[Congressional Record (Bound Edition), Volume 146 (2000), Part 6]
[Senate]
[Pages 8417-8418]
[From the U.S. Government Publishing Office, www.gpo.gov]



                 PRESCRIPTION DRUG PRICE DISCRIMINATION

  Mr. GORTON. Mr. President, all of us have read accounts of Americans 
crossing our borders in order to buy vital prescription drugs at deeply 
discounted prices. Every day seniors and other Americans can save 50 
percent, 60 percent, or even 70 percent on their drug bill simply by 
going to Canada or Mexico. A busload of seniors from Seattle recently 
saved $12,000 just by driving two hours north to buy their medications 
at a Canadian pharmacy.
  The reason drugs are so much less expensive in Canada, Mexico, and 
other countries? American manufacturers sell products that were 
discovered, developed and manufactured in the United States for far 
lower prices in virtually every other country in the world than the 
prices they charge American customers.
  Why? Every other country imposes some form of a price control on 
prescription drugs. As long as we let our drug companies impose all of 
their research and development costs on American consumers, our drug 
manufacturers agree to this arrangement because they can recoup their 
manufacturing costs and still make some profit. But the price other 
countries pay in no way compensates for the expensive research and 
development costs for new drugs. American consumers end up subsidizing 
the research and development for the rest of the world.
  When Americans pay higher prices at the drug store cash register, 
that is not the first time they subsidize the research and development 
of new drugs. Taxpayer dollars are used to fund the research conducted 
by the National Institutes of Health; much of the basic science 
conducted with NIH grants is then transferred to the private sector. 
Taxpayer money is also the major source of funds for training 
scientific personnel, scientists hired by the drug industry in large 
numbers.
  According to a 1993 report by the Office of Technology, in addition 
to general research and training support, there are 13 programs 
specifically targeted to fund pharmaceutical research and development. 
That same report noted: ``Of all U.S. industries, innovation within the 
pharmaceutical industry is the most dependent on academic research and 
the Federal funds that support it.''
  Finally there are the tax breaks: for research and development, for 
orphan drug development; and possession tax credits for manufacturing 
drugs in Puerto Rico.
  Let me be clear. I understand and support the need to invest in 
research and development. I have supported all of the programs I just 
spoke about including the National Institutes of Health and the 
Research and Development tax credit. I also agree that drug companies 
should be able to recoup costs associated with research and 
development. But I do not think that American consumers should be the 
only ones to foot that bill. American consumers who already strongly 
support R&D efforts through their tax dollars should not have to pay 
for R&D costs again in the form of higher prices at the drug store. All 
users, domestic and foreign, should pay a fair share of those costs.
  But drug companies are satisfied with the status quo. They know that 
they can simply raise prices in the U.S., if other countries negotiate 
or regulate to win lower prices. American consumers should not be 
subject to this kind of price discrimination--especially for products 
that are vitally important to preserving our health.
  My idea is to borrow from a law that has applied to interstate 
commerce within the United States for the last 60 years--the Robinson-
Patman Anti-discrimination Act. It simply says that manufacturers may 
not use price to discriminate among like buyers. My bill, the 
Prescription Drug Fairness Act, takes these same principles and applies 
them to prescription drug sales overseas. Drug manufacturers would not 
be able to offer lower prices at the wholesale level in Canada, Mexico 
or any other country than they charge inside the United States.
  Since 1936, the Robinson-Patman Act has established as a legal norm 
the concept of fair dealing in pricing by prohibiting unjustified price 
discrimination. The same principle of fair dealing should be applied to 
prescription drug sales to wholesale buyers in different countries.
  The drug companies have demonized my idea by labeling it ``price 
control.'' If this is a price control then we have had price controls 
on every product sold in the United States for the last 60 years. My 
bill in no way tells drug companies what they can or can not charge for 
a prescription drug. It simply says that they cannot discriminate 
against Americans.
  I asked the pharmaceutical companies for their ideas to ensure that 
Americans are treated fairly and have access to affordable prescription 
drugs. Their response? They simply want to expand Medicare by adding 
drug coverage for its recipients. While I do think coverage is one 
important part of the solution for seniors--it is only a partial 
answer.
  It does nothing to address the cost for the uninsured American and 
does nothing to address the growing concerns of employers, health 
plans, and hospitals about rising costs associated with prescription 
drugs. As more and more people use prescription drugs, drug costs take 
up more of overall health care spending. But drugs are also costing 
Americans more. Last week, Families USA released a study that showed 
the average cost of the 50 drugs most commonly used by seniors rose by 
3.9 percent, outpacing the inflation rate of 2.2 percent. A study from 
the University of Maryland's Center on Drugs and Public Policy projects 
prescription drug expenditures will rise 15-18 percent annually. Total 
prescription drug expenditures could double between 1999 and 2004 from 
$105 billion to $121 billion.
  I do think the Medicare program should be modernized to include a 
prescription drug benefit. If we expand the program, however, it must 
be done responsibly and must not jeopardize the benefits seniors 
currently have. CBO estimates that the program will be insolvent by 
2023. While there are a number of ideas for how to structure a benefit, 
the sticking point always seems to be how to pay for it. CBO recently 
revised its estimate of the President's proposal. It is expected to 
cost $160 billion between 2003 and 2010. And that is for minimal 
coverage up to $1,000 (with seniors paying a second $1,000 out-of-
pocket), relatively high premiums, and no protection for those seniors 
with exceptionally high drug bills.
  My skepticism about the industry's support for simply expanding 
Medicare is increased by reports in the Wall Street Journal last week 
that Medicare and Medicaid have overpaid the drug industry by as much 
as $1 billion a year for the few drugs these programs do cover. My idea 
would save Medicare beneficiaries money on their drug bills

[[Page 8418]]

and would in no way jeopardize the solvency of the fiscally ailing 
Medicare program.
  I am convinced that we need to address the issue of price 
discrimination this year, not only for Medicare patients but for the 
health system overall. I am pleased to note that Senator Jeffords will 
hold a hearing on the issue of drug pricing and safety in the next few 
weeks and I hope that the Senate Judiciary Committee, to which my bill 
has been referred, will also take a look at this issue.
  In the meantime, while seniors and health plans, employers, hospitals 
and others struggle with the growing cost of prescription drugs, the 
pharmaceutical industry has been among the most profitable U.S. 
Industries in the last five years, with year to year earnings growing 
by more than 10 percent and for some companies 20 percent. So far, they 
have refused to engage in this debate.
  I hope they will change their minds. Right now the current system 
leaves the drug companies' best customers feeling like they've been 
ripped off. Bob Elmer from University Place, Washington recently wrote:

       I am a recently retired pharmacist . . . and have always 
     been proud of the American pharmaceutical manufacturers and 
     the role that they play in . . . the search for new and 
     innovative entities that help us live not only longer, but 
     better. As a matter of fact, I worked for a major 
     manufacturer for some time.
       I, like you, am outraged at the manufacturers' practices of 
     charging the American public more than the Mexican public or 
     the Canadian public. What is their rationale for the price 
     differences?
       This overcharging is a black mark on this industry.

  Mr. President, I couldn't agree more. Drug companies should no longer 
be allowed to discriminate against Americans by charging higher prices 
here than they do elsewhere in the world. My bill will end that 
discrimination.

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