Capitol Words a project of the Sunlight Foundation

Sen. Tim Johnson

Mr. President, the United States remains the only developed nation that does not protect its consumers from drug price discrimination and, as a result, American consumers continue to pay the highest prices in the world for prescription drugs.

Drug spending in the United States and Canada rose by 11 percent last year to $230 billion, which accounts for nearly half of all the worldwide sales. Among seniors, total prescription drug spending rose an estimated 44 percent between 2000 and 2002. In 2002, a Families USA study found that for the 50 drugs most frequently used by seniors that year, prices rose 3.4 times the rate of inflation in 2002.

The House Committee on Government Reform report released last year found that seniors who lack drug coverage must pay twice as much for the five most popular drugs as purchasers in foreign countries, those prices being 131 percent higher than the United Kingdom, 112 percent higher than Canada, and 105 percent higher than France. For some drugs, U.S. seniors pay well over twice the price. For example Zocor, a cholesterol medication, costs only $37 in France for a monthly supply, but in the United States that same drug costs $117--over three times as much. A month's supply of Prevacid, an ulcer medication, costs only $42 in the United Kingdom compared to $118 in our country.

Clearly, this price discrimination must be addressed. Many, including myself, had hoped that the Medicare drug bill would be the first step in tackling the skyrocketing cost of prescription drugs. Unfortunately, the final product did very little to address these concerns. The new law expressly prohibits the Secretary of the Department of Health and Human Services from negotiating lower prices.

Again, this law not only does not correct the price differential, believe it or not, the new Medicare drug bill signed by the President last December actually prohibits the United States from negotiating lower drug prices the way every other foreign nation does. The United States remains alone.

When I traveled to South Dakota earlier this year to discuss the Medicare bill, seniors back home found this astonishing.

The new law also includes provisions that will allow the Secretary to prohibit real access to drug reimportation. Meanwhile, the cost estimates of the new prescription drug program continue to rise--to somewhere between $500 billion and $600 billion over 10 years.

We are in need of real solutions to this problem. It is my hope a real discussion could occur about drug pricing. What do we do about that gap and about the fact that American citizens pay twice the price or more as citizens of other nations?

There are several alternatives. We could allow drug reimportation from Canada or other countries and take advantage of their lower prices, and do so in a carefully monitored way that will secure the safety of those drugs. That would be one course. But, unfortunately, the White House and President Bush are opposed to that.

Second, we could be more direct. We could join the rest of the industrialized world and negotiate in behalf of our own citizens lower prices. That is what everybody else does. That is why France, Italy, Germany, Scandinavia, Great Britain, Mexico, Canada, and every other industrialized nation have prices far lower than the United States. But President Bush and the administration don't want to do that either.

Do you know what their answer is? Their answer increasingly is to use our trade rules not to cut the price of drug costs for U.S. citizens but to demand that other countries raise their drug prices on their citizens. That almost boggles the mind--that the solution is not to lower the cost of drugs for U.S. citizens but to raise them for everybody else in the world. Maybe in this case it is the United States that is out of step and the rest of the world has been in step in terms of drug pricing. The rest of the world has figured it out and we haven't.

In this country, we have done an extraordinary job of guaranteeing that the pharmaceutical industry has incredible levels of profits. And, of course, this new effort to use the trade rule would further enhance the profitability of the big drug companies, but it would do little or nothing for U.S. citizens. What good does it do U.S. citizens to know that the citizens of other nations have to pay higher prices? We need to moderate those prices and get the United States in step with the rest of the industrialized world.

It is an outrageous tactic to push the U.S. Trade Representative--USTR--to try to force other countries, through trade agreements, to up the price of prescription drugs in those nations. Most recently, the Speaker of the House and some in the Republican leadership in the Senate have advocated that USTR negotiate with Australia to increase its drug prices within its Pharmaceutical Benefits Scheme, or PBS. These proposals are outrageous for several reasons.

First, our Government should not be telling other nations how to run their health care system. How would we feel if Australia asked us to develop a universal health care program and do so in a way that would cost our citizens more than was necessary? Many of my colleagues and I do not believe anybody would believe it is appropriate for another country to tell us how we should run our health care system in America. Additionally, I find it inappropriate that some in Congress and the administration find it appropriate to ask other countries to increase their drug prices, but we certainly wouldn't do the same for our citizens at their request.

Would we be willing to increase drug prices under the VA program because Australia asked us to? I doubt it. I hope not.

Some of our colleagues will say other countries need to share the burden of research and development and that in so doing we will indirectly help to reduce prices in the United States. We should be very clear. Any trade agreement proposal that would require another country to increase its prescription drug prices provides no guarantee that prices will go down for U.S. consumers.

Does anyone really believe the pharmaceutical industry, which is reaping the highest profits of any sector of the Fortune 500, wouldn't pocket these as additional profits and say, Thank you, very much? Why would they lower costs to U.S. citizens? There is no data available to indicate that our prices would go down. In my mind, if this argument is the underlying justification for promoting these types of policies, the Trade Representative and members of Congress supporting these plans and the President owe it to our trade partners and American consumers to provide them the data--the proof that American consumers would benefit from increasing drug prices for everybody else around the world.

I also think we need to be very careful when making these assumptions--the unspoken assumption here--that research and development is the cause of our higher prices in this Nation. Isn't it the reality--that the lion's share of the prices paid by American consumers is not going into R&D but is going into the pockets of the pharmaceutical industry and its stockholders rather than research and development. There are very few industries that can boast the type of sales claimed by the drug industry, which has enjoyed average annual sale increases of 15 percent in recent years.

A Public Citizen June 2003 report found that in 2002 the top 10 drug companies netted profits of $36 billion, or more than one-half of all the profits of all the Fortune 500 companies.

While some may argue this increased spending is justified because it reduces other costs of health care spending, the overall rate of health care inflation continues to soar with no end in sight.

Beyond straight profits, the pharmaceutical industry continues to increase their spending on direct consumer advertising and lobbying. One study found that eight major American pharmaceutical companies spent more than twice as much on marketing and administrative costs as they did on R&D. For all the talk about research and development, in fact, more than twice of that is being spent on marketing and administrative costs.

The Security and Exchange Commission's 2002 financial data finds that for the fiscal year ending in December of 2002, the average profits of Pfizer, Merck, Bristol-Myers Squibb, Abbott and Wyeth was $5.1 billion, marketing and administration were $5.2 billion and R&D was much less at $2.3 billion. And let's not forget the campaign spending habits of the drug industry. During the 2000 election cycle, the drug industry gave disproportionate support to President George W. Bush and seventy percent of the industry's unprecedented $24.4 million in campaign contributions was spent on Republicans.

With all this in mind, I find it very hard to believe that American consumers are carrying the research and development burden, rather than the stockholder profit burden. And given that drug companies spend more on TV ads, marketing and administration than they do on drug research, perhaps we should first ask why the domestic pharmaceutical industry won't spend more of its money on developing new drugs, before we start asking our trading partners to pay higher prices for drugs.

The outcome of the Australia trade agreement included requirements that the PBS program in that country provide more transparency in how decisions are made about covered drugs. The PBS system seems to me to be a very good system. Before a medicine can be subsidized by the Australian government, the Pharmaceutical Benefits Advisory Committee or PBAC must recommend that a drug be listed on the PBS. When deciding what drugs make the list, the PBAC takes into account the medical conditions for which the medicine has been approved for use, its clinical effectiveness, safety and cost-effectiveness compared to other treatments. A drug providing new benefits receives a higher price reflecting that advantage. This system rewards true innovation by the pharmaceutical industry while ensuring value for the taxpayer dollar.

This is a well thought out and scientific process and I think the U.S. should at least explore similar steps in order to reduce drug prices under the Medicare program. I also think that the clinical comparative effectiveness analyses that the PBAC conducts are something that we should be making a priority in our country. The U.S. should also establish an independent source of this type of information. Right now, one of the reasons drug costs are so high in the U.S. is because consumers, doctors and purchasers do not have access to objective, unbiased, reliable data to compare how drugs measure up to one another. This type of information would force drug companies to truly compete with one another based on the value of their products. Australia is on the right track here and we should follow suit.

With the help of Senator Conrad, I am pleased we were able to obtain support during the Fiscal Year 2005 budget markup for a sense-of-the-Senate resolution supporting $75 million for the Agency for Health Care Research and Quality for getting these types of studies--drug comparative effectiveness studies--that are needed to find out what the real facts are. Having such information available and accessible to physicians and their patients has the potential to reduce our nation's prescription drug expenditures, by enabling doctors to make better informed prescribing decisions. I hope that my colleagues will support funding this year for these fund, which in the long run will mean lower drug prices for all Americans.

The very notion that the response from the Bush administration is not to allow cheaper drugs into the United States and not to negotiate lower prices for our citizens the way every other nation does but to try to demand that other countries raise the prices for their drugs indicates that the administration is out of touch and out of tune with the real needs and real priorities of American citizens. I urge my colleagues to join me in rejecting these proposals and ask that all members of this body work together to achieve real solutions to address the skyrocketing costs of prescription drugs.

I yield the floor and I suggest the absence of a quorum.

Sen. Byron L. Dorgan

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Sen. Byron L. Dorgan

Mr. President, while we are waiting for someone from our side who will manage the issue dealing with the Internet tax, I ask unanimous consent to speak in morning business for as much time as I may consume.