is off 
base. The statistics will show it. That is why this bill has such great 
support. I am certainly open and willing and eager to hear whatever 
suggestions my colleagues from Utah and Tennessee will make. But I will 
tell them this: The view that we should just go back to the old way in 
1984 doesn't work.
  Mr. KENNEDY. Will the Senator yield?
  Mr. SCHUMER. I am happy to yield.
  Mr. KENNEDY. We have before us the author of the amendment. Since the 
Senator has the floor, I would like to ask him a question or two.
  Isn't it true that HMOs use their bargaining power to lower costs of 
prescription drugs today? HMOs all over the country have been doing 
that.
  Mr. SCHUMER. Yes, all over.
  Mr. KENNEDY. Isn't it true that insurance companies use their 
leverage and powers to get the lowest cost possible?
  Mr. SCHUMER. Yes, and they are proud of it. They brag about it.
  Mr. KENNEDY. What could be the possible logic in denying the people 
of the States, particularly the smaller States--or large States, for 
that matter--what is the logic of denying them their bargaining power? 
If we are going to let the HMOs and insurance companies do it, why not 
the States?
  I am sure we will hear that it is because the States are a 
governmental power and therefore this is price control. As I understand 
it, if the drug company doesn't want to sell to them, they don't have 
to, do they?
  Mr. SCHUMER. My colleague is exactly right. By the way, our Federal 
Government does the same thing in Medicare. They bargain with the drug 
companies for a lower cost for Medicare. Why can't the States do it for 
their citizens who are not under Medicare and Medicaid? My colleague 
from Massachusetts is right on the money.
  Mr. KENNEDY. It seems we will hear that somehow the States can't 
bargain because they are a governmental institution. But the concept is 
very much the same. For the insurance industry, it is fine--it is a 
free market system; and for an HMO, it is fine--it is the free market 
system. But somehow for the State, it is government. Even though the 
pharmaceutical company is free to say: We don't like these 
negotiations; therefore, we won't sell to you. If all the 
pharmaceutical companies did that, obviously, the State would have to 
bargain in good faith. There is no indication that they are not 
bargaining in good faith.
  As the Senator pointed out, there is no indication that these 
industries have been suffering adversely. They are one of the most 
profitable industries--and Lord only knows they are paying the highest 
salaries to their executives as well. But I am not as interested in 
that as in the concept of what we are talking about here.
  Finally, if the Senator would agree, I am perplexed: We are not 
talking about bargaining for high income people in the State; we are 
talking about bargaining for the lowest income, the poorest of the 
poor, many of whom would not be able to have access to the prescription 
drugs unless this were offered. Why is that PhRMA says: No no, you 
can't do it; we are going to squeeze the very last dollar out of them?
  Mr. SCHUMER. The Senator is literally on the money. The bottom line 
is that the Senator is exactly right. There is no difference, from an 
economic point of view, in a State getting together and bargaining for 
its people and an insurance company or HMO doing it. In fact, you can 
argue that the State has more legitimacy, being an elected body and 
representing the will of the whole people of Michigan, Maine, 
Massachusetts, or New York, No. 1.
  No. 2, what about over in Europe or in Canada? They put on a price 
control. The pharmaceutical company still ends up selling the drug. Do 
you know what ends up happening? It is the American citizen who ends up 
paying for all the research, which does good around the whole world, 
for, say, Celebrex or Vioxx. Who pays the whole thing? Us.
  Why shouldn't the American taxpayer and citizen, through his and her 
State government, be allowed to say we should not bear that whole cost 
ourselves?

  That is the thrust of the amendment of the Senator from Michigan. It 
is free market. There is no lock-in. Just as Germany said, you can sell 
Vioxx for 3 pfennigs, and that is not worth it. The company doesn't 
have to sell it. It is the same exact thing here.
  Mr. KENNEDY. Well, the point is that the State is not even doing it 
for all the citizens; it is not even doing it for all of them. They are 
doing it for the poorest of the poor. That is whom they are trying to 
bargain for in these circumstances. The drug industry is contesting 
that.
  Let me, finally, ask my friend, Senator Stabenow, if she has a 
viewpoint on this matter. As I understand, this is not a partisan issue 
in any respect. I read Governor Engler's very strong comments about 
this where he was actually talking about manipulating public policy. He 
was using the word manipulate, suggesting that we have to manipulate 
public policy. The drug companies are manipulating public policy in 
their patent policy and in the collusion with the generics, which is 
being addressed by the Schumer proposal.
  So we have a Republican Governor talking about manipulating public 
policy. I was interested in the fact that this should not be a partisan 
issue. The silence in support from the other side of the aisle is 
deafening with regard to the Stabenow amendment. I am hopeful there 
will be voices on the other side that will rise in support of this. To 
their credit, they supported the Schumer proposal in the committee. 
Five Republicans did. I hope we will hear those voices again.
  I just say to the Senator, this isn't really a Democratic or 
Republican, or liberal or conservative issue. I find there are liberals 
and conservatives, Republicans and Democrats, as well as Republican and 
Democratic Governors who share the view of the Senator from Michigan 
and the Senator from New York. If the Senators would comment on that, I 
would appreciate it because it is an important issue.
  Mr. HATCH. Madam President, I have one simple question.
  Mr. SCHUMER. I am happy to yield to the gracious Senator from Utah 
for that.
  Mr. KENNEDY. If they can answer my question, then I will be seated.
  Mr. HATCH. If I may ask, how much longer does the Senator need?
  Mr. SCHUMER. No more than 5 minutes longer. I thank the Senator. I 
will yield to the Senator from Michigan to answer these very worthy 
questions.
  Ms. STABENOW. I thank both of my friends and colleagues, who are such 
champions on this underlying issue--the entire issue of Medicare and 
prescription drug coverage and lowering prices. In fact, as our leader, 
the Senator from Massachusetts, indicated, this is a measure that is a 
bipartisan amendment. We have Governors--frankly, the majority of 
Governors--Republicans and Democrats, who are struggling with this 
question of lowering prices and making prescription drugs and lower 
prices available to their citizens. So as the National Governors 
Association is meeting right now, they have said their biggest 
challenge is the price of prescription drugs

[[Page S6982]]

and the explosion, in their budget, of Medicaid. They need to address 
these issues.
  This amendment will support the Governors across the country. It is a 
bipartisan amendment. It is something supported across the country on a 
bipartisan basis. I am very hopeful that we will have colleagues' 
overwhelming vote on both sides of the aisle supporting the effort to 
say yes to this innovation of the States. This is not mandatory, it is 
purely based on States taking action on their own to decide if they 
would like to do this. If they do that through their State legislatures 
and the Governors on behalf of their people, this simply says that this 
is legal and that, hopefully, it will stop the suits PhRMA has been 
bringing against our State governments.
  Mr. SCHUMER. I thank the Senator. She is on the money. It is 
voluntary. No State is forced to do this. But if the citizens of the 
States, through their elected representatives, both Republican and 
Democratic Governors, want to do this, they should be allowed. We 
should not be tied up in litigation for years while the prices go up 
and up and up.
  I am fully supportive, again. To underline this, this is a free 
market policy. It is no different than what the insurance companies do, 
the HMOs, and God bless them. It is saying that people may aggregate. 
Are we going to have people opposing mergers of the big drug companies? 
No, we are not. They say they can do it better in a larger size. Why 
can't the average citizen do something in a larger size? That is what 
we are trying to do.
  I am going to conclude with one little pitch today. I know my 
colleague from Utah has been patient, and I very much appreciate that. 
Whether it be the Schumer-McCain bill, generics, or this bill, these 
are reasonable and modest proposals. I say to my friends in the drug 
industry--again, I admire them; I think they have done a good job--
please, you have become ``Dr. No.'' Whenever that comes up, you say 
no. No change. You are willing to change it with your lawyers to extend 
the patents, with all these new ways you find around what we think the 
original intent of the Hatch-Waxman law was. Do not be Dr. No. Get with 
it. Go back and innovate. Go back and form new wonderful drugs and get 
your patent on those, but when people want to get together to lower 
those prices in a fair negotiation, when this Congress says we ought to 
prevent the lawyers from changing the original intent of Hatch-Waxman 
and drawing it off course, do not stand in the way.

  In fact, I challenge PhRMA to come up with one constructive proposal 
to help people with the cost of drugs, not just to keep doing it the 
same way when we know there is an outcry. They know best what helps 
with innovation. Come up with a proposal. Do not go the way of the 
cigarette companies and spend all your life being sued. Do not go the 
way of the cigarette companies and become the object of scorn and 
hatred.
  You make a wonderful product. You do something good. Support the bill 
of the Senator from Michigan. Support our bill or come up with some 
constructive proposals.
  I will make one other point, Madam President, and then yield the 
floor. I went to PhRMA a year and a half ago. The Senator from Utah 
knows this because I informed him of the negotiations. I said: Let's 
sit down and figure out something. Let's get the generic industry and 
brand industry together to come up with a compromise to deal with some 
of the problems.
  They listened politely, but, frankly, I do not think they thought our 
legislation had much of a chance for passage, and they said no.
  Now we are knocking at the door. We are almost there, and it is not 
too late. It is not too late to come up with some answers that will 
solve our problems--the problems that the Senator from Michigan deals 
with in her legislation, and the problems that Senator McCain and I 
deal with in our legislation--and get something done. I think I speak 
for all of us that much rather than make speeches, much rather than win 
political victories, we want to get something done, and that is what we 
are here to do today.
  In conclusion, I urge support for the Stabenow amendment to restore 
some bargaining power which is voluntary. Let a State's Governor, if 
they want, do this. Do not wait 5, 10 years until the litigation is 
finished--it will probably come out the same way--and give people a 
break. Let them be able to afford these wonderful medicines that we 
have and at the same time allow the drug companies to continue on their 
path of real innovation as opposed to false innovation of patents, pill 
sizes, colors of bottles, and different applications.
  Madam President, I yield the floor and once again thank my colleague 
from Utah for his courtesy.
  The PRESIDING OFFICER (Mrs. Clinton). The Senator from Utah.
  Mr. HATCH. Madam President, I rise to speak on the pending 
legislation, S. 812, the Greater Access to Pharmaceuticals Act. I did 
not realize the pioneer companies that have been referred to as PhRMA 
are as satanic as they have been represented to be on the floor today. 
One would think they are everything that is bad in this world and that 
they are the cause of all the high costs of drugs in our society; that 
they are not being fair to the generic companies that help bring drug 
prices down; that HMOs are the reason drug prices come down and that 
the States do not have the same type of market power. I heard all these 
things. I heard how terrible the research-based companies are. My 
goodness, I have never known that before. I am so happy to get this 
information.
  I would like to cite a book called ``The System.'' This book was 
written by Haynes Johnson and David S. Broder, hardly a conservative 
set of authors, but very intelligent, and highly respected journalists 
and authors. The book is an excellent account of the infamous and 
failed Clinton health care plan. History has a way of repeating itself. 
You can hear a theme on the floor over the last several days that comes 
right out of the Clinton play book.
  On page 90 of that book, it says, in speaking about the political 
tactics to garner public support, a group of the President's political 
advisers have the following discussion, which sounds familiar to the 
way the debate is going on the floor of the Senate and elsewhere:

       In the campaign period, Fried recalled, Clinton's political 
     advisers focused mainly on the message that for ``the plain 
     folks, it's greed--greedy hospitals, greedy doctors, greedy 
     insurance companies. It was an us-versus-them issue, which 
     Clinton was extremely good at exploiting.

  That was Fried. Then they go on further, and I quote from the Broder 
and Johnson book:

       Clinton's political consultants--Carville, Begala, 
     Grunwald, Greenberg--all thought ``there had to be 
     villains.'' Anne Wexler----

  Who, of course, is not known for her Republican politics----

     remembered, It was a very alarming prospect for those of us 
     looking long term at how to deal with this issue. But at that 
     point, the insurance companies and the pharmaceutical 
     companies became the enemy.

  All this sounds familiar.
  That is what has been going on here on the floor. Frankly, I do not 
think it is right. My experience has been there is no one single group 
who should be blamed for the high costs of pharmaceuticals. I do not 
want to blame the FDA because it takes up to 15 years and 5,000 
different compound experimentations to get an approval of a drug and at 
a cost, according to some of the top authorities, of up to $800 
million. That is 15 years out of the patent life. Frankly, one wonders 
why, with the few remaining years they have on patent life, drugs cost 
so much. I am not going to blame the FDA because their job is to 
protect Americans, but on the other hand, that is a long time, and I 
may talk a little bit about that today.
  I am not going to blame the generic companies. They provide a 
tremendous amount of support for American people who need help. I 
believe in the generic industry. By and large, those companies are 
doing a great service, as we intended in the Hatch-Waxman bill.

  By the way, without the pharmaceutical companies, the pioneer 
companies, there would not be any drugs for the generic companies to 
copy and reduce prices. So there has to be a delicate balance between 
the two, and that is what Hatch-Waxman is all about.
  This underlying bill, of course, which for some reason is being 
debated before the Federal Trade Commission comes out with its 
comprehensive study and

[[Page S6983]]

recommendations on the very issues addressed in the pending bill, which 
should occur before the end of next month--will change one of the most 
important consumer bills in history. I am not concerned just because it 
is my bill and Congressman Waxman's bill, but because without waiting 
for the FTC to give its recommendations, this underlying bill will 
change the Hatch-Waxman law before we have had a chance to hear from 
the FTC, FDA, other experts and interested parties. I do not think it 
is right to change the law until we have all the facts and understand 
better what this bill will do.
  Hatch-Waxman, according to almost all authorities, has saved 
consumers $8 billion to $10 billion every year since 1984. It created 
the modern generic drug industry, but it also strengthened the PhRMA 
companies, the pioneer companies. Back then, they were spending about 
$3 billion a year on research and development. Today, it is over $30 
billion a year. I think almost as satanic as they are portrayed on the 
floor by our friends on the other side, it seems to me they ought to be 
given a little bit of credit for some of the major therapeutical 
pharmaceuticals we have today.
  Without them, we would not be where we are. We would not be the 
leaders in the world with pharmaceuticals, nor would we have the 
balance of trade surplus we get from the sale of American 
pharmaceuticals.
  Let me comment on three aspects of the underlying legislation: 
Politics surrounding floor consideration; the process by which the bill 
moved to the floor; and finally, the substance of this bill.
  At the outset of this debate, I congratulate and commend the original 
cosponsors of this legislation, our colleague from New York, my friend, 
Senator Schumer, and my colleague from Arizona, my friend, Senator 
McCain. Even though I disagree with them on the way they resolved the 
key issues addressed in S. 812, and although the bill that emerged from 
the HELP Committee does not adhere to the original Schumer-McCain 
language in virtually every key policy area, they deserve recognition 
for their effort in highlighting issues, issues that are of concern to 
each of us to in this body: Access to prescription drug coverage and 
affordable prescription drug coverage.
  As most of my colleagues know, I have a special interest in today's 
pending legislation. Throughout my career in the Senate, I have helped 
fashion a portfolio of legislation that facilitates our Nation's 
pharmaceutical research and development capacity. I am proud to have 
played a leadership role in crafting the law that the bill we are 
considering seeks to amend, the Drug Price Competition and Patent Term 
Restoration Act of 1984, known as the Hatch-Waxman bill. A key partner 
in this effort was my good friend from the House, Henry Waxman. That a 
liberal member like Mr. Waxman and a conservative like Orrin Hatch got 
together to write this law is but one sign of the bipartisan consensus 
that developed with respect to the 1984 law and that should be 
developed today.
  Incidentally, on the House side of the Capitol, this law is often 
referred to as Waxman-Hatch and in the Senate the names are often 
reversed. This shorthand is only used because it is so time consuming 
to keep repeating the Drug Price Competition and Patent Term 
Restoration Act of 1984.
  I have a lot of complaints about the process we followed to bring S. 
812 to the floor, and despite my grave dissatisfaction over the 
process, I do want to recognize the efforts of Senators Edwards, 
Collins, Kennedy, Gregg, and Frist to make improvements to the 
substance of the bill. To be fair, there have been improvements in some 
critical areas of the legislation. As a general matter, in moving away 
from some key provisions of McCain-Schumer, the HELP Committee 
substitute is headed in the right direction.
  Now, I hasten to add, though, that some new provisions were added to 
the bill during the markup process to make it impossible for me to 
support a bill that is so important to me--a bill that amends the law 
carrying my name, a law that has been shown to benefit millions of 
Americans every day.
  Let me talk about the politics and process. Before I discuss the 
merits of the committee substitute for S. 812, I want to make a few 
comments concerning the politics and process whereby we find ourselves 
discussing these issues at this time.
  One of the things about which I am most apprehensive in the current 
debate is the way the Drug Price Competition and Patent Term 
Restoration Act of 1984, a painstakingly crafted bill that passed with 
overwhelming bipartisan support in both the Senate and the House, now 
finds itself at ground zero in one of the most controversial and 
potentially divisive issues of this year, that is the debate over the 
Medicare drug benefit.
  The Medicare drug benefit is certainly an issue that deserves the 
Senate's attention, and I am in one of the original tripartisan groups 
that I believe has come up with a nonpartisan bill that would solve the 
drug benefit problems for the American people, especially the poor.
  I commend our colleagues in the House for successfully passing a 
prescription drug bill that promises to make a major expansion of 
Medicare benefits by providing an outpatient drug benefit. I think it 
is now time for the Senate to debate this issue, pass a bill, 
conference with the House, and present a bill for the President to sign 
into law. I am also, like I say, proud to be the cosponsor of the so-
called tripartisan Medicare prescription drug benefit bill. I think 
Senators Breaux, Jeffords, Grassley, Snowe, and I have put together a 
strong bill that our colleagues should, and I think will in the end, 
support.
  I had hoped the tripartisan bill could have been the subject of a 
Finance Committee markup, as it deserved. I think it would be approved 
by the Finance Committee, which more than likely explains why we are on 
the floor today with S. 812. So as we enter this debate, let us be 
clear that the way the Senate Democratic leadership has chosen to 
structure the floor vehicle, it is very possible the partisan fervor 
that often accompanies Medicare legislation will spill over into the 
heretofore bipartisan consensus surrounding the 1984 Waxman-Hatch law. 
I hope not.

  One of the things we did back in the 98th Congress in 1983 and 1984 
was to take the time and effort to build a broad, bipartisan coalition 
for the Hatch-Waxman law. I hate to see us lose support as this body 
becomes caught up in the unavoidable election year politics of 
Medicare. Frankly, it is almost amusing how the Democratic leadership 
has structured the debate on the Medicare drug benefit. A bill that 
involves hundreds of billions of dollars and over a trillion dollars in 
some of the proposals will be debated as an amendment to the more 
modestly sized S. 812. Talk about the tail wagging the dog.
  I hope if, as is well possible, we cannot achieve consensus on the 
Medicare drug debate, the inevitable ill feelings and political 
posturing do not create a poisonous atmosphere in which the broken tail 
of Medicare crushes the dog of Hatch-Waxman. Conventional wisdom has it 
that a large part of what is at stake in the legislation we will debate 
over the next number of days has to do with jockeying for political 
positioning over who is left holding the bag with the voters in the 
fall if we fail to enact a Medicare drug benefit before the November 
elections. That is why I hasten to add that I hope my colleagues will 
look at the tripartisan bill, which is nonpartisan, which basically can 
solve these problems for especially the poor in our society with regard 
to drug benefits and the cost of drugs.
  I firmly believe the best thing the Senate can do for the American 
public is to lay aside, as best we can, the political infighting and 
genuinely try to strike an acceptable compromise on the Medicare drug 
bill.
  Make no mistake about the fact that although S. 812 may be nominally 
the pending business before the Senate, the real matter we will be 
debating is the Medicare drug benefit. I would have greatly preferred 
to debate Hatch-Waxman amendments as a stand-alone bill in a less 
charged atmosphere. If we had to debate amending Hatch-Waxman with 
other legislation, probably my last choice would have been to lump it 
together with the politically volatile Medicare drug bill.
  Then we have the ill-advised drug reimportation bill, which has been 
added as an amendment to S. 812. This would have been my second to last 
choice to add to Hatch-Waxman. I laid out yesterday my concerns with 
that proposal.

[[Page S6984]]

Suffice it to say, the reimportation language was a bad idea in the 
year 2000, and it is an even worse idea today, given the threats of our 
post-September 11 world.
  While the regrettable encore appearance of this feel-good but 
ultimately downright dangerous drug reimportation legislation is deeply 
troubling to me, it is doubly troubling to me that it will now be 
linked to the 1984 Hatch-Waxman law because of the way the majority has 
chosen to proceed.
  I recognize part of the reality of being on the minority side of the 
aisle is that we have to go with the flow as the majority leader calls 
up legislation that he desires or his side desires, and I understand 
that. As a coauthor of the legislation that S. 812 seeks to amend, I 
take exception to calling up a bill that opens up Hatch-Waxman in order 
to create a legislative vehicle that promises to throw into play 
every conceivable way to punish one of the great American success 
stories in innovation and in the pharmaceutical industry.

  This, ``everything but the kitchen sink,'' mentality, may be 
satisfying to some politically. But mark my words, it starts this body 
down a path that ultimately can only punish the American health care 
system. In my experience, delicate provisions and nuances of patent 
law, antitrust law, and FDA regulatory law are generally not best 
crafted in the elbows-flying, raw meat atmosphere of high-stakes 
election year politics such as we will have during the course of this 
debate, in addition to what I consider to be an unfavorable environment 
that will be created by the likely flood of major amendments not 
relevant to S. 812 or the underlying Waxman-Hatch law.
  I must also raise objection to the manner in which the bill so 
hastily was reported from the HELP Committee. Frankly, I am deeply 
disappointed in the way the HELP Committee has acted, although I guess 
we should not be altogether surprised given the perceived political 
advantages my friends across the aisle believe they have and that they 
have gained by calling up S. 812 as the backdrop--or should I say 
backstop--to debate pharmaceutical issues.
  It is true that S. 812 was referred to the HELP Committee. It is true 
that the committee held a hearing on this bill on May 8. I testified at 
that hearing. I stated my reservations about the way the McCain-Schumer 
legislation acts to distort the original premise of the Drug Price 
Competition and Patent Term Restoration Act of 1984.
  While I am heartened by the fact that the HELP Committee version of 
S. 812 that is pending before the Senate today resembles more closely 
the perspective of my testimony than the original Schumer-McCain 
language, I am troubled by the fact that we basically have a bill 
emanating from the HELP Committee that centers on patent law, civil 
justice reform, and antitrust policy. I object to this outcome, and I 
want to take a few moments to comment that the way the Judiciary 
Committee was effectively cut out of the process is a matter of great 
concern to me.
  Even if three members of the Judiciary Committee serve on the HELP 
Committee and are highly involved in this effort, I am concerned that 
the recent actions of the HELP Committee with respect to this bill will 
come at the expense of the jurisdiction of the Judiciary Committee both 
today and into the future. This is wrong. The Judiciary Committee has a 
role to play in overseeing and legislating with respect to 
pharmaceutical patents and competition in the pharmaceutical 
marketplace. The process and timing that are being pursued can only 
undermine the appropriate role of the Judiciary Committee, a balanced 
committee.
  The fact is, last year we held a hearing on competition in the 
pharmaceutical marketplace and reported Chairman Leahy's bill, S. 754, 
the Drug Competition Act, which I support. I cooperated with Senator 
Leahy in the development and refinement of his bill, S. 754, the Drug 
Competition Act. I voted to report the bill out of committee even 
though I had some reservations about some of the language, and I remain 
prepared to work on those concerns.
  The fact is, the HELP Committee bill contains patent forfeiture 
provisions, similar in many respects to the concept once under 
discussion as Chairman Leahy and I worked to refine S. 754. I ask why 
the HELP Committee adopts a policy of patent forfeiture not on the 
outside of its jurisdiction but already rejected by members of the 
Judiciary Committee. I emphasize that this is not a matter of public 
health policy but a patent law and civil justice reform, and so is 
within the province of the Judiciary Committee, not the HELP Committee.
  I am mindful of the fact it was referred to the HELP Committee, but 
this body has a history of committees working in tandem on issues of 
mutual interest. In 1998, although the tobacco bill was referred to the 
Commerce Committee, the Judiciary Committee held 10 hearings on aspects 
of the legislation that touched upon our jurisdiction. We all know the 
long-awaited FTC study of the pharmaceutical industry that focuses 
precisely on the provisions of the law that the HELP Committee seeks to 
change today will be completed in a few short weeks. Why not wait for 
that? Why not get the best advice of the Federal Trade Commission? They 
have done an extensive review.
  Whether we agree or disagree with the final outcome of that, we at 
least ought to get it before we try to wholesale change the law that 
has been called the best consumer piece of legislation in the last 50 
years.
  It is clear, to me, that consideration of this legislation would be 
more informed if we had the information that is about to be presented 
by the FTC to Congress and the public. We should ask the experts at 
FTC, DOJ, the Patent and Trademark Office, and Health and Human 
Services if their perspectives on the changes in the law are advisable. 
It would have been preferable to hear what the experts think of the 
HELP Committee language before it was brought to the floor. Whatever 
happened to holding a hearing on the actual language of an important 
bill?
  The reality is, in the course of the markup, the HELP Committee 
virtually rewrote the major components of S. 812. Unfortunately, this 
sprint to the floor cannot foster the careful type of review and 
analysis that the Senate conducted in 1983 and 1984 when we passed the 
Drug Price Competition and Patent Term Restoration Act.
  Despite my disappointment about the committee process on 
consideration of the Medicare drug benefit in the Finance Committee and 
the way the Judiciary Committee was bypassed from playing a role in 
shaping S. 812 before it reached the floor, I want to take some time to 
make a few remarks about the spending bill, the underlying bill, and 
how it might affect the law it would amend; that is, the Drug Price 
Competition and Patent Term Restoration Act of 1984.

  It is useful to think about the words in the title of the law because 
they remind us that we had two distinct goals in writing the law--
goals, by the way, which have been met. Attempts to change the law must 
also reach the critical test of these two goals: First, to provide 
incentives for the development of innovative pharmaceuticals--if we 
don't have that, we don't have anything; second, to promote widespread 
distribution of generic drugs by permitting a shortcut to regulatory 
approval, which Hatch-Waxman did.
  There is evidence to conclude that the 1984 law has met with success 
in accomplishing both of these ends, much to the benefit of the 
American public. The 1984 law contains the incentives with respect to 
the intellectual market that have brought hundreds of therapeutic new 
drugs to the American public.
  To mention a few of the drugs, these include products such as Vioxx 
to treat arthritis; the cholesterol drug, Lipitor; new medications that 
help millions of diabetics; and as recorded from Barcelona last week, a 
family of drugs to treat HIV infection and the complications of AIDS, 
two areas in which both the distinguished Senator from Massachusetts 
and I have spent a lot of time working together.
  Private sector investment by research-based pharmaceutical firms 
increased from $3.6 billion in 1984 to over $30 billion this year. This 
substantial level of private sector applied research funding, coupled 
with the $27 billion invested by the taxpayers in the National 
Institutes of Health budget next year, helps explain why the unique 
public-private partnership that forms the U.S.

[[Page S6985]]

Biomedical Research Enterprise has American scientists positioned to 
usher in a revolutionary new age of discovery in the biological 
sciences. We all should take pride in the fact that the United States 
leads the world in developing innovative medicines. Part of the reason 
for this leadership is the intellectual property protections contained 
in the 1984 statute.
  The debate on the pending legislation centers on the price 
competition that occurs between generic and name brand drugs. But as we 
consider legislation that alters protection of the innovator firms' 
intellectual property, it is important not to lose sight of the 
importance of the fierce competition between the generic companies and 
the brand name companies. It is the competition for new drugs that 
creates advances in medicine and improves public health and ultimately 
provides blockbuster drugs for generics to copy and to put out at, 
hopefully, less cost.
  As we debate how to see that the American public, particularly senior 
citizens, gains access to today's pharmaceutical products, during the 
golden eggs of our biomedical research establishment we must be mindful 
of the long-term health of the goose that produces these innovative 
drug products. Not only does the American public enjoy the benefits of 
the latest breakthrough medicines, but consumers also reap the savings 
associated with the use of generic drugs.
  Since the 1984 Drug Price Competition and Patent Restoration Act, the 
share of the prescriptions written for generic drugs has more than 
doubled and has increased from somewhere less than 20 percent to almost 
50 percent of all prescriptions written. And as we will hear in the 
debate that will take place over the next several days, everyone in 
Congress knows that senior citizens, particularly senior citizens, have 
a great interest in programs, such as the 1984 law that resulted in 
cutting the costs of drugs.

  One undeniable bottom line measure of success of the Drug Price 
Competition and Patent Restoration Act of 1984 is the fact that 
according to the Congressional Budget Office, this law has contributed 
to annual consumer savings of $8 billion to $10 billion every year 
since 1984. I wish all our legislation would be as effective and as 
successful as this one.
  It might prove useful to summarize briefly how the Drug Price 
Competition and Patent Term Restoration Act works. When you hear how 
the statute operates, you will understand that a central principle of 
this legislation is balance among the incentives of both the research-
based firms, the pioneer firms, and the generic firms.
  This balance is not on only a simple matter of fairness to both of 
these sectors of the pharmaceutical industry. Achieving a balance was 
critical to help ensure that both of these sectors would succeed 
because the bottom line of Hatch-Waxman is to help the American public 
receive both the latest in medical breakthroughs, and the more 
affordable generic drugs.
  As we consider changes to Hatch-Waxman, we must be careful not to 
upset the balance because if we do, it is the American people who will 
suffer. Here is how the law works. In order for a drug to be marketed 
in the United States, a manufacturer must prove to the Food and Drug 
Administration that the drug is both safe and efficacious, effective. 
Drug discovery and development is an extremely time-consuming, 
expensive, and risky process.
  As I have mentioned before, experts at the Tufts University Center 
for the Study of Drug Development have placed the costs of developing a 
major new drug at $800 million, when the opportunity costs of capital 
and the cost of failed drugs are factored into the rare, successful 
product.
  During this debate, some will no doubt be tempted to characterize the 
drug industry as nothing more than a bunch of greedy, money-grubbing 
companies. In fact, for much of the last decade, it has been the most 
profitable sector of the U.S. Economy.
  Nevertheless, as many analysts have noted, and was discussed by 
Senator Wyden at the Commerce Committee hearing this past March, drug 
discovery is a highly speculative venture and there is currently an 
industry-wide slow down in the pipeline of products close to final FDA 
approval.
  For every drug that succeeds in gaining FDA approval, more than 5000 
compounds are screened and fall by the wayside during testing. Some of 
these compounds fall out in the lab; only about 250 of the original 
5000 compounds will proceed to full-scale animal testing; and, of those 
250 that enter animal testing, only 5 will make it to human clinical 
trials; and, finally, the great majority--4 out of the remaining 5 of 
drug product candidates--will fall out during the required 3 phases of 
human clinical testing.
  The first phase of clinical testing usually entails about 30 
patients. The goal of this phase is to assure that the compound under 
study is safe for human use. This is a very difficult hurdle as, for 
example, it can be expected that a compound that can eradicate 
cancerous cells will also likely be toxic to the surrounding healthy 
cells. It is no wonder that the pharmaceutical industry invests a 
higher percentage of its revenues into research than other industrial 
sectors. Are they given any credit for that on the floor over the last 
number of days? Give me a break. They certainly have not. In fact, they 
have been condemned in talk after talk as though they are the sole 
cause of the high cost of drugs.
  In the second phase of clinical trials, efficacy is examined. This 
may involve several hundred patients and it may take several years to 
design, conduct, and analyze the trial.
  If success is sustained through Phase II--and remember that 
experience teaches us that most of these costly trials will result in 
failure--an investigator may proceed to the third and final phase of 
human clinical testing in which the drug is administered to several 
hundred and sometimes several thousands of patients.
  Phase III trials attempt to further evaluate safety and efficacy, 
fine tune dosing regimens, and uncover any propensity for adverse 
reactions among subgroups of the broad patient population taking the 
medicine.
  Because they involve more patients and seek more precise information, 
Phase III trials are generally even more expensive and time consuming 
than the earlier phases of drug development. In order to gain FDA 
approval, the agency prefers to see two successful Phase III studies.
  In addition to costing hundreds of millions of dollars to screen and 
test drug candidates, it also takes a great deal of time. It has been 
estimated by experts that it takes, on average, about 14 years to bring 
a drug from the lab through clinical testing and FDA review.
  And all during this time the clock is ticking on the patents held on 
these drug candidates. For example, in the case of the anti-
inflammatory drug, Daypro, the patent lapsed during the 21-year FDA 
review of the product.
  While this case was clearly an outlier and FDA review time has 
improved somewhat over the last decade due to the user fee legislation, 
it remains true that the U.S. pharmaceutical industry is one of the 
most highly regulated sectors of the economy.
  It is an expensive process, mainly an expensive regulatory process. 
If we could somehow find a way of cutting that down, then the cost of 
drugs would come down, too.
  We passed a bill--it was another Hatch bill--called the FDA 
Revitalization Savings Act, in the early 1990s, that said we should 
create a central campus with state-of-the-art buildings and equipment 
and scientific facilities instead of the almost 40 different locations, 
some of them converted chicken coops, where they are conducting 
research today. The FDA has hardly hired a research scientist in the 
last 30 years. The reason is there is not the prestige in their eyes to 
work for the FDA for less money than they would get in the private 
sector.
  NIH doesn't seem to have that problem because it is so prestigious to 
work there, even at the lesser salaries, that scientists flock to NIH. 
It is exciting, plus they have state-of-the-art buildings and equipment 
with which to work.
  We need to do that. We need to stop blaming the pharmaceutical 
companies, the pioneer companies for all the problems here.
  In recognition of the exacting and time-consuming nature of FDA 
review of safety and efficacy testing, the Drug Price Competition and 
Patent Term Restoration Act provided a number of

[[Page S6986]]

incentives designed to help research based pharmaceutical companies.
  The statute provides for partial restoration of pharmaceutical 
patents, but only under limited rules:
  First, the law allows one day of patent term restoration for each two 
days spent in the human clinical trial phase.
  This is known as the IND Phase. IND stands for the investigational 
new drug and refers to the exemption that FDA grants to allow the human 
clinical trials to proceed.
  The law also allows day-for-day patent term restoration when the drug 
is in the final stage of FDA review. This is called the NDA phase. The 
NDA, or new drug application, is the formal application that contains 
the data demonstrating safety and efficacy. I should point out that 
given that each NDA contains data and records on thousands of patients, 
the NDA literally contains hundreds of thousands of pages of 
information. In some cases those millions of pages of information would 
fill this whole Chamber--that's how complicated it is. Yet, we hear 
badmouthing of the pioneer companies every day here on the floor. There 
are fair criticisms, but I don't think all the criticism has been fair.
  There are two further limitations on the partial patent term 
restoration. First, when the one-for-two rule in the IND Phase is 
applied with the day-for-day rule during the final review of the new 
drug application, no patent may be restored more than 5 years. You 
should keep in mind that, as I said earlier, it takes about 14-years to 
bring a drug through pre-clinical studies through FDA approval.
  Finally, even after this 5-year limitation kicks in there is another 
rule that prevents any patent from being restored such that it will 
have an effective patent life beyond 14 years.
  The 5-year and 14-year limitation rules are sometimes referred to as 
the Hatch-Waxman caps.
  So I just want to point out that you will hear a lot of talk during 
this debate about patent extensions, but what we are talking about is 
partial patent term restoration to offset part, and a relatively small 
part at that, of the time lost during the rigorous FDA review of safety 
and efficacy. You don't hear many comments about that from the critics 
the fact of the matter is, this is a long, arduous expensive time 
consuming, costly process. To blame the pharmaceutical companies for 
everything that is wrong is just not fair.
  It is worth noting that the 14-year cap on effective patent life 
contained in the Waxman-Hatch Act stands in contrast to how other types 
of patents are treated with respect to administrative delays at the 
Patent and Trademark Office.
  This is a somewhat complicated story but I think it bears discussion 
in order to place the Hatch-Waxman policies into context with 
subsequently enacted changes to the patent code.
  Basically the GATT trade treaty required implementing legislation 
that mandated the United States to change its patent system from 17-
years, measured from the date of approval to a new system of 20-years, 
measured from the of date of application with the Patent and Trademark 
Office.
  There was concern by many intellectual property owners that this 
change in the law could actually decrease effective patent life due to 
administrative delays at PTO. As a result, a provision was included in 
the 1999 American Inventors Protection Act--a bill that passed with 
broad bipartisan support--that allowed patent term to be restored up to 
17 years in cases where there was undue delay at the PTO.
  The 17-year patent term floor in the American Inventors Protection 
Act extends to all types of patents and should be contrasted with the 
14-year patent term ceiling contained in the Waxman-Hatch for 
pharmaceutical patents. Moreover, most patent applications are reviewed 
by PTO in one and one-half to two years, so that the effective patent 
life for most products is actually 18 to 18.5 years. When all is said 
and done, most patents run appreciably longer than patents related to 
drugs due to the 14-year Waxman-Hatch cap.
  In addition to the partial patent term restoration provisions of the 
1984 law, the statute provides that each FDA-approved new drug that 
consists of a new chemical entity receives 5 years of marketing 
exclusivity--not 18 years, which other manufacturers get, but 5 years 
of marketing exclusivity. In other words, we want to treat them at 
least somewhat fairly.
  This 5-year marketing exclusivity provision means that FDA may not 
approve any generic drug for that time 5-year period regardless of 
whether the drug is protected by any patent.
  The last major incentive on the R&D side of the ledger that I will 
discuss is the provision that entitles a pioneer drug firm that 
successfully undertakes a clinical trial yielding data that 
significantly improves, or modifies the use of an existing drug 
compound, to 3 years of marketing exclusivity.
  As you can see, this is complex. But it works, and it has worked 
amazingly well. Our country has benefited from it. And it was 
bipartisan. Actually, you would have to say it was nonpartisan. That is 
what I would like to see in a full Medicare prescription drug 
bill. This 3-year incentive helps encourage incremental, but often 
vitally important improvements, to existing drugs and does not bar 
generic competition from the original approved uses of the drug once 
any patent or marketing exclusivity has expired.

  I hope my colleagues can see that the 1984 law contains a powerful 
set of intellectual property incentives that help foster the necessary 
private sector investment in pharmaceutical R&D.
  That is one reason our pharmaceutical companies have done so well. 
That is why we have such a good balance of trade. They have been among 
the most successful companies in our society up until now, and they are 
about to be stratified where they won't have the money to go through 
this $800 million and 5,000 misses to get one single drug, if they are 
lucky and then have just a few years of patent life. You wonder why 
drugs cost so much through that market exclusivity.
  In parallel with the incentives I have just described for innovator 
firms, the Drug Price Competition and Patent Term Restoration Act 
provided the necessary regulatory regime that created the modern 
generic drug industry. Rather than unnecessarily squander societal 
resources by requiring the duplication of the expensive and time 
consuming process by which safety and efficacy is established for 
pioneer products, the law provided a shortcut through the FDA 
regulatory process.
  That was one of the generic aspects of the law. The 1984 law, in 
essence, allows generic competitors to rely upon the proprietary safety 
and efficacy data generated by the pioneer firm and requires that the 
generic drug merely be shown to contain the same active ingredient and 
be absorbed by the human body in a bioequivalent fashion. This simple 
provision of law allowed generic firm to bring on high quality copies 
of the pioneer drugs for a fraction of the cost and, most importantly, 
to pass these savings onto consumers.
  Their cost is less than 1 percent to put the drugs in the 
marketplace. I want it that way. We wanted it that way when we did the 
Hatch-Waxman bill.
  Another key feature of the law is a unique change in the patent code 
designed to allow generic product to enter the market literally the day 
after the patents on a pioneer drug expire.
  Upon first consideration this may not sound like a 
dramatic development in the law but it is. Here's why.

  Let us start with the Constitutional basis for patent protection. 
Article I, Section 8 of the United States Constitution provides: 
``Congress shall have the power . . . to promote the progress of 
science and useful arts, by securing for limited times to authors and 
inventors the exclusive right to their respective writings and 
discoveries.''
  It is said that Thomas Jefferson had his hand in the drafting of the 
first patent statute enacted by Congress back in 1790 and that in his 
capacity of Secretary of State actually issued and signed some of the 
first patents issued by the United States federal government.
  In areas such as pharmaceuticals, where it is relatively easy to copy 
pioneer products that require enormous R&D expenditures--I mentioned 
$800 million to find one drug--it is critical to have strong laws 
prohibiting the infringement of patents.
  I should also like to add that a patent right is a negative right and 
does not automatically confer monopoly power; a patent only allows the 
patent

[[Page S6987]]

owner the right to exclude others from utilizing the patented invention 
or process.
  Section 271(a) of title 35 of the United States code contains the 
general rule against patent infringement. It says: `` . . . whoever 
without authority makes, uses, offers to sell, or sells any patented 
invention . . . during the term of the patent . . . infringes the 
patent.''
  This is a tough provision and a good provision because it protects 
the rights of inventors, inventors of all products used, manufactured 
or sold in each of our states, who have made substantial investment in 
research and development.
  In order to allow generic drug firms to enter the market the day the 
patent expired, the general rule of section 271(a) had to be modified. 
This is so because in order to get the drug through the truncated FDA 
review process and gear up production the generic firm has to make and 
use the patented drug, and this is important, while the pioneer drug is 
under patent protection.
  I should also add that under the common law there is a research 
exception to the general rule against patent infringement so that 
academic researchers could be free to explore new areas of scientific 
inquiry.
  During the course of the negotiations over the Waxman-Hatch law, a 
question arose in the courts with respect to whether this research 
exemption might carry over to the type of research activities necessary 
to develop a generic drug.
  And right in the middle of these negotiations we got the answer when 
the precursor court to the Federal Circuit Court of Appeals issued its 
opinion in the case of Roche v. Bolar. The court held that the research 
exception did not extend to commercialization activities such as those 
necessary to prove bioequivalence.
  The result was that the Drug Price Competition and Patent Term 
Restoration Act contains a legislative override of the court case. This 
provision, the so-called Bolar Amendment, creates a unique provision in 
patent law. Section 271(e) of title 35 contains the Bolar Amendment. 
Section 271(e)(1) says: ``It shall not be an act of infringement to 
make [or] use . . . a patented invention . . . solely for uses 
reasonably related to the development and submission of information 
under a federal law which regulates the manufacture, use, or sale of 
drugs or veterinary biological products.''
  When considering the pending legislation, it is important to 
understand that in preparing an abbreviated new drug application, or an 
ANDA as they are called, the generic firm gets a head start over 
virtually all other types of generic manufacturers in that they are 
permitted to make and use--and thus violate--pioneer firms drug patents 
while these patents are still in effect.
  That is a major change in patent law that we put into Hatch-Waxman to 
get the generic industry really going. And it helped to create the 
modern generic drug industry.
  (Mr. EDWARDS assumed the Chair.)
  Mr. HATCH. In the interest of accuracy, I must add a footnote. In the 
1990 Supreme Court decision of Lilly v. Medtronic, the Court held in an 
opinion written by Justice Scalia that the Bolar amendment also applies 
to some other FDA-regulated industries such as medical devices. While 
you need to read the opinion for yourself to see how this not-so-
obvious result was accomplished, as coauthor of the bill, I did take 
note of Justice Scalia's observation that:

       No interpretation we have been able to imagine can 
     transform section 271(e)(1) into an elegant piece of 
     statutory craftsmanship.

  Mr. President, ouch!
  But the Medtronic decision has only limited significance and it is 
still fair to say that the generic drug industry enjoys a head start 
that virtually no other type of generic manufacturers could even 
imagine--the ability to make and use on-patent products for commercial 
purposes. The head start granted to generic drug firms by the Bolar 
amendment was an integral part of the balance of the 1984 law and must 
be kept in mind when I next discuss the closely related patent 
challenge provisions of the bill.
  But before I discuss these provisions, I want to first emphasize that 
the central feature of the Hatch-Waxman law thankfully remains 
unscathed by the pending legislation.
  This is the policy tradeoff whereby part of the patent term lost by 
innovator drug firms during the extensive FDA review is restored while, 
at the same time, generic drug firms were permitted to rely upon the 
proprietary safety and efficacy data of innovator drug firms and enter 
the marketplace upon a showing that the generic copy of the drug is 
delivered to the patient in a bioequivalent manner.
  And from the summary I have just provided, I think you get the idea 
that the Drug Price Competition and Patent Term Restoration Act of 1984 
law is a complex piece of legislation. It took us 2 solid weeks, 18 
hours a day, in my office. I was there every minute of those 
negotiations to get this negotiated between the PhRMA companies and the 
generic companies. I will also concede, as Justice Scalia has noted, 
that the statute does not read like a novel.
  The 1984 law has been instrumental in delivering both new drugs and 
more affordable drugs, but this is not to say that such a complex piece 
of legislation cannot be improved to address unanticipated or 
unintended consequences as well as changes in the marketplace and 
science.

  Before I discuss my views on the pending legislation, the HELP 
Committee substitute to S. 812, I would like to complete my summary of 
the Drug Price Competition and Patent Term Restoration Act by 
describing the patent challenge features of the statute. Perhaps no 
feature of Waxman-Hatch has generated as much controversy as the 
provisions relating to patent challenges. These are the least 
understood and, indeed, least appreciated provisions of the law. The 
guts of the HELP Committee substitute focus on these provisions.
  I hope that everyone agrees that patents are critical to the drug 
development process because absent patent protection it would be 
relatively easy to copy virtually any drug. The challenge of drug 
development is not in the chemistry of manufacturing, but in conducting 
the extensive and expensive preclinical and clinical research that 
demonstrates safety and efficacy.
  While patents are integral to drug development, consumers can benefit 
greatly from earlier price competition if it were determined that, for 
whatever reason, the underlying patents on a drug were invalid or not 
infringed.
  At any rate, during the negotiations over the bill in 1984, a policy 
question arose regarding how best to guarantee that drug patents would 
be challenged and what to do in cases in which a challenge was 
successful.
  We ultimately decided that a generic firm which successfully attacked 
the patents on a new drug would receive a period of 180-days of 
marketing exclusivity during which no other generic competitor could be 
approved by FDA.
  The 1984 law contains an elaborate set of rules surrounding patent 
challenges. Here is how the system works.
  From my earlier discussion, you will recall that all new chemical 
entities--even and especially drugs without any patent protection--
receive a 5-year period of marketing exclusivity during which the 
generic drug firm may not rely upon the safety and efficacy data 
generated by pioneer drug firms.
  And keep in mind that there may be no other industry in which generic 
competitors can rely upon pioneer manufacturers' proprietary 
information submitted for Federal approval purposes.
  In any event, the law allows the generic drug firm to submit an 
abbreviated new drug application after 4 of the 5 year marketing 
exclusivity period has lapsed. When the generic drug application is 
submitted, the generic firm has to make one of four certifications with 
respect to each patent related to the drug listed in the official FDA 
records called the Orange Book.
  This chart sets out these choices.
  First, that such patent information has not been filed.
  Second, that such patent has expired.
  Third, the date on which such patent will expire.
  And fourth, and finally, that such patent is invalid or will not be 
infringed by the manufacturer's use or sale of the new drug for which 
the application is submitted.
  It is the last certification, the so-called paragraph IV 
certification, that is the chief cause of the major problems the bill 
pending on the floor seeks to address.

[[Page S6988]]

  As I have said many times over a number of years, by the way, and 
will say again here today, I acknowledge there are some problems with 
paragraph IV patent challenges.
  These need to be corrected. I would like to shape legislation to 
correct them.
  But it is also no secret that my preference was to address these 
problems in the course of a comprehensive review of the Drug Price 
Competition and Patent Term Restoration Act.
  In fact, in the good old days when I was still chairman of the Senate 
Judiciary Committee and my friend from Vermont, Senator Jeffords, was 
the chairman of the HELP Committee, we were working together to conduct 
such a review.
  But times have changed. What should not change is that this body 
should resist the pile-on mentality which villianizes an industry which 
is doing more to help millions and millions of Americans daily than any 
other industry we could imagine.
  Before I close my remarks today, I will outline the types of issues 
that ought to be considered a more thorough review of the 1984 law than 
the pending bill contemplates.
  In any event, to return to the paragraph IV litigation procedures, 
the filing of a generic drug application triggers a 45-day period 
during which the pioneer drug company or firm could initiate a lawsuit 
to determine whether its patents were valid or infringed. In order to 
give a court adequate time to familiarize itself with, and hopefully 
dispose of on the merits, the almost always complex issues attendant to 
patent litigation, the Waxman-Hatch law provides a statutory 30-month 
stay.
  During this 30-month period FDA may not approve the generic drug 
application in dispute unless a court resolves the matter.
  It is also true that this is a unique provision not available to 
other types of patent holders. However, this unique 30-month stay 
provision that benefits patent holders must be understood in context of 
the overall system of balances contained in the 1984 law, and, in 
particular, in connection with the operation of the Bolar amendment.
  The Bolar provision, you will recall, has the laudable public purpose 
of trying to get the generic drug product onto the market the very day 
the patent expires.
  As I explained earlier, in order to achieve this pro-consumer end, 
the patent code was amended to allow the generic firms to infringe 
patents.
  But we must recognize that the reality of the Bolar amendment is that 
it takes away the customary rights of a patent holder to bring a patent 
infringement action the moment a generic drug manufacturer makes or 
uses a patented product. In this case, the commercial purpose consists 
of seeking FDA approval and gearing up production. It cannot be 
disputed that section 271(e) of the patent code--the Bolar amendment--
places pharmaceutical patent holders in a disadvantageous position from 
which to defend themselves against challenges to its patents by generic 
drug challengers.
  This is so because a second prong of the Bolar amendment, codified at 
section 271(e)(2) of the patent code, treats the somewhat artificial 
act of filing a generic drug application as an act of patent 
infringement, and it is at that point, and not before that point, that 
the patent holders can assert their normal patent rights through the 
courts.
  It seems only fair to recognize the unique head start that the Bolar 
amendment allows to generic firms on the front end of the generic drug 
development by making available to pioneer firm patent holders the 30-
month stay that allows the courts adequate time to delve into the 
merits of the challenged patents. Absent the Bolar amendment--and don't 
forget that this provision reversed the Federal Circuit Court of 
Appeals decision that decided against generic drug firms on the matter 
of patent infringement--the case for the 30-month stay would not be as 
strong.

  In any event, during the course of the 30-month stay, it is hoped 
that an adjudication on the merits of the patent challenge will be 
completed. If at the end of the litigation the pioneer firm prevails, 
the generic drug applicant must wait until the patents expire before 
the FDA can approve its application and the generic product can be 
marketed. On the other hand, if the courts determine that the patents 
are invalid or the generic drug firm has successfully invented a way 
around the patents, the 1984 law grants an award of 180-days of 
marketing exclusivity. As I said earlier, this is to encourage vigorous 
patent challenges so that consumers can benefit from earlier access to 
cost-saving generic drugs.
  I thought then, and think now, that it is sound public policy to 
contain an incentive to assure legal attacks on pioneer drug patents, 
and we all must recognize that such litigation is risky, complex, time-
consuming, and costly.
  Now that I have laid a foundation by discussing the basic provisions 
and policies of the Drug Price Competition and Patent Term Restoration 
Act, I want to add to the debate that was initiated yesterday by 
briefly describing the key problems that have been observed in recent 
years with respect to the 1984 law.
  I first remind the Senate that in the next few weeks the Federal 
Trade Commission is expected to issue a comprehensive report that 
centers on what many believe are the two most important abuses of the 
current system: First, the manipulation of the patent system for the 
purpose of triggering multiple overlapping or late-in-the-process 30-
month stays; and, second, collusive arrangements between pioneer and 
generic firms to game the Paragraph IV litigation in order to preclude 
the triggering of the 180-day marketing exclusivity clock so that no 
generic can reach the market in a timely fashion.
  I am frustrated by the fact that the tactical choices of my 
colleagues across the aisle preclude us from debating this important 
legislation without the benefit of the FTC report.
  I await with great interest the final version of the forthcoming 
comprehensive FTC report on the drug industry so we may get a more 
accurate picture of the number of instances in which drug firms have 
tried to game the system by listing a late-issued patents into the FDA 
Orange Book.
  While my staff and the staffs of a few other Members have been 
briefed on the general findings of the FTC study, it was under the 
condition of confidentiality and with the understanding that the 
commissioners had not evaluated the data and given us their 
interpretations, conclusions, and recommendations.
  Along the same lines, I would like to add that the FDA Chief Counsel, 
Dan Troy, convened a meeting in February of representatives of both the 
generic and pioneer drug firms.
  Mr. Troy elicited information and debate on several maters, including 
a full and frank discussion of both the 30-month stay and the 180-day 
marketing exclusivity provisions of the 1984 law.
  One of the many down sides of rushing this bill to the floor in this 
fashion was that it precluded members of several committees, including 
the Judiciary Committee, Commerce Committee, as well as HELP Committee, 
from first reviewing the comprehensive FTC study on the very issues 
that the pending legislation seeks to address.
  We may have also missed out on a meaningful opportunity to have the 
usual give and take of a public hearing with the FTC and the FDA on 
these issues. We could have--and should have--taken the more routine 
and orderly path to legislation by holding a hearing to solicit the 
administration's detailed advice in crafting language, including 
soliciting their views on the language that arose just last Tuesday in 
the HELP Committee.
  Yesterday, Senator Gregg read from the first, but no doubt not the 
last, missive from the administration commenting on this new language.
  In any event, let me turn to the 30-month stay provision. It is my 
understanding that the FTC report will reveal that there have been 
several--perhaps about 10--cases of either multiple, consecutive 30-
month stays or later-issued patents that resulted in surprise 30-month 
stays.
  The facts matter.
  We need to learn about these cases. We also have to keep matters in 
perspective. Although some in this debate suggest that there has been, 
and will continue to be, an epidemic of unjustified triggering of the 
30-month stay, I am not sure that the evidence will support this 
charge.
  We must take care not to overcorrect any problems based on anecdotal 
information.

[[Page S6989]]

  But I will say this: the now famous case of the drug Buspar convinces 
me and many others that Congress should take action to address the 
problems associated with late-issued patents triggering new 30-month 
stays.
  This was the case in which a patent on the metabolite of a drug was 
listed in the Orange Book just as the original patents on the drug were 
set to expire and generic were literally on the loading dock ready to 
be shipped.
  I do, however, want to note for the record that in the case of Buspar 
the courts stepped in and the stay lasted only 4 months, not 30-months.
  The HELP Committee bill would freeze those patents eligible for the 
30-month stay to those patents filed with FDA within 30-days of 
approval of the New Drug Application. All other subsequently issued 
patents would be eligible for injunctive relief but would not be 
entitled to the longstanding protection afforded by the 30-month stay.
  First, I commend Senators Edwards and Collins for overturning the 
McCain-Schumer language that completely--and unjustifiably--eliminated 
the 30-month stay. The Edwards-Collins amendment also is a great 
improvement over the language that Chairman Kennedy circulated in the 
days before the markup.
  The Kennedy language would have arbitrarily limited the types of 
patents eligible for the 30-month stay to drug substance patents and 
method of use patents.
  By treating some patents as inferior to others, the Kennedy draft 
would have reversed a longstanding principle of Hatch-Waxman not to 
discriminate among types of patents.
  The very purpose of the 30-month stay is to give the courts an 
adequate period of time to make an informed analysis of the complete 
patent portfolio surrounding a drug product.
  The 30-month stay allows the time necessary to make fact-based 
determinations of the validity of the challenged patents as well as to 
determine if the generic challenger has successfully navigated the 
field of valid patents and produced a non-infringing version of the 
drug.
  I know that Senator Gregg was working on a language that would have 
retained the 30-month stay for each patent recorded in the Orange Book 
prior to a generic drug challenger filed a marketing application with 
the FDA. I think that there is great merit in this approach.
  The Hatch-Waxman law does not even allow generic drug applicants to 
file a generic drug application until four full years have elapsed 
after the NDA has been approved for a new chemical entity.
  That is because, as I stated earlier, under the 1984 law, drugs 
consisting of new chemical entities--and these are likely to be the 
breakthrough products--automatically receive five years of marketing 
exclusivity before FDA can approve a generic copy of the drug. It seems 
reasonable to conclude that, at a minimum, all patents filed before a 
generic can first challenge a pioneer drug, that is, after four years 
have elapsed, should be accorded the protection of the 30-month rule.
  For example, consider the hypothetical but not unrealistic case of an 
approved intravenous drug covered by pre-NDA issued patents on the 
compound and the method of use. In addition, assume the drug sponsor 
has applied for, but does not receive, a patent on the intravenous 
formulation until two years after the NDA is approved. While the 
Edwards-Collins language is barely one week old and I am still studying 
its implications, upon first consideration, I find it difficult to 
justify treating the post-NDA-issued formulation patent differently 
than the earlier two patents. After all, a generic challenger--although 
free to infringe the patent under the Bolar amendment for the purpose 
of providing bioequivalence data and to prepare for full-scale 
production--cannot even contest any of the three patents for 2 years 
after the third patent issues.
  That is because the filing of the generic drug application creates 
the artificial act of patent infringement required by the Bolar 
amendment that allows the Paragraph IV litigation to commence.
  I emphasize the fact that the lawsuit may not begin at least until 
the four year statutory bar on submitting a generic drug application 
expires.
  And if it makes sense to include all patents issued within the first 
four years during which no ANDA application and Paragraph IV challenge 
can be made, one can argue, as Senator Gregg has, and I suggested in my 
testimony before the HELP Committee in May, that it makes sense to 
freeze the patents listed in the Orange Book for the purpose of the 30-
month stay on the day that any particular ANDA is submitted, whether or 
not it is filed on the first day of ANDA filing eligibility, or years 
later.
  The McCain-Schumer proposal to do away with the 30-month stay 
altogether is dead.
  The Kennedy proposal to allow only some types of patents to qualify 
for the 30-month stay is dead. Perhaps the governing principle should 
be one bite, and one bite only, of the 30-month apple and all we are 
debating is when, not whether, to cut off the availability of the stay. 
As I said last night, in some respects the Edwards-Collins language is 
a step in the right direction and this is one of those improvements.
  We know that it currently takes, on average, about 18 months for FDA 
to complete its review of generic drug applications. I understand that 
it takes, on average, about two years to reach a district court 
decision in Paragraph IV patent challenge case. We also know that the 
generic have argued--and the Edwards-Collins amendment embraces--that 
it would be unfair to start the 180-marketing exclusivity clock--a 
matter that I will discuss latter in my remarks--until a final decision 
has been reached by an appellate court. This appellate review takes 
about another year, so the total litigation period of Paragraph IV 
cases is about 36 months.
  I can understand why generic Paragraph IV challengers want to wait--
the prospects of treble damages seems to me like a good reason for them 
to exercise caution--until an appellate court decides the merits of the 
patent challenge. Given the risk adverse behavior engendered by the 
threat of treble damages, I don't see why it is so absolutely critical 
in the first place to bifurcate the application of the 30-month rule at 
the time a new drug application is approved.
  Perhaps the FTC study will unveil a pattern of cases in which courts 
have ultimately determined that frivolous, or at least invalid, patents 
were filed between the approval of the NDA and the first ANDA 
submissions. Perhaps not, only time will tell.
  But frankly, this is an area where the actual data that presumably 
will be forthcoming in the FTC study will be extremely helpful. I will 
be greatly interested to know how the patent challenge cases would have 
broken down if the Edwards-Collins NDA-plus 30 day rule were applied 
retroactively. Stated another way, are there any significant 
differences in the outcome Paragraph IV challenge litigation between 
Orange Book patents listed before, and those patents listed after, 30-
days after the NDA has been issued? It will be beneficial to get a 
sense on whether there is a pattern with respect to when invalid 
patents and patents that have been circumnavigated tend to be listed.
  And as I said earlier, I think we would have all been better served 
if the Committees of jurisdiction had been afforded the opportunity to 
conduct hearings with the purpose of analyzing the actual language of 
the Edwards-Collins Substitute and with the hindsight provided by the 
FTC report, together with the expert advice and analysis of the FTC, 
other federal agencies, and other experts and interested parties.
  We should all recognize that patent litigation is often, as in the 
case of pharmaceutical patents, inherently technical and complex.
  For example, The Legal Times recently reported that the Federal 
Circuit has a reversal rate of 40 percent in certain patent cases. I am 
concerned that to the extent we adopt a policy that relies too heavily 
on simply throwing the matter of injunctive relief to federal district 
courts absent a period to allow the court to sufficiently familiarize 
itself with the issues at hand not only disrupts a justified internal 
check and balance of Waxman-Hatch, but also may have the effect of 
creating uncertainty as the district courts wrestle with arcane matters 
of patent law.

[[Page S6990]]

  While I can see how some enterprising generic firms and their 
attorneys might be able to turn this new and potentially unpredictable 
environment into leverage for settling patent challenges, I am not sure 
that this instability is either fair to pioneer drug firms or in the 
long run interests of the American public.
  For now, I will listen carefully to the debate on this matter but, 
from what I now know, I am inclined to conclude that the Gregg proposal 
is preferable to the NDA-plus 30-day standard contained in the HELP-
reported version of S. 812.
  Moreover, as I stated earlier, I think a case can be made for making 
the 30-month stay available to all patents listed within four years 
after the NDA has been approved since no patent litigation can commence 
under the 1984 law until that time.
  In short, while I am open to further debate and discussion on the 
matter, at this point I question whether the Edwards-Collins language 
unnecessarily cuts off the 30-month stay too early in the process?
  I welcome the understandable and justified attempt to address the 
problem of late or even multiple 30-month stays that can occur when 
later-issued patents are entered into the Orange Book. As I said in my 
testimony in May, if there is a compelling case to keep the current 
policy of universal availability of the 30-month stay for all patent 
whenever listed, let's hear the arguments.
  Once again, let me commend Senators Edwards and Collins for moving 
the Committee away from the these negative aspects of the McCain-
Schumer and Kennedy proposals.
  I am pleased that there appears to be something of a consensus on the 
importance of retaining the 30-month stay even though, for the reasons 
I have just described, I think we need further discussion of when the 
stay should be available and when it should not be operative.
  Having addressed the general issue of the wisdom of retaining the 30-
month stay, I would be remiss if I did not comment upon some aspects of 
the Edwards-Collins substitute that would also drastically affect 
patent litigation under the 1984 Waxman-Hatch law.
  Mr. President, I speak now of the what I will call the file-it-or-
lose-it and sue-on-it-or-lose-it provisions of the HELP Committee 
Substitute.
  Mr. President this is a case of the HELP Committee trying to rewrite 
patent law and doing an absolutely horrible job at it to boot.
  There are three very similar and very disturbing provisions that 
essentially say a pharmaceutical patent holder can effectively forfeit 
their rights by not filing patent information or a patent infringement 
action at a certain time.
  The first of these provisions is found in Section 3 (a)(1) ``(2)(F)'' 
of the bill. This provision requires manufacturers of innovative new 
drugs to file certain patent-related information in the FDA Orange Book 
upon penalty of--and here's the rub--forfeiture of their patent 
enforcement rights.
  A second provision of the bill, contained in Section 3(a)(2)(B) of 
the bill makes this filing requirement applicable to drugs approved 
prior to enactment of S. 812.
  This provision says, in effect, that upon enactment of S. 812, every 
holder of a pre-enactment approved new drug application has 30 days to 
file all specified patent-related information in the FDA Orange Book or 
lose forever their rights to sue for patent infringement.
  Talk about Draconian remedies for failing to file information with 
the government. This takes the cake! I should also point out that 
section (a)(1) ``(2)(C)'' of the bill significantly expands the type of 
patent information that must be filed, including requiring very precise 
claim by claim certifications of what each particular patent covers. I 
am concerned about the policy and potential effects of this language.
  Given that forfeiture of patent rights is the penalty for the two 
file-it-or-lose-it provisions I just described, you should not be 
surprised to learn that the patent right forfeiture trifecta is 
completed in section 4(a)(2)(C) which contains a sue-on-it-or lose-it 
provision that appears to say that failure to defend against any 
Paragraph IV challenge waives your patent rights against all 
challengers for all time.
  I was relieved to hear Senator Kennedy state on the floor yesterday 
that this last provision was not intended to require forfeiture of 
patent rights as against all potential infringers. I take him at his 
word that this language will be clarified. But, once again, I must ask 
why we find ourselves on the floor with a poorly drafted patent 
provision that has not been vetted by the Judiciary Committee, the PTO, 
the White House or the patent bar or any number of other experts?
  Nevertheless, I find these three provisions so troubling I hardly 
know where to start my criticism. Under the current law, failure to 
defend against a Paragraph IV challenge does not result in automatic 
forfeiture of patent rights.
  Mr. President, my colleagues should know that under current law the 
penalty for not promptly defending against a Paragraph IV litigation 
challenge is waiver of the 30-month stay, not forfeiture of any patent 
rights.
  It seems to me that the current law waiver of the 30-month stay 
against the particular litigant bringing a particular paragraph IV 
challenge is a proportionate response to the failure to defend against 
a particular lawsuit.
  I think that both of the two file-it-or-lose-it provisions and the 
sue-on-it-or-lose provision simply go too far. I am not aware of any 
analogous provision in title 35, or in case law, but I am the first to 
admit that because this language is only a week old my study is not 
complete. I must question embracing the principle that if a patent 
holder, for whatever reason, fails to file information with the FDA 
that those rights should be automatically surrendered against any 
would-be patent infringers.

  It seems to me that these provisions should be subjected to careful 
scrutiny under the takings clause before they are adopted. As well, the 
disadvantageous treatment accorded pharmaceutical patents under these 
three positions should be examined from the perspective of the TRIPS 
provisions of the GATT Treaty. That involves the Finance Committee as 
well.
  We must not lose sight of the fact that patents are presumptively 
valid. We must not lose sight of the fact that the reason we have laws 
to protect intellectual property is because society benefits from 
advances in the arts and sciences, as the Constitution asserts.
  If we expect to have breakthrough medicines, we better protect 
patents.
  Why would we ever support a system in which the failure of a mail 
room clerk, even if underpaid and overworked, or the U.S. Postal 
Service could result in the forfeiture of rights stemming from 
literally hundreds of millions of dollars and precious human capital 
invested in cutting edge biomedical research?
  Just this week, because of the anthrax problem, I received some 
Christmas presents. One can imagine what can happen on some of these 
patent cases.
  Why shouldn't pharmaceutical product patent owners retain the same 
time-honored rights exercised by all other patent owners to decide how 
and when to respond to patent challenge litigation?
  Mr. President, I must tell my friends on the HELP Committee that this 
member of the Judiciary Committee--the committee charged with 
overseeing the patent law, antitrust law, and the administration of 
civil justice--that I do not support the manner in which they have 
resolved significant matters of patent law, civil justice and antitrust 
policy.
  In fact, when Judiciary Committee Chairman Leahy and I were 
negotiating over the provisions of his bill, S. 754, the Drug 
Competition Act, at one point a Leahy staff draft contained a provision 
in some ways similar to the pending bill's file-it-or-lose-it and sue-
on-it-or-lose-it provisions. Ultimately, that approach was rejected. 
And for good reason.
  As many of my colleagues know, S. 754 requires the prompt reporting 
of any potentially anticompetitive agreements between brand name and 
generic drug firms to DOJ and FTC.
  Basically, the Leahy staff proposal--I cannot say whether Chairman 
Leahy was aware of all of the details of this particular provision--was 
that a drug company would surrender its patent rights if it did not 
promptly report to

[[Page S6991]]

FTC and DOJ any potentially anticompetitive agreement with a generic 
drug firm.
  Let me read the Leahy staff draft that was circulated to my staff 
last July.
  It was contained in the enforcement section of the bill, and it said:

       Contract and Patent Enforceability--if any person, or any 
     officer, director, partner, agent, or employee thereof, fails 
     to comply with the notification requirement under section 5 
     of this Act, such failure shall render permanently 
     unenforceable any agree which was not filed with the 
     Commission--[referring to the FTC] and the Attorney General, 
     and [here comes the relevant language] shall also render 
     permanently unenforceable any patent of the generic drug 
     manufacturer or the brand name drug manufacturer that is the 
     subject of the agreement.

  I must give Senator Leahy's staff a great deal of credit. One of them 
is Ed Barron, the deputy chief counsel of the Judiciary Committee 
Democratic staff. Ed is a level-headed, gifted lawyer and has been an 
asset to the Senate and the Judiciary Committee for many years.
  As well, Susan Davies, a former Supreme Court clerk, is an extremely 
talented lawyer.
  When they consulted with experts in the field and further studied the 
matter, they properly concluded that patent forfeiture was an improper 
response for a mere reporting failure--even if that unreported 
agreement was ultimately found to be violative of the Federal antitrust 
laws.

  How does a patent law provision with civil justice reform 
implications aimed at an antitrust problem find its way in three places 
in a HELP Committee-reported bill, one year after the chairman and 
ranking Republican member of the Judiciary Committee considered and 
rejected the same basic policy in a bill that covers the same concerns 
as the pending legislation?
  Mr. President, I am afraid that yet another casualty of the truncated 
process observed by the HELP Committee in its consideration of S. 812 
can be seen in the last minute inclusion of the ``file-it-or-lose-it'' 
and ``sue-on-it-or-lose-it'' provisions of the pending bill. But this 
is exactly the kind of negative outcome that can occur when there is a 
markup on a Wednesday and untested language appears the day before.
  The truth of the matter is that is exactly what took place last week 
in the HELP Committee.
  While I have commended Senators Edwards and Collins for rejecting the 
key provisions of the McCain-Schumer bill, in the case of the ``file-
it-or-lose-it'' and the ``sue-on-it-or lose-it'' provisions, I must 
commend Senator McCain and Senator Schumer for not including such 
troublesome language in the first place.
  I urge all of my colleagues to think carefully about the precedent 
this body would be setting for patent and copyright owners if we follow 
the lead of the HELP Committee and retain this language.
  At a minimum, I hope the Judiciary Committee will have a chance to 
hold a hearing on this novel language.
  If the press of election year politics precludes the Senate Judiciary 
Committee from holding such a hearing, I would hope that the House 
Judiciary Committee will step up to the plate and fully vet this issue.
  We need to hear from PTO and the patent bar on this issue.
  We need to hear from the American Intellectual Property Law 
Association and the intellectual property groups on this issue.
  This matter is far too important to be brushed aside in the rush of 
the HELP Committee to report a virtually complete substitute to S. 
812--a substitute that suddenly springs forward last Tuesday, a day 
before the markup--a substitute that is then hastily plucked off the 
Senate calendar before, I believe, a committee report is even filed, 
and then rockets its way onto the floor as a straw man for the Medicare 
prescription drug debate.
  I am dubious of the language in the bill that creates, I am told, 
perhaps for the first time in the Federal Food, Drug, and Cosmetic Act, 
a private right of action.
  I am speaking of the provision in the Section 3(a) ``(2)(E)'' of the 
bill that creates what appears to be a new cause of action to attack 
patent listings.
  Aside from setting an unwelcome foothold for trial lawyers to reach 
into the FDC Act, one must wonder how a provision that seems to create 
a parallel course of litigation to the well-established Paragraph IV 
patent contests simplifies or adds any measure of certainty to the 
patent challenge system? As the debate unfolds, I may have more to say 
on this matter and urge my colleagues to act to strike this language.
  The last major area on which I wish to comment with respect to the 
pending legislation relates to the collusive agreements that have 
occurred in connection with the 180-day marketing exclusivity incentive 
of the 1984 law.
  Mr. President, in closing, I have just discussed why I believe the 
pending bill's treatment of the 30-month stay is an improvement over 
the McCain-Schumer bill. For the reasons I have just discussed, I think 
the NDA plus 30-day rule goes too far. I come here today to give you my 
views on the 30-month stay issue and to see how the sponsors of the 
pending legislation respond to my arguments. If they say this is a 
nonnegotiable matter, that is one thing. If they are willing to modify 
the language, I will be willing to work with them on this. I would like 
to hear from them on this issue.
  I have a number of other issues I will raise, but I want first to see 
whether there is a willingness to work with me in correcting what I 
consider to be inflexible language and to work with me in providing the 
flexibility to work on the 30-month stay, the file-it-or-lose-it or the 
sue-on-it-or-lose-it provisions, and the private right of action.
  I have worked on many occasions with the Senator from Massachusetts. 
I have worked against him. I have worked with him. I know sometimes he 
adopts the no amendment strategy. The minute we yield the floor, I am 
raising the question of whether the sponsors are totally locked in on 
the language, and then I would like to hear what they have to say about 
the arguments I have made. This is too important an issue to play 
politics. We are talking about the health of the American public. I am 
willing to work to improve the bill. The language has improved as it 
has moved further away from the original Schumer-McCain language, but 
for the reasons I have described I think the language still needs some 
work.
  I have a lot more to say, but I will end by rereading first an 
administration policy from the Executive Office of the President and 
then rereading a paragraph from this book.
  In the Statement of Administration Policy, it says:

       However, the administration opposes S. 812 in its current 
     form because it will not provide lower drug prices. S. 812 
     would unnecessarily encourage litigation around the initial 
     approval of new drugs and would complicate the process of 
     filing and protecting patents on new drugs. The resulting 
     higher costs and delays in making new drugs available will 
     reduce access to new breakthrough drugs. Moreover, this new 
     cause of action is not necessary to address patent process 
     abuses. Clearly, the bill would benefit from consideration by 
     the Senate's experts on Hatch-Waxman law on the Judiciary 
     Committee, the proper committee of jurisdiction for this 
     bill.

  Let me finally conclude where I began, and that was the book written 
by Haynes Johnson and David Broder, highly respected journalists, 
certainly not conservative journalists but journalists I respect, and 
they said this on page 90:

       In the campaign period, Fried recalled, Clinton's political 
     advisers focused mainly on the message that for ``the plain 
     folks, it's greed--greedy hospitals, greedy doctors, greedy 
     insurance companies. It was an us-versus-them issue, which 
     Clinton was extremely good at exploiting.'' Clinton's 
     political consultants--Carville, Begala, Grunwald, 
     Greenberg--all thought ``there had to be villains.'' Anne 
     Wexler remembered--

  Who is one of the leading Democrats in this town, one of the leading 
lobbyists in this town. I respect her greatly. She said--

       It was a very alarming prospect for those of us looking 
     long term at how to deal with this issue. But at that point, 
     the insurance companies and the pharmaceutical companies 
     became the enemy.

  All I ask in this debate is that we get rid of some of this rhetoric 
that the large pharmaceutical companies are a bunch of criminals and 
bad people who have run up the costs of drugs and who really do not 
play much of an important role in our society, and who literally are 
the reason we cannot get low-cost, affordable drugs to the American 
people.
  During those 18 days or so, whatever it was, that we debated in my 
office and came up with the Hatch-Waxman

[[Page S6992]]

Act, we had almost fist fights between the PhRMA companies, the 
pioneering companies, and the generic companies, but in the end we were 
able to bring them together. Neither side was totally happy, but I 
believe both sides have been totally happy with the Hatch-Waxman 
results over the last 18 years. To be honest, before we change 
something that has been so doggone effective and efficacious, I might 
add, to use an FDA term, it seems to me we ought to at least make sure 
we are doing it the right way.

  I have a lot more to say, but I have spoken for a long time. I 
understand that. I apologize to my colleagues, but I will be back to 
discuss other issues such as the 180-day rule which is at the center of 
what are considered to be collusive deals between the generics and the 
pharmaceutical firms.
  To me, these issues are important. I want to apologize to my 
colleagues for going on so long, but this is a very complex bill. There 
is no way it can be explained in a matter of a few minutes. I have only 
covered a small part of it, but I have covered some very important 
parts, and I think, and I hope, my colleagues will realize I have made 
a case that they really ought to give consideration to.
  I do not have any political axes to grind. I like both sides of this 
business. I like the pharmaceutical companies that have done so much to 
come up with lifesaving drugs, and I love the generic firms that have 
done so much to duplicate those drugs at an almost nonexistent cost, 
compared to the $800 million to create those products, but that have 
gotten them out there in bioequivalent ways for the benefit of the 
American people.
  They both deserve a great deal of credit. Neither one of them 
deserves to be torn down in the Senate. I think we can fix Hatch-Waxman 
in ways that will continue to give both of them the incentives to 
continue to provide a pipeline of very wonderful drugs, lifesaving 
drugs, for us, and at affordable prices ultimately. I hope my 
colleagues will listen to what I have to say. I do not have any desire 
to malign anybody, but I really believe what I have had to say today is 
important and that Hatch-Waxman is an important bill. I do not want to 
see it fouled up because we are unwilling to pay the price to do it 
right.
  I yield the floor.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Tennessee is recognized.
  Mr. FRIST. Mr. President, I rise to extend in many ways the comments 
made by the Senator from Utah. At the outset, I not only express my 
respect and admiration for his eloquent remarks, but also for the 
tremendous commitment he has shown on this particular issue over the 
last 20 years, especially with the Hatch-Waxman law which for the last 
18 years has achieved so much for the benefit of the American people. 
The Senator from Utah has shown a commitment and has shown real 
foresight, in sponsoring and authoring--along with other colleagues in 
this body--the original Hatch-Waxman bill in his eloquent analysis of 
the legislation before us, as has been modified and improved markedly 
in the Health, Education, Labor, and Pensions Committee. He has also 
provided an excellent analysis of the underlying McCain-Schumer bill 
and some of the deficiencies he sees within this legislation.
  After listening to his remarks, I think the underlying message was 
the real beauty in this legislation and in the original Hatch-Waxman 
legislation in achieving a sense of balance between the brand 
pharmaceutical companies and what they achieve through research and 
development, creativity and innovation, that balance with the growth 
and the appropriate incentives given to the generic community, where we 
know that cost-effectiveness has been demonstrated and needs to 
continue to be demonstrated as we move forward. We need to keep this in 
mind especially in this world with skyrocketing drug costs, which are 
putting the cost of pharmaceuticals out of the reach of seniors, of 
everyday Americans, and of individuals with disabilities.
  Much of the discussion over the last 3 days has been on how best to 
provide seniors and individuals with disabilities in Medicare access to 
prescription drugs, and that debate will continue into next week.
  Throughout this entire discussion is the whole issue of cost--what we 
need to do responsibly that can be sustained long term in terms of cost 
to make sure the cost of drugs are appropriate, reasonable, and not 
beyond the reach of Americans. The Hatch-Waxman law has had 18 years of 
balance, and now is the time to go back and readjust and make sure that 
balance is well situated for the next 5, 10, 15, or 20 years.
  I heard the distinguished Senator from Utah say the legislation, as 
currently written--and recall he commended the various amendment 
processes in the HELP Committee to improve the bill--goes too far in 
correcting what is out of kilter today. That balance needs to be 
readjusted. The underlying legislation has many deficiencies that he 
believes, and I agree, should be addressed. I will walk through several 
of those from the perspective of having served on the Health, 
Education, Labor, and Pensions Committee.
  The issue of cost is one that disturbs everyone. It is at the heart 
of the discussion on health care and on extending prescription drugs in 
an affordable way, in a bipartisan way, to seniors and individuals with 
disabilities. The cost is not just in the public sector but the private 
sector as well. The skyrocketing cost is driving people to the ranks of 
the uninsured.
  As we look at the overall skyrocketing cost of health care, the cost 
of prescription drugs is increasing in a way that cannot be sustained 
over time. In the name of cost savings and in the name of reaching out 
and rallying support for particular pieces of legislation or amendments 
focusing on cost savings, never should we threaten public health, which 
we talked about yesterday. Furthermore, never should we threaten the 
research and innovation that has made us the envy of the world in terms 
of health care--the great breakthrough drugs, the investment in 
research and delivery, which eventually will deliver a cure for things 
which are not curable today, such as HIV/AIDS. That virus will kill 
somewhere around 60 million people over the next 20 years. We do not 
currently have a cure, however, I am confident a cure will be found by 
research and development from our pharmaceutical companies.
  The Hatch-Waxman Act has served us very well. As the distinguished 
Senator from Utah said, generic drugs represented only about 20 percent 
of the market in 1984. Yet today, half of all drugs in this country are 
generic which, again, is a huge advance. At the same time, we have been 
able to see this rise in the generic industry, which I advocate because 
of the cost-effectiveness that is demonstrated there because of the 
balance we have. The brand name pharmaceutical companies have continued 
to invest in research and development. Over that same period of time 
since 1984, that research and development by the brand name 
pharmaceutical companies have increased not twofold, threefold or 
fivefold but have increased ninefold since 1984.
  We have seen dramatic breakthroughs in pharmaceutical treatments for 
such areas as mental health, cancer, and heart disease. Costs have put 
drugs out of reach for too many Americans today, and we must address 
that. Over time, both the generic industry and the brand name 
pharmaceutical companies have, unfortunately, circumvented the 
intentions of Hatch-Waxman. That circumvention is clearly an abuse 
because it ultimately drives up the cost of health care, and it must be 
addressed. Adjustments are in order. What concerns me and what clearly 
concerns the original author of the Hatch-Waxman legislation, the 
Senator from Utah, is that this underlying legislation goes too far.
  I will comment on several of the areas. First, I restate the 
legislation in the Senate today is currently much improved over the 
original Schumer-McCain legislation introduced last May. The original 
version of S. 812 took a heavy-handed approach to this very real 
problem. It would have dealt a serious blow to pharmaceutical research 
and innovation, which we all depend on as we look for potential cures 
and potential therapies in the future.

  My colleagues, Senators Edwards, Collins, Gregg, Hutchinson and 
others should be commended for working

[[Page S6993]]

with the chairman of the Health, Education, Labor, and Pensions 
Committee. Senators McCain and Schumer also worked to approve the 
legislation. Nevertheless, the bill before us has significant flaws. 
Let me briefly outline several of my concerns.
  First, we are focused most importantly on cost savings, the driving 
force. Everyone knows the costs are too high. It is important for our 
colleagues to understand there has been no demonstration that the 
underlying legislation will actually save money, lower the overall 
burden of prescription drugs and generic drugs in the aggregate to 
either consumers or in the aggregate in terms of the overall health 
care dollar.
  The intent of the authors has been clear--the goal of the legislation 
is to improve competition. If improving competition is achieved, and I 
have real questions about whether competition will be improved as 
written, I believe costs will decrease. It will speed cheaper generic 
drugs to the market, which is the intent of the authors of this 
legislation.
  Part of the legislation discussed today is clearly being promoted 
because of the intent, or what the proponents say it would do, and that 
is to lower costs. The real question is, Does it? Is there any evidence 
that it will do so?
  The Congressional Budget Office, to the best of my knowledge, has not 
scored this piece of legislation. By score, I mean it has not estimated 
the cost of this legislation. Neither this legislation nor the original 
bill introduced by Senators Schumer and McCain has been analyzed by the 
CBO.
  As you listened to Senator Hatch's eloquent comments earlier and you 
listened to the complexities of this bill, I ask, Does this increased 
complexity and new cause of action actually contribute to increasing 
costs?
  Lastly, I am not aware of any other estimates of potential savings by 
independent, nonpartisan experts that members of the Senate will have a 
chance to review before we go forward.
  My second point refers to how best to curb abuses. The whole idea of 
curbing abuses is a common goal that we share in the underlying 
legislation, in the amendment process, and in the H.E.L.P. Committee. 
As Senator Hatch again spelled out in his comments, the Federal Trade 
Commission is currently conducting an extensive study of potential 
abuses in this area. As we discussed in the hearing several days ago 
and as Senator Hatch requested, the FTC is preparing a report regarding 
this area. It would be nice to have an objective body like the Federal 
Trade Commission present its data before we potentially complicate 
legislation over the next several days and weeks.
  Unfortunately, we are not going to have that opportunity. It is too 
bad because as I understand it, the real problem is being made in terms 
of the Federal Trade Commission's ongoing study.
  Current law, as we look at the 180-day exclusivity provision, 
provides an incentive for the first generic that challenges an 
innovator's original patent. It awards that generic company 180 days, 
or about 6 months, during which other generics may not be approved. The 
bill before the Senate, which is quite different than the original 
legislation, provides that if one generic loses that 180 days of 
exclusive rights, it can pass on to the next generic.
  I am told the 180-day exclusivity rule has been the most frequently 
litigated area of the Hatch-Waxman legislation over the last several 
years.
  I am concerned and again this understates the concern of Senator 
Hatch. The provisions in the proposed bill are overly complex and they 
might actually encourage even more litigation and promote even greater 
confusion in this area.
  As Senator Hatch mentioned, during the Health, Education, Labor, and 
Pensions Committee's evaluation, we reached out to understand the 
language in this particular bill. I have to admit that the new bill's 
language was confusing to me, but at the end of our discussion, my 
interpretation as we listened to the proponents of the bill is that the 
180-day exclusivity period would allow, theoretically, a rollover 
indefinitely.
  If that is a correct interpretation, it could actually take longer 
for cheaper generic drugs to get to the market. While a generic drug 
would be cheaper during this 180-day period than a brand name drug, it 
certainly would be more inexpensive during the 60-day or 180-day 
exclusivity period, where it had absolutely no generic competition.
  Last May, Senator Hatch and others were highly critical of a concept 
of rolling exclusivity when they testified before the Health, 
Education, Labor, and Pensions Committee. In fact, Senator Hatch 
testified and quoted former Acting Director of FDA's Office of Generic 
Drugs, Gary Buehler, as follows:

       We believe that rolling exclusivity would actually be an 
     impediment to generic competition.

  Senator Hatch further stated:

       If our goal is to maximize consumer savings . . . it is 
     difficult to see how rolling exclusivity achieves this goal.

  In fact, many experts believe and have expressed that the 180-day 
exclusivity period is no longer necessary today, and that if it were 
abolished, even more significant cost-savings could be achieved. 
Moreover, eliminating the 180-day provision altogether, in my opinion, 
could be the best way to curb abuses currently being investigated by 
the FTC--where brand companies and generic companies have allegedly 
entered into collusive and potentially anti-competitive agreements to 
prevent cheaper generic drugs from coming to market and benefitting 
consumers.
  My main point is if we are going to act in the absence of the FTC 
report, which examines this very issue and their findings, we clearly 
should not add confusion to this area. We should not add provisions 
which would increase litigation or increase costs, and we should not 
add provisions that could exacerbate incentives for anti-competitive 
behavior by both generic and brand name drug companies. This is the 
area we need to fix.
  If we are not ready to eliminate this 180-day rule or wait for the 
FTC report to help guide us on how we can make that ultimate decision 
and act responsibly, I believe what is called a ``use it or lose it'' 
policy would better discourage anti-competitive behavior. This so-
called ``use it or lose it'' policy would take away incentives for 
generic companies to make their own potentially anti-competitive 
arrangements.
  Senator Gregg initially proposed this ``use it or lose it'' policy 
during the Health, Education, Labor, and Pensions Committee 
consideration of this legislation. I believe this policy would clearly 
benefit consumers more than any form of ``rolling'' exclusivity. If we 
are going to act in the absence of the full report of the FTC, we ought 
to at least to do so in a straightforward way that promotes competition 
and that clearly helps consumers.
  The third issue I would like to raise is the issue of bioequivalence. 
This is a particular issue that I introduced in the Health, Education, 
Labor, and Pensions Committee and spoke a little about on the floor two 
days ago. Again, it is an issue I want to put out to my colleagues for 
their consideration. The unintended consequence, in the way this 
legislation is written, is potentially harmful in a way that I will 
delineate.
  The Hatch-Waxman law allows generic companies to market off-patent 
drugs if they are able to demonstrate this so-called bioequivalence. 
Bioequivalence simply means the active ingredient in a generic 
pharmaceutical or a generic drug is absorbed at the same rate and to 
the same extent as the brand drug.
  The bill before us--and this is the key point--could significantly 
weaken this important patient protection by giving the Food and Drug 
Administration broad authority to significantly relax, to loosen, the 
statutory Hatch-Waxman bioequivalency standard. My concern is this 
potential loosening of the standards.
  We all have agreed--at least in the Health, Education, Labor and 
Pension Committee discussions, including the proponents of the 
legislation--that the FDA has broad authority with regard to 
bioequivalence and that there has not been a successful challenge to 
the FDA bioequivalence standards as they exist today.
  Based on existing statutory language the FDA has developed through 
the process of notice and comment--rulemaking specific bioequivalence 
test methods to address a range of products have been established over 
time. They

[[Page S6994]]

have not been successfully challenged. As we discussed this in 
committee, the FDA has been uniformly successful in defending its 
bioequivalence methodology and its findings. In fact, we agreed in 
committee that the FDA's authority in this area has been repeatedly 
upheld. There has not been a reported case challenging the FDA's 
bioequivalence standards since the case was decided in FDA's favor back 
in 1997, five years ago.
  Therefore, as we look at bioequivalence, I think it is unnecessary, 
imprudent, and unwise to include any bioequivalence language in this 
legislation. Nonetheless, the bill before us would deem FDA's 
regulations to be authorized under relevant provisions of the Food, 
Drug, and Cosmetic Act.
  Again, my concern is that it could insulate the FDA from any 
potential challenge in this area.
  The reason I keep bringing it to the floor and talking to my 
colleagues about this issue is because I hear a lot about it from the 
medical community, the scientific community, and the biological 
research and development community. Given the importance of the 
bioequivalence requirement in assuring the safety of generic drugs, I 
believe any loosening of standards is in the disinterest of the 
American people. Why? Because, once again, it goes back to safety and 
public health. Instead of moving forward, it is moving backwards.
  There are many examples, but a typical example would be taking a 
blood thinner such as Coumadin. Coumadin is used all over the country. 
It is a tremendous drug and a very powerful drug. It is well known that 
one generic of Coumadin versus another versus yet another behaves in a 
different way, even if you prescribe the same dose in milligrams. The 
bioequivalence can be variable and might be tiny, 3 percent, 5 percent, 
8 percent. But when the goal is thinning of the blood so you do not 
have another stroke or heart attack, when you go from one drug to 
another drug for whatever reason--it might be the pharmacy telling you 
to do it, it might be your health plan, it might be you who has chosen 
to do it--your blood might be thin one day and not thin the other, and 
you think you are taking the same drug.
  That is what bioequivalency is--where there might be loosening of the 
current standard. The reason I say there might be loosening is because 
people who are a lot smarter than I who study the language tell me the 
language as written looks to be loosening.
  Mr. GREGG. Mr. President, will the Senator yield for a question?
  Mr. FRIST. I am happy to yield for the question.
  Mr. GREGG. The Senator from Tennessee understands the issue better 
than anybody else, and certainly the points he makes are excellently 
made.
  It was my understanding on this specific point of bioequivalency that 
the Senator had a commitment from a primary Democratic sponsor of the 
bill, Senator Edwards, that this would be worked out or straightened 
out before the bill came to the floor. Am I correct?
  Mr. FRIST. Mr. President, in response to my distinguished colleague, 
this issue of having a general agreement that we would work out 
technical language, and then after 48 hours or 72 hours have the bill 
come to the floor without the opportunity, in a bipartisan way, to be 
able to access experts in the field, is what concerns me most. You can 
take an initial bill and improve it a little bit, and then you can 
leave something out and not reach bioequivalency. In response to the 
question is a particular instance where during the discussion, the 
mark-up, we said let's get together and make absolutely sure that we 
address it in a way so that standards are not being loosened; yet, the 
bill that comes to the floor does not have that guarantee in it.
  Mr. DURBIN. Will the Senator yield for a question?
  Mr. FRIST. Mr. President, let me continue. Let me answer one 
question, and then return to my comments. I would be happy to yield for 
a question.
  Mr. DURBIN. The Senator from Tennessee is the expert. He is a cardiac 
heart surgeon who is recognized for what he has done before he came to 
the Senate. I will certainly bow to his educational and professional 
experience.
  Talking about bioequivalency, is it not true that when it comes to 
the efficacy of a drug that we should also take that into consideration 
when we are dealing with women, children, or pregnant women? It is my 
understanding that all of these are relevant to the efficacy of drugs--
bioequivalency.
  Is it not correct that were it not for the congressional pressure and 
mandating the same pharmaceutical companies the Senator is speaking of 
they would not be engaged in clinical trials sufficient to make certain 
that the efficacy of drugs would be the same for women and men, and 
dosages for children?
  The point I am making is the industry, itself, had to be pushed into 
a position to find exactly what was better for people in usual 
circumstances of life. Is that not a fact?
  Mr. FRIST. Mr. President, I agree with my distinguished colleague 
that we need to do a much better job in pushing the pharmaceutical 
industry to make sure that when it comes to testing of drugs or 
investigating drugs that they are adequate, especially as you look at 
bioequivalency in a varied population.
  In fact, in the HELP Committee, as my colleague knows, we have passed 
legislation and we will continue to work on legislation that says we 
need to do more in terms of testing to see what the bioequivalent 
standard is. What is called in my profession of medicine a ``dose 
response'' relationship is in populations--whether it varies by race, 
age, or gender--we need to do a lot more. We need to keep pushing 
there.
  My concern with bioequivalence--we will agree, whichever population 
it is or whether clinical trials are being conducted--the way this 
language is written today allows a significant loophole for a lessening 
of the bioequivalent standards that we as the American people deserve. 
That is my concern.

  As the Senator from New Hampshire addressed in his question to me, we 
are reaching out. Clearly, we are in the minority. We are not going to 
have the votes. But I am going to continue to reach out. And I think 
you will see that our side will continue to reach out in the interest 
of cost savings. We do not want to push so hard that we lower the 
standards for the safety of the American people who take these drugs. I 
do not care if the cost savings is $100, $50, or $5. If that drug is 
not bioequivalent--if the dose is too strong, then your blood will not 
clot properly and you can get a stroke from bleeding in the brain, or, 
if the dose is too weak, then your blood clots too easily and you can 
get a stroke from having a blood clot go to your brain--you have done a 
disservice to the American people.
  As the Senator from New Hampshire just mentioned, I will continue to 
reach out on this particular issue of bioequivalence.
  You heard Senator Hatch from Utah stress that we need to slow down a 
bit to make sure that your intent in having cost savings does not hurt 
the American people. That is really the issue.
  I am not the expert. Of course, I have dealt with a lot of these 
drugs, and I know what it is like being told by a managed-care 
organization that you have to switch drugs. The fear I have is that the 
drug has not been tested in a certain population effectively. Again, it 
could be by race or gender or age. That concerns me. Therefore, I do 
not want any lowering of those standards by our Government.
  The Biotechnology Industry Organization sent a letter to Senator 
Kennedy dated July 15.
  I ask unanimous consent that it be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:
                                            Biotechnology Industry


                                                 Organization,

                                                    July 15, 2002.
     Hon. Edward Kennedy,
     U.S. Senate, Russell Senate Office Building, Washington, DC.
       Dear Senator Kennedy: This letter protests proposed 
     legislation (the Edwards-Collins substitute) to alter the 
     Hatch-Waxman Act of facilitate generic drug approvals. The 
     substitute's proposed changes raise serious concerns for 
     members of the Biotechnology Industry Organization (BIO). We 
     urge you to reconsider these amendments and to work on a more 
     considered basis on any effort to revise the carefully-
     balanced Hatch-Waxman system.

[[Page S6995]]

       As you know, the Drug Price Competition and Patent Term 
     Restoration Act of 1984 (the ``Hatch-Waxman'' Act) strikes a 
     balance between promoting access to generic drugs and fairly 
     protecting the legitimate rights of the patent holder. It 
     proves an expedited path to market for generic drugs, while 
     ensuring that innovators receive an adequate term of patent 
     life to stimulate new drug development.
       The initial purposes of proposed amendments to Hatch-Waxman 
     were to prevent abuses and facilitate efficient market entry 
     of generic products. The reported bill goes far beyond these 
     purposes. Among other things, the reported bill would 
     completely abolish patent rights if litigation is not 
     initiated within 45 days of notice by a generic that it 
     intends to challenge a patent, or if a new drug applicant 
     failed to list its patent with the FDA within 30 days. It 
     creates a private right or action for generic manufacturers 
     to attempt to ``correct'' patent information filed on a 
     listed drug. At least prior to committee consideration, the 
     bill provided the FDA with broad authority to define and 
     apply standards governing bioequivalence--the critical 
     determination of safety and efficacy of a generic drug--
     without challenge (or even comment) from affected members of 
     the public. If enacted, these proposals would significantly 
     erode the measures included in Hatch-Waxman to ensure an 
     effective patent incentive for new drug development, and 
     would create undesirable precedents for sound science-based 
     regulations of drug products in the United States.
       Our specific concerns follow:
       When it enacted the Hatch-Waxman Act, Congress recognized 
     that patent disputes over drugs regulated by the abbreviated 
     new drug procedure were inevitable. The abbreviated new drug 
     system thus provides procedures to permit generic and pioneer 
     manufacturers to resolve these disputes before the FDA grants 
     marketing approval to a generic producer. Under its 
     procedures, the FDA will not immediately approve an 
     abbreviated new drug application if the ANDA applicant 
     challenges a patent that has been identified as covering the 
     drug (a so-called paragraph IV patent certification). 
     Instead, the patent challenge triggers, by statute, an 
     opportunity for the patent owner to initiate a legal 
     proceeding to resolve the patent dispute. The initiation of a 
     patent suit in response to the paragraph IV certification 
     will trigger a 30-month stay of action by the FDA on the 
     abbreviated new drug application. The patent challenge 
     procedures and the stay of approval ensures that products 
     that would clearly infringe the patent rights of the 
     innovator will not enter the market.
       The amendments approved by the HELP Committee convert these 
     procedures--which were designed to enhance the ability of a 
     patent owner to enforce its rights--into an all or nothing 
     system that can eliminate the patent rights of our companies. 
     Under the legislation, a patent owner who for any reason 
     fails to initiate litigation against a generic drug applicant 
     within 45 days of receiving notice under the ANDA procedure 
     will be barred from enforcing patent rights in any forum 
     against either the ANDA applicant or any party that 
     manufactures, uses, sells or offers for sale the approved 
     drug product. In addition, a new drug applicant--who may 
     not even be the patent owner--who fails to list a patent 
     with the FDA within 30 days of approval of a new drug 
     application, or within 30 days of the grant of a patent if 
     that occurs after the NDA is approved, is similarly barred 
     from enforcement of patent rights on the drug against a 
     generic manufacturer. Either of these events will 
     completely abolish patent rights in new drugs or related 
     technology.
       The legislation also creates new opportunities for generic 
     drug makers to harass our companies through unnecessary and 
     pointless litigation. As proposed, our companies and their 
     drug marketing partners would be required to list patents 
     that pertain to an approved new drug. Failure to list patents 
     would render our patent rights void. Notwithstanding this 
     mandatory listing process, the legislation would create a 
     private right of action to permit a generic manufacturer to 
     challenge these mandatory patent listings. The legislation 
     also would allow generic drug applicants to initiate this 
     litigation regardless of whether our companies or their 
     partners intend to assert their patent rights in the ANDA 
     process. Plainly, the motivation to prevent improper listings 
     of patents has been turned onto its head by these procedures.
       Members of BIO thus unquestionably will be harmed by the 
     Edward-Collins substitute. Many of our companies focus on 
     improving currently marketed drugs regulated under the new 
     drug and abbreviated new drug approval system. These 
     innovations of our companies create new and better medicines 
     for patients that are more effective, easier to administer 
     and open up new opportunities for treating unmet medical 
     needs. These technologies frequently--often by commercial 
     necessity--are licensed to multiple drug manufacturers who 
     have the resources to bring new drug products that use these 
     technologies to market. Perversely, under the legislation 
     approved by the HELP committee, if our companies elect to not 
     aggressively enforce their patent rights by immediately suing 
     every generic drug applicant, or if one of the marketing 
     partners makes administrative errors in listing patents with 
     the FDA, the patent rights of our companies will be 
     forfeited. This forfeiture will occur without compensation, 
     without a right of appeal and without any recourse. This 
     provision is probably unconstitutional, and in any event is 
     totally unconscionable.
       Finally, as you know, as originally drafted, Section 8 of 
     the bill would selectively codify certain regulations 
     governing ``bioequivalence'' requirements and would 
     legislatively shield the FDA from challenges to its actions 
     in setting approval standards. We understand the purposes of 
     Section 8 to be limited: to confirm the authority of the Food 
     and Drug Administration to use testing methods other than 
     those specifically set forth in current law to establish the 
     bioavailability and bioequivalence of a generic drug, when 
     the methods specified cannot be applied. Types of generic 
     drugs to which alternative testing methods would be applied 
     would include drugs intended to deliver the active moiety 
     locally, such as topical preparations for the skin or oral 
     dosage forms not intended to be absorbed.
       As pointed out by Senator Frist during markup, section 8 as 
     currently drafted goes far beyond the intended purposes of 
     the provision. The draft proposal presented during markup 
     would codify fifteen pages of FDA regulations governing 
     ``bioequivalence'' requirements on both new drugs and 
     generics and would legislatively shield the FDA from 
     challenges to its actions in setting approval standards. In 
     essence, the proposed changes would make it impossible for 
     drug manufacturers, whether pioneer or generic, or members of 
     the public, to challenge improper standards enacted by the 
     agency on key approval criteria, or to challenge improper 
     decisions made under valid authority. Moreover, the current 
     regulations include several provisions in which FDA provides 
     to itself unfettered discretion to create or define at will 
     any standard ``deemed adequate by FDA.'' This makes an 
     otherwise legitimate challenge to an agency decision 
     virtually impossible to sustain. Shielding the agency from 
     actions to challenge its proper authority simply makes no 
     sense, particularly when the consequences involve potential 
     risks to patients and to public health.
       We were assured by your staff that this provision would be 
     narrowed to its intended scope, in consultation with BIO, 
     prior to floor consideration, and we provided alternate 
     language to your staff that would accomplish the intended 
     purpose of section 8. We have been presented with another 
     draft that would continue to codify all of FDA's 
     bioequivalence regulations (including the ability to define 
     at will any standard it deems adequate) but only preserves 
     ``existing'' legislative authority to regulate biologics 
     under the Federal Food, Drug and Cosmetic Act. This is simply 
     unacceptable to BIO. At this stage we can only ask that the 
     entire section 8 be deleted. We point out that FDA's 
     authority to establish different standards for non-systemic 
     drugs has been confirmed by the courts. See Schering Corp. v. 
     Food and Drug Administration, 51 F. 3d 390 (3rd Cir., 1995).
       Provisions in the draft that served as the basis for 
     committee discussion were made available to the biotechnology 
     industry less than two days prior to markup. These provisions 
     would have an enormously negative impact on the property 
     rights of the emerging biotechnology industry and completely 
     upset the delicate balance between the interests of pioneer 
     and generic companies crafted by the Hatch-Waxman law. They 
     go far beyond the provisions of McCain-Schumer, which served 
     as the basis for the Edwards-Kennedy redraft; the late 
     release of the redraft made meaningful legal review and 
     comment impossible.
       We urge you not to rush this bill to the Senate floor. The 
     implications of the changes being proposed by the Edwards-
     Collins substitute are far reaching and will significantly 
     and adversely impact biotechnology companies. They would 
     severely diminish the incentives of the patent system for our 
     industry to develop newer, safer, easier to administer and 
     more effective drugs that could help patients lead better 
     lives. The changes being proposed, simply stated, will not 
     yield better results for patients or the biotechnology 
     industry.
           Sincerely,
                                                 Carl B. Feldbaum,
                                                        President.

  Mr. FRIST. Mr. President, I also ask unanimous consent to have a 
similar letter from the Massachusetts Biotechnology Council be printed 
in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


                          Massachusetts Biotechnology Council,

                                     Cambridge, MA, July 16, 2002.
     Hon. Edward M. Kennedy,
     Russell Senate Building,
     Washington, DC.
       Dear Senator Kennedy, I request that you oppose S. 812, 
     legislation to alter the Hatch-Waxman Act. The bill raises 
     serious concerns for our Massachusetts Biotechnology Council 
     membership. I urge you to work on a more considered basis on 
     any effort to revise the carefully-balanced Hatch-Waxman 
     system.
       I understand that under the reported bill, a patent owner 
     who for any reason fails to initiate litigation against a 
     generic drug applicant within 45 days of receiving notice 
     under the ANDA procedure will be barred from enforcing patent 
     rights in any forum against either the ANDA applicant or any 
     party that

[[Page S6996]]

     manufactures, uses, sells or offers for sale the approved 
     drug product. In addition, a new drug applicant--who may not 
     even be the patent owner--who fails to list a patent with the 
     FDA within 30 days of approval of a new drug application, or 
     within 30 days of the grant of a patent if that occurs after 
     the NDA is approved, is similarly barred from enforcement of 
     patent rights on the drug against a generic manufacturer. 
     Either of these events will completely abolish patent rights 
     in new drugs or related technology.
       The legislation also creates new opportunities for generic 
     drug makers to harass biotech companies through unnecessary 
     and pointless litigation. The reported bill would create a 
     private right of action to permit a generic manufacturer to 
     challenge these mandatory patent listings. The legislation 
     also would allow generic drug applicants to initiate this 
     litigation regardless of whether our companies or their 
     partners intend to assert their patent rights in the ANDA 
     process.
       The proposal would codify fifteen pages of FDA regulations 
     governing ``bioequivalence'' requirements on both new drugs 
     and generics and would legislatively shield the FDA from 
     challenges to its actions in setting approval standards. In 
     essence, the proposed changes would make it impossible for 
     drug manufacturers, whether pioneer or generic, or members of 
     the public to challenge improper standards enacted by the 
     agency on key approval criteria, or to challenge improper 
     decisions made under valid authority. Moreover, the current 
     regulations include several provisions in which FDA provides 
     to itself unfettered discretion to create or define at will 
     any standard ``deemed adequate by FDA.'' This makes an 
     otherwise legitimate challenge to an agency decision 
     virtually impossible to sustain. Shielding the agency from 
     actions to challenge its proper authority simply makes no 
     sense, particularly when the consequences involve potential 
     risks to patients and to public health.
       I urge you to oppose S. 812. The implications of the 
     changes being proposed are far reaching and will 
     significantly and adversely impact biotechnology companies. 
     They would severely diminish the incentives of the patent 
     system for our industry to develop newer, safer, easier to 
     administer and more effective drugs that could help patients 
     lead better lives. The changes, simply stated, will not yield 
     better results for patients or the biotechnology industry.
           Sincerely,
     Stephen Mulloney,
       Director of Government Relations and Communications, 
     Massachusetts Biotechnology Council.
  Mr. FRIST. Mr. President, the Biotechnology Organization represents 
over 1,000 biotechnology companies and their members all over the 
country and in every State. California, Massachusetts, and Maryland 
have the highest concentration of biocompanies in the United States.
  I think what people understand and what my colleagues understand is 
that the biofield is a fairly new field. When I was in medical school, 
these biotech companies were not out there. The drugs they are looking 
at today were nonexistent. For the most part, they are in their infancy 
today. Fifty years from now and looking back, we will see on the curve 
an increase that right now we are at the beginning of.
  Of the 130 biotech drugs approved by the FDA, all were produced by 
fewer than 100 companies. As I just said, there are over 1,000 
biotechnology companies that exist today. What that means is, if you 
have ten companies working at the early research stage to figure out 
what drug is going to cure HIV/AIDS, or reverse a certain case of 
emphysema or reverse that blood clot just about ready to cause a stroke 
in your brain, one company will ultimately produce an effective 
product. Many of these companies are small, emerging companies.
  Look at Senator Kennedy's language on bioequivalence. That is the 
language that will ultimately go into the bill.
  These letters make clear the concerns raised by myself in committee 
and others during the Health, Education and Labor Committee markup. The 
bioequivalent language in the underlying bill has not been addressed.
  You heard Senator Hatch's plea. Even if this bill sails through, 
please listen to us and allow us to participate in changing that 
language.
  Let me just say that I also share the concerns of others about the 
codification in this bill.
  Let me quote from their letter only three sentences. This is from the 
biocommunity.

       . . . section 8 as currently drafted goes well beyond the 
     intended purpose of the provision. In essence, the proposed 
     changes would make it impossible for drug manufacturers, 
     whether pioneer or generic, or members of the public, to 
     challenge improper standards enacted by the agency on key 
     approval criteria, or to challenge improper decisions made 
     under valid authority. Moreover, the current regulations 
     include several provisions in which FDA provides to itself 
     unfettered discretion to create or define at will any 
     standard ``deemed adequate by FDA.'' This makes an 
     otherwise legitimate challenge to an agency decision 
     virtually impossible to sustain. Shielding the agency from 
     actions to challenge its proper authority simply makes no 
     sense, particularly when the consequences involve 
     potential risks to patients and to public health.

  Bioequivalence--again, that is probably the last time I will be able 
to address this issue on the floor. It is a plea that we work together 
and come to an agreement so we do not accomplish a loosening of these 
standards.
  The Senator from Utah also mentioned the 30-month stay provisions.
  Let me just say that this 30-month stay provision has served a very 
important purpose. If you look back at the legislation, which is 
consistent with remarks from the Senator from Utah, you will see that 
the 30-month stay is part of the balancing act between the brand name 
pharmaceutical companies, which are heavily invested in R&D, and the 
cost-effective generic companies to achieve that balance, which we have 
seen is so important.
  As I have said, it has been the magic over the last 16 to 18 years. 
We need to be very careful when we start tinkering with that and 
whether or not that goes too far in upsetting that balance.
  I know and my colleagues know that there have been huge abuses by 
some brand name companies versus the generic companies in our 
discussions. They have filed what are late patents. They file late 
patents that may not represent significant medical advances. Their 
purpose is because they saw the law written this way as simply to 
extend that 30-month stay protection period. And they are protected. 
When you have that sort of protection, obviously, it affects prices 
throughout.

  The legislation before us would treat patents, listed after a new 
drug application is approved, differently than patents listed when a 
new drug application is approved. Providing lower protections to 
patents at any point in time will have real implications in terms of 
innovation, in terms of incentives to innovate as you develop new 
formulations and new aspects of drugs.
  There are a whole slew of examples where these patents that are 
issued, not early on but later, could involve an important innovation. 
I will not go through the examples here today, but we have talked about 
them in our Health, Education, Labor, Pension Committee.
  So if you have a new drug here, a patent here, and you can improve on 
that drug later in the life cycle, that improvement needs to be 
protected in some way. Furthermore, you need to give a pharmaceutical 
company an incentive, which is what this patent protection is. That is 
what patents are all about: an incentive to look at a new formulation 
of that drug that could be important.
  There was a question, a few minutes ago, about certain populations. 
For example, this applies very specifically to the pediatric 
population. If you have a drug that can either be injected or be 
applied intravenously inside a vein, and you have a patent on that 
drug, it would be nice to give somebody an incentive to make sure you 
can use that same drug in a liquid formulation, to give them some 
incentive to develop that liquid formulation. And it may come later in 
the cycle of that drug.
  In fact, two weeks ago Dr. Tony Fauci of NIH was quoted in the New 
York Times about the importance of developing an oral formulation of a 
drug that was discovered as an injectable drug to treat HIV/AIDS. Forty 
million people in the world today with HIV/AIDS are struggling in 
countries, such as in Africa, where two out of three of these cases are 
today. Many of my colleagues, on both sides of aisle, are trying to 
figure out how we can link prevention, care, and treatment. The problem 
is, treatment today is just so expensive. So we want to incentivize 
people to take an injectable drug, which is very difficult to 
administer throughout Africa, and develop an oral formulation of that 
particular drug.
  Dr. Tony Fauci talked about the importance of developing and 
patenting an oral formulation of this drug. Unfortunately, that is the 
kind of new patent, on a previously discovered drug,

[[Page S6997]]

that would be afforded less protection under this bill. When you afford 
something with less protection, it is true that fewer companies, fewer 
people, are going to be interested in investing and figuring out that 
new formulation.
  Again, because the distinguished Senator from Illinois mentioned the 
pediatric population, it brings to mind the fact that we worked very 
hard on what is called a pediatric exclusivity bill. We unanimously 
passed it in the Senate. It provides a market incentive for brand-name 
drug companies to test certain drugs in the pediatric population. Many 
of us were cosponsors of that bill, and it unanimously passed in this 
body. It provides a market incentive for brand-name drug companies to 
test certain drugs for pediatric use for which the FDA issues a written 
request.
  We gave certain protections. Now, all of a sudden, we are saying: 
Well, maybe or maybe not in the pediatric population. Let's lower the 
protections that we are giving instead of increasing the protections--
which was the intent of this body--and give less legal protection just 
because of the timing in which a patent was filed.
  The issue is complex, as Senator Hatch has said. People say, you are 
being critical of it. You illustrate the problems. Are there better 
approaches? The answer is, yes, there are better approaches, to my 
mind, that I hope we will have the opportunity to debate.
  One approach would be to not allow brand companies to automatically 
extend the 30-month stay for patents issued after the filing of what is 
called an abbreviated new drug application--what is called an ANDA--by 
a generic company.
  Another alternative would be to allow an additional 30-month stay 
only for patents that were filed but not approved by the Patent and 
Trademark Office at the time of the NDA.
  The impact of this would be to reduce incentives for brand companies 
to ``game'' the system, something that all of us want to avoid--
companies coming in and trying to take advantage of whatever structure 
we set up.
  The fifth point that I want to bring up, in the hopes that we will be 
able to come back in some form to be able to address these issues, is 
the broad bar on patent lawsuits. Senator Hatch also raised this point, 
for the record.
  I am troubled by provisions in the bill that cause patent holders to 
lose their rights to sue for infringement of a patent if the patent 
holder does not meet certain requirements, including these timing 
requirements.
  For example, a patent holder would lose its right to sue for 
infringement if it does not submit appropriate patent information to 
FDA within the specified deadline, or if it does not bring an 
infringement lawsuit within 45 days of receiving notice from the 
generic applicant that its patents are being challenged.
  I believe this fundamental change, of which the Senator from Utah 
spoke, to the Hatch-Waxman law will force companies to bring more 
litigation, not less litigation. In our hearing, we kept saying that we 
want to see less litigation. It will force more companies to bring more 
litigation to avoid the risk that otherwise they will waive their 
rights for all time.
  If they do not sue, they are going to waive those rights for the 
future. That is a concern to me, especially as we are looking to 
decrease the number of lawsuits and decrease overall cost.
  In fact, as I understand it, this provision alters basic rights that 
go with a patent, rights that give brand-name drug companies the 
incentives, as I mentioned earlier, to improve upon existing products.
  I have to ask: What happens if a patent owner does not have a good-
faith basis to sue at some point in time, but later learns something 
that would give him reason to sue for infringement? The answer is that 
that patent holder is simply out of luck.
  America's research institutions and academic medical centers would 
clearly suffer under the ``list-it-or-lose it'' or ``sue-or-suffer'' 
provisions of this bill. Under these provisions, NDA holders are 
required to file patents that meet listing criteria whether or not they 
own or have a license under those patents. Under the bill, patent 
owners will be lose their rights to enforce their patents if the NDA 
holder fails to list, and the patent owners can do nothing about that 
(only NDA holders, not patent owners, have the ability to list 
patents).
  For example, suppose Harvard University owns a patent on a drug 
substance discovered by one of its academic researchers. Normally 
Harvard would license that patent to a brand name pharmaceutical 
company that would develop the drug and submit an application for 
approval to the FDA. Under the bill before us, if that brand name 
company failed to list the patent within the arbitrary 30 day period, 
Harvard, the patent owner, would irreparably forfeit its ability to 
enforce its valuable patent rights against any generic drug applicant 
forever.
  This is true even if a company completely unrelated to Harvard 
develops a drug that might potentially be claimed in a Harvard patent. 
Under this approach, Harvard, which has not control over the timing of 
the listing, would suffer a complete loss of its patents rights against 
generics without any recourse or ability to remedy the situation. That 
is both arbitrary and punitive.
  While we are acting, in large part, over these next several days out 
of concerns over health care costs, as I mentioned before, the Senate 
has no formal cost estimate from the Congressional Budget Office, the 
Office of Management and Budget, or really any other credible source.
  I mention that only because the overall assumption--and what we would 
all like--is that whatever we pass here will ultimately bring costs 
down. But we do not have any outside independent evaluation of that.
  While we are acting aggressively to curb past abuses, we do not have 
the benefit, as you have heard from Senator Hatch and myself today, of 
the ongoing information that is being compiled by the Federal Trade 
Commission. The FTC has been specifically charged with the 
investigation of potential abuses by brands and generics. I believe and 
I am confident this report will provide crucial additional information. 
As Senator Hatch has said: We just simply don't have the facts.
  I look forward to working with my colleagues on these issues. Again, 
Senator Hatch and I have spent a long time outlining our concerns, in 
large part, because I do not think we are going to be in the climate--I 
know we are going to other very important amendments about extending 
prescription drug coverage to seniors--that each of these very 
technical issues are going to be able to be adequately debated, but 
also to write in language that would fulfill the intentions on the 
floor, and that we are going to reach out and hopefully have that 
opportunity to work together on these.
  I will likely end up, for the reasons I have outlined, voting against 
this underlying base legislation, despite the good work and the 
incremental advantages that have been added to this bill by Senators 
Collins--and I mentioned most of them--Edwards, Gregg, Hutchinson, and 
many of my colleagues.
  The bottom line is, the balance is critical. Balance has been 
achieved to a very successful degree, much better than I would think 
anybody would have anticipated in 1984 from the Hatch-Waxman 
legislation. It is the magic as to why it has worked. It is why we have 
seen this proliferation of generic drugs and, at the same time, 
preserving the innovation and research.
  What I am afraid is that in the legislation as written, we have gone 
too far. Going too far could indeed have a detrimental impact on 
research and innovation and the public good, without providing the cost 
savings promised by its supporters.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Mr. President, I ask unanimous consent that before I am 
recognized to speak, the Senator from Missouri be recognized for 5 
minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Missouri.
  Mrs. CARNAHAN. I thank the Senator from Illinois.
  Mr. President, over the next 2 weeks, the Senate will address an 
issue that Americans have come to understand far too well--the high 
price of prescription drugs. We need to do all we can to lower the 
price of prescription drugs for consumers.

[[Page S6998]]

  Senator Stabenow's amendment is one example of a concrete action the 
Senate can take. Her amendment would give the State the flexibility to 
negotiate Medicaid drug discounts for non-Medicaid-eligible 
individuals. This amendment would help lower prices for all consumers. 
I am a cosponsor of the amendment and encourage my colleagues to 
support it.
  We need to do much more. We need to pass the underlying Schumer-
McCain legislation. Today, pharmaceutical companies are making historic 
profits while average Americans are paying historic prices. Let's look 
at those profits.
  Earlier this year, Fortune magazine did a comparison of U.S. 
industries to see how profitable they were in the past year. The 
pharmaceutical industry ranked No. 1 in all three of Fortune's 
profitability measures. Almost 20 percent of its revenues were profits.
  But now let's look at the prices. In 2001, the prices of the 50 
prescription drugs used most often by seniors increased on the average 
by nearly three times the rate of inflation. For example, Lipitor, 
which is used to treat high cholesterol, rose 13.5 percent, more than 
five times the rate of inflation. Paxil, which is used to treat 
depression, rose 11.6 percent. And Celebrex, used to treat arthritis, 
rose 10.4 percent. For seniors who are living on a fixed income, the 
high price of prescription drugs means making tough choices every day 
between lifesaving medication and food and rent and heat.
  The No. 1 issue which I hear about in Missouri from our seniors is 
prescription drugs. Whether people live in urban or rural or suburban 
areas, they are all feeling the pain of high prices.
  Recently, I visited the Terrace Retirement Community in Columbia, MO. 
While I was there, I led a roundtable on the topic of prescription 
drugs. If you could have heard some of those stories. They were 
definitely heart wrenching.
  One of the women I met that day in Columbia was Annie Gardner. She is 
an impressive 63-year-old mother of five children, but she suffers from 
diabetes and high blood pressure. Her hardship began after taking a 
buyout from her employer. In this transaction she lost her health 
insurance and was not able to afford insurance on the private market. 
This left her unable to afford her prescriptions. Often she had to 
ration them by taking half the prescribed amount so it would last 
longer.
  Ms. Gardner knows how dangerous this can be because she is a licensed 
practical nurse and has been for 40 years. Later, she had to quit 
purchasing the drugs entirely because of other expenses, such as fixing 
her car and paying increased taxes on her home. Ms. Gardner and 
thousands like her make these tough life-threatening decisions every 
day. But no one should have to make those kinds of decisions.
  Seniors are not the only ones who have been hit hard. For far too 
many families, the cost of prescription drugs is a budget buster. 
Working families without health insurance are paying the highest price 
of all because they do not get the benefits of the negotiated 
discounts. This issue also hits employers. They absorb the cost of high 
prescription drug prices in the health benefit packages they provide to 
their employees.

  For example, last year General Motors spent $1.3 billion for 
prescription drugs for its employees and retirees. This problem has 
reached such a crisis that companies, including General Motors, have 
joined the Governors to form the Business for Affordable Medicine 
Coalition. Their key issue is the one we are debating today--closing 
the loopholes in the current law so that generic drugs can compete 
fairly with brand name drugs.
  I am pleased that the Senate is considering ways to close these 
loopholes with the Greater Access to Affordable Pharmaceuticals Act. I 
applaud Senators Schumer and McCain for authorizing this legislation. 
I, too, am proud to be a cosponsor of that bill.
  It is imperative that we close these loopholes in current law that 
prevents generics from coming on the market. Generics cost on the 
average one-third the price of brand name drugs. Generics bring 
competition into the market and lowers the price for drugs for all 
Americans.
  When a brand name drug is under patent, its manufacturer enjoys a 
monopoly. One company sells the drug; one company sets the prices. Now 
I support patents for drugs. Patents are there for a legitimate 
reason--to allow companies to recoup the cost of research and 
development that they invest in creating the drugs. But drug companies 
are abusing loopholes under the current law and extending their 
monopoly on prices sometimes for years at a time.
  A 1-year delay in a generic coming to market can translate into 
hundreds of millions of dollars in profit for the brand name company. 
In 1984, Congress passed the Hatch-Waxman act. This act was intended to 
strike a balance, a balance between brand name drug companies being 
compensated for their investments and generic companies eventually 
having access to the market. But the original purpose of the law has 
been distorted.
  The law is now being used to extend patent protections far beyond 
what Congress intended. Balance needs to be restored. American 
taxpayers deserve better than what they are getting.
  Over the next 5 years, a remarkable 26.7 percent of the entire 2001 
pharmaceutical market is scheduled to face exposure to generic 
competition. If generics are allowed to come on the market, it would 
mean more choices and lower prices.
  The PRESIDING OFFICER. The Senator's time has expired.
  Mr. DURBIN. Mr. President, I yield 5 additional minutes to the 
Senator from Missouri with the consent of the Senate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. CARNAHAN. Generics can save consumers over 60 percent per 
prescription. Here are some examples of brand name drugs whose patents 
are supposed to expire in the next few years. Listen to the numbers on 
what consumers should be expected to save.
  The patent on Claritin, an allergy medication, is scheduled to expire 
in December. Annual savings after the generic becomes available are 
expected to be over $500 million. The patent on Zocor, a cholesterol-
lowering drug, is scheduled to expire in December 2005. The annual 
savings after the generic becomes available is expected to be about 
$735 million. The patent on Zoloft, a drug for depression, is scheduled 
to expire in December 2005. The annual savings after the generic 
becomes available is expected to be $577 million.
  However, given the amount of money that is at stake, pharmaceutical 
companies have a lot of incentive to delay generics from coming on the 
market. Unfortunately, current law allows them to do this.
  If we in this Congress have the courage to act, American consumers 
will save billions of dollars. If we don't, the money will go directly 
from the pocketbooks of American families and on to the profit 
statements of the drug companies.
  Congress must move on yet another front. We will soon be considering 
a historic addition to the Medicare Program, a prescription drug 
benefit. The legislation I am supporting would create an affordable and 
accessible benefit administered through the Medicare Program.
  This Senate plan is simple. Assistance begins with the first 
prescriptions. There are no gaps or limits on coverage, and seniors 
will pay $10 for generic drugs and $40 for brand name drugs. There is 
certainty and there is stability.
  The House bill is the complete opposite. It is complicated. There is 
a $250 deductible before seniors get relief. There are months where 
seniors have to pay a premium, but they would not get assistance with 
their drug costs. Under the House plan, seniors will pay approximately 
a $35-a-month premium but still pay the full price at the drugstore.
  The House Republican plan would require seniors to use drug HMOs to 
get their benefit. However, there are no guarantees that private plans 
would provide a benefit in all geographic areas, or that a plan would 
even stay in business.
  Look at what has happened with Medicare+Choice, Medicare's HMO. Since 
1998, nationwide, 2.2 million Medicare enrollees have lost 
Medicare+Choice as an option because of plans withdrawn from the 
market. In Missouri, from 1998 to 2001, eight health plans stopped 
providing Medicare+Choice options in the State.

[[Page S6999]]

Furthermore, some options are available in only urban centers and not 
in rural areas.
  Why would we rely on this same type of system to give prescription 
drug coverage to rural areas?
  To me, what the House passed is unacceptable. It is an incomplete 
benefit with absolutely no effort to lower drug prices. It is 
unacceptable for Missouri's seniors and unacceptable for American 
seniors. We must do better in the Senate.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Illinois is recognized.
  Mr. DURBIN. Madam President, I thank my colleague from Missouri. The 
Senator spelled out in amazing detail what this debate is about. We 
come to this floor understanding that a miracle has taken place in 
terms of health care in America within the lifetime of most of us. When 
this Senate considered the Medicare bill back in the 1960s, there was a 
very limited formula, a limited number of prescription drugs that were 
available, and they did not include in Medicare the coverage of 
prescription drugs.
  Look at what has happened since then. There has been a massive 
investment by the Government, the taxpayers, and by private industry, 
and we have seen emerging from that brandnew pharmaceuticals that give 
us the hope of conquering diseases that have plagued mankind forever. 
This new formulary, ever-expanding, has created a new demand. Of 
course, it is a demand brought on by people who want to save their own 
lives as well as those of their family members. It is a demand that is 
monitored by doctors; a doctor will decide whether this particular drug 
is right for this patient at this moment.
  But at the same time that this miraculous evolution was taking place, 
the cost of these pharmaceuticals was also rising geometrically, to the 
point that today many average Americans cannot afford the very 
prescription that their doctor believes will keep them healthy and out 
of the hospital. So many of them put off filling a prescription and 
maybe take half of what they are supposed to take or they have to make 
a sacrifice--whether it is food, shelter, or paying a utility bill--in 
order to pay for their drugs.
  There has been a demand growing in America for the Congress to 
respond and to expand the Medicare Program again so we would include 
prescription drugs. That is something that is worthy and is supported 
by Democrats and Republicans and Independents.
  When you come down to the specific challenge of making it work, one 
of the biggest problems you face is price. If the cost of prescription 
drugs continues to grow, as it has in the past, there is no way any of 
us in the Senate or in the House can devise a Government program to pay 
for it and to keep up with that cost. Last year, the cost of 
prescription drugs across America went up some 18 percent. You cannot 
create a Government program and fund it properly that will keep up with 
that kind of geometric growth in price.
  So there are various ways we can address it. To the north of us, 
Canada has addressed it with a national health system. We can argue 
back and forth about whether doctors or hospitals should be Government 
employees, but when it comes to prescription drugs, what Canada said to 
the drug companies in America is: If you want to sell your product in 
Canada, we will bargain with you as to how much you will be paid. The 
American drug companies said: Fine, let's start the bargaining process. 
As a result of that bargaining process, there are dramatic differences 
in the price of drugs between the United States and Canada.
  If you look at this chart and go through the drug names, you will 
recognize some of them. These are the drugs that you find advertised on 
television, on radio, in newspapers, and in magazines almost on a daily 
basis. Celebrex, for arthritis, goes for $135 for 90 doses in the 
United States. In Canada, the same drug, same dosage, and the same 
company, it is $83. Lipitor, for cholesterol, is $266 in the United 
States and $179 in Canada. Nexium, for ulcers--the little purple pill, 
I think it is--is $344 in the United States and $219 in Canada. Paxil, 
which we have seen ads for, is for depression and anxiety; it is $236 
in the United States and $152 in Canada. The list goes on. There is 
Premarin, Prevacid, Vioxx, Zocor, Zoloft--all the names we are familiar 
with because of advertising.

  The lesson to be learned is that when the Canadian Government said 
they were going to bargain for the good of people living in Canada, 
they started saving money for their people and their health system. 
What is missing in this picture? There is nobody in the U.S. who is 
bargaining for the American consumer.
  Yesterday, on the floor of the Senate, my colleague from 
Pennsylvania, Senator Santorum, argued that is just a price Americans 
have to pay. It is our responsibility, as he argues, to subsidize the 
profitability and growth of American drug companies. The fact that 
these same drugs are costing a fraction--the exact same drugs--in 
countries around Europe, Canada, and Mexico, he believes is just part 
of their socialized Government-controlled system.
  I can tell you from the U.S. consumer's point of view, it is cold 
comfort to be told that for a drug you have to pay 40, 50 percent more 
than someone living a few miles over the border in Canada because it is 
your burden to subsidize American pharmaceutical companies. But that is 
the argument being made by those who are opposing many of the issues 
before us today.
  Now, Canada isn't the only entity bargaining with American drug 
countries. Mexico and a lot of European countries bargain and say: If 
you want to come into our health system and sell your drug in our 
country, we are going to reach an agreement as to what you can charge; 
otherwise, you are not welcome. Well, the companies, by and large, have 
all agreed to do exactly that--enter into this agreement and reduce 
drug costs in every country but the United States.
  In the United States, there are certain elements within our society 
that have bargaining power with the drug companies. A couple of 
examples come to mind immediately. The Veterans Administration, on 
behalf of America's veterans and hospitals, bargain with drug companies 
to bring down the cost of drugs. I am glad. The veterans benefit from 
it. Indian Health Service, the same story; Public Health Service, the 
same story. Many States, through Medicaid, bargain in terms of bringing 
down the cost of drugs. When you look at it, private insurance 
companies reach these same bargains. They say to a drug company: If you 
want to have an eligible drug for the people we insure, we are going to 
bargain on a price that we think is acceptable. That bargaining takes 
place to the benefit of another group of Americans.
  If you look at the population of this country, who is being left out 
in the cold? I will tell you. The first group you will notice is 
Medicare recipients, people over the age of 65. No one is bargaining 
for them. These people, retired and on fixed incomes, are paying the 
highest prices, not only in America but in the world, for drugs that 
are being made in the United States. High prices, of course, apply to 
many other families as well.
  There are several ways we can approach this. We can decide that, as a 
society and as a government, we are going to negotiate on behalf of 
American consumers, the same way it is done in other countries around 
the world. Well, we have not quite reached that decision. Instead, we 
are trying to inch toward more competition and price justice. I salute 
the Schumer-McCain bill--the underlying bill--because this bill says we 
are going to try to make certain that generic drugs continue to play a 
major role in terms of providing the kinds of protections that 
Americans need.

  Generic drugs have come a long way in America. We have seen, in a 
very short period of time, that they have become a substantial part of 
serving America's health needs. Almost 40 percent of the drugs today 
are generic drugs.
  What is the difference between a brand named drug and a generic drug? 
Well, by classic definition, a brand name drug is under patent 
protection exclusivity. Only one company can make that drug. But when 
the patent runs out, expires, other companies can move in and use the 
exact same formula, make the same drug, and the price drops 
dramatically.
  I will give you an illustration of how it works. I doubt there is a 
person in

[[Page S7000]]

America who hasn't heard of Claritin, made by the Scherling-Plough drug 
company. The ad shows people skipping through a field of wildflowers 
saying, I am not sneezing, so go to the doctor and tell him you need 
Claritin. Scherling-Plough spent more money advertising that drug than 
Pepsi-Cola spent advertising Pepsi in a given year or Anheuser-Busch 
spent advertising Budweiser. They wanted the Americans to develop an 
appetite for this drug Claritin. Then they got panicky because the 
patent was running out because then someone else could make a Claritin 
generic drug at a fraction of the cost. So they would come to Congress 
and try to find, at the midnight hour, a way to slip in an amendment to 
extend their patent another few months or years. We fought them back 
time and again.
  And Scherling-Plough wasn't the only group trying to do that. What we 
have seen happen now is Claritin is coming off patent and the generic 
drugs are going to compete. Scherling-Plough is thinking: What are we 
going to do?
  What did they do? They tweaked a molecule in Claritin and created a 
new allergy drug called Clarinex. Have you seen it on TV? It will soon 
be coming to a television near and dear to you. Now they want to create 
this appetite for Clarinex because it is back at the price they used to 
charge for Claritin. The odd thing is, if you had asked, many doctors 
from the start would have told you that over-the-counter drugs are as 
effective as Claritin or Clarinex will be ever be for most Americans.
  The point I am making is, when you are talking about generic drugs, 
you are talking about affordable drugs for Americans. You are talking 
about giving them the same type of drugs, bioequivalent, as those under 
brand name and patents, and making certain they save money in the 
process. Senator Schumer and Senator McCain are trying to eliminate 
some of the abuses as drugs come off patent and move toward generic so 
consumers can enjoy that benefit.
  Yesterday, on the floor of the Senate, by a vote of 69 to 30, we 
adopted an amendment by Senator Dorgan. Senator Dorgan of North Dakota 
said he finds it strange that in Canada, the exact same drug made by 
the same American company subject to the same inspection sells for a 
fraction of the cost, and why shouldn't we be allowed to reimport these 
drugs from Canada for the benefit of American consumers?
  They came here on behalf of the pharmaceutical industry and said it 
is an invitation to terrorism; you are going to bring in counterfeit 
drugs. One of my colleagues said he had a formula he was holding up 
that was made out of highway paint. I could not follow the debate very 
closely, but the suggestion is that drug that moved across the border 
is, all of a sudden, suspect when it comes back.
  I wanted to ask the critics of the Dorgan amendment why, if we have 
busload after busload of Americans going into Canada buying these 
drugs, if there is such a danger, why have we not heard some scandalous 
report about people dropping dead on the buses or as soon as they got 
home? It has not happened. It will not happen.
  In the Senate, by a vote of 69 to 30, we decided to create another 
opportunity, beyond generic drugs, for reimportation of drugs from 
Canada, with the approval of the Secretary of Health and Human Services 
in terms of their safety and the fact they save us money. That was a 
step forward.
  Today, I am happy to be a cosponsor of an amendment presently before 
the Senate which, frankly, has not been discussed for about 3 hours. I 
have listened to the debate on the floor, and no one has discussed this 
amendment by Senator Stabenow.
  The last two speakers on the Republican side, Senator Hatch and 
Senator Frist, spoke to the generic drug part of the bill, but they are 
not addressing this bill which I think is a good one by Senator 
Stabenow.
  What this bill says is that States across the Nation, such as Maine, 
Vermont, even the State of Illinois, can decide they want to try to 
bargain with the drug companies to bring down prices for everyone 
living in the State. What is wrong with that? If we are letting it be 
done in Canada and Mexico, the Veterans' Administration, private 
insurance companies, the Indian Health Service, why shouldn't a State 
try to find drug prices more affordable for the people living there? 
That is what the amendment says. It is as simple and straightforward as 
that. It is another opportunity for us to put some competition in drug 
pricing and to give consumers a break when it comes to paying for the 
pharmaceuticals they need to survive.

  I think this amendment moves us in the right direction. It is sad 
that, once again, we are looking for another alternative to national 
action. That is what we need in this situation. We can think of a dozen 
different ways to reduce prices--by where you live, what State, whether 
you happen to be a veteran, whether you happen to have access to 
Canada. But shouldn't we as a nation address this in a straightforward 
fashion, understanding that the drug companies are in business to make 
a profit?
  I will concede that point, but for the last 10 years, when one takes 
a look at the profitability of drug companies, one finds that it is 
about 19 percent a year on average. The median income and profitability 
of Fortune 500 companies during the same period of time is 3.3 percent. 
Drug companies are extremely profitable, and they are selling more and 
more drugs at higher prices and driving up that profitability.
  We also believe that you should have enough money at a drug company 
to put money back into research--capital investment in research for new 
drugs. It is obvious. It is not only a question of making a profit, it 
is a question of finding that next generation of drugs to improve the 
lives of Americans. I think that is a very valid thing to do.
  Senator Stabenow will not be offering the amendment I cosponsored 
with her that said those companies that are spending more money on 
advertising than they are on research ought to be held to only 
deducting the amount of money equivalent to what they spent on research 
for their advertising. I think that is reasonable, too. It calls the 
bluff of a lot of companies that say: We need to be more profitable for 
research. They need to be more profitable for more advertising, 
advertising creating many times a false appetite.
  I stand today in support of this legislation on generic drugs. I 
believe it is a step in the right direction. The average price paid for 
a prescription for a brand name drug is about three times the amount of 
that paid for generics. The average consumer pays 238 percent more for 
brand name drugs, an average of $45.96.
  Last year, 47 percent of all prescriptions were filled with generic 
drugs. Remember, the doctor makes the ultimate decision. If the doctor 
happens to believe a brand name drug is better for you or your family 
because of some situation, some peculiarity, that is the doctor's call, 
but having generic drugs available gives that doctor a choice and gives 
you a chance to find an affordable alternative for safe and efficacious 
treatment.
  The underlying bill on generics is sound. I supported the 
reimportation amendment and stand in strong support of flexibility for 
States to act, which Senator Stabenow has submitted and which I am 
happy to cosponsor. Let us give to the States the opportunity to reduce 
prices so people can benefit from this competition and bargaining and 
still remain healthy.
  Mr. SCHUMER. Will the Senator yield?
  Mr. GRASSLEY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Illinois may yield for a 
question.
  Mr. DURBIN. I believe I have the floor, and I have agreed to yield to 
the Senator from New York.
  The PRESIDING OFFICER. The Senator may yield for a question.

  Mr. SCHUMER. Mr. President, I know the Senator from Iowa is in a 
hurry. Maybe I can ask unanimous consent I be recognized immediately 
after he finishes instead of yielding.
  Mr. DURBIN. If the Senator from New York does not have a question, I 
will be happy to yield the floor.
  The PRESIDING OFFICER (Mr. Miller). Is there objection to the 
unanimous consent request?
  Mr. REID. Mr. President, what was the unanimous consent request?
  The PRESIDING OFFICER. The Senator from New York wishes to speak for 
5 minutes immediately following the remarks of the Senator from Iowa.

[[Page S7001]]

Is there objection? Without objection, it is so ordered. The Senator 
from Iowa.
  Mr. GRASSLEY. Mr. President, I am so glad we are in a position where 
we are able to discuss these very important prescription drug issues, 
including a prescription drug program for senior citizens as part of 
Medicare.
  I am also glad that we are in a position on the floor of the Senate 
where we are divided in a traditional way, and in that traditional way, 
I do not mean just Republican and Democrat because too often that is 
overplayed.
  We are divided between a group of Senators. First of all, I think we 
may not have 100 Senators who favor a prescription drug program for 
senior citizens, but I surely believe that we have 85 Senators who 
believe that we should have a prescription drug program for senior 
citizens as part of the modernization of Medicare.
  Within that 85, I suggest we have some traditional division--division 
between those who have only confidence in the Government running the 
program and those, including myself, who have some confidence in the 
Government but not enough to believe that drug prices are going to be 
kept minimal through Government control so that we have confidence in 
the competition of the marketplace to reduce the price of drugs.
  We are going to find over the next several days, as we continue to 
debate this legislation and hopefully bring it to culmination and pass 
a bill so we answer the concerns of our senior citizens who sometimes 
have to choose between food or medicine--and they should not have to 
make that choice--that we will have a prescription drug program as part 
of Medicare.
  During that debate, I hope the American public listening will 
consider, do they have confidence in the Government running a program 
or in the private sector and the competition of the private sector 
keeping down prices?
  Quite frankly, I believe when the Government is involved, we are 
going to run up the price of drugs. I think I can give evidence from 
the Congressional Budget Office, the nonpartisan scoring arm of the 
Congress, to that effect. I can also give evidence that if we have a 
program for senior citizens that has competition in it--in other words 
different organizations competing for membership of seniors and, in 
turn, competing for the lowest possible price with the 
pharmaceuticals--we are going to bring down the price of pharmaceutical 
medicines.
  Since 1965, the Medicare Program has provided lifesaving health care 
services to our Nation's seniors and disabled populations. Hundreds of 
millions of Americans have had their quality of life improved and their 
health protected because of this Medicare Program. So we must ensure 
that Medicare continues the exemplary service it has provided 
beneficiaries since its inception in 1965, and through these program 
changes, including prescription drugs, improve it vastly.
  Unfortunately, we have a situation that this is necessary because 
Medicare has not kept up with the advances in medical treatment. 
Medical advances in delivering health care have moved us light-years 
beyond 1965, but the Medicare Program has not changed to reflect those 
health care advances. So in order to ensure that Medicare is meeting 
the needs of today's and tomorrow's seniors, the program needs to be 
brought into the 21st century.
  Very few people drive 1965 automobiles today, but every senior 
citizen is using a 1965 model of Medicare. So that is why, after a year 
of work, I introduced, with Senators Snowe, Breaux, Jeffords, and 
Hatch, a bipartisan bill--or if you look at the political backgrounds 
of all five, a tripartisan bill. Our 21st Century Medicare Act, as we 
have named it, is designed to bring Medicare up to date by adding a 
comprehensive prescription drug program and by making other 
improvements in the program as well. The Congressional Budget Office 
has estimated our bill will cost $370 billion over 10 years.
  Now there are other proposals. Senator Daschle, from the other side 
of the aisle, has a bill. As I understand it, it has not yet been 
scored by the Congressional Budget Office. How much does it cost? I 
have heard figures from introducers of that legislation, maybe $450 
billion, maybe $600 billion. We need to know what these programs are 
going to cost before we vote for them.
  I want to take a moment and walk my colleagues through the elements 
of the 21st Century Medicare Act. First, the prescription drug benefit 
adds a comprehensive, voluntary, and permanent drug benefit to 
Medicare. Our monthly premium is $24. It is the lowest premium of any 
comprehensive proposal before the Congress, as the authors of those 
proposals have expressed what their premium is. Our drug benefit is 
focused on providing money where it is needed most--to the low-income 
senior citizen who has to choose in some instances between food and 
medicine. They will no longer have to make that choice.
  It also targets those who have very high out-of-pocket expenses. Some 
people might refer to that as catastrophic coverage. We have other 
names for it, but I think we know that we are trying to protect people 
where the sky is falling in on them because of the need for 
prescription drugs.

  I will describe for seniors with low incomes what this would do, 
starting with those below 135 percent of poverty. That would be about a 
$12,000 yearly income individually, about $16,000 a year income for a 
couple. Medicare will first pay the entire amount of their monthly drug 
premiums, no out-of-pocket expenses for them buying into the program.
  Secondly, Medicare will assist them in paying for drugs at every 
level of spending. They will pay only $1 to $2 for their prescriptions. 
On average, this group of low-income, older people will see a 98 
percent reduction in their total drug costs, another example of one not 
having to choose between food or medicine because they are low-income.
  Next we would look at seniors with incomes above 135 percent of 
poverty but below 150 percent of poverty. This includes individuals 
with income a little bit over $13,000 and couples with income of almost 
$18,000. These enrollees will receive Medicare assistance on a sliding 
scale based upon their income to help pay their monthly premium to get 
into the program, and also Medicare will assist them in paying for 
drugs at every level of expenditure. There is no gap for these 
beneficiaries below 150 percent poverty.
  Let us look at those with incomes above 150 percent of poverty, which 
is above $18,000 for a couple. They will pay an average monthly premium 
of $24 for their immediate care drug benefit--again, the lowest of any 
premiums that have been announced by other authors that we know about. 
They will pay a $250 deductible, and after they have reached the 
deductible, Medicare will cover 50 percent of their drug costs up to 
the benefit level of $3,450 in total drug spending. Furthermore, 
Medicare will cover 90 percent of all drug costs after beneficiaries 
have paid $3,700 out of their pocket for drugs.
  Let me say a bit more about our drug benefit for Medicare 
beneficiaries above 150 percent of poverty. That is the group I just 
described. First, I wish we did not have a gap in coverage between 
$3,450 and $3,700, but the problem is that we are working within a 
limited amount of money--$370 billion--which is about halfway between 
the President's program for seniors and, let us say, the other 
prominent plan before the Senate, the Democrat plan. We are about in 
the middle. We have adopted a policy of using funds to benefit the 
largest possible number of Medicare beneficiaries, particularly those 
with low incomes, as I have demonstrated.
  So helping low-income people as opposed to doing more with incomes a 
little bit higher, it requires some sort of a trade-off, and we have 
opted to help lower income and to help less the further up the line one 
goes. It is important to point out and to stress that even with these 
trade-offs, fully 80 percent of all Medicare beneficiaries will spend 
less than the initial benefit limit or will have access to low-income 
protections and therefore will have no gap in the coverage. The 
percentage, again, is 80 percent.

  In the jargon of Washington, DC--and I know our constituents get 
tired of hearing Washington talk; we need to talk Iowa talk, but for my 
colleagues, that means 80 percent of the seniors in America under our 
plan will not be touched by what we call the doughnut hole. For the 20 
percent of enrollees exposed to this gap in coverage, our bill

[[Page S7002]]

requires that Medicare drug plans pass negotiated drug discounts along 
to Medicare enrollees all the time. All of those enrollees will be able 
to purchase drugs at a reduced price.
  Everyone is going to benefit from this legislation. Our bill may 
include this small doughnut hole, but proposals from the other side of 
the aisle seem to me to include a black hole since this drug benefit 
ends in 2010, leaving Medicare enrollees without any drug benefit 
whatever.
  Again, when we talk about legislation, if it comes to an end, we say 
that is a sunset. It is my understanding that the proposal from the 
other side has a sunset; in other words, a time when the benefit will 
end unless Congress reenacts it. Seniors are not going to sunset. 
Seniors are going to continue to need prescription drugs after this 
other proposal sunsets.
  One of the disputes is lack of understanding of our benefit delivery 
system. I heard my colleagues describe how we arrived at the approach 
to delivering drugs, as the tripartisan bill does. That reminds me, I 
want to say another thing because I think we forget how things get 
done. No Republican plan can get through the Senate. No Democratic plan 
can get through the Senate. A Republican plan can get through the House 
of Representatives because that is the way that system runs and the 
majority party rules with an iron hand. There is a Republican plan that 
got through the House. There is a Democrat plan in the House that 
obviously did not pass the House. We got the President's program that 
is obviously a Republican program because we have a Republican 
President. We have a Senate Democrat plan. We do not have a Senate 
Republican plan, but we have a Senate bipartisan plan. That is the only 
way we will get anything through the Senate, and that is a bipartisan 
approach.
  Getting back to how did we settle upon our delivery system for the 
prescription drug program for Medicare, we have been working for 
several months, to my chagrin, too many months, with the CBO to work 
through policy and what a certain policy would cost and changing 
policy--not basic policy but fine-tuning our policy from time to time 
to fit the realities of what CBO says.
  The CBO is important in this process. It is an independent, 
nonpartisan congressional staff office that analyzes legislative 
proposals for costs on the one hand and workability on the other hand. 
The CBO does not have any ax to grind. And they had better not. And we 
in Congress rely on that. They are the bible for a lot of decisions 
made, particularly budget decisions.
  According to CBO, spending on drugs for seniors over the next decade 
will grow at an astronomical rate. Over the next 10 years, there will 
be a steep rise in the price of pharmaceuticals. The CBO said the only 
way to contain the cost of a drug benefit is to ensure that drugs are 
delivered efficiently. In turn, the CBO says the only way to have drugs 
delivered efficiently is to have true competition, two or 
more organizations competing with the drug prices to get the prices 
down, as opposed to the other program I am talking about that relies on 
a government-run program. I quote the CBO that a government-run program 
will not bring down the price of drugs but one where there is true 
competition. We have a delivery system based on true competition.

  According to CBO, this requires that we must use private plans that 
assume a reasonable degree of risk; in other words, some risk on the 
organization to make sure it is efficiently run, to see there is 
competition, as opposed to a government-run program where risk in 
pricing of drugs is assumed by the government. What I mean by risk is, 
if they are efficient, they will make money and, if not, they will lose 
money. If they drive hard bargains with drug manufacturers, they will 
make money. If not, they will lose money.
  A limited degree of risk is all the tripartisan bill requires. People 
will ask, What sort of risk do you have if there is going to be a 75-
percent subsidy for the Medicare prescription drug plans in our 
program? Because the Federal Government is protecting that 75 percent. 
We are told by CBO that at 25-percent risk we will be assured this 
level of risk is high enough to promote sufficient drug coverage and 
low enough to assure that plans participate in a stable, reliable drug 
system. It is the optimal level of risk.
  Insurers who are so unhappy with the House bill in 2000 have 
indicated they can live with the level of risk in our bill. They would 
be crazy not to participate.
  Our opponents are saying if the Federal Government lays $340 billion 
on the table, by far the largest entitlement expansion ever, plans will 
not participate. Where do our opponents get that? Flatout, according to 
the CBO, they are wrong. CBO says the insurers themselves say they are 
wrong. Most importantly, common sense says they are wrong. 
Unfortunately for our opponents, no one has invented a prescription 
drug that gives you common sense.
  We need to make the dollars we have go as far as we can. Whatever our 
individual thoughts, the CBO in this case is an arbiter, and they tell 
us our bill, the 21st Century Act, does that; in other words, it keeps 
the cost of medicine down, guarantees the participation of those 
agencies to deliver the drugs.
  Now, I know the Presiding Officer is from a rural State. I will 
address the question of whether the system the bill will establish will 
work in rural areas. Even if you are from Atlanta, there are a lot of 
rural areas in Georgia, so you ought to be asking, will we take care of 
rural areas? If you are in Montana or North Dakota, it is probably even 
more of a concern. I represent a rural State--maybe not the most rural 
State--and I would not support a Medicare drug bill that would put the 
rural parts of our Nation in jeopardy of not receiving equal access to 
prescription drugs under the same conditions as people in New York 
City.

  Our bill guarantees that every Medicare enrollee will have a choice 
of at least two Medicare drug plans, a minimum of two. The Government 
will establish service areas for plans to offer Medicare drug benefits. 
These service areas must be the size of a State at a minimum. They can 
be multistate but at least the size of a State.
  I stress that because you hear from the other side that plans will 
cherry-pick. You are not going to cherry-pick in the State of Iowa. You 
have to serve Des Moines just as you have to serve Armstrong, IA.
  Another point I want to make concerns pharmacists. Pharmacists play a 
very important role in prescription drug programs for seniors. Not only 
that, but as we have increasing use of drugs, and seniors taking 
multiple prescriptions, and the interaction of those, pharmacists are 
going to play an even more important role. They are going to be needed 
to protect--I don't know whether the word ``protect'' is right--but 
oversee, to some extent, when prescription drugs are given, how they 
interact. Maybe a doctor won't be on top of that. You might have a 
person who gets a prescription from two different doctors. Are they 
going to interact? The focal point for that determination might be the 
pharmacist--ought to be the pharmacist, and will be. So there is going 
to be an increasing need for pharmacists.
  Another thing I want to point out about the legislation is our 
assurance that Medicare beneficiaries will have convenient access to a 
brick-and-mortar pharmacy. The standards outlining what is convenient 
will be determined by our Department of HHS. Furthermore, in developing 
convenient access standards, our Department is explicitly required to 
take into account Medicare beneficiaries in rural areas.
  We ought to consider consumer protection, so I will address that as 
our bill does. Our drug benefit proposal puts into place important 
consumer protections for our Medicare enrollees.
  By the way, one of the things I didn't say that the CBO said about 
ours, we will have 99 percent of the seniors taking advantage of this 
program. That is how high the enrollment is going to be.
  First, in regard to consumer protections, all Medicare drug plans 
will be put through a comprehensive approval process to ensure they 
will deliver quality drug benefits to seniors. The new Medicare 
competitive agency in the Federal Department of Health and Human 
Services will have to review and approve the application of the plan 
before that plan can participate in the program.
  Standardized information on each drug plan will be sent by Health and

[[Page S7003]]

Human Services to all Medicare enrollees. If a Medicare drug plan wants 
to advertise for enrollees, all marketing material will have to be 
approved by HHS. All seniors will have access to necessary prescription 
drugs. Health and Human Services will determine therapeutic classes of 
drugs. Medicare drug plans will be required to offer drugs in all 
therapeutic classes.
  If Medicare drug plans use formularies, they must establish a 
pharmacy and therapeutic committee to develop and review the formulary. 
Physicians and pharmacists must be represented on that committee. The P 
and T Committee shall base formulary decisions on scientific evidence 
and on standards of practice.
  What I have outlined is a few ways in which our bill differs from 
Senator Daschle's bill. I would like to add a few more ways in which 
our bill differs as well.
  First, Senator Daschle's plan is overly bureaucratic and I think 
extravagant, therefore it does nothing to curtail or even slow 
skyrocketing prescription drug costs. Why pass a bill if we are not 
going to do something to put the damper on the rapidly rising increases 
in the cost of drugs?
  That is why it is essential that any new prescription drug benefit 
contain proper cost management controls that moderate growth in price 
while ensuring Medicare enrollees' access to prescription drugs.
  While guaranteeing prescription drug coverage for all seniors, our 
proposal imposes reasonable cost-sharing obligations on beneficiaries 
and does promote competition among prescription drug plans which, as I 
have said so many times, will lead to a better overall effect on drug 
prices. That is a benefit to Medicare beneficiaries and to all 
Americans who are not even yet eligible for the Medicare Program 
because of age.
  We have flexibility in Medicare drug benefits that we do not want to 
overlook because under Senator Daschle's plan, seniors face fixed 
copayments that, in many instances, mean they will actually pay more 
for drugs than they would under a system such as the one we propose, 
that gives prescription drug plans more flexibility to offer lower cost 
copayments.
  I suggest that before the plan is finally put before the Senate by 
the other side--I will bet they will have that fixed because they have 
looked at our plan and they know we are more fair, particularly to low-
income seniors, with our flexible drug benefit than what their fixed 
costs are.
  Senator Daschle also writes into law the monthly premium seniors will 
pay for a drug benefit. But what happens if a plan has been efficient 
and wants to attract more Medicare enrollees by lowering their premium 
below that of other plans? Under Senator Daschle's approach, Congress 
would have to pass legislation for the plan to lower the premium. If 
you look at most of the problems we have with Medicare developing over 
the last 35 years, probably those coming directly from reimbursement of 
various health care providers, you will find that micromanagement of 
the Medicare Program by the Congress has led to most of the problems we 
have. So to the extent that we can have the marketplace be the 
disciplinarian in premium prices, copayments, in deductibles where 
catastrophic kicks in, et cetera, et cetera, we ought to allow that to 
happen.
  We ought to look at what has benefited us as Senators and 10 million 
Federal employees or retirees or their families. You will see that 
competition among several of the Federal employee health benefits 
plans--they have, I don't know how many dozens of plans, but at least a 
couple of dozen plans, with competition among those plans, flexibility 
in those plans, the tailoring in those plans for particular interest 
groups of people in Federal employment, including Senators, they have 
been able to keep down the price of our Federal programs. That is 
directly related to the flexibility in the plans and the competition.
  Why would you want to write into your plan a certain monthly premium?
  Our plan then gives the freedom to offer premiums, copayments, and 
deductibles that are flexible, saving seniors money, or gives them more 
money.
  We also have an enhanced Medicare fee-for-service option that is an 
improved and strengthened Medicare option--not one that seniors would 
have to take. If they are satisfied with the 1965 model, they can keep 
it with or without prescription drugs. If they would like to have a new 
and improved 21st century Medicare Program with or without prescription 
drugs--because prescription drugs are optional on all of these plans--
we would give them the opportunity to do that. I will explain that.
  None of the other proposals on the table do any of this. It creates 
the enhanced option. It is within the Medicare Program. It is a fee-
for-service program. Let me be clear about the fact that it is 
delivered by the Federal Government just like Medicare. There has been 
some confusion on that point. It ought to be easily understood.
  We think it is an option that many beneficiaries might find 
attractive. But the beauty of it is that we are not going to make that 
choice for them. It is voluntary. It is their choice.
  Here is the bottom line. Beneficiaries, such as Medicare, have a 
right to keep it--keep it until you die. It is their choice. In fact, 
even future beneficiaries will always have this same choice under our 
plan--20-50. If you are 65 years old and you want the 1965 model of 
Medicare, choose it. But if it is 20-50, you are 65 years old and you 
want a 21st century model of Medicare, then you can choose the enhanced 
option.
  I want to make it very clear that there is no sunset of the existing 
Medicare benefit package in our bill--like Senator Daschle's sunset in 
his drug benefit. We know on our side that senior citizens aren't going 
to sunset. They are going to be around forever.
  In addition, Medicare enrollees can enroll in the Medicare drug 
benefit, whether they are in traditional Medicare fee-for-service, 
enhanced Medicare fee-for-service, or the Medicare+Choice.
  Here is the choice that our bill offers seniors, if they want to take 
it.
  Existing Medicare Part A and Part B focus on the coverage of routine, 
predictable medical expenses. But the enhanced option, which we are 
going to call Part E, focuses on preventive care and protection against 
devastating costs of serious illness. If beneficiaries prefer what they 
have now, for the third time, I say they can keep it. But if they like 
the idea of a better prevention and better insurance when they need it, 
then, for the third time, I say they can have the new, enhanced 
version.
  On the subject of prevention, I would like to explain that we put a 
lot of emphasis on prevention. Medicare's current policy makes 
beneficiaries reluctant to seek out preventive services that may 
identify health problems and prevent more expensive care later. Part of 
that is because they have to pay a deductible.
  Unlike many private health plans, Medicare today subjects people in 
this Part B to usually a 20-percent deductible.
  For those who would elect the new, enhanced option, preventive 
benefits would not be subject to any deductible, or to any coinsurance.
  That is an example of moving Medicare from 1965 to the 21st century.
  I would like to highlight another improvement of enhanced option.
  Medicare today has no limit on a beneficiary's expenses in a year, 
creating the potential for crippling costs in the event of a serious 
illness and maybe impoverishing some families. The bill would limit 
beneficiaries' exposure then to out-of-pocket costs for Medicare 
coverage services other than drugs to $6,000 per year. Beyond that 
amount, Medicare would pay 100 percent of any costs incurred by the 
beneficiaries.
  In a given year, it is estimated that 2 to 3 percent of beneficiaries 
may have costs that reach above that level. Of course, if one looks at 
beneficiaries over multiple years, the likelihood of such expenses 
increases accordingly. If beneficiaries want the peace of mind that 
comes from such protection against serious illnesses, then for a fourth 
time, I say they have that choice.
  Another issue our enhanced option addresses is the Medicare 
deductible structure. Under current law, the Part A deductible will be 
extremely high in the year 2005--$920 every time you go to the 
hospital--while the Part B deductible is going to stay at $100 per

[[Page S7004]]

year. The enhanced option includes a unified deductible of $300 per 
year for all services.
  Medicare's irrational two-deductible system is unheard of in the 
private insurance industry today. Beneficiaries are used to single 
deductibles from their prior employer-based plan. If they like what 
they had while they were working, then they have the option, as I say 
for the fifth time, of taking the enhanced option within Medicare.
  Here is another benefit from the enhanced option. Because Medicare 
benefits have so many holes in contrast to private insurance, most 
beneficiaries are forced to carry supplemental coverage to fill in the 
gap. We call that Medigap. Reducing those gaps will make such 
supplemental coverage less necessary, but, more importantly, if they 
want to have it more affordable for the beneficiaries, our bill 
establishes such new more affordable Medigap plans.
  By the way, those employers who offer supplemental coverage will also 
find it less costly to do so under the enhanced option since it will 
have fewer holes to fill.
  Is the enhanced option a better deal? From an actuarial standpoint, 
the answer is definitely yes.
  The Congressional Budget Office tells us it is a more valuable 
benefit, largely because of the serious illness protections that it 
offers our seniors. But not all seniors are actuaries. So we are 
leaving it up to the seniors to decide which of the two plans is a 
better deal.
  We make a few changes also in Medicare+Choice improvement. Starting 
in 2005, our bill takes modest steps to improve the Medicare+Choice 
Program. Medicare+Choice has been a big disappointment in my home State 
of Iowa. Only 1 county out of 99 has it. But seniors elsewhere--
particularly in the larger cities and in the Sun Belt--rely on it.
  Our proposal keeps that option alive without throwing money at the 
program as we have so much in the past. Instead, we create a 
competitive bidding system under which Medicare+Choice plans will 
compete with each other but not with the Medicare fee-for-service 
programs for beneficiaries.
  I want to emphasize that no one in the fee-for-service Medicare will 
be affected by this change. We have made this change because today's 
bureaucratic pricing system sets arbitrary and inaccurate rates, and 
that discourages Medicare+Choice plans from participating. Our approach 
to Medicare+Choice is based on a bipartisan model embraced by the 
Clinton administration, and will result in fairer and more accurate 
payments to Medicare+Choice.
  Before I give up the floor, I would like to comment for a short 
period of time on some statements that were made yesterday regarding 
our tripartisan 21st Century Medicare Act by people on the other side 
of the aisle. I think in some ways the facts were not given straight. I 
would like to correct the Record for the benefit of my colleagues.
  Yesterday, there was reference made to an assets test as if there is 
something wrong with it. There is nothing wrong with it. Public policy 
for low-income Medicare populations has included assets tests since 
1987. Our policy here in the Congress for low-income Medicare 
populations has included an assets test since 1987.
  I said it twice so people know that it is not something new being 
thrown out there.
  Specifically, assets test policies were first included in Federal 
policy in the Omnibus Budget Reconciliation Act of 1986, which passed 
the Senate by a vote of 88 to 7 with help from people who, yesterday, 
were denigrating our plan, and voted for the 1986 plan.
  Our bill includes an assets test similar to the 1999 President 
Clinton--remember he was a Democrat--Medicare bill.
  Under current law, States have the flexibility to waive this assets 
test. Nine States and the District of Columbia have chosen to waive the 
test.
  Our proposal allows assets test flexibility, found in current law, to 
be retained in the Medicare drug benefit program. The assets test 
ensures that seniors who need assistance the most are provided the most 
protection.
  Also, let me clarify that current law specifically excludes from the 
assets test a person's home and the land the home is on, household 
goods, personal effects, including automobiles, the value of any burial 
space, and other essential property.
  The people attacking our plan also attacked our plan yesterday 
because of the flexibility we have in it. So I want to respond to that.
  Medicare enrollees deserve a quality drug benefit that meets their 
individual needs. The Daschle-Graham proposal does not allow any 
variation in cost sharing or premiums and is a one-size-fits-all plan 
which will fail to adapt to the needs of seniors, as we are now so far 
behind with the 1965 plan that was adopted in 1965.
  It is also important that Medicare enrollees get quality drug 
benefits at the lowest possible price. The tripartisan plan strikes the 
right balance to ensure Medicare enrollees have access to prescription 
drugs they need at the best possible price.
  Anyone wanting to offer a Medicare drug benefit will be required to 
receive the approval of Health and Human Services. This is not a 
checkoff approval process. There will be intensive interaction between 
any plan and the Government to ensure that Medicare enrollees are 
getting what they are paying for.
  There are five separate places in our bill where the administrator is 
required to certify that a plan meets strict standards of actuarial 
equivalence. The plans will not be determining what is the equivalent 
standard benefit. The U.S. Government is going to make that 
determination. If a plan is not equivalent to the standard benefit, it 
is obvious the bid will be rejected, and should be.
  In fact, the Congressional Budget Office has told us our standards of 
equivalence are strict enough that Medicare drug plans will have little 
room varying in premiums or cost sharing. In their words, that little 
room to vary is critical to the success of a Medicare prescription drug 
benefit and indicates how the tripartisan bill has found the right 
policy in Government assumption of risk--just enough--to make sure 
there is competition out there, to make sure plans are run efficiently, 
to make sure there is competition to drive down drug prices.
  While the Democrat plan claims to include competition, I do not 
understand how Medicare plans will compete if they are required to 
offer identical premiums and identical cost sharing. If drug plans 
wanted to lower their cost sharing or lower their premiums in order to 
attract Medicare enrollees, the only way it could be done is for 
Congress to pass more legislation.
  The tripartisan bill ensures the innovations of the private sector 
are not stifled by micromanagement, one-size-fits-all, Government-run 
drug benefits.
  There is guaranteed access to the plan. We have had Members of the 
other side apparently unaware that the tripartisan bill guarantees 
access provisions. The tripartisan bill guarantees two Medicare 
prescription drug plans to every Medicare enrollee.

  If the enrollee lives in an area where there is Medicare+Choice, the 
Medicare+Choice plans will not count towards the two-plan minimum.
  The Medicare plans are not determining their own service areas. The 
Government will determine service areas, and the service areas must be 
at a minimum the size of a State.
  The Government will be covering 75 percent of the value of the 
Medicare drug benefits, equalling $340 billion over the next 10 years. 
So anyone who says the plans will not participate is simply not 
operating with any common sense--$340 billion of encouragement to 
participate. This is a clear attempt, and a failing attempt, I believe, 
to paint the tripartisan bill not as what it is--something that five 
Senators have worked on for a year--but to paint it, instead, as the 
House Republican bill, which it is not.
  Lastly, we have been attacked from the other side about the 
tripartisan's policy toward employers. The tripartisan bill gives 
employers a 100-percent subsidy to offer drug benefits to their 
retirees, as long as the retiree plan is, at a minimum, as generous as 
the standard Medicare benefit.
  In contrast to the tripartisan plan, the Democrat plan only gives 
employers a two-thirds subsidy to retain their retiree prescription 
drug plan.

[[Page S7005]]

  Listen, from the other side you heard that our plan does not take 
into consideration protecting retirees who already have a corporate 
retirement plan with health benefits in it, when we pay 100 percent of 
that. And what does the other side pay? Sixty-seven percent. The other 
side's plan forces a standard benefit on all Medicare beneficiaries. 
Will employers be forced to change their entire drug benefit structure 
in order to obtain the two-thirds subsidy? This could result in 
employers being forced to charge higher drug expenses for their 
retirees in order to receive the subsidy.
  Mr. KENNEDY. Is the Senator willing to yield for a question?
  Mr. GRASSLEY. I will try to answer your question.
  Mr. KENNEDY. I was just wondering about the time that the Senator 
will use. We have several Senators indicating----
  Mr. GRASSLEY. I will be done in 2 minutes.
  Mr. KENNEDY. I thank the Senator.
  Mr. GRASSLEY. Currently, employers receive no assistance whatsoever 
in paying the drug costs for their retirees. Our 100-percent subsidy 
plan will allow employers who are offering a drug benefit at least as 
generous as the standard benefit to receive the full value of the 
standard benefit.
  Again, our policy targets dollars where they might do the most good. 
And an employer subsidy recognizes the value of employer-sponsored 
retiree drug benefits.
  In closing, I will simply say something I said when I started. In the 
next 3 or 4 days, there will be a lot of debate on this subject. It is 
very important to have a lot of debate on this subject.
  You are going to find strong advocates for plans where the advocates 
have great faith in Government-run price programs versus whether or not 
you ought to have competition from the private sector. Remember, CBO 
says that a Government-run program is going to raise the price of 
prescription drugs. The alternative is to have competition. The 
Congressional Budget Office says that is going to reduce the price of 
prescription drugs.
  We should be in the business of having public policy that is going to 
give seniors the best medical care, including prescription drugs, based 
on the least cost to the Government, as well as the least cost to the 
senior citizen.
  I yield the floor and I thank my colleagues.
  The PRESIDING OFFICER. The Senator from Massachusetts is recognized
  Mr. KENNEDY. Mr. President, I know we have not had an agreement with 
regard to time, but we have had the opportunity to hear from that side 
of the aisle for about 2 hours 40 minutes of the last 3 hours. So I was 
going to see if we could recognize the Senator from New York. And 
although our leaders here don't frown on allocating the time and 
indicating individuals, the Senator from New Hampshire has been willing 
to agree to this proposal: The Senator from New York would go for 10 
minutes, the Senator from Georgia 10 minutes, the Senator from New 
Jersey 10 minutes, and I need 20 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from New York.
  Mr. SCHUMER. Mr. President, I have been waiting here patiently to 
speak for a particular reason. Earlier this afternoon, the 
administration came out with its Statement of Administration Policy on 
S. 812, the Greater Access to Affordable Pharmaceuticals Act sponsored 
by myself, Senator McCain, and 10 others.
  I have rarely seen a piece of paper so far from reality and so far 
from the truth. Let me quote from it:

     . . . the Administration opposes S. 812 in its current form 
     because it will not provide lower drug prices.

  What planet are they on? What are they smoking? Generic drugs will 
not lower the cost of drugs? If you want to oppose the bill for one 
reason or another, fine. Here are some costs: Claritin, brand name $86; 
generic $33; Cipro, brand name $89; generic, $35; Zocor, high 
cholesterol, $116; generic, $45; Zoloft, $69; generic, $27; brand of 
Singulair, $84; generic, $32.
  That doesn't lower costs? It has been estimated it will save the 
American people $70 billion. It has been estimated it will save our 
State governments hundreds of millions of dollars. And they say it 
doesn't lower cost. What kind of argument is that? We all know it will 
lower cost. If they want to come clean and say they don't want to 
alienate the pharmaceutical industry, fine. If they want to say there 
is a better plan and better scheme, fine. If they want to say, keep 
things status quo, fine. But it won't lower costs?
  I think they have a lot of disagreement even from people normally on 
their side. Here are some of the groups that think it will lower costs: 
General Motors, Ford, Chrysler, UAW, AFL-CIO, Verizon, Wal-Mart, Kodak, 
Motorola, Caterpillar, Kmart, Georgia Pacific, Albertson's, UPS, 
Kellogg, Sysco. The list goes on and on. These companies are not 
usually supporters of the kind of legislation we are talking about. 
They are all for this. They are for it for one reason: lower cost. 
Their own health care plan costs are going through the roof. I am 
utterly amazed. I ask the administration to retract this statement or 
prove why they believe that moving to generic drugs is not going to 
lower cost.
  They say a few other things, too, which shows you that they really 
don't know what the bill is. They say in their statement that this bill 
would encourage litigation around the initial approval of new drugs. 
The legislation does not allow litigation for the approval of new 
drugs. They don't know what the bill does.
  Will it prevent unnecessary litigation when someone files a patent in 
the Orange Book that is frivolous? Yes. That is not about a new drug. 
In fact, when it comes to a new drug, that is one of the few places 
where, of course, the patent can be contested by our legislation. What 
our bill does is simply force them to play by the rules.
  The administration says the bill would complicate the process of 
filing patents. Of course, our initial legislation was clean. There was 
an amendment to change it, mainly to get support from members of their 
party. But if what the administration means is that it will complicate 
the process, if that means it makes brand companies comply with the 
FDA's current rules, you bet it will complicate the process.
  The FDA requires that brand companies only list patents in the Orange 
Book that cover the drug or cover that approved use of the drug. Now 
the FDA does not enforce this, so the brand companies don't play by the 
rules. Our bill requires them to do it.

  I had hoped that when Senator McCain and I introduced this 
legislation--and my hopes were heightened when the legislation passed 
16 to 5 and got half the members of the HELP committee from the 
Republican side--that we could have a debate and come to an agreement. 
The Senator from Utah, understandably, has pride of authorship. He may 
want to make some changes. But to just so baldly oppose a bill on 
specious grounds makes one wonder where the administration is coming 
from. Are they so afraid to offend PhRMA that they have to put out a 
statement that is just patently wrong?
  We saw in the area of corporate litigation that the administration, 
which likes the American people to think it is moderate, is to the 
right of the Business Roundtable. We are finding the same thing here. 
We are finding that the administration, on the issue of drugs and the 
high price of prescription drugs, is to the right of much of corporate 
America.
  Please, Mr. OMB Chairman, Mr. Vice President, work with us. We are 
not going to agree on everything, but work with us. This is a serious 
problem. If this memo is an indication that all we are going to get on 
the issue of reducing the cost of drugs and increasing the access of 
drugs is stonewalling, then it is a sad day for the American people.
  We are going to fight hard for this legislation. The American people 
need this legislation. It needs to go beyond the original bill. That is 
why I have supported other amendments, and I hope the prescription drug 
plan offered by the Senators from Florida, Georgia, and Massachusetts 
prevails. But if even in this modest bipartisan step we get such 
stonewalling and such failure to grapple with the truth, then all those 
Americans who are paying such high prices for drugs are in trouble.
  Mr. GREGG. Will the Senator yield for a question?
  Mr. SCHUMER. I am happy to yield for a question.

[[Page S7006]]

  Mr. GREGG. The Senator is probably not aware of this because this 
information has just been forwarded to me. I will actually have a paper 
on it. But there have been a lot of different representations as to how 
much the underlying bill would save. I have seen numbers that ran from 
$20 billion to $60 billion, and I believe the Senator mentioned it is 
actually a higher number.
  We have just been advised by CBO that the underlying bill, the 
Edwards-Collins bill, will have $8 billion savings assigned to it by 
CBO. So as we debate this issue--I know some people are planning to use 
that savings to assist the major movement on the overall drug benefit--
this is going to change the dynamics around here a little bit. But just 
so we are all playing off the same song sheet on savings, this bill is 
now scored by CBO as an $8 billion savings.
  Mr. SCHUMER. If I could answer the question, which I know was meant 
to be a question, of the Senator from New Hampshire--the junior Senator 
from New Hampshire to correct the error of my ways--first, the $8 
billion is the CBO estimate--I guess; I haven't heard it yet--but that 
is just for Medicare. The administration is saying it will not provide 
lower drug prices. The estimates are pretty widespread and pretty 
accepted that when you take not just the Medicare savings but the 
savings to every consumer who goes and buys the drug, the savings to 
all these companies that have their own health care plans, the savings 
to the States, it is going to be much more than that.
  I am not debating how much right now. I don't know if that estimate 
is correct. It seems low to me. But let's assume it is. It is in direct 
contradiction to the Statement of Administration Policy that came out 
this morning which says: ``will not provide lower drug prices,'' 
period--not ``will not lower them enough,'' not ``will not lower them 
for everybody.'' It says, unequivocally, no lower drug prices.
  So I would like to thank my colleague from New Hampshire because even 
though he is making a different point, he makes mine. The 
administration seems so hardheaded against anything to change the 
status quo, even though the vast majority of Americans are unhappy with 
the status quo, that it leads them to make statements that are patently 
absurd on their face.
  The PRESIDING OFFICER (Mr. KENNEDY). The Senator's time has expired.
  The Chair recognizes the Senator from Georgia.
  Mr. MILLER. Mr. President, I rise to urge the Senate to let us try to 
come together on a prescription drug bill in these next 2 weeks for the 
sake of America's seniors.
  Our seniors are up against a rich and powerful drug industry--an 
industry that, obviously, will fight tooth and nail against anyone who 
seeks to meddle with its obscene profit margin or its astonishing 
salaries for its CEOs or its TV media blitz.
  Our seniors cannot fight this battle alone. Goliath is too big. 
Congress must step in immediately and help America's elderly in their 
day-to-day life and death struggle with prescription drugs.
  This Senate has already taken a very big step toward helping seniors 
get their medicine at lower prices by passing the reimportation 
amendment. Now it is time to give some more help. It is time to add a 
prescription drug benefit to Medicare.
  I was very glad to hear this week that the Nation's largest advocacy 
group for seniors, AARP, has declared the Graham-Miller-Kennedy bill as 
the one that, in their opinion, offers the very best value for seniors.
  Let me take just a few minutes to tell you why they think and why I 
think this bill is better than the rest.
  First, we use a system that is now in place--a system that is now in 
place for most working Americans, a system that the Federal Government 
and most employers use right now for their own workers. This new 
benefit is too important to risk using an untried, experimental 
delivery system; but the competing bills do just that.
  Under our bill, every beneficiary will know how much their premium 
will cost each month and how much they will have to pay for each drug 
they buy. We guarantee seniors an affordable premium, while the 
Republican bill allows private insurers to set the premium cost. That 
means insurers would be free to charge seniors whatever premium they 
want, whenever they want.
  It is simply a fact that seniors who live in rural America are often 
older, often sicker. Under the Republican bill, insurers would be able 
to charge them even higher premiums than those who live in urban areas. 
That would hurt the very people I call my friends and neighbors back 
home, and that is unacceptable.
  The private insurers that are the centerpiece of the Republican bill 
will make profits based on managing drug care for beneficiaries, just 
as HMOs make their profits on managing care. That would result--it 
could not help but result--in fewer drugs being available to our 
seniors. That is not the kind of benefit our seniors need. That is not 
the kind of benefit they deserve.
  Our bill uses a system that is already up and running in every ZIP 
Code in the United States. We guarantee that services will be available 
to seniors 24 hours a day, 7 days a week, for any emergency that 
arises. The competing bills offer no such protection.
  The Graham-Miller-Kennedy bill is also the best plan out there 
because it has no gaps in coverage. That is very important to me, and 
to AARP, and to every senior in this country. We help seniors pay for 
the very first drug they buy each year. That coverage continues with no 
interruption through the last day of each year. No other bill makes 
the same guarantee.

  There are two gaps in the competing bills. First, under the House 
Republican plan, all seniors would have to pay a $250 deductible. That 
means they would pay premiums but would get no coverage for the first 
$250 of their drug bills. Then, once drug costs reached $2,000, 
coverage would be cut off altogether. Seniors would get no help from 
the program until their out-of-pocket spending hit the $4,800 mark.
  During this huge gap in coverage, seniors would still be required to 
pay their monthly premium even though they were not receiving a single 
penny of benefits from the program. And every beneficiary would 
experience that first gap in coverage because every senior would have 
to spend $250 before they saw the first dollar of benefit.
  Then, almost half of all the beneficiaries would fall into the second 
coverage gap. Sixty percent of them would never climb back out of that 
gap to receive coverage again. Let me say that again. Nearly two-thirds 
of seniors who ran up drug bills of $2,000 would never see another 
penny in benefits for the rest of the year.
  Because of these gaps, the typical beneficiary--let's say an elderly 
woman whose prescriptions run $2,400 each year--would still have to 
cover 71 percent of her drug bill each year.
  Beneficiaries with higher drug bills are even worse off. Take an 
elderly man whose drug expenses run $400 a month, or $4,800 each year. 
He would have to pay 85 percent of his drug costs each year under the 
Republican bill. That is not much of a lifesaver to be throwing a 
drowning man.
  Once again, there are no gaps of any kind in the Graham-Miller-
Kennedy bill. Coverage continues every day, every week, every month, 
all year long, regardless of how high a senior's drug bill is.
  Once drug costs have reached $4,000, the Graham-Miller-Kennedy bill 
says that we will pick up the entire bill for the rest of the year. It 
is what our seniors need. It is the least they deserve.
  Mr. President, the time has come. It is just like back in 49 B.C. 
when Caesar had to ask himself a question: ``Do we cross this 
Rubicon?'' Do we make the commitment? Do we take this risk? You know, 
we throw around the term ``It's a matter of life or death'' pretty 
lightly. Seldom is that really the case. But this time it really is.
  Many seniors--our mothers, fathers, grandparents, and other loved 
ones--will live or they will die because of this vote. Are we going to 
pass a meaningful prescription drug benefit as we have been promising 
and talking about for years? Are we going to go home and face the 
seniors of this Nation without doing diddly squat?
  We have had a lot of sound and fury in this Chamber. Will it signify 
nothing, just a big fat zero? It isn't enough to have just good 
intentions, Mr. President. The road to hell is paved with good 
intentions. It isn't enough to promise good deeds. We must do them.

[[Page S7007]]

  Thank you, Mr. President. I yield the floor.
  The PRESIDING OFFICER. The Senator from New Jersey is recognized.
  Mr. TORRICELLI. Mr. President, the Senate is engaged in probably the 
most important health care debate in a generation. If we succeed in 
establishing a pharmaceutical benefit for the American people, it will 
be the greatest contribution to health care since Medicare.
  We are engaged in this debate in the middle of an economic and 
corporate crisis. It would not be honest or even productive to pretend 
that one event is taking place without the backdrop of the other.
  It is an extraordinary time to be redesigning the delivery system of 
an industry while corporate America is going through a series of 
tumultuous events.
  I have an amendment prepared that I will offer to this legislation 
that is the nexus between the two problems because the pharmaceutical 
industry requires a transparency and a proper accounting of itself in 
the delivery and pricing of its products, just as certainly a variety 
of other American industries have suffered from their failure to do the 
same.
  I address specifically two persistent problems. First, when an 
American family goes to a pharmacy to buy a prescription product, they 
operate under the assumption that they are getting sound medical 
advice, that the prescription that is being offered to them is suited 
for their problem, their malady, it is priced properly, and a medical 
judgment is being made on the merits. That is the assumption of every 
American family. It may not always be sound.
  Through the years, marketing techniques from sporting events and 
theater productions to expensive vacations and gifts have become part 
of the routine of marketing pharmaceutical products. American families 
and senior citizens are left not knowing whether a product is being 
prescribed because it is the best for their health or because the 
doctor is indebted to a marketer or a corporation.
  The same could be true of a pharmacy. Of all the corporate governance 
issues in America that deserve transparency, nothing could be more 
fundamental than the relationship between an individual American family 
and the delivery of their health care. People want to know, people have 
a right to know, is a gift an incentive, part of the prescribing of a 
prescription drug, or is it the quality of the product? Has a doctor 
been convinced this is the right drug for your child, for your family, 
for your health, or is this simply part of a relationship with an 
undisclosed incentive?
  Under the amendment that I will offer, any corporation providing a 
gift to a doctor or health care provider as part of marketing a 
pharmaceutical product will need to disclose it. The incentive can be 
provided, the gift can be provided, you can offer the vacation, but at 
least people have a right to know whether the sales of products are 
related to price, science, the merits, or the financial incentive to 
consume them.
  Some will argue that such techniques are common in industry. It may 
be true, but it is one thing if a retailer is getting an incentive to 
sell you a shirt or an automobile manufacturer is getting a secret or 
private incentive to an automobile dealer. That might be business. It 
may or may not interfere with the right judgment of the proper pricing, 
but that is marketing.
  It is something else when it interferes with the judgment of a doctor 
and the confidence in health care delivery upon which people have come 
to rely, a judgment that involves not simply price but the intangible 
of trust in a health care provider.
  Second, the amendment expands to deal with pharmaceutical benefit 
managers, otherwise known as PBMs. PBMs are essentially health 
maintenance organizations designed to deal with the delivery of 
pharmaceutical products. They are the middlemen who have placed 
themselves between drug manufacturers, health plans, and pharmacies. If 
they operate properly, they negotiate better prices, provide service 
and delivery at a superior cost to a beneficiary. For most of the last 
25 years, that is exactly how they have operated.

  A problem has developed, much like the gift, the vacation offered for 
selling a pharmaceutical product, except it happens on a much larger 
scale.
  Pharmaceutical benefit managers have an obligation to their clients, 
the people who have contracted with them to buy the best product at the 
best price. The best product is to be based on a medical judgment. The 
best price is what can be negotiated. But the law has allowed a 
practice that is as morally wrong as it is reprehensible.
  Pharmaceutical benefit managers who allegedly represent their clients 
go to pharmaceutical companies and ask for rebates. That is a polite 
word for a kickback. The client, the senior citizen, the working person 
is left believing they are buying a pharmaceutical product represented 
to them because it will deal with their illness and has the best 
science and is at the best price.
  What they do not know is the pharmaceutical benefit manager may be 
offering that product because they are getting hundreds of thousands of 
dollars or millions of dollars in a rebate. Indeed, nothing else would 
explain what has emerged.
  Pharmaceutical benefit managers are far less inclined to ever 
recommend generic drugs. Indeed, at the moment, brand name drugs are 
offered only 46 percent of the time compared with 54 percent of the 
time by a local pharmacist. The cost of a brand name drug offered by a 
pharmaceutical benefit manager can be $47 compared with $37 at a local 
pharmacy. So people who believe they are in a benefit plan to negotiate 
a better price are paying more, and they are not only paying more, they 
may be directed to products that are offered not based on a medical 
judgment or on a cost basis but because of a secret rebate.
  The chart on my left illustrates exactly the problem, in what is now 
a four-tiered system from manufacturer to senior citizen. The 
manufacturer may offer a rebate with the belief that it could lower 
price and make their product more available through pharmacies to 
senior citizens, and many of these rebates may be offered by 
pharmaceutical manufacturers with the belief that like the rebate from 
an automobile manufacturer to an auto dealer, it is making the product 
more available, but here is the problem. The law allows the 
pharmaceutical benefit manager to keep the money. It does not go to the 
pharmacy. It never reaches the senior citizen. It stays here. The 
pharmaceutical benefit managers are in a contractual relationship 
supposedly representing the senior citizen. They are supposed to be 
their advocate, getting their price. Instead, they are keeping the 
money.
  The PRESIDING OFFICER (Mr. Corzine). The Senator's time has expired.
  Mr. TORRICELLI. Mr. President, I ask unanimous consent for 1 
additional minute to conclude.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. TORRICELLI. Under the amendment I am going to offer to this 
legislation in the coming days, as certainly as pharmaceutical 
companies will have to disclose any gifts they are giving, any 
incentives they are giving to doctors to influence their medical 
judgments, so, too, pharmaceutical manufacturers will have to disclose 
any rebates given to PBMs so the clients of the PBMs know what they are 
getting and can demand that those rebates be handed down to senior 
citizens at a lower price.
  It is simply transparency. It is what every American is asking of 
every American corporation. We have a free enterprise system for people 
to price their products, but we do demand truth and honesty. This is a 
minimum of transparency that we can bring to the pharmaceutical 
industry in America.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.
  Mr. REID. Mr. President, I appreciate very much the Senator from 
Massachusetts withholding. The Republican leader is present, and I have 
a unanimous consent request that I would like to propound.
  I ask unanimous consent that following the statement of the Senator 
from Massachusetts--he has 20 minutes. The Senator from Oklahoma, Mr. 
Nickles, will speak for probably 20 minutes. Following that, Senator 
Gregg will speak for probably 5 or 10

[[Page S7008]]

minutes. Following those statements, we would vote on----
  Mr. GREGG. Senator Stabenow would then have the right to close.
  Mr. REID. I am going to do that before the vote. Following that, we 
would have a vote on or in relation to Senator Stabenow's amendment; 
that prior to the vote on Senator Stabenow's amendment, we would have 2 
minutes for her to speak on behalf of her amendment, and Senator Gregg 
or his designee would speak 2 minutes in opposition to that amendment.
  Mr. GREGG. Senator Stabenow would close?
  Mr. REID. Yes. That upon disposition of Senator Stabenow's amendment 
No. 4305, Senator Dorgan's amendment No. 4299 be temporarily laid 
aside, and Senator Graham be recognized to offer his prescription drug 
amendment; that immediately upon the reporting of his amendment, it be 
laid aside and Senator Grassley, or his designee, be recognized to 
offer his prescription drug amendment; that the two amendments be 
debated concurrently; that no other amendments or motions be in order 
during the pendency of these amendments, except motions to waive as 
listed below; that on Tuesday, July 23, at 2:15 there be 30 minutes 
equally divided between Senators Graham and Grassley; that at 2:45 on 
that Tuesday, July 23, the Senate vote on waiving the Budget Act with 
respect to Senator Graham's amendment; that immediately following that 
vote, the Senate vote on waiving the Budget Act for Senator Grassley's 
amendment; that if either amendment successfully waives the Budget Act, 
it be further debatable and amendable; that if either fails to waive 
the Budget Act, it then be withdrawn; and that the preceding all occur 
without any intervening action or debate.
  I further ask unanimous consent that when the Senate resumes 
consideration of Senator Dorgan's amendment that Senator Gregg or his 
designee be authorized to offer a second-degree amendment thereto and 
that upon disposition of Senator Gregg's amendment, Senator Rockefeller 
be recognized to offer a second-degree amendment to Senator Dorgan's 
amendment.
  The PRESIDING OFFICER. Is there objection?
  The Senator from Massachusetts.
  Mr. KENNEDY. Reserving the right to object, and I will not, will the 
Senator include that the allocation of time be equally divided on 
Monday and then Tuesday morning?
  Mr. REID. That certainly is fair. We will equally divide the time.
  Mr. NICKLES. Will the Senator yield?
  Mr. REID. I would be happy to yield.
  Mr. NICKLES. Is it correct there would be a budget point of order 
that would lie against both the Graham and Grassley amendments?
  Mr. REID. The Senator is correct.
  I ask that the request be amended so the time be designated, Senator 
Kennedy, Senator Gregg, even though the amendments are those of other 
Senators. They are the managers of the bill and that is the way it 
should be.
  The PRESIDING OFFICER. Is there objection? Without objection, it is 
so ordered.
  The Senator from Mississippi.
  Mr. LOTT. Mr. President, while I object to the process under which 
this is being considered--I think we should have had this prescription 
drug issue go through the Finance Committee. We should have a normal 
debate, markup, and report out what would normally have been a 
bipartisan bill and probably a tripartisan bill. That is the way we 
should do business, and I predict right now that eventually the only 
way we are ever really going to get a real prescription drug result is 
we are going to have to go back and do that.
  Having said that, the bill before us everybody understood was going 
to be a vehicle to which Senator Daschle and others would be able to 
add prescription drug amendments or bills. That is what has happened.
  I think we will have sufficient time for debate later on tonight, on 
Friday, on Monday, on Tuesday morning, I presume, with the votes to 
occur one after the other on Tuesday afternoon. I think that is a fair 
way to proceed.
  Right up until the last few moments, we are getting people inquiring 
about what happens then. Well, of course, if one of them does get 60 
votes, as is in the agreement, we could go back and have additional 
debate and amendments, or if they do not, then other options are 
available, other amendments to the pending issue that is being set 
aside or other proposals with regard to a different approach to the 
prescription drug issue.
  I know Senators Hagel, Ensign, Smith, Allard and Graham are 
interested in the Hagel amendment, and perhaps other amendments on this 
side.
  We also retain the right to move to commit this whole issue to the 
Finance Committee with instructions, and at some point it might wind up 
being the most reasonable and popular thing to do. But this is not 
cutting off other amendments, not cutting off this issue, just setting 
it aside. It is not blocking other options from being considered. The 
truth is, both sides have been working for the last couple of days to 
try to get to this point. So I think it is the fair way to proceed. 
Everybody will be heard. We will have a vote and then see where we are.
  Mr. REID. I want to express the appreciation of the Democratic 
Senators to the two leaders. It was not easy to get where we are right 
now, and the reason I appreciate that--I think everyone does on this 
side; I am sure on their side--we have two big issues that will be 
debated for several days. This issue, prescription drugs, is why we are 
here--one of the main reasons we are here, I should say. This will give 
everyone a chance to listen to what others have to say.
  There will be some who do not want either one of these; they want 
something else. But they have a right to vote accordingly.
  I think we have made great progress. If I can get Senator Gregg's 
attention, Senator Stabenow asked if there would be a problem with her 
having 5 minutes, and the Senator from New Hampshire having 5 minutes 
immediately prior to the vote.
  Mr. GREGG. That is no problem at all.
  Mr. REID. I say to the Senators who are watching, this vote will 
probably occur around 5:30, give or take a few minutes.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Massachusetts is recognized for 20 minutes.
  Mr. KENNEDY. Mr. President, I yield myself 15 minutes.
  I thank our leaders, Senator Reid, Senator Daschle, and our 
Republican leaders, for this agreement we have entered into. This is a 
historic time. It will be the first time in over 5 years since there 
have been prescription drug amendments before the Senate.
  I am a cosponsor of the Graham-Miller bill and later in this debate, 
either tomorrow, Monday or Tuesday, I will have an opportunity to go 
over why I think that measure is so compelling and deserves strong 
support.
  We were reminded, once again, earlier in the afternoon, of the 
publication of a study that reviewed the different options that are 
before the Congress most actively; that is, the Republican proposal 
that passed the House of Representatives, the tripartite, and the 
Graham-Miller proposal. The study examined the impact of each of these 
proposals on individual States and what impact each would have on 
seniors and others that would benefit from the program. In every single 
instance, every single State, without a single exception, the one that 
was embraced by the seniors, the one that provided the greatest 
coverage for the seniors, was the Graham-Miller proposal.
  We will have more of a chance to debate that over the next couple of 
days.
  It is very important as we come to vote on the amendment of Senator 
Stabenow to realize what has happened in the last couple of days.
  The focus of the underlying legislation--which was originally 
introduced by Senator Schumer, Senator McCain, and then altered or 
adjusted by Senator Edwards and Senator Collins--basically addresses 
the egregious situation taking place today all over our country by 
unscrupulous brand name drug companies gimmicking the patent laws in 
order to take unfair advantage of consumers in this country and 
maintaining higher costs. They are doing it by extending the patent 
process with a phony regime called ``evergreening'' and also through 
collusion with certain generic drug companies. This practice is 
resulting in costs of billions of dollars to our seniors.

[[Page S7009]]

  If there are people who are watching this Senate proceeding, if there 
are cancer patients and they have been paying higher prices for various 
prescription drugs dealing with breast cancer, the fact is the 
pharmaceutical companies delayed Taxol, the generic drug, for 19 
months. That means consumers paid $1.2 billion more because of the 
delay of competition. If patients suffer from epilepsy, as a result of 
this system, those patients have paid $1.4 billion more than they 
otherwise would have paid. That has been true with various brand name 
drugs for depression, and it also includes blood pressure as well.
  In all those areas, there has been a gimmicking of the system, which 
permitted those companies that had the patents for a period of time, 
and under the old Hatch-Waxman legislation were going to have their 
time expired and the generics would be on the market, to be able to 
compete, and would have saved the consumers billions of dollars. The 
actions of those brand name companies have been such as to result in 
higher prices.
  That is the basic issue we have before the Senate, whether we will 
pass that legislation.
  The Dorgan amendment was favorably considered in a vote yesterday. It 
will also have a dampening down in the increase of prices of 
prescription drugs. And American taxpayers are paying taxes, and those 
resources go to fund expanded NIH research, which I strongly support.
  This is the time of the life sciences, and we will see unbelievable 
opportunities in the future in breakthroughs with prescriptions. It is 
an enormously important time. I believe we will see these breakthroughs 
in the life sciences, as in the physical sciences last century. We have 
seen what is happening with the analysis of DNA, and the sequencing of 
the human genome, and all the breakthroughs with unlimited 
possibilities, using the high technology available and the advancements 
in biology. The opportunities are virtually unlimited. It is an 
enormously exciting time.
  That is why it is important to have a policy that will make available 
to all Americans these lifesaving prescription drugs reasonably.
  We had the excellent presentation made by our friend and fellow 
colleague, Senator Dorgan. The vote was a clear indication that the 
Members of this body are prepared to see that prescription drugs that 
are FDA approved, produced in an FDA-approved laboratory, imported here 
with the safety provisions included in the Dorgan amendment, would be 
available to American citizens.
  Today we have the Stabenow amendment. We have had limited debate on 
the merits of the amendment. I hoped we would have seen an acceptance 
of the Stabenow amendment. It makes eminently good sense. We have heard 
a great deal of debate and discussion about the free enterprise system. 
That is what the Stabenow amendment is all about.

  It is the ability of the States to use their economic power in order 
to negotiate with the various drug companies to try to get the lowest 
possible price for the neediest individuals, the poorest people in the 
United States. And the drug companies say no. Yesterday they said: We 
want to play by the free market system; and now we have a free market 
system being utilized and they say: No, no, we want to play by our own 
rules. What does that mean? They have now taken the various States to 
task and said: We will not permit that because that is government 
interference in the free market system.
  The fact is, what is being tried in the State of Maine and the other 
States is the same kind of market experience we have seen with an HMO 
when they negotiate with various brand name companies. It is the same 
kind of negotiations insurance companies have. It is routine, the same 
as major companies. General Motors does this when they buy prescription 
drugs. It is the same element, to use market forces to try to get the 
lowest possible prices. When they do not want to do that, and companies 
do want them to do it, there is no reason they have to sell. It is a 
free and open exchange.
  That is not good enough. We have seen where the drug industry has 
sued the State of Maine, they have sued the State of Vermont, they have 
sued Michigan, they have sued Illinois, they have sued Florida. The 
drug industry is waging war against our Governors and our State 
legislatures to bring them into court.
  From the NGA statement of July 15, I quote Michigan Republican 
Governor Engler:

       The nation's governors are extremely disappointed with the 
     course of action chosen by PhRMA. It is unfortunate that 
     their organization feels compelled to use the court system to 
     manipulate public policy.

  I will mention another feature of the attack by the industries on the 
States. This is what they are about. First of all, the industry sued 
the State. That probably is not any surprise, given their abuse of the 
Hatch-Waxman. The drug industry instructed its front group, the so-
called Citizens for Better Medicare, to run television, radio, and 
prints ads in Maine and Vermont attacking the laws. That is what the 
drug industry does to keep the prices sky high. They sue our State 
governments, and waste taxpayers' dollars defending against frivolous 
suits, because the States have to defend themselves; they have to use 
tax dollars. And then they run attack ads.
  Lest anyone question whether the so-called Citizens for Better 
Medicare is anything but a front group for the drug industry, let me 
quote the June 18 Wall Street Journal, Tim Ryan: PhRMA's past marketing 
director founded the grassroots sounding Systems for better Medicare at 
the expense of the major drug companies.
  So it is a phony organization, but they use the phony organization to 
attack the public officials in those States for resisting their action.
  Enough is enough. The American people are sick and tired of the drug 
industry's abuses.
  I have an IG report from the HHS inspector general, who issued a 
report in August of last year which documents the fiscal crisis of sky-
high drug prices. Here is the inspector general's conclusion about the 
current Medicaid discounts shared by the States and the Federal 
Government:

       We believe it is not a sufficient discount to ensure that a 
     reasonable price is paid for drugs.

  This is done under a Republican administration, a Republican IG, 
August of last year.
  The Department of Health and Human Services, Office of IG, Medicaid 
pharmacy. This is what he says in paragraph 2:

       Although this discount averaged 10.31 percent nationally, 
     we believe that it is not a sufficient discount to ensure 
     that a reasonable price is paid for drugs.
       We believe that there is a critical need for States to 
     better control the costs of their Medicaid drug program 
     because expenditures are rising at a dramatic rate. Medicaid 
     drug expenditures increased by slightly over 90 percent since 
     our previous review in 1994.

  I repeat, 90 percent. So says the IG report, a Republican HHS 
discussing what is happening in the States.
  Then we have the Governors try to do something about it and PhRMA 
comes right in and says no.
  Senator Stabenow's amendment will clarify that. It will support the 
Governors--support Republican Governors, support Democratic Governors--
support the findings of a Republican IG to help deal with this issue.
  Just in the last day we had a meeting of the Governors, actually, out 
in the State of Idaho. The Nation's Governors met out in Idaho and the 
Governors voiced their concern over the lawsuit that seeks to bar the 
States from dealing with the Medicaid cost-controlling measures.
  This is the Governors saying just what Senator Stabenow has been 
saying, Republican and Democrat alike.
  This is a serious amendment. Therefore, I am very hopeful it will be 
accepted.
  Let me bring to the attention of the membership, something that has 
developed in my own State of Massachusetts, in the U.S. attorney's 
office. One of the developments in recent times is the development of a 
health fraud unit, which has been extremely active. I was talking to 
our U.S. attorney recently up there. We were discussing the situation 
about health care fraud. He mentioned to me this particular case.
  Just last October, the Federal authorities secured the largest health 
care fraud settlement in history. Not surprisingly, it was against a 
drug company for overcharging taxpayers through Medicaid--just what we 
are trying to deal with here in the U.S.

[[Page S7010]]

Senate. The Top Pharmaceuticals paid $875 million in criminal and civil 
fines for overcharging the States and the Federal Government for the 
cancer drug, Lupron. It is a life-or-death cancer drug, and here you 
have Top Pharmaceuticals found guilty of overcharging consumers and now 
having to pay the criminal fines and civil fines of $875 million. There 
are now class action litigations brought by consumer advocates in 
Boston to further recover the overpayments to this drug company.
  We need to close ranks with our States, Republican and Democratic 
Governors alike--consumers against high drug prices. The Stabenow 
amendment is the right tool in the hands of the States to lower drug 
prices for low-income people and the uninsured.
  I want to reiterate two facts. Who are the States looking out for? 
Are they trying to use their bargaining power in terms of a massive 
purchase of drugs for all the people in their States? No. They are 
trying to use it for the most needy people in their States in most 
instances--and I think in the State of Maine, in every instance--those 
who are uninsured, the poorest of the poor who cannot get insurance for 
one reason or another, or are not eligible for Medicaid, in order to 
get them lower costs. It is the poorest of the poor trying to get life-
sustaining drugs, and PhRMA, the industry, is going after that and 
saying they do not want that to take place. They think that is un-
American. They think it is price fixing and so forth.
  We have seen, and I have certainly seen it in our committee because 
it was not believed we would get this legislation out of the committee 
because we heard the drug industry is strongly opposed to it--and we 
have certainly heard that from our friends on this side of the aisle--
we understand that--they are opposed to it. They are opposed to the 
Schumer proposal. We understand that. They are opposed to the Dorgan 
proposal. We heard that yesterday. And they are opposed to the Stabenow 
proposal.
  What we have not heard is what they are for. What we have not heard 
is what they would do. What we have not heard is their sense of outrage 
about these abuses. We have not heard that.
  We have been here the better part of the day today, yesterday, the 
day before, and we have not heard that. That is a matter of deep 
concern to everyone on this side of the aisle. It is the reason the 
majority leader has brought this up to the Senate, on the floor of the 
Senate.
  I heard my good friend--and he is my friend--the Senator from 
Tennessee, talk about the process and procedure, about whether we are 
circumventing the procedure in order to consider the legislation. Of 
course it did not bother him very much in May of 2000 when they brought 
up the energy bill, sponsored by Senator Lott, without committee 
approval; or brought up, on March 20, a bill to eliminate the earnings 
test for individuals attaining retirement age, without committee 
approval. The list goes on. In June 1999, the Republicans brought up 
Social Security lockbox without committee approval. It didn't bother 
them at that time.
  But what you did not hear about is a prescription drug program for 
the needy in this country. They were never willing to circumvent the 
rules to try to protect the seniors or try to get lower prices. No, 
there is no example for that. We have had legislation in the committees 
for over 5 years. This is the first time--the first time--the only time 
that we have had the opportunity to debate.
  Next Tuesday will be the first time we have had the opportunity to 
vote. And people are complaining about process and procedure.
  We know what happens. Every Member in this body knows what happens 
when you get back in those committee rooms, you get out in the 
corridors--we know what happens. That is the end of the legislation. 
That is the end of it. We all know it. But we know next Tuesday we are 
going to have a chance to vote on this. It will be the first time, and 
we would not have that opportunity unless Senator Daschle said: This is 
a matter of national priority. This is a matter of central concern. 
This is an issue that ought to be debated and discussed on the floor of 
the Senate. This is a moral issue of central concern to every family, 
young and old--not only those who take the drugs but the families who 
look at their parents and are concerned about whether they have the 
resources to purchase those drugs.
  The parents themselves do not want to burden their children about 
their own kinds of conditions. They are proud men and women who want to 
live in dignity and who have paid a price for this Nation--fought in 
the wars, lifted the country out of the Depression.
  The PRESIDING OFFICER. The time allocated to the Senator has expired.
  Mr. KENNEDY. The last 5 minutes has expired? I asked to be reminded 
when I used 15 minutes.
  The PRESIDING OFFICER. The Senator can use that time now--5 minutes.
  Mr. KENNEDY. The remaining time.
  Mr. President, these are people who have built the country. Now we 
are asking whether they have paid into the system. I was here in 1965 
when that commitment was made here on the floor of the Senate, 
Republicans and Democrats alike. The President who signed it--President 
Johnson as well--said:
  Look, play by the rules, pay under the system, and when you turn 65 
you will have health security.
  Everyone in this room understands it. This Chamber understands that 
we failed the elderly people on that promise. We provided physician 
services and hospitalization but not prescription drugs. That is a 
three-legged stool. If you only have two and you do not have the third, 
you do not have health security. Every family understands that, 
everyone except the Senate.
  We are prepared to do something about it. Can you imagine if we had 
not provided hospitalization or physician services? We would certainly 
understand it. Would we not be debating that today? Does anybody 
believe it to be so? Does anybody believe this is not important?
  Finally, I remind everyone in this body as we are coming in, and as I 
intend to remind them next week, every Member of this body has a 
prescription drug program.
  Every Member of this body has a prescription drug program that is 
paid for by taxpayers by 80 percent. We understand that. Any Member of 
this body who wanted to go down to the clerk's office could go in there 
and say: Take my name off that. I don't want it. I don't believe as a 
matter of principle that we ought to have the Federal Government 
dealing with this policy.
  Anyone could do that. I have checked on it. There isn't a single 
Member in here who has done that.
  All we are trying to do with this particular proposal is to treat the 
American people the same way Republicans and Democrats and this 
President are being treated. Is that asking too much for this body to 
do? I don't believe so.
  I withhold the remainder of my time.
  The PRESIDING OFFICER (Mrs. Carnahan). The Senator from Oklahoma is 
recognized.
  Mr. NICKLES. Madam President, I rise in opposition to the Stabenow 
amendment. I will mention several reasons.
  First and foremost, it is going to increase in the price of Medicaid. 
I want to make sure our colleagues know that. I am going to say it 
about 10 times in the course of this debate. If we pass the Stabenow 
amendment, the price of Medicaid is going up. The price of drugs going 
into the Medicaid system is going up. That is just a fact that 
everybody should know.
  If we think that we are going to pass this amendment and that this is 
a great deal for the State--I disagree. The States have to share in the 
cost of Medicaid, and the cost of Medicaid is going up.
  I heard my good friend--he is my good friend--the Senator from 
Massachusetts say the Governors have united; we need to get cost 
controls on Medicaid.
  This will mean a monumental increase in the cost of Medicaid. I think 
I can say that very plainly and very easily. I want to make sure 
everybody is aware of that.
  Let me mention a couple of other reasons we should be opposed to this 
amendment.
  Some people say ``process.'' Did we have a hearing on this bill? No. 
Did we have a markup on this bill? No. Was one even requested? I don't 
think so. The Democrats are in control of the

[[Page S7011]]

Senate. Senator Baucus is chairman of the Finance Committee. If he 
wanted to have a markup on this bill, he could have done that.
  I see the sponsor of the legislation. I will ask her. Have we had a 
hearing on this bill, and have we had a markup on this bill in the 
Finance Committee?
  Ms. STABENOW. Madam President, I think my friend from Oklahoma knows 
that in fact that did not have a hearing. That is not unusual. That 
happens sometimes in the process. I have only been here 1\1/2\ years. 
But there are many times when that has occurred. The Senator is 
correct. That has not occurred on this bill.
  Mr. NICKLES. Let me ask another question. Is it not correct that your 
bill will increase the cost of drugs going into the Medicaid system?
  Ms. STABENOW. I would argue that that is not the case, absolutely 
not. Under the program right now, States operate with companies, and I 
don't have any indication whatsoever that it is going to increase the 
cost of Medicaid. I certainly would have to object to that.
  Mr. NICKLES. I will make the case that it does. I believe I will show 
that GAO happens to agree with me. GAO has studied this issue. They 
basically said it boils down to the fact that if everybody gets a 
discount, nobody gets a discount. That is the economics of it.
  Right now, you have a system where Medicaid gets the best price. 
Medicaid gets the best price--lowest price--in the country. But if 
everybody gets it, nobody gets it. If everybody gets a 15-percent 
discount, that is the price. This is not a discount. That is exactly 
what we are doing here. You are going to increase the cost of Medicaid 
by not giving a discount. Does that mean everybody's drug costs are 
going down? Actually, no. It means the discount or the best price is 
going up.
  Ms. STABENOW. Will the Senator yield?
  Mr. NICKLES. I will not yield. I want to make a lot of comments, and 
I will be happy to discuss it. But I only have limited time. I want to 
make sure I make all of these points.
  No. 1, this is an important issue. It hasn't had a hearing.
  This committee is now controlled by the Democrats. It has been for a 
year and we haven't had a hearing. I don't know that one has been 
requested. I am on the committee, and I am on the subcommittee.
  Some people say that is not insignificant, that we do a lot of 
things.
  When you are talking about major issues--and we are talking about 
prescription drugs for all of our seniors--we should have a hearing on 
this. We should have a markup.
  There happens to be, collectively, on the Finance Committee hundreds 
of years of experience dealing with Medicare, Medicaid, and 
prescription drugs. A lot of us are willing to put some input into it. 
That is the reason we have the committee process.
  I am ashamed of the way the Senate is operating today in this 
fashion. We are taking probably the most important and most expensive 
piece of legislation considered in decades and it hasn't had a hearing, 
it hasn't had a markup, and it hasn't had a scoring by the 
Congressional Budget Office--none of the above--and yet we are in the 
process of marking it up. We are going to have votes on Tuesday on a 
proposal that nobody has a clue about how much it costs.
  On one of these proposals, some say it will cost $500 billion. Others 
say it is closer to $800 billion. Although, they forgot to tell that it 
only lasts a few years, and it is sunset. Then we will stop paying for 
prescription drugs. No entitlement sunsets after a few years. If 
somebody thinks we are going to start paying for prescription drugs and 
then we are going to stop, that is more than hypothetical. That is 
misleading.

  If we are talking about trying to put corporate officers in jail for 
misleading financial statements, we ought it be ashamed of what we are 
doing in the Senate. We are taking up the biggest expansion of an 
entitlement program, and no one has a clue about how much it costs. And 
we are going to say we are fiscally responsible? Shame on us. We do it 
without a hearing, without a markup, and without scoring from the 
Congressional Budget Office. That is a really poor way to legislate. 
That is the way you get things started, and you later say: Wow, I had 
no idea it would cost this much.
  Let me be a little more specific about the amendment of my colleague 
and friends from Michigan.
  Very seldom do we legislate by intervening ourselves before a case 
goes before the Supreme Court and say this is the way we mean for it to 
be. We usually let the Supreme Court make the decision. This issue is 
before the Supreme Court. The position of the Senator from Michigan 
lost at the district court level. Then she won at the circuit court 
level, which has now brought the case before the Supreme Court. But we 
are going to intervene before the Court and say: Oh, here is what we 
mean. Rewrite the law.
  Basically, we are going to say: All right, under the Medicaid system, 
which gives a discount--the best price for Medicaid beneficiaries, low-
income beneficiaries--we are going to say that is applicable to anybody 
the State deems eligible.
  Guess what. A lot of States have programs for drugs that have no 
limitation on income.
  Senator Kennedy mentioned three times that we need this program. He 
said the Senator from Michigan is trying to help the neediest and the 
poorest of the poor.
  I looked up in the State of Massachusetts. This drug program has no 
income limitation. You could be a billionaire in Massachusetts and you 
would be benefitting from this program. This has is no direct 
relationship to income.
  In the State of New York, it is 419 percent of the poverty level. 
That is about $50,000 for a couple.
  So this idea of saying this just applies to the neediest--no, this is 
hijacking. That happens to be the word used at the district court 
level--a program that was targeted to benefit the low-income people and 
say, wait a minute, we want it to apply to a lot of other people who do 
not need the income eligibility of Medicaid.
  We are going to take a discount program that was designed and 
targeted to help low-income people and say it applies to a lot of 
people, let's make it apply to everybody.
  Really, what you are talking about are price controls. But what you 
are talking about is saying, we are going to take a discount right now 
that is targeted towards low-income people, and we are going to spread 
it around to a lot of other people who aren't low-income, and who in 
some cases have unlimited income. Does that really make sense?
  Let me give you an analogy. Maybe sometimes economics arguments are 
hard to follow, and maybe with prescription drugs it is harder than 
others. Let us take an example.
  I see my good friend and colleague from New Hampshire. He is the 
former Governor of New Hampshire. As Governor, he purchased automobiles 
for the highway patrol and for the State police. My guess is that, as 
Governors, they get a good deal for the automobiles that are sold to 
the highway patrol and to the State police. He probably buys hundreds 
of them. Certainly, in a large State such as New York, or Michigan, 
they buy hundreds, and maybe thousands. So they get a good discounts. 
They get a better deal than the average consumer.
  But if you are going to say, wait a minute, let us not just give this 
to the police, and a volume discount to the State, let us just give 
this to basically anybody in the State. That sounds pretty good, 
doesn't it? We are all going to get a good deal.
  Guess what happens now. The price at which they were selling to the 
State before has just gone up.
  In other words, if everybody gets the discount, nobody gets a 
discount. You are going to find out that the savings that the highway 
patrol had by buying several hundred vehicles just disappeared because 
they are not going to get any better deal than anybody else on the 
street.
  That, in effect, is what is going to happen if we adopt the Stabenow 
amendment. This is a costly amendment if we are going apply this 
discount that Medicaid now gives on best price for Medicaid to every 
State program--and some State programs are quite generous. I mentioned 
for the State of New York it applies to individuals up to 419 percent 
of poverty; for a couple, incomes up to $50,000. In Massachusetts, 
there is no income limit.

[[Page S7012]]

  So if you make it apply--incidentally, under this amendment, a 
Governor could say: For any drug sold in my State, I am going to have 
it come under this agreement because I want to offer low-priced drugs 
to anybody who comes in the State of Oklahoma. So if that is the State 
program, then every drug would fall under this program. So the net 
result is, everybody gets a discount. Let's break out the champagne. 
This is a great deal.
  What you have done is, you have taken away--if that is the case--the 
discount for the low-income people on Medicaid and just taken it and 
spread it out to everybody else. Is that really what we want to do?
  If we adopt the Stabenow amendment, I am just telling you right now, 
you are eliminating the discount, you are eliminating the low-targeted 
subsidy that we are now giving low-income people. So if everybody gets 
the discount, nobody gets the discount. You have just targeted and, 
quite frankly, greatly increased the cost of the Medicaid Program. You 
have increased the cost of what is targeted towards low-income people, 
the people who really need the help.
  Keep in mind, this is not targeted to seniors. I have read the 
Stabenow amendment very closely, and it does not say anything about 
income limits. As a matter of fact, it says: Hey, you don't have to 
meet income limits in Medicaid. You don't have to meet eligibility. You 
don't have to be unemployed. You don't have to be uninsured to benefit 
under this amendment. It applies to almost everybody.
  If the Governor and the legislature write a program broad enough, 
anybody can apply. Anybody would. So everybody gets a discount. How 
great is that? It means that nobody gets a discount. This is the impact 
of this amendment.
  It is going to increase costs, as well as costs to the Federal 
Government. Maybe this thing will become law. Mark my words, we will 
just write it down. Today is July 18. Don Nickles says if this 
amendment passes, you are going to see Medicaid costs go up. We will 
find out. Some of us will be here for a while. Sometimes we do things 
that have results. This will result in Medicaid costs going up.
  So the very people we think we are trying to help--whoa, wait a 
minute, we are not helping Medicaid people; we are hurting Medicaid 
people because they will have to pay more for their drugs. They will 
lose their discount. This discount will be spread out amongst a lot of 
other people.
  Let me make a couple other comments.
  It not just me saying it. This is not my hypothetical situation: 
Well, Don Nickles says: Wait a minute, this may backfire.
  The General Accounting Office did a report. I will read part of this 
and then include it in the Record:
  In an August 2000 report, the GAO determined:

       The larger the group that would be newly entitled to 
     receive a federal price, the greater the incentive for drug 
     manufacturers to raise that price. The Medicaid rebate 
     experience suggests how federal and nonfederal drug price 
     discounts could change if Medicare beneficiaries had access 
     to the same price discounts available to federal purchasers. 
     Following the enactment of the rebate program, discounts for 
     outpatient drugs decreased significantly because 
     manufacturers raised the prices they charge large private 
     purchasers.

  That is from the General Accounting Office. That is looking at the 
facts after we enacted the discount program some time ago. They are 
saying, if you expand that base of people eligible for a discount, 
costs are going to go up. It is just a fact.
  The other thing is, the Stabenow amendment harms Medicaid 
beneficiaries. It will raise drug prices in Medicaid and raise Medicaid 
Program costs at a time when States can least afford it.
  I will mention something from the administration. I have a note from 
them:

       The administration opposes any change in the Medicaid law 
     that would increase Medicaid drug prices and reduce Medicaid 
     coverage. This is what the Stabenow amendment would do. 
     Medicaid law has always focused on what is best for Medicaid 
     beneficiaries. The administration opposes changes in the 
     Medicaid law that would harm Medicaid beneficiaries. The 
     administration said this is what the Stabenow amendment would 
     do. That is exactly what this amendment would do--exactly.

  I do not find this to be rocket science. You just tell everybody they 
are going to be able to get a discount, then nobody gets a discount. 
Medicaid? Sorry, you are going to have to pay more. They do get a 
discount now. They do get the best price. They do get the lowest price 
of anybody in the country. But if you make that applicable to everybody 
in the country, then nobody gets it. That is what is going to happen.
  I am just kind of against that people think: Oh, yeah, we will just 
do this, and this will save money. It is going to cost money. It is 
going to cost money from people who can least afford it. And it is 
going to greatly exacerbate the problems that many of our States right 
now are struggling with, and struggling with greatly. So I just wanted 
to mention that. I think it is important.
  I will mention two or three things. Let's not increase the cost of 
Medicaid. That is what this amendment would do.
  No. 2, let's not intervene in a case before the Supreme Court. That 
is pretty foolish.
  How many of us really studied this case? How many of us have studied 
the Maine law? How many of us have studied the idea that: Oh, yes, we 
are going to say that this program, that was designed for Medicaid, 
should really be applicable to all programs?
  Is that really a smart thing to do? Does it have some delusion or 
some negative impact on one small group if you say it applies to 
everybody? I think it is very shortsighted.
  So I urge my colleagues to vote no on this amendment. And if, for 
whatever reason, this amendment is adopted, I will tell my friend and 
colleague from Michigan, I am going to offer an amendment, and the 
amendment is going to have the effect to guarantee that the amendment 
would not have an adverse impact on Medicaid.
  My colleague stated, with assurances: Oh, I am sure it will not 
increase Medicaid costs. The administration says it would. GAO says it 
would. I think anybody who looks at it says it would. But if she is 
that confident, then I hope she will accept my amendment that says the 
proposal will not be effective if it is proven to have an adverse or 
increased cost in Medicaid drug prices.

  I will have that amendment later should her amendment prevail. I hope 
it does not prevail. I think it is a mistake.
  There is a reason we have a committee process. The reason we have a 
committee process is we have two different ideas on this and two 
different opinions. We could have experts come in and testify, and they 
could say exactly what they think the results would be of the Stabenow 
amendment.
  We have not had that opportunity. I would love to have that. I will 
be happy to participate in a hearing on it next week, next month, 2 
months from now, and find out what the experts think, the people who 
are in charge of CMS, the old HCFA. Let's see what they have to say. 
Let's see what other experts say.
  Let's hear from Governors who not only have Medicaid that they are 
wrestling with, but other programs. Hey, there are some pluses and 
minuses in it for them. After all, they have to pay part of it.
  Ms. STABENOW. Will my friend from Oklahoma yield for a question?
  Mr. NICKLES. I will be happy to yield.
  Ms. STABENOW. I am wondering if you are saying for the future, then, 
any amendment that comes to the floor that has not gone through a 
committee or subcommittee, you intend to oppose from here on out? Is 
that correct, for as long as you and I are here in the Senate, you 
would, in fact, oppose any amendment that comes before us that way?
  Mr. NICKLES. I tell my friend and colleague, I think the committee 
process is being totally ignored by the present leadership in the 
Senate.
  Ms. STABENOW. But does that mean you will, in the future--as opposed 
to what has happened in the past--object to anything that comes to the 
floor, any amendment that comes to the floor that has not gone through 
the committee process? I would be interested in knowing if, in fact, 
that is your position.
  Mr. NICKLES. I would not go that far. But I tell my colleague, I will 
be

[[Page S7013]]

happy to join her in requesting Senator Baucus to have a hearing on her 
proposal as soon as possible. Let's bring in the experts. Let's see 
what they have to say.
  I am a little bit chapped at the fact that I had been in the Senate 
for about 16-some years before I even got on the Finance Committee, and 
now it is not working. It has the reputation of being one of the most 
powerful, great committees, and it does not meet.
  The chairman of the committee does not call meetings on this. We have 
not had a markup on the prescription drug bill. I would liked to have 
input. I would like to be able to offer an amendment. And I would like 
to have testimony so we can find out what the substance of the proposal 
is, what the impact will be. How much will it cost States? How much 
will it increase Medicaid costs?
  I heard somebody say: Well, we think it would increase Medicaid costs 
by $1 billion or a couple of billion dollars. I think it may be a lot 
more than that. But I would like to know. Well, we don't know. We have 
not had estimates. It would be nice to have CMS give us an estimate.
  Have we had the chance to do that? No. Because we have not had a 
hearing. I don't believe a hearing was requested, but it should have 
been. And the chairman of the committee should have agreed.
  I will just tell my colleague, I am happy to participate in a hearing 
so we can get the facts out. But to change a program totally, and say, 
OK, we are going to have price controls and discounts for one group, 
and now we are going to expand it for everybody, with these great 
savings, assuming that everybody is going to get the savings--the net 
result is, nobody is going to get the savings. Instead of everybody 
getting a discount, nobody is going to get a discount. And that is the 
unfortunate result.
  Ms. STABENOW. Will the Senator yield?
  Mr. NICKLES. No, I will not yield.
  That is the unfortunate result of her amendment. It is just too bad 
that we bypassed the committee. I don't know why the chairman of the 
Finance Committee and the ranking member are not saying: Wait a minute, 
this might be a good proposal. Let's have a hearing on it. We will mark 
it up. We will consider it.
  We haven't done that; again, for something that involves State after 
State, a Supreme Court decision that will be made in probably a few 
months. We are going to interject ourselves with a trivial amount of 
debate on the floor, and we will have Senators vote on it and probably 
not half a dozen Senators have looked at the amendment in any detail. 
That is not a good way to legislate.
  I reserve the remainder of my time.
  Mr. GRASSLEY. Mr. President, I do not support Senator Stabenow's 
amendment No. 4305 to S. 812 to amend section 1927 of the Social 
Security Act. As my colleague Senator Nickles pointed out during 
debate, this amendment raises important policy and budgetary questions 
that have not yet been considered by the Senate during a hearing or a 
committee mark-up. The far-reaching nature of this amendment deserves 
serious consideration by Congress prior to a vote. Additionally, at 
present there are pending legal decisions related to matters addressed 
in this amendment, and I believe it is worthwhile to await the decision 
of the courts prior to enactment of this amendment. For these reasons, 
I do not support this amendment, but I reserve the right to re-evaluate 
the matter at a later date.
  Mr. KENNEDY. Madam President, what is the order now? We were 
allocated time to different individuals, and then at the conclusion of 
that we were going to recognize the Senator from Michigan to make final 
comments. I think Senator Gregg is here.
  The PRESIDING OFFICER. The Senator from New Hampshire has 5 minutes 
and the Senator from Michigan has 5 minutes.
  The Senator from New Hampshire.
  Mr. GREGG. Madam President, it was my understanding that I had 5 
minutes plus 7 minutes which would have been 12 minutes.
  Mr. KENNEDY. That was my understanding as well. I think the Senator 
was recognized for 5 minutes and then when they extended the time of 
the Senator from Michigan, I think they extended the time of the 
Senator from New Hampshire as well. I would ask that he be accorded the 
12 minutes.
  The PRESIDING OFFICER. The Senator is recognized for 12 minutes.
  Mr. GREGG. I understand there is a desire not to have us go to a vote 
until 5:40 or so. So there is extra time here. I would suggest that I 
take 12 minutes and the Senator from Michigan take 12 minutes, that we 
equally divide the time between now and 5:40, and then, at 5:40, 
proceed to a vote.
  Mr. KENNEDY. That is satisfactory to me. I generally try to check 
with our leadership.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. KENNEDY. I think, for the benefit of the Members, the time for 
the vote will be at 5:40.
  Mr. GREGG. Let me first associate myself with the excellent comments 
made by the Senator from Oklahoma who has made most of the points I 
would have made but made them with more energy and eloquence.
  If you look at this proposal which has come forward, offered by the 
Senator from Michigan, essentially its outcome will be that the 
discounts allowed under Medicaid, which States get for their Medicaid 
recipients, which are significant discounts--nobody should 
underestimate, these are big discounts which drug companies that make 
your product are required to give to the States through the Medicaid 
process--those discounts under the proposal of the Senator from 
Michigan, those discounts will now be transferable to a whole new 
population of people, a very large, potentially very large population 
of people.
  As the Senator from Oklahoma pointed out rather correctly, that 
population is not necessarily going to be means tested, not necessarily 
going to be of need. It could simply be a population which qualifies 
for this new discount under a State plan.
  As a result, what you are going to do is end up for those drugs 
significantly reducing the revenues which flow to whoever produced that 
drug. What is the impact of that? Assuming that this is not a situation 
where the people who produced the drug are charitable organizations but 
are, rather, organizations which, in order to be able to produce that 
drug, had to go out and borrow money from somebody through the capital 
markets or through actual borrowing in order to be able to raise enough 
money to be able to bring that drug to market, remembering that the 
average cost to bring a drug to market in America today is somewhere 
between $500 million and $800 million and it takes somewhere between 10 
and 12 years, assuming that this is not a charitable organization, then 
that company, in order to be successful, those people who invented that 
drug, who created that drug, who put their life into that drug for 12 
years, managed to manufacture it after going through all the hurdles--
and believe me, there are an unlimited number of hurdles, an incredible 
number of hurdles, at incredible expense, had to go out and line up 
their financing to do this--those people are going to have to raise the 
cost to somebody else. Because they still have to pay off the people 
who financed the drug. They have to give a reasonable return to the 
people who invested in that company or they are not going to be able to 
produce another drug. The drug that they produce may put them into 
bankruptcy for all intents and purposes, if they can't get a fair 
recovery on it.

  What is the practical implication? Essentially what we are doing here 
is another example of saying: The big, bad, greedy drug companies, they 
can take the hit no matter what. They can take the hit. We have seen it 
happen out here on the floor. We have heard the argument from the other 
side. We can just do this because the big, bad drug companies are going 
to take the hit.
  Let's remember what we are talking about. We are talking about one of 
the most important elements of our society, organizations which are 
producing products which are making American lives better, longer, and 
more healthy. Is it our goal to fundamentally undermine the capacity to 
do that? If we continue on this course--and this is obviously not the 
most extreme example of it, but this is a clear example of price 
controls and an attempt to drive

[[Page S7014]]

down the return on the ability of somebody to produce a product, which 
saves lives--if we continue on this process, we are essentially going 
to be plucking the feathers, rather aggressively, of the guys who are 
laying the lifesaving drug.
  In the end we are not going to have a whole lot of gooses or they are 
going to be geese that don't have enough ability to produce those 
lifesaving drugs anymore because they don't have any feathers left on 
their bodies. This is really pretty obvious, if you think about it 
logically.
  Capital in a marketplace system--I understand this is an elementary 
concept which has escaped some people in the Government--flows where it 
gets a return. That is just simple fundamentals. By capital I mean 
money which allows people to invest in products, which creates jobs, 
and create items that give us as a nation a better chance to compete 
internationally but, more importantly, gives our American people a 
better standard of life.
  Capital flows where it gets the best return. If you reduce radically 
or even if you reduce incrementally but in a way that is basically 
pyramiding on top of itself like straw on a camel's back, if you 
continue to reduce the ability of the people who are creating the new 
drugs which are saving lives to have a viable market to go into and get 
capital; in other words, to be able to go to somebody who is willing to 
lend them money or willing to invest in their business and expects a 
reasonable return, if you reduce their ability to get a reasonable 
return or to pay that debt, you inevitably reduce the amount of drugs 
coming to the marketplace that will benefit citizens.
  In the process, you cut our productivity, cut our national 
competitiveness, and take what is a very vibrant part of our economy 
and undermine it.
  I realize it is great politics to come to the floor of the Senate and 
claim that if we do this we will be helping the poor. We will be 
helping the indigent, helping people who need help. That is great 
politics. But if you are not producing the drugs, you are not helping 
anybody. If that lifesaving drug, that drug that is going to give 
people a better way of life, isn't going to come to market because the 
people who produce it can't get the money to make it because they can't 
go in the capital markets and get a decent return, then you are not 
helping anybody. It is a fraud to come to the floor and claim you are 
helping all these people. There was a statistic, which I found most 
interesting, cited today by a colleague on the other side of the aisle. 
They said that in the biotech industry today there are a thousand 
firms, but only a hundred of them have products on the market, and we 
are really excited to think the next 900 are going to come to market 
with their products.

  Well, if we continue to pluck this goose, those 900 firms are not 
going to come to market with their products because they are not going 
to have the financial strength to survive the 9, 10, 11, 12 years it 
takes to get to market with their product. It takes money, cash, 
capital flowing into those companies--and paying the employees, by the 
way. It doesn't happen to go to somebody making a gazillion dollars; it 
goes to the employee. It takes money, cash, and capital to fund that 
period from the time you think of the product, from the time you invent 
that concept, from the time it germinates as an idea in some wonderful 
scientist's mind, to get it to the market, and $500 million to $800 
million. So those 900 companies that are out there that don't have a 
product on the market, but if those products come to the market--this 
was their point--those products will save hundreds of thousands of 
lives.
  Those products are not going to be there if we continue on this path 
of, every time we turn around, taking another nick--a fairly 
significant nick--out of the ability of those companies to be viable.
  Are those companies evil and greedy because they want to bring to the 
marketplace something that is going to improve the lives, or extend the 
lives, and improve the quality of life of Americans--and, well, yes, be 
sold in Canada for less because they take advantage of all our 
research, in a very mercenary way, as does the rest of the world? No. 
They want to produce a product that is going to improve the quality of 
life of Americans; and they are willing to do it, willing to put at 
risk their time, effort, brain power, and their resources, including 
cash and capital.
  But the argument on this floor is they are greedy, so let's just shut 
down their capacity to do that. And then, at the same time, we are out 
here claiming: But we are going to have a wonderful, viable drug 
industry in this country, and we are going to continue to be on the 
cutting edge.
  Well, we are not. We cannot continue to say to people who are 
producing products you can't get a fair return on your product and 
expect that they are going to continue to produce their products.
  This amendment is not overwhelmingly egregious, but it is one more 
straw on the back of the ability of the marketplace to move their 
capital into the production of quality health care products versus 
moving it into who knows what--software for video games or movies that 
are violent or whatever else for which the capital gets a better 
return.
  The basic element of this amendment is that we are going to take a 
very limited program, which demands that people sell a product at 
significantly less than what the market will bear, and should bear, in 
order to give a reasonable return and demand that it be spread across a 
whole new population. And as a result, that population will get a lower 
cost drug, no question about it. But somebody else is going to have to 
pay more for the ones that come to market and are put under that 
system. It is like a balloon, when you squeeze it in one place, it pops 
out in another place. Other people--probably those on an insurance 
program--will pay more. So their insurance will go up and maybe they 
will become uninsured. We can also talk about that. More importantly, 
fewer people are going to be willing to pursue the path of producing 
quality drugs because you are not going to be able to go into the 
marketplace and get the capital to do it. That is what this debate 
comes down to--whether this feel good, ``I care about everybody'' 
concept that says that the way you feel good and you care is you 
basically say the drug companies are greedy, the production is greedy, 
the biotechs are greedy, and you drive their price down so they can no 
longer compete, but for a while at least people get a lower cost drug.

  I will admit there will be a window where you will be successful. But 
4 or 5 years from now, or 8 years or 10 years from now when that drug 
that might have addressed the issue of Alzheimer's, or of arthritis or 
addressed the issue of arteriosclerosis, multiple sclerosis, or any 
number of diseases, that drug didn't come to the market because the 
person who had the idea could not get the money in the capital market 
to finance the 8 to 12 years and the $500 million to $800 million to 
bring it to market because there was not a market that generated that 
kind of return. Have we done a lot of good for the American people 
then? I don't think so.
  So as we move down this road, we have to be balanced. Good ideas may 
flow, things that seem appropriate to the moment. We can throw them 
out, but let's evaluate them in the context of what their ultimate 
outcome will be.
  How much time do I have remaining?
  The PRESIDING OFFICER. The Senator has 10 seconds.
  Mr. GREGG. Well, I may use all my 10 seconds. I will reserve that 
time.
  The PRESIDING OFFICER. The Senator from Michigan is recognized.
  Ms. STABENOW. It is difficult for me to know where to begin with all 
of this what I view as misinformation. I will at least clarify what I 
believe to be the facts regarding the situation in the bill and, beyond 
the bill, the general issue regarding the pharmaceutical industry.
  I ask unanimous consent that Senators Clinton and Leahy be added as 
cosponsors of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Ms. STABENOW. I find it interesting, there is great concern about 
expanding discounts to people who are not on Medicaid. Do you know what 
is unfair in this country right now? The only people who pay retail, 
the only people who pay the highest prices in the world are people who 
are uninsured. No insurance company pays retail. Every insurance 
company, including Blue Cross Blue Shield, or any company, gets a 
discount. The States as well--when we

[[Page S7015]]

buy for the VA hospital, the Federal Government--we negotiate a 
discount. Under Medicaid, we have given the States the ability to get 
what is, frankly, a modest discount--15 percent on brand name drugs, 11 
percent on generics. So they don't pay retail. Nobody pays retail. 
Everybody gets a discount, except for one group--the uninsured in this 
country.
  The majority of those using prescriptions who are uninsured are our 
senior citizens--the seniors and the disabled of this country. How 
unfair that we would think they, too, should get a discount. This 
amendment only affects those who are uninsured. Why? Because everybody 
else already gets a discount. So if you vote no on this, you are saying 
this system right now that allows States to get discounts under 
Medicaid, the Federal Government for the VA, Blue Cross Blue Shield, 
and every other system--our own insurance system as Federal employees, 
we don't pay retail--if you vote no, you are saying the only people who 
don't deserve a discount from retail are uninsured seniors and 
families. The folks who are not seniors--most of those who are 
uninsured work and they work for small businesses. Those small 
businesses are struggling every day to provide health care and they are 
seeing premiums go up 30 to 40 percent a year, and most of that is 
because of prescription drugs.
  This is a modest amendment. This is an amendment that simply says our 
States that are struggling right now, both to pay for Medicaid and also 
to provide some kind of lower cost prescriptions for their citizens, 
mostly seniors who don't have insurance, ought to be able to use the 
creativity of a State, the great ``laboratories of democracy'' that I 
hear about all the time from my colleagues on the other side of the 
aisle--let them continue to do what they are doing, be creative to 
lower prices.
  I might just quote something that was quoted earlier today by my 
colleague from Massachusetts, and that is my own Governor of the State 
of Michigan, who is leading the National Governors Association. We have 
meeting now Governors who are concerned about prescription drug costs 
and wanting to provide programs for their citizens, being sued, many of 
them, because they want to expand the discount for lower prices, to be 
creative like Maine and Vermont.
  We had from Governor Engler:

       The Nation's Governors are extremely disappointed with the 
     course of action chosen by PhRMA, said NGA chairman Michigan 
     Governor John Engler. It is unfortunate that their 
     organization feels compelled to use the court system to 
     manipulate public policy. With pharmacy costs alone rising 15 
     to 20 percent each year, all purchasers, including the 
     manufacturers themselves, are using tools that manage costs 
     while maintaining quality and access to affordable 
     pharmaceuticals.

  That is about an optional program to say to the States: If you choose 
to be creative and use your leverage under Medicaid to expand a 
discount to people who do not get a discount, who are the only people 
who do not get a discount, who are the uninsured, mostly seniors, that 
you can do that.
  I commend the administration because under this administration, the 
Bush administration, the Solicitor General, Theodore Olson, went to 
court in support of the Maine plan. He said in his brief:

       The initiative should be allowed to go forward without 
     further intervention.

  Olson argued:

       States enjoy a broad measure of flexibility in tailoring 
     the scope and coverage of their Medicaid plans and that court 
     review of Maine Rx was not warranted.

  I commend him and the administration for stepping in on the side of 
States rights, which is what this is all about. This is about States 
rights. It is not about concerns about the pharmaceutical industry.
  I understand they will fight everything, they have been fighting 
everything, they will continue to fight everything. There is no 
question about that. We fully expect their arguments to be put forward 
on this floor.
  I wish to make two other points; that is, when we talk about the 
industry as a whole and the concern that maybe the uninsured would get 
the same discounts as people with insurance, and what that would do to 
the poor pharmaceutical companies, we need to look at what the real 
picture is today economically with this industry as we are concerned 
about making sure our seniors pay, when they walk into a local 
pharmacy, the highest prices in the world.
  A study that was put out yesterday by Families USA shows some 
startling comparisons. We all want research. We want those new 
lifesaving drugs. Unfortunately, 80 percent of the new patents being 
approved by the FDA are ``me too'' drugs, not new lifesaving drugs, but 
we want those.
  I am deeply concerned about the direction of the companies. The 
pharmaceutical company is more about being a sales machine, sales and 
marketing, quarterly reports and profits than about creating new 
lifesaving drugs, and that is of deep concern to me as to the future 
for all of us in health care.
  A number of companies were outlined yesterday. As an example, Merck 
spends 5 percent on research and development; 15 percent profits last 
year, there were three times more profits than what was spent on R&D 
and 13 percent was spent on advertising, marketing, and administration. 
It is almost three times as much on advertising and marketing and three 
times more in profits than they are spending on R&D.
  Pfizer received 1\1/2\ times more in profits than they spent on 
research and development, more than two times more on advertising, 
marketing, and administration than on research and development. It is a 
pattern that continues. R&D is not the top expenditure of the companies 
today.

  When we look at the individuals, it is difficult for me, representing 
the great State of Michigan where people work hard every day for a 
living, most people working hard for that paycheck, concerned about 
their kids, whether they are going to be able to send them to college, 
whether they can afford their health care, working hard every day, and 
then we hear we cannot possibly lower prescription drug prices, we 
cannot possibly even get them down to the rate of inflation--they are 
going up an average of three times the rate of inflation--we could not 
possibly give a 15-percent discount to uninsured seniors.
  Then we look at the numbers, and we see astounding salaries in the 
drug companies. I mentioned this morning--not to be personal but this 
is public information--the comparisons are astounding. The former 
chairman and CEO of Bristol-Myers, $74.9 million last year in earnings 
and, in addition, $76.1 million in unexercised stock options.
  We have been talking in this Chamber about corporate responsibility 
and integrity and, I would argue, morality. What is the morality of 
huge, tens of millions of dollars in salaries and huge amounts of 
profits, and when we say just get the prices in line so people can 
afford these new lifesaving drugs so they are not cutting the pills in 
half, taking them every other day--worst yet, not affording them at 
all--and we are told, no, nothing can be done, nothing can be done. 
They fight every single attempt to rein in prices or expand coverage.
  This is a fundamental battle, I believe. I think we are needing to 
help an industry save itself and get back to its soul, which is 
research and development in new drugs, and to get back in touch with 
the American people.
  I commend the States that are involved right now. They are close to 
the people. They are close to the people in their States and they know, 
they hear the stories every day, and they are trying to do something. 
They want us to act. I do not know if we are going to be able to get 
this all the way through. I certainly hope so, and I will do everything 
I can humanly do to work with my colleagues to make it happen.
  In the meantime, the States are trying to help. We have 30 States 
that are doing something in the area of prescription drugs trying to 
help, and we have States being sued by the drug lobby because they are 
trying to help.
  I will simply say, as we bring this debate to a close, that this is 
an amendment that does not force a State to do anything. It only 
affects the States that want to expand their drug discounts to those 
without coverage. It is an issue of flexibility.
  The administration has gone on record in support of the Maine project 
which we use as an example of what can be done, and we appreciate that. 
It will stop unnecessary litigation. I know there is a great deal of 
concern by my colleagues about unnecessary

[[Page S7016]]

litigation. It will allow States to stop spending money on litigation 
and put money in essential services, such as being able to make 
available prescription drugs to their citizens.
  I hope my colleagues will join in support of this bipartisan--
tripartisan--amendment this evening and send a message that we support 
our States and we support their right to be involved in putting 
together efforts to lower prices and make lifesaving medicine available 
to their citizens.
  I ask for the yeas and nays on my amendment.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  Ms. STABENOW. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. REID. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________