[Congressional Record (Bound Edition), Volume 150 (2004), Part 19]
[Senate]
[Pages 25371-25373]
[From the U.S. Government Publishing Office, www.gpo.gov]




            CONTROLLED SUBSTANCES EXPORT REFORM ACT OF 2004

  Mr. FRIST. Mr. President, I ask unanimous consent that the Senate 
proceed to the immediate consideration of S. 3028, which was introduced 
earlier today.
  The PRESIDING OFFICER. The clerk will report the bill by title.
  The assistant legislative clerk read as follows:

       A bill (S. 3028) to amend the Controlled Substances Import 
     and Export Act to provide authority for the Attorney General 
     to authorize the export of controlled substances from the 
     United States to another country for subsequent export from 
     that country to a second country, if certain conditions and 
     safeguards are satisfied.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. HATCH. Mr. President, I rise to introduce with my colleague, 
Senator Biden, the Controlled Substances Export Reform Act of 2004. 
This bill would make a minor, but long overdue, change to the 
Controlled Substances Act to reflect the reality of commerce in the 
21st Century and to protect high-paying American jobs, while 
maintaining strong safeguards on exports.
  Before I discuss this bill, I want to thank Senator Biden for working 
with me on this important legislation. Senator Biden has long been 
recognized as a national leader on drug-related measures, and we have a 
history of working together on a bipartisan basis to enact sensible 
reforms in this area, as evidenced by the recent enactment of our 
steroid precursor bill. I respect his thoughtful collaboration, and I 
thank him for his work on the proposal we are introducing today.
  In sum, this proposed legislation will amend the Controlled 
Substances Act of 1970 providing greater parity for U.S. manufacturers, 
who wish to export their products while retaining full DEA authority 
over U.S. exports.
  Current law places severe restrictions on exports of certain drug 
products from the United States. The Controlled Substances Export 
Reform Act proposes to amend that law to correct one small, but onerous 
provision that is unnecessarily threatening American jobs. This change 
is entirely consistent with the long-established regulatory scheme 
pursuant to the Federal Food, Drug and Cosmetic Act.
  At present U.S. pharmaceutical manufacturers are permitted to export 
most controlled substances only to the immediate country where the 
products will be consumed. Shipments to centralized sites for further 
distribution across national boundaries are prohibited. This contrasts 
with the freedom of pharmaceutical manufacturers throughout the rest of 
the world to readily move approved medical products among and between 
international drug control treaty countries without limitation or 
restriction.
  The unique prohibitions imposed on domestic manufacturers 
disadvantage U.S. businesses by requiring smaller, more frequent and 
costly shipments to each country of use without any demonstrable 
benefit to public health or safety. By imposing significant logistical 
challenges and financial burdens on U.S. companies, the law creates a 
strong incentive for domestic pharmaceutical manufacturers to move 
production operations overseas, threatening high-wage American jobs.
  The Controlled Substances Act of 1970 permits U.S. manufacturers of 
Schedule I and II substances and Schedule III and IV narcotics to 
export their products from U.S. manufacturing sites only to the 
receiving country where the drug will be used. The law prohibits export 
of these products if the drugs are to be distributed outside the 
country to which they are initially sent. The effect of this 
restriction is to prevent American businesses from using cost-
effective, centralized foreign distribution facilities. In addition, 
under the current regime, unexpected cross-border demands or surges in 
patient needs cannot be met. Likewise, complex and time-sensitive 
export licensing procedures prevent the shipment of pharmaceuticals on 
a real time basis.
  European drug manufacturers face no such constraints. They are able 
to freely move their exported products from one nation to another while 
complying with host country laws. This is entirely consistent with the 
scheme of regulation imposed by international drug control treaties. 
Only the United States imposes the additional limitation of prohibiting 
the further transfer of controlled substances.
  Thus, while a French or British company can ship its products to a 
central warehouse in Germany for subsequent distribution across the 
European Union, an American company must incur the added costs of 
shipping its products separately to each individual country.
  The Controlled Substances Export Reform Act would correct this 
imbalance and permit the highly regulated transshipment of exported 
pharmaceuticals placing American businesses on an equal footing with 
the rest of the world. Importantly, however, DEA's authority to control 
U.S. exports would not be diminished.
  The legislation authorizes the Attorney General, or his designee, the 
DEA, to permit the re-export of Schedule I and II substances and 
Schedule III and IV narcotics to countries that are parties to the 
Single Convention on Narcotic Drugs and the Convention on Psychotropic 
Substances under tightly controlled circumstances: First, each country 
is required to have an established system of controls deemed adequate 
by the DEA. Next, only permit or license holders in those countries may 
receive regulated products. Third, re-exports are limited to one single 
cross-border transfer. Then the DEA must be satisfied by substantial 
evidence that the exported substance will be used to meet an actual 
medical, scientific or other legitimate need, and that the second 
country of receipt will hold or issue appropriate import licenses or 
permits. Fifth, in addition, the exporter must notify the DEA in 
writing within 30 days of a re-export. And finally, an export permit 
must have been issued by the DEA.

[[Page 25372]]

  These safeguards are rigorous but fair, and represent a much-needed 
modernization of the law. The current restrictions on U.S. 
pharmaceutical exports have remained essentially unchanged for more 
than thirty years. In that time, the global economy has changed 
dramatically. For those among us who express concerns about the 
outsourcing of American jobs and the competitiveness of U.S. companies, 
this modest change represents an opportunity to address such problems 
head-on.
  The Controlled Substance Act's limitation on U.S. pharmaceutical 
exports imposes unique, unnecessary, and significant logistical and 
financial burdens on American businesses. The effect of this outdated 
policy is to create a strong incentive for domestic pharmaceutical 
companies to move production overseas, threatening American jobs and 
eliminating DEA jurisdiction over the manufacture and shipment of their 
products. The Controlled Substances Export Reform Act removes this 
unwarranted barrier to U.S. manufacturers' use of cost-effective 
distribution techniques while retaining full DEA control of U.S. 
exports and re-exports. Accordingly, I urge my colleagues to join 
Senator Biden and myself in support of this bill.


                              section 1003

  I appreciate the distinguished Senator from Delaware's work on this 
legislation and am pleased to join with him in correcting this small, 
but important provision of law.
  Section 1003 of the Controlled Substances Import and Export Act 
currently permits U.S. pharmaceutical manufacturers to export schedule 
I and II drugs and schedule III and IV narcotics only to the exact 
country where the products will be used. While American companies are 
prohibited from using centralized foreign distribution facilities, our 
international competitors face no similar restrictions and can freely 
ship medicines for cross-border distribution between all international 
drug control treaty countries.
  Mr. BIDEN. Will the Senator yield for a question?
  Mr. HATCH. Yes.
  Mr. BIDEN. Isn't it true that the disadvantage to U.S. businesses of 
requiring smaller, more frequent shipments to each country of use is 
substantial? When a foreign entity seeks to import a schedule I or II 
drug, or a schedule III or IV narcotic from the United States, they 
must first secure an import permit that is shared with the U.S. 
manufacturer and DEA. Our companies then have 60 days in which to 
obtain independent safety and quality testing on each separate product 
batch to be shipped. Upon completion of that testing, the manufacturer 
submits a highly detailed export permit application for DEA's approval. 
If DEA fails to issue the permit within 60 days, the entire process 
must be restarted. Because independent testing is expensive and the 
export process is highly paper intensive, it is not unusual for 
companies to struggle against the 60-day deadline only to have to begin 
again. Unfortunately, while we engage in this burdensome process, 
patients suffer without their drugs and foreign physicians seek out 
substitutes to unreliable U.S. supplies.
  This process was put in place long before the adoption of our 
international drug control treaties and the anti-diversion protections 
they provide. It is now outdated and unnecessary.
  Mr. HATCH. Yes, the Senator is correct. In addition to the burden 
imposed on U.S. manufacturing exporters, the advent of the European 
Union has created a situation that places our foreign distributors in 
violation of European law. Member countries of the EU are considered 
borderless in terms of trade. Products introduced into the European 
Union are required to be available for transport and shipment among and 
between all member countries under their law. However, because we don't 
recognize the European Union as a single entity and cross-border 
transfers are prohibited, our distributors are placed in the position 
of violating European law in being forced to deny inter-country 
distribution of U.S. drugs.
  Mr. BIDEN. Will the Senator yield for another question?
  Mr. HATCH. Yes.
  Mr. BIDEN. While the Controlled Substances Act restrictions made 
sense when they were adopted over 30 years ago, would you agree that 
changes in the way international pharmaceutical markets work, and in 
the way controlled substances are tracked, and have since rendered the 
requirements unnecessary? Our legislation was developed in cooperation 
with the Drug Enforcement Administration to ensure that all necessary 
anti-diversion controls remain.
  Under our bill, each country is required to have an established 
system of controls deemed adequate by the DEA. Only DEA permit or 
license holders in those countries may receive regulated products. Re-
exports are limited to one single cross-border transfer. The DEA must 
be satisfied by substantial evidence that the exported substance will 
be used to meet an actual medical, scientific or other legitimate need 
and that the second country of receipt will hold or issue appropriate 
import licenses or permits. The exporter must notify the DEA in writing 
within 30 days of a re-export, and an export permit must have been 
issued by the DEA.
  The legislation specifically retains the Drug Enforcement 
Administration's authority to deny a request to export or re-export a 
controlled substance. A company seeking to export a drug for subsequent 
transfer must provide the DEA with exhaustive information on both the 
country of initial export and the countries to which the controlled 
substances would ultimately be destined. In addition, DEA must be 
provided follow-up notification of any cross border shipment within 30 
days of that transfer. The U.S. Government will know where all drugs 
are being shipped and for what purpose. Without that information, U.S. 
pharmaceuticals will never leave our soil.
  Mr. HATCH. That it is correct. The purpose and intent of this 
legislation is to place U.S. pharmaceutical companies on equal footing 
with their international competitors. Moreover, this change is entirely 
consistent with the long-established regulatory scheme pursuant to the 
Federal Food, Drug and Cosmetic Act. Eliminating the need for multiple, 
small shipments and the associated wasteful, small batch testing, will 
save U.S. companies nearly 80 percent over current export distribution 
costs, savings that will result in more American jobs and stronger 
international markets for U.S. products.
  As the Senator noted, the bill has been crafted with the assistance 
of the Drug Enforcement Administration to ensure all necessary controls 
will remain in place while creating a level playing field for American 
business. It is simply a commonsense update to an outdated law, and I 
urge its passage.
  Mr. FRIST. Mr. President, I ask unanimous consent that the bill be 
read a third time and passed, the motion to reconsider be laid upon the 
table, and that any statements regarding this matter be printed in the 
Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (S. 3028) was read the third time and passed, as follows:

                                S. 3028

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. REEXPORTATION OF CONTROLLED SUBSTANCES.

       (a) Short Title.--This Act may be cited as the ``Controlled 
     Substances Export Reform Act of 2004''.
       (b) In General.--Section 1003 of the Controlled Substances 
     Import and Export Act (21 U.S.C. 953) is amended by adding at 
     the end the following:
       ``(f) Notwithstanding subsections (a)(4) and (c)(3), the 
     Attorney General may authorize any controlled substance that 
     is in schedule I or II or is a narcotic drug in schedule III 
     or IV to be exported from the United States to a country for 
     subsequent export from that country to another country, if 
     each of the following conditions is met:
       ``(1) Both the country to which the controlled substance is 
     exported from the United States (referred to in this 
     subsection as the `first country') and the country to which 
     the controlled substance is exported from the first country 
     (referred to in this subsection as the `second country') are 
     parties to the Single Convention on Narcotic Drugs, 1961, and 
     the Convention on Psychotropic Substances, 1971.

[[Page 25373]]

       ``(2) The first country and the second country have each 
     instituted and maintain, in conformity with such Conventions, 
     a system of controls of imports of controlled substances 
     which the Attorney General deems adequate.
       ``(3) With respect to the first country, the controlled 
     substance is consigned to a holder of such permits or 
     licenses as may be required under the laws of such country, 
     and a permit or license to import the controlled substance 
     has been issued by the country.
       ``(4) With respect to the second country, substantial 
     evidence is furnished to the Attorney General by the person 
     who will export the controlled substance from the United 
     States that--
       ``(A) the controlled substance is to be consigned to a 
     holder of such permits or licenses as may be required under 
     the laws of such country, and a permit or license to import 
     the controlled substance is to be issued by the country; and
       ``(B) the controlled substance is to be applied exclusively 
     to medical, scientific, or other legitimate uses within the 
     country.
       ``(5) The controlled substance will not be exported from 
     the second country.
       ``(6) Within 30 days after the controlled substance is 
     exported from the first country to the second country, the 
     person who exported the controlled substance from the United 
     States delivers to the Attorney General documentation 
     certifying that such export from the first country has 
     occurred.
       ``(7) A permit to export the controlled substance from the 
     United States has been issued by the Attorney General.''.

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