[Congressional Record (Bound Edition), Volume 149 (2003), Part 11]
[House]
[Pages 14668-14672]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       FEDERAL PRISON INDUSTRIES

  The SPEAKER pro tempore (Mr. Franks of Arizona). Under the Speaker's 
announced policy of January 7, 2003, the gentleman from Michigan (Mr. 
Hoekstra) is recognized for 60 minutes as the designee of the majority 
leader.
  Mr. HOEKSTRA. Mr. Speaker, I want to spend a few minutes talking 
about an issue that I have got a passion for because it impacts workers 
around the country, and then I am going to be joined by my colleague 
from Minnesota to talk about another issue that we feel passionate 
about because it affects those folks who want to buy prescription 
drugs.
  The first thing I want to do is I want to introduce my colleagues to 
a Federal program. Actually, I want to introduce my colleagues to a 
company in the United States of America, a company that is growing 
rapidly; and its automotive component sector last year grew by about 
216 percent, and its office furniture segment grew by over 30 percent 
last year and grew in textiles, grew in a wide variety of different 
product categories that it produces. An outstanding company, creating 
jobs.
  You kind of say who is this company, who is this great company? We 
are having some economic tough times around the country. Who is this 
company that is growing, growing in a number of different market 
segments and what is its secret to being competitive and growing in a 
tough economy? What is it doing that maybe other U.S. companies ought 
to be taking a look at?
  The company that we are talking about tonight is called Federal 
Prison Industries. You say, excuse me, Federal Prison Industries, they 
are growing jobs? And the answer is, absolutely yes. Federal Prison 
Industries is one of these government monopolies. They enjoy an 
advantage which is called ``mandatory sourcing''; and it means that if 
the Federal Government is looking at buying a product, whether it is 
shirts for the military, whether it is office furniture for the Federal 
Aviation Administration, or whether it is automotive components for its 
fleet of cars, the Federal Government is required to buy these products 
from Federal Prison Industries regardless of the price, regardless of 
the quality, regardless of the delivery schedule; and this has enabled 
Federal Prison Industries, or UNICORP as it is called, to become one of 
the fastest-growing companies in America today.
  So as in certain parts of the country in my district or right outside 
of my district, unemployment has now reached 8 percent, the highest in 
11 years, home to the largest office furniture manufacturing company in 
America. You wonder how the Federal Government can grow office 
furniture by double digits in the last 12 months while the industry 
itself over the last 30 months has probably declined by 30 to 40 
percent. Let's see, if the Federal Prison Industries is growing by 
double digits, the private sector is declining by double digits on an 
annual basis, what is happening?
  What is happening is that Federal Prison Industries is going in and 
taking some significant business and using their preferred or mandatory 
source capability, is putting people in the private sector, we call 
them taxpayers, we call them workers, putting them out of jobs.
  Just recently, Federal Prison Industries took this form of 
competition that they have to a new height. What happened was there was 
a project, and this was the Federal Aviation Administration requiring 
$6 million, roughly $6 million of new office furniture for their 
facilities. It is kind of like, yes, that is a good sized project that 
any one of a number of private sector companies would be thrilled to 
get. It is like, yes, we are going to go out and bid for that project.
  So Federal Aviation Administration put this project out to bid and a 
number of companies went through the design process, the specification 
process, the pricing process and they put in a bid. The Federal 
Aviation Administration opened the bids and company A won the bid. The 
company was excited, like yes, we need this business, we have laid off 
workers with up to 25 years of seniority, up to 28 years of seniority, 
$6 million may provide the opportunity, it is not going to solve their 
problem, but it may provide the opportunity to put some of these people 
back to work.
  Are these people back to work? No, because as Federal Prison 
Industries came into the process, this is very unique. This company had 
won the bid, ready to go to work and at the last minute Federal Prison 
Industries walks in and says no, no, no, excuse me, you do not 
understand the bidding process when you are doing business with the 
Federal Government.

                              {time}  2015

  They said first round of bidding is you guys out in the private 
sector; the second round of bidding is we get to come in as Federal 
Prison Industries and take a look at the winning bid, and then we have 
a second round of bidding. Of course the second round of bidding is one 
company, Federal Prison Industries. And in this case Federal Prison 
Industries came in and literally copied the winning bid to the penny.
  So they said we matched the bid price of the private sector, we are 
taking this business. And so now some folks in west Michigan who were 
hoping to go back to work are not going to have the opportunity to go 
back to work, but we are going to be creating jobs for folks in Federal 
prisons.
  It is not only the office furniture industry. Federal Prison 
Industries are huge in textiles. They put a number of

[[Page 14669]]

textile companies out of business. Just last fall, Hathaway Shirts in 
New England closed. One of the reasons was one of the dress shirt 
contracts put out by the Air Force went not to Hathaway Shirts, went to 
Federal Prison Industries. This time, though, it was not that a few 
workers would be laid off, the company shut its doors and Hathaway 
Shirts, at least being made in that plant, are no longer made in the 
United States. Hathaway Shirts tried to compete. Federal Prison 
Industries was the organization that put the last nail in the coffin 
that resulted in the factory closing and these people being put out of 
work.
  It is absolutely outrageous what is going on and what is going on 
with this Department of Justice, that this Department of Justice 
believes that the best way to rehabilitate Federal prisoners is by 
putting taxpayers out of work, and that the best way to compete and 
create high-quality and high-paying jobs in America today is to create 
new jobs for prisoners. And they are talking about building 11 new 
plants, new jobs for prisoners that are high-quality, high-paying jobs 
that pay in the neighborhood of 23 cents to $1.15 an hour. Of course 
they pay no benefits.
  They pay no taxes. Think about it. They pay absolutely no local 
taxes, so that is an advantage. They pay no State taxes, no sales taxes 
or Federal taxes. They do not pay any taxes. They put taxpayers out of 
work. It is a huge, huge problem. They are doing this in a whole series 
of different industries.
  Look at the kinds of things that they make. Clothing and textiles is 
a business group. Electronics is a business group. Graphics business 
group; fleet management; vehicular components business group; 
industrial products business group; office furniture business group; 
and recycling activities business group.
  They have declared war on American manufacturing, American 
manufacturing that is already under attack by low-cost producers in 
China and other parts of Asia, and it is very interesting. My 
colleagues come to the floor and they rail against Chinese prison 
labor, saying these people work in unsafe conditions. It is 
interesting. American prisoners, do they have the protection of OSHA? 
Absolutely not. So they are low paid, and work in unsafe conditions. 
They are government sponsored, just like our prisoners are government 
sponsored. So our manufacturers not only have to compete against low-
cost manufacturing from overseas, they are also now in the process of 
having to fight their own government, their own Department of Justice.
  Like I said, this is an industry that this Department of Justice has 
said is going to be a growth industry for the Federal Government. They 
anticipate growing. And in office furniture alone, and this is an 
industry that has declined 30-40 percent, one would think that Federal 
Prison Industries would realize this is an industry that is facing some 
hard economic times, and that they might slack off in terms of the 
amount of business that they would take out of the Federal Government 
and let the private sector compete for more of this business. But when 
we look from 2002 to 2003, what has Federal Prison Industries' strategy 
been in office furniture? They are authorized to grow their business in 
office furniture by an additional 50 percent.
  Office furniture workers in America who are competing against Canada, 
China, Korea, Indonesia, now are also competing against their own 
Federal Government, and their own Federal Government is not even giving 
them the slightest of a break and saying we have got the opportunity, 
we are going to increase our volume by up to 50 percent. They are 
looking for the growth numbers.
  Federal Prison Industries, taxes; and this is from their annual 
report. As a wholly-owned corporation of the Federal Government, 
Federal Prison Industries is exempt from Federal and State income 
taxes, gross receipts taxes, and property taxes. That is not a bad way 
to run a business.
  We have a reform proposal in place. The interesting thing for the 
reform proposal, we are not asking for Federal Prison Industries to be 
eliminated, although some of my colleagues would say that they should 
not be competing for these jobs, and that is exactly what Congress said 
back in the 1930s when they created Federal Prison Industries. They 
said they should have minimal to no impact on free labor, they should 
not be competing with the private sector. But they do.
  All I am asking is let the workers in west Michigan, Minnesota, New 
England, and other States in the South, let them just compete for the 
opportunity to sell their products. Right now they cannot compete. What 
are the businesses that they are in? Clothing and textiles, $157 
million; electronics, $116 million. They grew from $116 million to $132 
million in electronics. Fleet management, automotive, which is an 
industry facing tough competition from overseas, and now they are 
facing it from their own government. Fleet management; in 2001 Federal 
Prison Industries grew their automotive component sales from $31 
million in 2001 to $99 million in 2002.
  Thank you very much, Federal Prison Industries. I wonder how many 
private sector workers they put out of work when they grew their 
business by $68 million?
  Office furniture, they went from $174 million to $217 million. They 
are authorized for another expansion of up to 50 percent in 2004.
  Services, they grew from only $8 million, but they are on the right 
track as far as they are concerned. They are up to $12 million.
  Mr. Speaker, this is an area that needs congressional oversight. When 
American workers are under attack, I think it is time for this Congress 
to stand up and say we are going to stand up for American workers, we 
are going to stand up for American taxpayers. It is the right thing to 
do. And we are going to allow these folks to compete, to keep their 
jobs and compete against Chinese workers, to compete against Korean 
workers, and we are going to allow them to compete against American 
prison labor, labor that is paid 23 cents an hour to $1.15 an hour in 
tax-free facilities which have no OSHA safeguards. It is the right 
thing to do.
  We need a manufacturing base in the United States. And our reform 
bill does not say we are not going to have prisoners do nothing. We 
increase technical training. We increase the amount of work 
opportunities that we give to prisoners, but we say they should make 
things that will be used in the not-for-profit sectors. That is what 
Michigan does in its prisons. It does not compete against the private 
sector. We should take that kind of model and apply it to the Federal 
Government and Federal Prison Industries.
  It is time for this Congress to act. We are looking forward to the 
Committee on the Judiciary moving a reform bill that does exactly that, 
allows American workers to again compete for their jobs, compete for 
the jobs that enable them to provide health care and a living to their 
families.
  I walk around my district and I cringe every time when I run into a 
worker who says, I just got laid off; recognizing that as that person 
has gotten laid off, we have put people in our prisons to work for 
maybe the first time. But it is totally inappropriate for this 
government, for this Department of Justice to believe that its best 
strategy for dealing with inmates is to put them to work at the expense 
of American workers.
  Mr. Speaker, I welcome one of my colleagues who is here tonight and 
change the subject. This is an issue that my colleague, the gentleman 
from Minnesota (Mr. Gutknecht), and I have a passion on because it 
addresses a real concern that we have, and again it is about 
competitiveness. I know my colleague is a firm believer in 
competitiveness, whether it is supplying products to the Federal 
Government or whether it is providing prescription drugs to our senior 
citizens or to other Americans. It is not just senior citizens.
  One of the things that we face in America today is the gentleman and 
I both live in border States. One of the things that is happening in 
border States on the north and the southern borders of the U.S. is that 
consumers are rather smart. What are they doing?

[[Page 14670]]

  Mr. Speaker, I yield to the gentleman from Minnesota (Mr. Gutknecht).
  Mr. GUTKNECHT. Mr. Speaker, I thank the gentleman, and it is not just 
Minnesotans and Michiganers who are smart. One of our favorite 
Presidents, Ronald Reagan, said it best: Markets are more powerful than 
armies. Starting several years ago, consumers figured out that they 
could buy their prescription drugs cheaper in Canada and Mexico, and 
now they know in Europe and almost every other industrialized country 
in the world they can buy the same drugs for dramatically less.
  Mr. HOEKSTRA. Mr. Speaker, if my colleague will explain to me, many 
of these drugs are manufactured in the U.S. We are the largest market 
in the world for most of these prescription drugs. One would think in 
the largest market in the world, and when the drugs, many of them are 
made in the United States, we would not be paying a premium, we would 
be paying the lowest price. That is not the case?
  Mr. GUTKNECHT. Mr. Speaker, as they used to say on The Tonight Show, 
you would be wrong, oh, great one. That is the irony. We are the 
world's best customers by any measure, and some people have challenged 
some of the sources, but nobody challenges the numbers. The numbers 
speak for themselves. Even now the pharmaceutical industry acknowledges 
that the world's best customers, the Americans, pay the world's highest 
prices for their drugs.

                              {time}  2030

  We are not just talking about a little bit more.
  Mr. HOEKSTRA. We pay the highest prices. We do the development, the 
testing, we do all the market research and all of that here in the 
United States. We are the largest market. These drugs are made here, 
and we pay the highest prices.
  Mr. GUTKNECHT. The gentleman is correct. It is one of the mysteries 
that we as public policymakers have been wrestling with for several 
years trying to figure out why is it the world's best customers pay the 
world's highest prices. It seems to me that we have an obligation as 
policymakers not only to try and get answers to those questions but, 
more importantly, to try and do something about it. I think the reason 
is, if I can just say this, if you go to Tokyo, Japan, and this is 
starting to change in Japan because Japan is starting to open up its 
markets, but for many years, if you went to Tokyo and you wanted to 
have a good steak----
  Mr. HOEKSTRA. You would never want a good steak in Tokyo. It is too 
expensive.
  Mr. GUTKNECHT. It would be over $100. The same steak that you could 
get in Grand Rapids, Michigan, for $15 or the same steak that I could 
get in Rochester, Minnesota, for $15, you would pay over $100 in Tokyo. 
Another example is blue jeans in the former Soviet Union. The Soviets 
decided that people did not need blue jeans, did not want blue jeans, 
and therefore they were not going to produce blue jeans in the former 
Soviet Union. So a black market started to develop for blue jeans. The 
price reached over $100 a pair for blue jeans. The example is analogous 
because any time you have a captive market, as they have in Japan with 
beef or they had in the Soviet Union with blue jeans, you will find 
that market forces will just go amuck because you are a captive market. 
Americans are being held captive not so much by the big pharmaceutical 
companies, but by our own FDA.
  Mr. HOEKSTRA. I am assuming that the differences in price between the 
U.S. and Canada or the U.S. and Europe are not that significant. You 
would think that with the trade agreements and those types of things 
that we have that there would be some leveling out of prices. You might 
be able to explain some of the differences because of currency 
fluctuations and maybe some government regulations from one country to 
another, but I would not expect that you would find major differences 
in prices for products that many times were made in the same factory 
and just distributed from one point and distributed around the world. I 
am wrong again?
  Mr. GUTKNECHT. Wrong again. Let me give you an example. This is a 
drug that my 85-year-old father takes. It is called Coumadin. Coumadin 
is a wonderful drug. It actually was developed at the University of 
Wisconsin.
  Mr. HOEKSTRA. It was probably funded with some government research 
dollars.
  Mr. GUTKNECHT. It was paid for by the taxpayers. Originally, as it 
was developed, the drug was called Warfarin. They are basically 
identical drugs, but Warfarin is used as a rat poison. It is a blood 
thinner. What they do is they give it to rats, rats will eat it, they 
go back to their little dens, they bleed to death internally, no mess, 
no fuss. It kills rats. They found that this made a great blood thinner 
for human beings as well.
  Let me give you the differences in what Americans pay. The average 
price for this package of Coumadin in the United States is about $84.
  Mr. HOEKSTRA. I think you have just given me more information on 
Coumadin than I would like to have. I really did not want to know all 
of that. Let us just talk about the price.
  Mr. GUTKNECHT. Warfarin, Coumadin, developed at the University of 
Wisconsin. The price here in the United States, about $84 for this 
package. The price in Canada, only $25. But here is the real kicker. 
Over in Europe they buy this same drug, as a matter of fact we bought 
this drug in Munich, Germany, for about $16. About $85 in the United 
States; $16 in Germany. Here is the other interesting thing. People 
say, well, they have price controls in Canada. To a certain degree that 
is true. I am not one that supports price controls and neither, I 
think, do you.
  Mr. HOEKSTRA. Not at all.
  Mr. GUTKNECHT. Here is the interesting thing. They do not have price 
controls in Germany. What they do in Germany is what we ought to do 
here, and that is they allow the pharmacists to shop for the best 
price.
  Mr. HOEKSTRA. Whether it is from the Swiss or Spain or Canada or the 
U.S. Again, I am assuming many times that that product is going to be 
built in a factory perhaps even in the United States; or a single or a 
couple of factories are going to supply the world market for this 
product.
  Mr. GUTKNECHT. There are only 600 FDA-approved facilities that make 
prescription drugs in the world. They have to be made in an FDA-
approved facility. So, yes, these drugs essentially, this probably came 
out of a plant in the United States. Or it may have come out of a plant 
in Puerto Rico, which is part of the United States. Or it may have been 
made over in Europe somewhere, but they supply essentially the entire 
world from that plant. It is much more efficient.
  I also have in my hand something, and it bothers me, some of these 
prices because we bought 10 and if anybody doubts my research, we have 
the receipt for the 10 largest-selling drugs. We bought these at the 
airport pharmacy in Munich, Germany. The total for this worked out to 
about $373 American. Those same drugs, we checked the prices here in 
the United States of America, and again cash prices, walking in off the 
street, we are not talking about going to an HMO or any of these other 
things, the cash price was almost $1,100 in the United States, more 
than double, almost triple the price for the same 10 most popular 
drugs.
  Let me give you this example. This is the one that really chaps my 
hide. This is a drug called Tamoxifen. It is a very effective breast 
cancer drug. But it was developed essentially with Federal taxpayer 
dollars at the National Institutes of Health. They paid for almost all 
the research. This drug in the United States, this package of drugs 
sells for $360. We bought it at the Munich airport pharmacy about a 
month ago for $59.05 American. $360 here, $60 there. Worse than that, 
the American taxpayers paid for almost all the research costs on this 
drug.
  Mr. HOEKSTRA. And you do not have to go to Germany. I met, I think, 
one of your constituents today or at least a woman from Minnesota today 
who I thought was dynamic. What was her name, Kate?
  Mr. GUTKNECHT. Kate. Kate Stahl.

[[Page 14671]]


  Mr. HOEKSTRA. Kate Stahl. She wants to get arrested. Why would she 
get arrested?
  Mr. GUTKNECHT. Kate Stahl is a true American patriot. Once in a while 
you meet some people like this; and you just say again, as Ronald 
Reagan said, people who say there are no more American heroes, they do 
not know where to look. We met an American hero today. Her name is Kate 
Stahl. I want every Member of Congress to get a copy of last week's 
edition of the U.S. News and World Report, and there is a special 
report by Susan Brink, the title of which is ``Health on the Border, 
Elderly Americans head north and south to find drugs they can afford.'' 
It features Kate Stahl who works with the Senior Federation in the 
State of Minnesota. The caption above her little picture here says, 
``I'd like nothing better than to be thrown in jail.'' She stands on 
the shoulders of the Sons of Liberty who threw tea in Boston Harbor and 
said, enough is enough. She calls herself a drug runner. She goes to 
Canada to buy drugs for her friends.
  Mr. HOEKSTRA. What does she do that would get her thrown into jail? 
Going to Canada or going to Mexico or going to Europe is not illegal to 
buy these drugs, is it?
  Mr. GUTKNECHT. The FDA says it is.
  Mr. HOEKSTRA. All right. Wrong again?
  Mr. GUTKNECHT. Wrong again. They treat Kate Stahl and literally 
almost a million, or more than a million, Americans just like her, they 
treat her like a common criminal. This is an 84-year-old grandmother 
who is only doing this to try and save her friends and neighbors some 
dollars on the cost of prescription drugs. If one of them is suffering 
from breast cancer, $360 is a lot of money. They can afford $60, but 
$360 is a lot of money. And it repeats itself, with all the drugs. 
Zoloft, Zocor, we have got all the drugs. Glucophage. This is 
outrageous what they charge for Glucophage here in the United States. 
This drug has been around a long time. It is a miracle, marvelous drug. 
It really helps people with diabetes. But the bottom line is Americans 
are required to pay way too much because they are a captive market.
  Mr. HOEKSTRA. The interesting thing, reclaiming my time, why is it so 
critical that we are talking about this tonight? The reason that my 
colleague from Minnesota and I are talking about this, and how many 
years has the gentleman been working on this?
  Mr. GUTKNECHT. Longer than I want to remember. Actually I got started 
with this about 5 years ago. I always tell people that I have moved 
from fan to fanatic. Winston Churchill said a fanatic is one that 
cannot change his mind and will not change the subject.
  Mr. HOEKSTRA. Which is kind of where I am with Federal Prison 
Industries. I have never been a fan of them, but I have been fanatical 
about it just because of the sheer injustice. But this is absolutely 
critical right now, just like the Federal Prison Industries because we 
are in a manufacturing slump right now and we need every manufacturing 
job we can get. But this is critical because we are looking at creating 
a Federal benefit, expanding the Medicare program to include 
prescription drugs. Actually, we could probably take care of much of 
the problem with prescription drugs if we would just deal with the 
pricing.
  That is the scary thing. You cannot create a Federal entitlement for 
prescription drugs and just promise folks that you are going to, and 
help folks that probably genuinely need it. We are going to do that and 
we are going to feel good about doing that; but at the same time as we 
provide them with that benefit, you cannot ignore the price side. 
Because if you ignore the price side, we are just going to explode the 
cost. And if we get at the price side, we can offer more benefits to 
more individuals, or we can offer the same benefits at a much lower 
cost to the American taxpayer. That is why we need to work on the 
benefit side at the same time that we are working on the price side, or 
we are going to find ourselves with a program that we just cannot 
afford.
  Mr. GUTKNECHT. Absolutely. Let me just talk about this Glucophage. 
This package of Glucophage in the United States sells for over $100. We 
bought it in Munich, Germany for $5. $5.
  Mr. HOEKSTRA. Let us run this by again. $100 in the U.S. and $5 in 
Germany. This may be one of the bigger differentials of the drugs that 
you bought.
  Mr. GUTKNECHT. I must admit I am using it as an example because it is 
probably the most egregious example, with the possible exception of 
Tamoxifen, which the taxpayers paid for.
  Mr. HOEKSTRA. But just the sheer difference between these, for $5 in 
Germany to $100. The thing is, for anybody who has traveled, you 
typically do not go to an airport and expect best prices. It would be 
interesting what would happen if you went to a pharmacy in Germany and 
see whether you would be paying more or less. But the bottom line is an 
American could be in Munich and could buy that, the same package that 
when they left the U.S. it would cost them $100; if they needed a 
refill, they would be paying $5 in Germany.
  Mr. GUTKNECHT. That is the point. If we are going to have a 
prescription drug benefit for seniors, which I think virtually everyone 
agrees we should, we ought to first of all deal with the issue of 
affordability. Because just shifting the responsibility of buying $100 
Glucophage onto the shoulders of the taxpayers really makes no sense, 
because ultimately we are going to bankrupt our children if we make a 
stupid mistake and do not deal with this issue of affordability in 
price. Listen, we are Republicans. I am a Republican. I do not think 
the word ``profit'' is a dirty word, but I do think the word 
``profiteer'' is. I think it is time if we are going to get in this 
business, we ought to demand some accountability from the 
pharmaceutical industry.
  Mr. HOEKSTRA. The other thing that happens on this, there is a ripple 
effect, because when you go to Canada, and we are competing against 
Canada for automotive manufacturing, furniture manufacturing, when a 
Canadian worker needs to pay for health care and if prescription drugs 
are a part of their benefit, all of a sudden providing that benefit to 
a Canadian worker is a whole lot cheaper than it is providing that same 
benefit to a UAW employee or retiree in Detroit, Michigan, or to an 
active worker. That just says we are making it more expensive.
  If you talk to your manufacturing people today, what are they 
complaining about? They are complaining about the escalating cost of 
health care which many and most people say is being driven primarily by 
the escalating cost of prescription drugs. The cost of prescription 
drugs is one thing. The cost of health care is another. But that has a 
ripple effect into other parts of our economy, which makes it more 
difficult for our workers to be competitive against other workers 
around the world. Again, Germany, they are buying that stuff for $5. So 
for a German company or the German Government to provide that benefit 
to a factory worker is $5. Here it is $100. Where do you think it is 
going to be more expensive to manufacture a car or anything else? It is 
going to be more expensive here in the United States. So it has a 
ripple effect. It is not just prescription drugs. It is a ripple effect 
throughout. It is kind of like a cancer that starts eating at all these 
unintended consequences. That is why we have got to deal with it, and 
we have got to deal with it as we go through this prescription drug 
plan and this prescription drug debate.
  Mr. GUTKNECHT. Absolutely. The time is now. You mentioned in coming 
from Michigan, General Motors has been a fabulous employer. Not only in 
the State of Michigan but for suppliers all over the world. The 
interesting thing is General Motors, I met with a General Motors 
lobbyist last week. Do you know how much they are going to spend this 
year on prescription drugs, the company? This is just for their 
employees and their retirees. $1.3 billion. GM will spend $1.3 billion. 
What is worse, that number is going up 16, 17, 18 percent per year. 
That is a cost before they sell the first automobile, before they sell 
any cars. Those are costs they have to pay for.

[[Page 14672]]


  Mr. HOEKSTRA. Just think, the numbers and the examples you are using, 
a conservative estimate says rather than the U.S. price being 20 times 
what they might be able to get it somewhere else, let us say U.S. 
companies could save, 25, 30 percent. For a company like General 
Motors, for any employer, that gets to be real money. Think about it. 
For General Motors if they are spending $1.3 billion, that would be 
$300 million, either in lower prices, increased competitiveness, or 
better services and more benefits to their employees.
  Mr. GUTKNECHT. Right.

                              {time}  2045

  We are absorbing that cost, and I think when we talked about this at 
a conference today, what somebody said is we are subsidizing the rest 
of the world in health care and prescription drugs, and we are 
subsidizing, I think your term is, the ``starving French,'' or the 
``starving Swedes,'' or the ``starving Swiss.''
  Mr. GUTKNECHT. You can use whichever. I would say Americans are 
willing to pay their fair share. We understand there is a cost for 
research. We understand we have to pay that $3.9 billion that one of 
the big pharmaceutical companies will spend this year on advertising 
and marketing. We understand that has to be paid. We are willing to pay 
our fair share. We are willing to subsidize the people in Sub-Saharan 
Africa. But we should not be willing to subsidize the starving Swiss.
  Mr. HOEKSTRA. This affects the ability of GM to sell cars in Europe. 
This affects the ability of GM to sell cars in the United States 
against cars that are made in Europe by companies who are providing 
benefits to their workers. And we are subsidizing their health care. We 
are subsidizing health care in Canada, we are subsidizing it in Mexico, 
we are subsidizing it in Japan and in Europe, because we are paying 
prices that the rest of the world is unwilling to pay which means these 
companies can go to other places in the world and sell the prescription 
drugs for prices significantly lower than ours.
  Mr. GUTKNECHT. Well, the real bottom line is virtually every other 
company has to compete in a world marketplace. What we are saying is 
let markets work. Open up the markets.
  Finally, we are all concerned about safety. But this is a 
counterfeit-proof package. It is a blister pack, one of the first 
versions. It is getting better.
  There is a great little company out in California that is helping to 
develop the technology for the new $20 bills to make them counterfeit-
proof. It is good enough for the U.S. Treasury, but, so far, not good 
enough for the FDA.
  We are going to demonstrate in the coming weeks how we can have 
safety-sealed counterfeit-proof packaging which will guarantee the 
safety of drugs wherever they happen to come from. If the drug 
companies have to compete in a world marketplace, the way General 
Motors does, the way Eastman Kodak does, the way IBM does, the way 
Microsoft does, or the way every other company in America has to 
compete, you will see prices in the United States drop dramatically; 
and that amounts to billions and billions of dollars of savings, not 
just for retirees, but for all Americans.
  Mr. HOEKSTRA. There is no reason drugs cannot cross borders safely. 
We have food that crosses borders safely, and there is no reason we 
cannot develop a system to maintain the integrity of prescription drugs 
as they go from Canada into the U.S. and those types of things. We can 
put the measure in place to ensure the safety and security of our 
prescription drug supply.
  Mr. GUTKNECHT. We just have a few more minutes, and I will close by 
saying this. The gentleman is exactly right. We import in the United 
States thousands and thousands of tons of fruits and vegetables and 
meats. As a matter of fact, this year we will import 318,000 tons of 
plantains. If we can safely import 318,000 tons of plantains, we can 
surely figure out a way to import Prilosec and Glucophage.
  There is no way people will argue we cannot do this safely. We have 
the technology today. The time has come to open up markets, let our 
people go and stop this captive market. We will see prices drop in the 
United States by at least 30 percent.
  Mr. HOEKSTRA. I thank my colleague for joining me talking about 
prescription drugs and talking about Prison Industries.

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