[Congressional Record Volume 141, Number 164 (Monday, October 23, 1995)]
[Senate]
[Pages S15421-S15432]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
GATT AND PRESCRIPTION DRUGS
Mr. PRYOR. Mr. President, the Senate is in the midst of a crucial
debate over Medicare and Medicaid. In the midst of this controversy,
the fate of a single bill or amendment might be inconsequential. But
today I rise to discuss a bill which speaks clearly and directly to a
very simple question at the heart of all of this debate, and that
question is this: Can the Senate do what is best for the American
people?
My colleagues, Senator Chafee of Rhode Island and Senator Brown of
Colorado, and I have offered just such a proposal. Compared with the
matter that we began debate on Wednesday in the reconciliation bill,
our proposal is simple, and it is easy to miss. But it is important. It
is crucial. It admits a congressional mistake, and it fixes a
congressional mistake. It closes a glaring legislative loophole and
saves billions of dollars in the process.
But, most important, it sends a very simple message to the American
people: Congress makes mistakes, but Congress can fix those mistakes
when the interests of the American people are at stake.
Mr. President, we offered this bill because the interests of the
American people--both as taxpayers and as consumers--are clearly at
stake here. And deep down my colleagues know it, too.
Let me briefly describe our proposal. It enjoys broad bipartisan
support in the Senate and in the House and has been endorsed by every
single Federal agency involved with trade, patents, or drugs: the U.S.
Trade Representative, the Patent and Trademark Office, and the Food and
Drug Administration.
Mr. President, here is what it does: When Congress passed the GATT
Treaty last year, we enacted two transition provisions. First, we
granted a generous extension to all current patents. Second, as a
condition of that extension, we permitted generic competitors onto the
market on the old patent expiration date if they had already made a
substantial investment and were willing to pay a royalty. That was our
agreement. That was our discussion as it related to GATT. These changes
were universally understood by all of the negotiators from every
country, from every industry, from every economic aspect of our
economic life in America.
Let me be very clear on this point. U.S. Trade Representative Mickey
Kantor states categorically in a letter dated September 18 to me that
the law was meant to apply universally, that there would be no
exceptions. The GATT negotiators themselves--the experts who physically
sat down at the table and negotiated the GATT Treaty on behalf of the
United States--have personally confirmed that the transition provisions
were meant to apply to every single person, product, company, and
industry in the country.
There was a loophole. And guess who came out smelling like a rose? A
few pharmaceutical drug companies, who now--if we do not do something
about it--are going to have a free ride for the next 3 years when
generic competition is poised and ready to compete with them in the
marketplace.
This spring the Congress discovered this loophole. We failed to
modify this loophole in the Finance Committee because of a technical
problem. When we passed the GATT Treaty, we inadvertently gave the
prescription drug industry a giant unintended windfall. Of all the
companies, of all the products in America--from automobiles to zippers,
computers and TV parts, everything--only prescription drug companies,
only drug companies, received a competition-free patent extension, a
free ride, a windfall.
In fact, when one of the officials of Glaxo Co., that manufactures
Zantac, heard about this loophole being discovered, his first word
was--and I quote--``eureka.'' They got the extension, and they were
mistakenly shielded from the competition intended by GATT. Without that
competition, today a handful of drug companies are now, beginning
today, receiving a whopping multibillion-dollar windfall paid for by
consumers and paid for by taxpayers.
This was a simple mistake of oversight, Mr. President. I wish to
emphasize that. We make mistakes around here every day. Sometimes we
correct them and sometimes we do not. But this is an opportunity to
correct that mistake. Every authority that I have spoken to, every
Member of this body, every Senate committee, and every Government
agency admits this was an error, and now we have a chance to change it.
Even the companies that gained this unjustified multibillion-dollar
windfall admit it was a mistake.
This is why my colleagues, Senators Chafee and Brown and myself, will
be offering this amendment. This amendment does one thing and one thing
only. It applies GATT to those few drug companies the same way it
applies to every other company and every other product in this country.
Unless we correct this loophole today, enormous profits, unjustified
and unexpected, will go to those few companies. We have already taken
the first steps to a solution, but 3 weeks ago we were blocked by a
procedural technicality in the Finance Committee. And make no mistake.
The only way to rectify this problem is here and it is now. The Senate
is the court of appeals for this issue to be decided.
If there is any doubt whether Congress should fix its own mistakes, I
have some news for my distinguished colleagues. The Patent Office and
the FDA have tried to correct this problem on their own. They failed
because of
[[Page S 15422]]
technicalities. The problem is, their hands are tied by the letter of
the law in the GATT treaty.
On last Thursday, despite their best efforts, a Federal court held
that three drug makers that had filed suits in the court had actually
won, which meant that they ruled against this loophole being corrected.
The Federal court said that their hands were tied.
Even worse, the court ruling now means that potentially hundreds of
products could be affected. This could mean as much as $6 billion--I
repeat, $6 billion--in unnecessary health care costs for every
purchaser of prescription drugs--the elderly, hospitals, clinics,
HMO's, drugstores, insurance companies and, not the least, the
governments, State and Federal governments.
According to securities analyists, the ruling could ``affect sales of
billions of dollars of brand name drugs that would otherwise be open to
competition from less expensive generic versions.''
For the average person, this means money out of our pockets for no
good reason. If they are one of the millions of people who take the
world's best selling drug, Zantac, our legislation would cut the cost
of Zantac by one-half. Think of it, cutting the cost of one medication
by one-half that is the best selling drug in America.
Our legislation would cut the cost of Capoten for hypertension by
two-thirds. By over 65 percent we would cut the cost of this drug
simply because there would be competition in the marketplace. That
competition in the marketplace is going to be delayed unless the court
of appeals, in this case the U.S. Senate, the last court of appeals,
handles this matter and corrects this very tragic mistake.
Let me tell you three other reasons why we should be supporting this
amendment at the proper time. Our proposal will save the Government
hundreds of millions of dollars for the poor, the veterans, active
military personnel, pregnant women, Native Americans, and every
American served by Medicaid, the Department of Veterans Affairs, the
Department of Defense, as well as the Public Health Service and the
Indian Health Service clinics. All of those would be included and all
of those would benefit with the adoption of our proposal.
Second, everyone wants to do what is best for older Americans, the
sick and the poor and the consumers. How often do we hear that? Here we
have an opportunity to do it. It is clear. It is evident that we can
help these groups by supporting this idea. Our proposal is supported by
senior citizens, consumers, medical practitioners. It is endorsed by
the National Council on the Aging, National Consumers League, the Gray
Panthers, the National Women's Health Network, the United Homeowners
Association, the National Council of Senior Citizens, and the National
Black Women's Health Project.
Finally, this issue has been the focus of intense media scrutiny for
the last several weeks. People are beginning to see how a big ripoff is
about to happen unless we correct it. Articles and stories inspired by
disbelief have appeared in the New York Times, NBC News, Associated
Press, Los Angeles Times, Business Week, Reuters, Journal of Commerce,
Roll Call, and the Orlando Sentinel, and the list goes on and on.
Why is there so much attention on this issue? Well, the bottom line
is there is a lot of money at stake. There are multibillion-dollar
health care cuts being debated in Congress today, and here we are about
to give an enormous windfall to one of the most profitable segments of
our economic activity, the pharmaceutical companies.
Why does anyone care about this particular legislation? I think the
reason people care is because they know this bill is the right thing to
do. They are sick and tired of the excuses that are given when we fail
to do the right thing. Please let me repeat, this is not a partisan
issue. It never has been. It is about fixing a mistake. It is about
saving taxpayers' money. It is about precluding an enormous windfall in
unjustified profit to several drug companies that have gotten, in my
opinion, extremely greedy.
This morning, Mr. President, I was just handed a page from the Roll
Call newspaper, dated Monday, October 23, 1995, page 8. Here is an
advertisement placed by the American pharmaceutical research
companies--by the way, that is the old PMA--Pharmaceutical
Manufacturers Association. They changed their name a few months ago,
Mr. President, so they could add a little cloak of dignity emphasizing
research. They take what we are trying to do apart and they try, as
they say, separating fact from fiction in this particular ad. But the
bottom line is what they have said is extremely misleading. It is
motivated by economic gain. In addition to that, it is simply wrong.
The motivation for this particular advertisement, in my opinion, is the
continuation of economic greed by some of the pharmaceutical
manufacturers.
Just in the Wall Street Journal, I believe, on Friday, the drug
companies talked about, well, they cannot sell drugs in America as
cheaply as they can sell these same drugs in Europe or in the other
industrialized nations. Look at this headline: ``Strong Global Sales
Lift Drug Company Profits.'' So they are selling overseas these same
drugs they sell to us for 40 and 50 and 60 percent more in this
country, they sell these drugs overseas at so much less and they are
making such an enormous profit that they see their stock is going up in
these companies, and once again the drug companies find a way to take
advantage of the American consumer and certainly the American
taxpayer. If we do not correct this issue now, we are going to be
actually a part, in my opinion, of a terrible mistake that we had a
chance to correct.
Here is the alternative, Mr. President. We can stand here and do
nothing, we can let these drug companies make off like bandits with
these unjustified profits, or we can vote for the amendment offered by
myself and, hopefully, some of my other colleagues. We can rob older
Americans, HMO's and every single taxpayer in this country if we do
nothing. We can enrich two or three drug companies, we can keep
competition out of the market, or we can make certain that they do not
receive money they do not deserve.
We can let a loophole rob American consumers of as much as $6
billion. We can let the intense lobbying efforts by one or two drug
companies sway us. We can ensure special treatment to a few companies
while the rest of the country plays fair, following the rules and
obeying the law.
Once again, Mr. President, a few pharmaceutical drug companies are
the only companies that are excluded under this provision. They are the
only ones given this mistake. They are the ones taking advantage, I
should say, of this mistake in the GATT treaty. Now is our opportunity
to change it. And in my opinion, Mr. President, this is the mother of
all special interest issues.
Let me read from the New York Times when they observed a few days
ago:
Some of the Nation's largest drug companies will have spent
and lobbied heavily against one bill that hardly amounts to
budget dust. While its impact on the Federal budget may be
minuscule, the measure means a fortune to these drug
companies.
Mr. President, I urge my colleagues to join us in supporting this
proposal. If we fail, it will allow the legal combination of a legal
loophole, a procedural technicality, intense lobbying, big bucks, and
our own failure of will, robbing the American consumers of billions of
their taxes and their income. Every American citizen will be forced to
continue subsidizing an outrageous, unintended windfall to a handful of
drug companies simply because we do not have the courage or the
foresight or the will to admit and to fix our own mistakes.
Mr. President, I ask unanimous consent that documentation of savings
from this proposal, letters of support, and recent media articles be
printed at this point in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the New York Times, Oct. 20, 1995]
Three Drug Makers Win Suit To Extend Protection of Patents
Alexandria, Va.--Merck & Company, the Schering Plough
Corporation, and Roche Holding A.G., have won a lawsuit
against the United States Patent Office and the Food and Drug
Administration, in which they had sought an extension on some
of their patents.
The ruling, reached Monday by the Federal District Court
here, is a victory for brand-name drug makers who fought a
decision by the F.D.A. and the Patent Office to limit patent
protection.
Securities analysis said the ruling could affect sales of
billions of dollars of brand-
[[Page S 15423]]
name drugs that would otherwise be open sooner to sharp competition
from less expensive generic versions.
Neil B. Sweig, an analyst with Brown Brothers Harriman &
Company, said that based on current sales in the United
States, the extension could result in $3 billion in sales of
Zantac, the ulcer treatment made by the Glaxo Wellcome
Company; $1.45 billion in sales of Mevacor, a cholesterol-
lowering drug made by Merck, and $280 million in sales of
Capoten, a hypertension treatment produced by the Bristol-
Myers Squibb Company.
Mr. Sweig added that the court ruling had been anticipated
by investors and was already reflected in drug companies'
stock prices.
Under a Federal rule that took effect on June 8, drug
makers could either have patent protection under the new
world trade organization or the previous system.
The new patent protection for brand-name drugs would last
as long as 20 years from the date of the patent filing. Under
the old system, drug patents were protected in the United
States for 17 years after they were granted, plus some of the
time drugs were waiting, regulatory review by the F.D.A. In
some cases, protection would last longer under the old
system.
``The courts ruled that they were wrong, and you can be
protected under both systems,'' said Steve Bercham of the
Pharmaceutical Manufacturers Association.
Mr. Bercham said, however, that the court had decided that
a patent could never result in exclusive marketing rights for
more than 14 years.
As a result of the decision, Merck's patent on its
cholesterol-lowering drug Mevacor was extended to June 15,
2001, from Nov. 4, 1999.
Gary Latchow, a Merck spokesman, said the patent for the
company's ulcer medication Pepcid had also been extended.
____
U.S. Trade Representative,
Washington, DC, September 18, 1995.
Hon. David Pryor,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Senator Pryor: Thank you for your recent letter
updating me on the ongoing concerns of the Congress, health
care purchasers and consumers over the exclusion of the
prescription drug industry from the scope of the Uruguay
Round Agreements Act (URAA) transitional ``grandfather''
provision.
As you note in your letter, I wrote to Food and Drug
Administration (FDA) Commissioner Kessler earlier this year
to inform him that the URAA ``grandfater'' provision language
was intended by its drafters to be generally applicable and
to permit generic pharmaceutical producers to market their
products where they had made substantial investments in
anticipation of the expiration of the unextended patent
terms. While the FDA found that the URAA did not permit it to
allow the generic pharmaceutical producers on the market
until the expiration of the extended patent term, it stated
that ``the language of the URAA does not reflect the
legislative intent'' which Congress desired.
In light of these events, I applaud your effort to seek to
correct this situation through your introduction of the
Consumer Access to Prescription Drugs Act. The draft
legislation generally reflects the intent of the drafters of
the URAA.
With regard to the issue of whether this correction would
either weaken patent protection under the URAA or diminish
our ability to campaign for stronger patent protection
abroad, I believe that any concerns in this area are
overstated. As you know, we intended to apply this
``grandfather'' provision to the pharmaceutical area, and so
legislation of this type should result in a level of
protection that is consistent with our original intent.
Additionally, this level of protection is consistent with the
obligations under the intellectual property agreement
negotiated as part of the Uruguay Round, called the ``TRIPs
Agreement.'' Just as we are permitted to make limited
exceptions to the grant of additional rights as the result of
the TRIPs Agreement, so are our trading partners. As we have
already made certain exceptions to the rights granted during
the extension period for all types of patents other than
pharmaceutical patents, the application of these exceptions
to pharmaceutical patents should not weaken our ability to
insist on strong patent protection in our trading partners.
You can be sure that if a trading partner attempts to expand
these exceptions beyond those permitted by the Agreement, we
will vigorously oppose them.
Consequently, I do not think that your efforts will have a
negative effect on our ability to ensure that the TRIPs
Agreement is fully implemented by our trading partners. I
look forward to working with you on this issue.
Sincerely,
Michael Kantor.
____
U.S. Trade Representative,
Washington, DC, September 25, 1995.
Hon. John H. Chafee,
U.S. Senate,
Washington, DC.
Dear Senator Chafee: Thank you for your letter concerning
the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPs) and the intended effect of certain
provisions of the Uruguay Round Agreements Act (URAA). You
raise several significant issues related to the nature of the
United States' obligations under the TRIPs Agreement and the
way in which the United States implemented those obligations
in the URAA. In answering your questions, I would like first
to indicate the nature of certain of the obligations under
the TRIPs Agreement, and then to discuss the provisions in
the URAA that are intended to implement those obligations.
U.S. Obligations Under Article 70 of the TRIPs Agreement
Article 70 of the TRIPs Agreement generally requires World
Trade Organization (WTO) Members to apply the high levels of
protection required by the TRIPs Agreement to all existing
intellectual property. In other words, if a WTO Member
provides an additional right or benefit to the owners of a
particular type of intellectual property as a result of its
implementation of the TRIPs Agreement, it must provide that
additional right or benefit to intellectual property created
in the future and to intellectual property already created
but still subject to protection. Accordingly, in the URAA the
United States modified the term of patents from seventeen
years from grant to twenty years from application for all
future patents, and also applied the new term to existing
patents, thereby giving some owners of U.S. patents a longer
term of protection.
The primary provisions of Article 70 on treatment of
existing subject matter and ``newly infringing acts'' are
Articles 70:2, 70:3 and 70:4. Article 70:2 contains the
general requirement that TRIPs-consistent levels of
protection must be applied to existing intellectual property.
Article 70:2 also states that in the case of copyrightable
subject matter (e.g., books, movies, sound recordings,
computer software), copyright obligations, including the
grant of retroactive protection must be implemented solely
through the application of Article 18 of the Berne Convention
for the Protection of Literary and Artistic Works. This
provision makes clear that where copyrightable subject matter
must be pulled out of the public domain and granted
protection to comply with TRIPs, the terms of Article 18 of
the Berne Convention shall control.
Article 70:3 of the TRIPs Agreement provides that no WTO
Member is obligated to restore protection to subject matter
which has fallen into the public domain. For example, an
expired patent need not be granted a new term of protection,
even if the patent would still be in effect had it been
granted a TRIPs-consistent term of protection. As noted
above, Article 70:2 expressly carves-out copyright protection
from Article 70:3.
Article 70:4 provides that to the extent that certain
activities become infringing because of the higher levels of
protection required by TRIPs, WTO Members may allow a person
to engage in such infringing acts as long as they pay
equitable remuneration to the right holder. This provision
was intended to permit WTO Members to treat equitably those
persons who in good faith used or made a significant
investment in connection with the use of the intellectual
property right in a way that would be prohibited after a
TRIPs-consistent level of protection applied. For example, if
TRIPs requires an extension of the patent term in a WTO
Member, that Member may allow a person who built a factory
for the purpose of manufacturing a patented product when the
patent was previously expected to expire to make the produce
during the extension period, as long as that person pays
equitable remuneration to the right holder during the
extension period.
Consequently, while Article 70:4 could apply to treatment
of inventory created before the application of the Agreement,
it was not intended to be limited to that situation. The
primary intent of this provision was to treat equitably those
persons who had made a substantial investment in reliance on
the pre-TRIPs level of protection. It was not intended to
allow nations with weak patent laws to protect domestic
industries while those nations came into conformity with the
new TRIPs standards. Investment must be substantial and it
must be made by a certain date.
U.S. Implementation of Article 70 of the TRIPs Agreement
The United States implemented its obligations under the
TRIPs Agreement in Sections 501-532 of the URAA. Section
532(a) of the URAA amended Section 154 of the Patent Act to
change patent terms from a seventeen years from grant system
to a twenty years from application system. As noted above, in
accordance with our TRIPs Article 70:2 obligations, Section
154(c)(1) of the Patent Act was amended to grant owners of
patents still in force the benefit of this new system to the
extent it increased their term.
To treat equitably those persons who had made a substantial
investment in reliance on the old patent term, Section 154(c)
(1) and (2) of the Patent Act was amended to provide that
such persons would be able to make use of the patent during
the extension term as long as they paid equitable
remuneration to the patent owner. This provision was written
neutrally because it was intended to apply to all types of
patentable subject matter, including pharmaceutical products.
Conforming amendments should have been made to the Federal
Food Drug and Cosmetic Act and Section 271 of the Patent Act,
but were inadvertently overlooked.
Our creation of the ``transition period'' in Article 154(c)
of the Patent Act is consistent with our obligations under
the TRIPs Agreement. The extension of this transition period
[[Page S 15424]]
to pharmaceutical products would also be consistent with these
obligations and the intent of the U.S. negotiators involved
in drafting the TRIPs Agreement.
Finally, the extension of the Section 154(c) to
pharmaceutical products would not undermine ongoing U.S.
efforts to seek high levels of intellectual property
protection around the world. We are acting wholly within our
rights in establishing the transition period, as other
countries would be if they did the same. Furthermore, we have
already established under our law the transition period with
respect to all types of patents other than pharmaceutical
patents; extending it to pharmaceutical patents would in no
way increase the ability of our trading partners to justify
their failure to provide TRIPs-consistent patent protection.
You can be sure that if one of our trading partners attempts
to overstep the equitable treatment permitted under TRIPs
Article 70:4, or otherwise fails to live up to the TRIPs
Agreement, we will work vigorously to bring them into
compliance with their international obligations.
I look forward to working with you further on this manner.
Please let me know if I can provide you with any more
information.
Sincerely,
Michael Kantor.
____
[From Prime Institute, College of Pharmacy, University of Minnesota,
Health Sciences Unit F-7-159, Minneapolis, MN, March 1995]
Economic Impact of GATT Patent Extension on Currently Marketed Drugs
Executive Summary
At least 109 currently patented and marketed drugs will
receive a windfall patent extension if GATT rules are
retrospectively applied to previously filed or issued
patents.
The average patent extension for the currently marketed
drugs would be more than 12 months with some drugs receiving
more than 28 months of added exclusivity.
The windfall extension of patent exclusivity for currently
marketed drugs will mean that the introduction of lower cost
generics will be delayed. Therefore, the American consumer
will have to pay more for prescription medications.
FDA approved versions of generic drug products typically
enter the market at a price more than 25% less than the
patented brand. Within one year the price of competing
generics will be 45% below the brand; at two years the price
will be 60% less and at three years it will average 75% less
than the brand name drug (Kidder, Peabody: Generic Drug
Industry Overview, October 5, 1994).
FDA approved versions of generic drug products typically
capture 45% of the units sold within one year of market
introduction. After two years their market penetration
averages more than 50% of all units sold and by the third
year the penetration approaches 60% (Kidder, Peabody: Generic
Drug Industry Overview, October 5, 1994).
The economic impact of extending the GATT rules to
currently marketed drugs can be estimated by applying the
recent pricing and market penetration performance of generics
to the actual and projected sales volume of currently
marketed drugs for the additional length of time that
American consumers will have to wait for access to lower cost
generics.
The projected cost to American consumers from the windfall
extension of patent exclusivity for the 109 currently
marketed drugs affected by this change will exceed $6 billion
(1996 net present value) over the next two decades.
Twenty of the most common prescription drugs will account
for an increased cost to American consumers of over $4.5
billion (1996 net present value) in the next two decades.
There are at least 10 drugs whose patents will expire in
1995. The lack of generic competitors for just three of these
drugs will cost American consumers $1.2 billion (1996 net
present value) in 1996 and 1997.
The lower price and high market penetration of generics,
when available, results in substantial savings to American
consumers. These savings are also of benefit to Medicaid,
federal and state government, private insurers, managed care,
employers, unions, ERISA plans, and others who pay for
prescriptions. The cost of this windfall extension of
exclusivity to Medicaid alone will be about $1 billion (1996
net present value) and the total cost to federal and state
government will exceed $1.25 billion (1996 net present
value).
The projected cost to American consumers from the extension
of GATT rules to currently marketed drugs has been estimated
in a study conducted by the PRIME Institute at the University
of Minnesota. The PRIME Institute specializes in research
involving pharmaceutical benefit management, economics, and
public policy issues.
____
[From the Associated Press, Oct. 19, 1995]
Drugs Get Extra Patent Time
Washington.--A federal court has decided nearly 100 brand-
name drugs may get an extra few years' monopoly in the
market, the pharmaceutical industry announced Thursday.
At issue is whether the drugs could get two patent
extensions--one from a 1984 law and another under a global
trade agreement.
The General Agreement on Tariffs and Trade, which went into
effect in June, extends patent protection to 20 years from
the date drug makers file for a patent. Until now, those
patents have had a 17-year life from the time they were
granted. Current patent-holders will get whichever expiration
date is later.
A 1984 law already has offered brand-name drugs up to an
extra five years' patent life to help offset the time it
takes those medicines to get Food and Drug Administration
approval for sale.
Makers of brand-name drugs said they were entitled to both
extensions, which could have given some drugs patent
protection for a total of 25 years.
But the Patent and Trademark Office decided in June that
drugs that got the 1984 extension couldn't get one from GATT
too. The ruling affected 94 brand-name drugs and meant the
longest a medicine could monopolize the market was about 22
years.
The drug industry went to court. Thursday, the
Pharmaceutical Research and Manufacturers Association
announced that a U.S. District Court in Alexandria, Va., had
ruled that both extensions were the law.
____
[From the Roll Call, Oct. 5, 1995]
Simpson Abstains Because of Stock
(By Amy Keller)
In an unusual acknowledgment of the potential conflict
created by Members' financial holdings. Sen. Alan Simpson (R-
Wyo) abstained from a Finance Committee vote Friday on an
amendment that could affect two major pharmaceutical
companies in which he owns thousands of dollars worth of
stock. Simpson, who chairs the Finance subcommittee on Social
Security and family policy, abstained from voting on an
amendment offered by Sens. David Pryor (D-Ark) and John
Chafee (R-RI), which according to Pryor would ``close a
multibillion-dollar loophole in the General Agreement on
Tariffs and Trade for the name-brand pharmaceutical
industry.''
According to his 1994 financial disclosure forms, Simpson
owns between $1,000 and $15,000 worth of stock in both Glaxo-
Wellcome PLC and Bristol-Myers Squibb Co.--two pharmaceutical
companies that stand to lose millions of dollars if the
Pryor-Chafee amendment is enacted.
Simpson said yesterday that he ``just didn't feel
comfortable'' voting on the amendment.
``I abstained . . . simply because I own about . . . four
or five thousand bucks of Glaxo stock. . . . It is a serious
amendment and I just chose to abstain,'' Simpson said.
The amendment seeks to put an end to exemptions granted to
name-brand pharmaceutical companies allowing them patent
extensions on drugs.
As Pryor explains it, through GATT, the US ``agreed to
extend patents [on all sorts of products] we grant from 17
years to 20 years to conform with the rest of the world,''
but the treaty also included language to allow ``generic
manufacturers to come on the market after the 17-year term
ended if they agreed to pay a sort of franchise fee to the
brand-name company.''
After heavily lobbying Congress to keep the 20-year patent
extensions under the treaty, the pharmaceutical industry was
granted ``special protection'' for some 100 specific drugs.
The United States Patent and Trademark Office later revoked
the protection of 94 of those drugs, and the Pryor-Chafee
amendment seeks to revoke the 20-year patents of the handful
of drugs that still carry such protection.
Citing a study by the University of Minnesota, Pryor
contends that Glaxo, which makes the ulcer drug Zantac
prescribed to some 33 million Americans and is the world's
largest pharmaceutical company, and Bristol-Myers Squibb,
maker of the blood pressure medication Capoten (prescribed to
some 15 million), could net a ``windfall'' of $1 billion and
$100 million, respectively, if generic companies are
prevented from manufacturing the drugs for an additional
three years.
Despite a 9-7 vote in favor of the amendment, the measure
failed when Finance Chairman Bill Roth (R-Del) ruled that the
amendment to the budget reconciliation bill was out of order.
Roth said the amendment was nongermane, thus requiring a two-
thirds majority vote for passage instead of a simple
majority.
Three other members of the 19-member Finance Committee--
Sens. Bob Dole (R-Kan) and Larry Pressler (R-SD) and then-
Sen. Bob Packwood (R-Ore),--also abstained from voting on the
amendment.
According to Pryor press secretary Justin Johnson, Pressler
and Dole had prepared ``no'' votes by proxy and only
abstained from voting on the amendment when it became
apparent the amendment would fail with or without their
votes.
And while Dole has no direct holdings in pharmaceutical
stock, his wife Elizabeth owns between $1,000 and $15,000 in
Bristol-Myers Squibb stock, and she holds between $1,000 and
$15,000 in Kimberly-Clark Company stock, another major
pharmaceutical corporation, according to 1994 financial
disclosure records.
Pryor and Chafee have not given up the fight on their
amendment, however, and plan to raise the issue on the Senate
floor in the near future. According to Johnson, there will be
a modification to the amendment and it will be re-offered.
And should the Pryor-Chafee amendment make it to the Senate
floor, at least five of Simpson's colleagues will face the
same choice the Senator did last week, on whether to vote on
a measure that could constitute a conflict of interest in
light of their private investments.
[[Page S 15425]]
Among those also owning stock in the affected
pharmaceutical companies according to their 1994 financial
disclosure records are: Sens. Paul Coverdell (R-Ga), who
holds between $1,000 and $15,000 in Glaxo; Judd Gregg (R-NH),
between $100,000 and $500,000 in Bristol-Myers Squibb; James
Inhofe (R-Okla), between $1,000 and $15,000 in Bristol-Myers
Squibb; Lauch Faircloth (R-NC), between $1,000 and $15,000 in
Glaxo; and Claiborne Pell (D-RI), between $1,000 and $15,000
in Bristol-Myers Squibb.
Simpson said he doesn't know if he will again abstain from
voting on the Pryor-Chafee amendment if it reaches the Senate
floor.
``I'll go sort it out again and see where we are, but at
least everybody will know that I have that type of holding in
Glaxo, which is listed in my [financial disclosure] reports
anyway,'' Simpson said.
According to Rule 37 of the Senate Code of Official
Conduct, no Senator shall ``knowingly use his official
position to introduce or aid the progress or passage of
legislation, a principal purpose of which is to further only
his pecuniary interest. . . .''
Still, it is exceedingly rare for lawmakers to abstain
themselves from a vote, an ethics expert confirmed.
According to former House Counsel Stan Brand, ``[Conflict
of interest] is something that has been broadly construed in
the annals of ethical rule of the House and Senate, and it's
only in the most acute cases of a conflict that [someone] is
actually barred from voting.''
In the first half of 1995, Glaxo-Wellcome's PAC gave
$94,300 in political contributions to Republicans and $28,500
to Democrats, while Bristol-Myers Squibb's PAC gave $22,800
to Republicans and $7,300 to Democrats, according to Federal
Election Commission records.
Five members of the Senate Finance Committee--Sens. Max
Baucus (D-Mont), Alfonse D'Amato (R-NY), Charles Grassley (R-
Iowa), Frank Murkowski (R-Alaska), Pressler, and Simpson--
received political contributions from Glaxo.
Baucus and D'Amato each also received contributions from
Bristol-Myers Squibb.
____
[From the Reuter Business Report, Sept. 29, 1995]
Drug Company Preserves Tax Break in Senate Committee
(By David Lawsky)
A major drug company Friday won a fight in a Senate
committee, holding on to a loophole that opponents said will
cost consumers $3.6 billion.
The Senate Finance Committee, which is considering an
omnibus budget bill, turned down an attempt to remove the
special treatment for Glaxo Holding PLC and other brand name
drug companies.
Those against the break promised to bring the fight up
again on the floor of the Senate.
Sen. John Chafee, R-R.I., proposed ending the break for
Glaxo because he said it was ``unanticipated and totally
inadvertent.'' In fact, Chafee said, when the lawyer for
Glaxo discovered the loophole, he said he had a `` `Eureka!'
moment.''
``I might say he's entitled to shout `Eureka!' when you've
got $3.6 billion'' at stake.
A study cited by Chafee showed that without cheaper
competition by generic drug companies 13 drug companies stood
to reap $4.3 billion, with Glaxo getting most of it.
Chairman William Roth, R-Del., ruled Chafee's motion out of
order. To the consternation of Chafee and his allies, Roth
said he was going to require a two-thirds vote to overturn
him, citing a rule.
``Mr. Chairman I've never known us to require a two-thirds
vote'' in such a situation, said Sen. Daniel Patrick
Moynihan, D-N.Y., who was chairman when Democrats held a
majority.
But Roth held firm and although the committee voted 9-7 to
remove the break, Chafee lost.
The issue arose out of the General Agreement on Tariffs and
Trade, which has a section that in many cases stretched
patents from 17 to 20 years.
But that section would put generic companies at a
disadvantage if they had made expensive preparations to go
into business against a patent-holder, anticipating the end
of 17-year patents.
So a special section was adopted that permitted companies
that had sunk money into competition to go ahead and market
their competing product, so long as they paid royalties to
the brand name company which won the extra patent time.
U.S. Trade Representative Mickey Kantor said this week in a
letter to Chafee the section was supposed to apply to all
products but that ``pharmaceutical products . . . were
inadvertently overlooked,'' because they needed a special
change in the law governing the Food and Drug Administration.
The measure was opposed by Sen. Orrin Hatch, R-Utah, who
called it ``complex,'' and by Sen. Carol Moseley-Braun, D-
Ill., who said through a spokeswoman she was a friend of the
president of Glaxo and had traveled on the company plane to
speak at its headquarters.
____
[From the Orlando Sentinel, Sept. 30, 1995]
Generic-Drug Talks Stall in Committee
(By Maya Bell)
A bill that would allow generic-drug companies to begin
competing with brand-name rivals suffered a setback in
Congress on Friday.
The Senate Finance Committee voted 9-7 to consider
correcting a congressional oversight that protected the
makers of 13 brand-name drugs from generic competition for up
to three years. Among the drugs are two best-sellers, Zantac
for ulcers and Capoten for high blood pressure.
But committee Chairman William Roth, R-Del., ruled that
two-thirds of the committee had to agree to debate the bill.
Lacking that majority, the amendment was tabled.
``It's still a victory. The reason we couldn't get a
hearing was procedural,'' said Natalie Shear, a spokeswoman
for the Generic Drug Equity Coalition, a consortium of
consumer groups and generic-drug companies lobbying Congress
to correct its mistake. ``The bottom line was the senators
indicated their support.''
Sen. Bob Graham, the only Floridian on the committee, voted
to consider the bill.
A spokesman for one of the sponsors, Sen. Richard Pryor, D-
Ark., said the measure would be brought up again in another
forum.
``It's definitely not dead yet,'' said Justin Johnson,
Pryor's press secretary. ``There will be a modification, and
it will be reoffered. We'll keep after it.''
The bill is intended to correct what is widely acknowledged
to have been a congressional oversight. The mistake was made
when Congress adopted the language for the global trade
treaty known as GATT. While extending U.S. patent terms from
17 years to 20 years to comply with the General Agreement on
Trade and Tariffs, Congress inadvertently exempted 13 brand-
name drugs from generic competition for up to three years.
The drug coalition estimates that the oversight will cost
consumers, who won't have generic alternatives for some
prescriptions as early as anticipated, nearly $2 billion.
Among the biggest beneficiaries are drug giants Glaxo-
Wellcome Inc., the makers of Zantac, and Bristol-Myers Squibb
Co., which produces Capoten. Last year, Glaxo sold $2.7
billion worth of Zantac and Bristol-Myers $581 million of
Capoten in the United States.
Neither company could be reached for comment Friday. Glaxo
spokeswoman Nancy Pekarek has said the company opposes the
GATT fix because it would send a message to other countries
that they, too, can tinker with the treaty to protect a
favored industry.
____
[From the Journal of Commerce, Sept. 28, 1995]
Drug Firms Fight To Preserve Windfall
(By John Maggs)
Washington.--A handful of powerful drug companies are
waging one of the most furious and extravagant lobbying
campaigns seen on Capitol Hill in years, all to preserve an
inadvertent change to U.S. law in last fall's trade bill that
promises them billions of dollars in unexpected profit.
The drug companies are shelling out millions of dollars to
enlist the influence of distinguished former senators such as
Warren Rudman of New Hampshire and Dennis DeConcini of
Arizona, and former U.S. Trade Representative and Senator
William Brock of Tennessee.
The prize for this largess is one of the biggest payoffs
for the smallest number of companies ever granted by Congress
without a word of debate.
One company alone, Britain's Glaxo Holdings PLC, will rake
in $3.6 billion over the next two years as a result of this
legal twist of fate, all of it money that it never expected
to earn. This windfall will come out of the pockets of ulcer
patients, most of them in the United States, who will pay
higher prices for Glaxo's revolutionary anti-ulcer drug
Zantac.
The explanation begins with last year's bill to implement
the Uruguay Round trade agreement, which lowered trade
barriers worldwide and increased protection for patented
drugs and copyrighted material. As part of that international
patent deal, the United States agreed to change the life of
new patents from 17 years after they are first granted to the
norm for the rest of the world--20 years from the date a
patent request is first made.
The trade legislation sent to Congress made the patent term
change effective for all patents, so that those coming due
less than 20 years after they were originally filed were
automatically granted an extension. Mindful that this would
have handed drug companies an unwarranted windfall, the trade
bill provided that generic drug firms would be allowed to
begin manufacturing the patented drugs after the original
patent date, provided they pay a licensing fee to the big
drug companies.
But unknown to the drafters of this legislation, a 1984
drug law effectively freed Glaxo and other big pharmaceutical
companies from this obligation to license their products. In
a moment of insight a lawyer for Glaxo discovered this
overlooked statute, and set off a bitter fight with generic
drug companies to reverse this inadvertent stroke of good
luck.
This list of beneficiaries is a long one. Glaxo is by far
the biggest--it will receive nearly two years of extra
monopoly control over Zantac, earning $6 million a day more
than it would have earned if competing with generic drug
producers. Also benefitting are Squibb, which will get $311
million of added profits for its ACE hypertension drug;
Organon, which gets $108 billion for its Norcoron anestesia;
and Searle, which gets $102 million for its Cytolec anti-
ulcer drug.
Advocates of the generics have lined up the support of U.S.
Trade Representative Mickey
[[Page S 15426]]
Kantor in arguing that the windfall was an inadvertent one.
As soon as today, Sens. David Pryor, D-Ark., and John
Chafee, R-R.I., are expected to offer an amendment to reverse
this windfall profit, but they face an uphill battle. Sen.
Jesse Helms, R-N.C., is leading the fight for Glaxo, whose
U.S. subsidiary is based in North Carolina. Sen. Helms faces
re-election in 1996 and some of Zantac's billions of dollars
in earnings would be useful in financing his campaign.
Sen. Helms has lined up the support of majority leader Bob
Dole, who has in turn made preserving the windfall for the
drug companies a partisan issue. Few Republicans other than
Sen. Chafee have committed to support the Pryor amendment.
____
[From the Journal of Commerce, Oct. 2, 1995]
Senate Panel: No Vote on Drug Loophole
Washington.--Senate Finance Committee Chairman Bill Roth,
R-Del., refused to allow a vote to repeal a controversial
loophole in U.S. patent law, despite opposition to his
unusual ruling from a bipartisan majority of the committee.
Behind the maneuvering was a huge amount of money for
British-owned Glaxo Holding PLC and the tight grip that
Senate Majority Leader Bob Dole, R-Kan., holds over the
Finance Committee.
The issue apparently resulted from an inadvertent mistake
in drafting last fall's trade bill, which gave Glaxo an
unexpected windfall of $3.6 billion by extending for two
years its exclusive patent rights on the anti-ulcer medicine
Zantac.
Generic drug companies are clamoring to put out knock-off
versions of Zantac, but cannot because government lawyers
drafting the trade bill overlooked a 1984 law that
effectively prevented these generics from starting
production. Career trade negotiators who worked on the
legislation confirmed Friday that it was an oversight.
Sens. John Chafee, R-R.I., and David Pryor, D-Ark., Friday
sought to reverse this mistake with an amendment to the huge
budget reconciliation bill before the Finance Committee.
Although Finance was hearing other amendments on Medicaid and
Medicare, Mr. Roth deemed the patent measure out of order,
declaring that it was in the jurisdiction of the Labor
Committee and he refused to accept a letter from Labor
waiving jurisdiction.
Behind his resolve was Mr. Dole, who had agreed to block a
vote at the request of Sen. Jesse Helms, R-N.C., who faces
re-election in 1996 and could use the financial help of the
U.S. subsidiary of Glaxo, located in North Carolina.
In a perhaps unprecedented move, Mr. Chafee forced a vote
on Mr. Roth's decision. Little-used rules required a two-
thirds majority to overrule the chair.
Thus a 9-7 vote to overrule failed, despite the majority.
Mr. Roth later declined to comment on whether the ruling
had been made under pressure from Mr. Dole. ``I don't discuss
my meetings with Sen. Dole,'' he said, ``but this was based
on the rules of the Finance Committee.''
____
[From the Journal of Commerce, Oct. 5, 1995]
The Senator From Glaxo?
When Sen. Bill Roth succeeded Bob Packwood as chairman of
the Senate Finance Committee, he had a cloud over his head.
Sen. Roth, so the thinking went, would be beholden to Sen.
Majority Leader Bob Dole and not act independently on
committee business. That may have been an unfair rap, but so
far it seems to be coming true.
Consider a case involving patents that came before the
Finance panel recently. Last fall, as part of the new Uruguay
Round trade deal, Congress changed the term for patent
protection to make the U.S. standard match the norm in most
other countries. An oversight by government lawyers, however,
effectively extended the life of a handful of drug patents,
denying generic drug companies the right to compete with
these patent-holders.
By far the biggest beneficiary of this mistake is British-
owned Glaxo Pharmaceuticals, which will earn $3.6 billion by
gaining an extra 19 months of patent protection for a single
drug--its Zantac anti-ulcer medicine.
To preserve this windfall, Glaxo has enlisted, among
others, Sen. Jesse Helms of North Carolina, the state where
Glaxo's U.S. subsidiary is located. Facing re-election in
1996, Sen. Helms reportedly went to Sen. Bob Dole and got his
support for squelching any attempt to repeal Glaxo's bonus.
When Sens. John Chafee and David Pryor offered an amendment
to close the Glaxo loophole, Sen. Roth blocked them. Using a
parliamentary ruling from Sen. Dole's office, he ruled the
amendment out of order, even though it fell within the
committee's purview on health care and trade.
Even though most committee members favored a vote on the
proposal, Sen. Roth ignored their pleas. In a move the
committee hadn't seen in decades, a majority of members then
voted to overrule the chairman on a procedural point, tossing
out a tradition of collegiality.
In the end Sen. Roth prevailed, since two-thirds of
committee members were needed to overrule him. But he lost
this first test of leadership.
____
Transcript From NBC Nightly News With Tom Brokaw, Wednesday, September
27, 1995--``In Depth'' Segment
[Brokaw in studio standup.]
Brokaw. More on Medicare reform as Congress looks for ways
to save. We've got the shocking story of how some drug
companies are cashing in--at your expense.
[Video to footage of Congressional Hearing on Capitol
Lawn.]
In the Medicare debate today, House Democrats held their
second hearing on the Capitol lawn, protesting what they say
is Republican unwillingness to hold official hearings.
[Brokaw in studio standup.]
In the Senate, gridlock as Democrats blocked the Finance
Committee from working on the Medicare proposal today. But
there is one area where Congress could help save millions of
taxpayers dollars--now. NBC's Lisa Myers has this Indepth
report.
[Video footage of Florence Davis.]
Myers. Ninety-year-old Florence Davis takes the
prescription drug Capoten for her high blood pressure. A
month's supply costs $125 at her pharmacy.
Davis. If I could get the generic cheaper, I would.
Myers. Her son, Norman, pays for the medication.
Norman. For all of my mother's drugs, I pay for them. She
can't afford it.
Myers. Mrs. Davis was supposed to be able to buy a cheaper
generic version of Capoten beginning last month, cutting the
cost by as much as half.
[Video footage of pharmacist dispensing pills in pharmacy.]
But, thanks to Congress, she'll have to wait until at least
February, and here's why.
[Cut to video of Myers in Senate Hearing Room showing GATT
bill.]
Last year, Congress made a costly mistake in this huge bill
implementing the trade agreement called GATT. It gave big
drug companies longer patent protection on about a dozen
drugs, enabling them to charge high prices without
competition.
[Cut to video of Senator David Pryor (Democrat-Arkansas)
holding pill bottle.]
Pryor. They're getting a two billion dollar a year
windfall. It is a bonanza. This is an absolute ripoff to
consumers and to taxpayers.
[Cut to graphic of ``Big Winners'' showing Bristol-Myers
Squibb and Glaxo, with picture of drug products.]
Myers. The big winners: Bristol-Myers Squibb, maker of
Capoten, taken by 15 million Americans last year, and Glaxo,
maker of Zantac, an ulcer drug prescribed to 33 million.
[Cut to graphics ``Big Losers.'']
The biggest losers: everyone who uses the drugs.
[Cut to graphic of Zantac.]
Take Zantac, the ulcer drug which costs about $83 a month.
Buying generic could cut that cost in half, a big savings if
you're on a fixed income.
[Cut to video of Horning.]
Horning. That can mean the difference between her having
lunch or not. It's simply that critical to some of our
elderly.
[Cut to video of crowded street scene.]
Myers. And if you don't use the drugs, you still lose.
Taxpayers have to pay $200 million more for these
prescriptions under health programs for the poor.
[Cut to video of drug production line.]
It's no wonder drug companies are fighting to save their
huge windfall. In fact, they claim it was no mistake at all.
[Cut to video of Mossinghoff.]
Mossinghoff. Congress knew exactly what it was doing. It
was extending patents across the board.
[Cut to video of Chafee and Dole talking; video of Chafee.]
Myers. However, Republican Senator John Chafee says that's
not true.
Chafee. Each of us that were involved never thought that
this was taking place.
[Cut to graphic on campaign contributions.]
Myers. Still, fixing the problem will be an uphill battle.
Glaxo has given $600,000 in campaign contributions in the
last two and a half years: $375,000 to Republicans; $236,000
to Democrats.
[Cut to video of senior citizen purchasing prescription.]
Senior groups warn that if Congress does not correct its
mistake, it would send a powerful message to voters.
[Cut to video of Horning.]
Horning. It is a signal that, ``Well, we really don't care
about you because, you know, the pharmacies are giving me
campaign money.''
[Cut to video of Davis.]
Myers. Florence and Norman Davis say they can't afford to
have Congress and big drug companies conduct business as
usual.
Lisa Myers, NBC News, the Capitol.
____
[From the New York Times, Sept. 28, 1995]
Battle Over Bonanza for Drug Companies
An army of lobbyists has been enlisted to do battle over a
loophole in a trade treaty that has created a windfall for
the makers of patent drugs.
A Senate committee is considering amending a provision in
the General Agreement on Tariffs and Trade that extends the
life of patents on prescription drugs. Under the provision, a
handful of drug companies would receive billions of dollars
in additional profits by having a longer period to sell their
products without competition before other companies would be
allowed to make low-cost generic alternatives.
On one side are companies like Glaxo-Wellcome, the world's
largest pharmaceutical concern, whose ulcer drug Zantac
[[Page S 15427]]
earns it $2.1 billion a year, a figure that could drop sharply once
generic versions of the drug are sold.
On the other side is a coalition of generic drug makers and
consumer groups who say that failure to close the loophole
will cost consumers billions of dollars.
____
[From the New York Times, Sept. 28, 1995]
Drug Firms at Odds Over Patent Extensions
special pleaders--a periodic look at lobbying
(By Neil A. Lewis)
Washington, September 27.--By the time the Senate Finance
Committee resumes consideration of the Federal budget's
multibillion dollar issues Thursday, some of the nation's
largest drug companies will have spent and lobbied heavily
against one amendment that hardly amounts to budget dust.
But while its impact on the Federal budget may be
minuscule, the measure means a fortune to the drug companies.
The amendment at issue would close what appears to be an
unintended loophole in an international trade treaty enacted
last year that extends the life of patents on prescription
drugs. A handful of drug companies are fighting to protect
the provision for billions of dollars in additional profits
they would receive by having a longer period to sell their
products before other companies could make low-cost generic
alternatives. On the other side of the issue are members of
the generic drug industry, which in coalition with consumer
groups argues that the failure to close the loophole will
cost patients billions of dollars.
While both sides have their teams of lobbyists, the major
drug companies have enlisted a virtual army of advocates,
including one former Senator and several former senior
Congressional aides who have been clustering outside the
Senate hearing room in which the committee has been meeting
this week. One company, Glaxo-Wellcome P.L.C. of North
Carolina, which probably has the most at stake, has retained
the most influential phalanx of lobbyists.
Donations from Glaxo's political action committee to
members of Congress have more than doubled in the most recent
reporting period, compared to the same period two years ago,
according to records of the Federal Election Commission.
Glaxo, the world's largest pharmaceutical company, has the
patent on Zantac, widely used drug to treat ulcers. The drug,
which retails for about $2 a tablet, accounts for about $2.1
billion in annual sales for the company, said Nancy Pekarek,
Glaxo's manager of corporate relations. This revenue will
drop sharply once generic versions of Zantac are permitted.
That the issue of the patent extensions arises from an
unintended loophole is generally beyond dispute.
Glaxo's lawyer told Business Week magazine in May that he
had ``a Eureka! moment'' when he was poring over the details
of the General Agreement on Tariffs and Trade signed into law
last year and discovered that the language could be read to
extend patents on prescriptions drugs. The drug companies
pressed their interpretation on the Food and Drug
Administration, which last May reluctantly acknowledged they
were correct. Mickey Kantor, the United States Trade
Representative who negotiated the treaty has written a letter
to the Senate saying the negotiators did not mean to incur
this consequence.
Senator David Pryor, an Arkansas Democrat, has been trying
to enact an amendment to the budget bill that would do just
that, eliminate what he said is a ``windfall'' for the drug
companies. His amendment would restore the 17-year limit on a
drug company's patent of a new medicine, the period during
which other companies are prohibited from making a generic
equivalent.
``It's absolutely an unjust enrichment,'' he said. ``A
classic case of the law of unintended consequences.''
What happened to create this fortuitous situation for the
drug companies was that when the trade agreement was
negotiated, it included a provision for bringing all 123
countries onto the same standard for patent protections. It
required the United States to switch from granting 17-year
patents from the time of their approval to giving 20-year
patents from the time of the application for a patent.
Depending on how long it took to gain patent approval, the
law gave companies up to three years of extra protection for
their products. About 10 drugs are affected, and Glaxo's
Zantac would gain 19 extra months of patent protection.
Ms. Pekarek of Glaxo said that her company was not fighting
the amendment because of its effect on Zantac, but because of
``a much broader issue of worldwide patient protections.''
She said that it was important not to tamper with the trade
treaty because, ``if we do anything to undercut it that would
be opening the door for other countries to make special
provisions on patents for their products.''
The United States is the world's leader in producing new
medicines, and the pharmaceutical industry has long argued
that its profits during the patent protection period finance
research on new drugs.
Among those Glaxo has employed to lobby the Senate is
William Brock, a former Republican Senator from Tennessee.
Mr. Brock is also particularly suited to press the point
about worldwide patent consistency because he is also a
former United States Trade Representative.
He has been making that argument this week in the
Republican cloakroom to which he has access as a former
Senator. Mr. Kantor, the current trade representative, has
disputed that argument.
The amendment sponsored by Mr. Pryor as well as Senator
John H. Chafee, a Rhode Island Republican, may come up as
early as Thursday.
But its fate is uncertain, since it is a tenet of Capitol
Hill that it is more difficult to pass something than to
defeat it. Most of the Democrats are expected to support the
measure but at least one Senator Carol Moseley-Braun of
Illinois declared her opposition today.
Senator Moseley-Braun said through a spokeswoman today that
she was a longtime friend of Robert Ingram, president and
chief executive of Glaxo. She flew on the company's jet last
March to Glaxo's headquarters to give a speech and meet with
community leaders.
She said through her spokeswoman, Joanna Slaney, that she
opposed the amendment because she believed the trade
agreement should not be tampered with.
____
[From the Food and Drug Inside Report, Sept. 29, 1995]
Glaxo Rolls Out ``Big Bucks'' Card in GATT Battle on Capitol Hill
republicans uneasy with heavy-hitter lobbyists and score sheet on
campaign contributions being touted by glaxo
When the congressional staffers working on H.R. 5121 sat
down last November to draft the specific language that would
implement the GATT in the United States, it must have been
very late when the final draft was completed. It would, after
all, be understandable that these staffers would be tired
after laboring for months on multiple versions of the
implementing statute for GATT. The complexities of the GATT
Agreement are legion, and even experienced international
trade lawyers were hard pressed to provide clear explanations
of a great deal of the sections of GATT. The bottom line,
borne no doubt from those difficult conditions, the Congress
made a mistake.
Like much of the grinding machinery of the legislative
process, the impact of that mistake took some time to assess.
In this case, the mistake was a simple oversight by the
drafters who failed to contemplate the importance of
including conforming amendments to the Federal Food and
Cosmetic Act and Section 271 of the Patent Act.
Shortly after passage of H.R. 5121, no doubt in the richly
paneled offices of one of Washington's expensive law firms, a
lawyer by the name of Marc Shapiro was laboring on the
language of the newly passed legislation. No doubt it was an
effort to advise his client, Glaxo Holding PLC, of what they
needed to do to comply with the various. For Marc Shapiro,
who is known among his colleagues as a professional with a
deep understanding of his craft, it was a mind numbing
experience when he read the plain language that set forth
Congress' view of how GATT would be implemented in the United
States.
In order to comply with an ``international harmonization''
of patent terms with member nations of GATT, the United
States adopted changes to the patent term to commence at the
date of filing with the patent office and extend for a period
of 20 years. That contrasts with the previous U.S. patent law
that had provided for a 17-year patent term which commenced
from the date of approval of the patent by the Patent and
Trademarks Office (PTO).
The GATT includes a section known as Trade-Related Aspects
of Intellectual Property Rights (TRIPs) which requires member
countries to apply high levels of protections for existing
patent holders. The United States fulfilled its obligations
under TRIPs by amending the Patent Act of grant owners of
patents still in force the benefits of the new terms to the
extent that it increased their patent protection term.
But TRIPs also had specific provisions to protect those
individuals who had made a ``substantial investment'' in
anticipation of the expiration of the patent under the old
system. To balance the interests to the existing patent
holders, those who had made substantial investment would be
required to pay ``equitable remuneration'' to the patent
holder.
Marc Shapiro, while sifting through the legislation, had
what he characterized to a Business Week reporter as a
``eureka moment'' when he discovered that Congress had
extended the patents of a number of Glaxo products, and had
provided no protections for generic drug manufacturers even
if they had made the required substantial investment.
For generic drug manufacturers, it was a setback. For
senior citizens on fixed incomes who rely heavily on access
to generic drug products to ease the financial burden of
needed prescription drugs, it was a disaster. For low-income
families with children who are forced to rely upon generic
drugs in difficult economic circumstances where the choice
is often not to fill a needed prescription because of
cost, it was a horrible calamity. For the U.S. government
health care programs like Medicare, Medicaid, Veterans
Affairs, Indian Health Service, and the Public Health
Service, it is an unmitigated catastrophe.
[[Page S 15428]]
Glaxo executives and lobbyists, however, were whooping it
up like they had just won the Super Bowl. In a certain sense,
they had.
The flagship Glaxo product, Zantac, was granted an
additional 19 months of patent protection. It was totally
unanticipated by Glaxo. Indeed, they had priced their product
over the 17-year patent term in anticipation of the old term,
and the passage of the new law occurred within months of the
expiration of the patent. The overall revenue gain was
billions.
Glaxo lobbyists now bristle at the characterization of the
revenues raked in during the extended patent term as being
``windfall profits.'' ``That is not fair because we all know
that we gave up a lot to the generic industry back in 1984.
We're just seeing a justified correction,'' claims one Glaxo
lobbyist.
The 1984 Drug Price Competition and Patent Term Restoration
Act, commonly referred to as ``Hatch-Waxman,'' did indeed
involve a carefully crafted compromise between the brand
industry and generic drug manufacturers. The generics got
pre-expiration access to patented raw materials to conduct
testing to theoretically allow FDA to approve the ANDA on the
date of patent expiration. The brand industry got a guarantee
of 14 years of market exclusivity despite any delays in FDA
review.
Many have credited the Hatch-Waxman Act as having been the
catalyst for a rapid expansion of the generic drug industry.
Senior citizen groups and consumer advocacy groups have
lauded the Act as key to improving the health of financially
fragile purchases who often deferred purchasing needed drugs
simply because of the high cost of brand name drug products.
There has not been any serious attack on the Hatch-Waxman
Act as having been ``unbalanced'' to one side or the other
over the first ten years of its existence. But now, in 1995,
Glaxo points to the need for restoring some balance to the
brand industry for injury heaped on it by Hatch-Waxman.
The Generic Drug Equity Coalition, a group of consumer
advocate groups, senior citizen lobbying groups, and generic
industry supporters, sees the issue a little differently.
``Glaxo has no legitimate gripe with the proposed fix. It
will simply mean they won't get to keep the multi-billion
windfall profit they received solely from a legislative
mistake. They didn't earn that windfall profit. They don't
deserve that windfall profit. But they want to take those
profits right out of the pockets of people who can least
afford their high prices,'' complained one Coalition FDA
Insider.
Capital Hill staffers are caught in a tough situation.
Privately, of 33 staffers contacted on this issue, none
disagreed with the fact the mistake needed to be corrected.
None disagreed that the consumers and government would have
to pay unjustified higher prices for products that should
have generic competition. All of the staffers agreed that
Glaxo did not deserve the billions they would receive from
this mistake. But only 1 staffer was absolutely confident
Congress would correct the mistake.
``What can we do. Glaxo has made campaign contributions to
all of our bosses. The Chairman of the company [Glaxo] has
been demanding personal meetings with our bosses. Is there
any doubt about the subtle message being conveyed. `We are
here to pick up the chit.' This is going to be a case of pure
political conflict, with the consumers on the side of the
angels and Glaxo with the gold shillings. I just don't know
how it will come out,'' laments one Senate Finance Committee
staff FDA Insider.
The battle lines drawn
The political battle lines are not clearly defined. For the
generic coalition, Senator John Chafee (R-Rhode Island),
Senator Hank Brown (R-Colorado), and Senator David Pryor (D-
Arkansas) have been working to correct the mistake in the
GATT language. For Glaxo, there is less public enthusiasm,
but a lot of fire-power by virtue of the campaign favors that
are being called in. Senator Alfonse D'Amato (R-New York) has
obviously been pressed into service by virtue of his position
as Chairman of the Republican Senatorial Campaign Committee.
Some other Republicans are concerned about the
appropriateness of the high-level of visibility that D'Amato
has taken on the issue, but sources at the Campaign Committee
bluntly told FDIR that ``Glaxo was taking no prisoners'' on
this issue.
Senator Jesse Helms (R-North Carolina) has dutifully
stepped to the plate to help his home state Glaxo workers
(the U.S. Glaxo operations are in the Research Triangle in
Raleigh, North Carolina). Beyond that, there are only a group
of stealth Glaxo supporters who are desperately hoping that
something will happen to allow them to get off the end of the
Glaxo spear. For most it is a horrible political position to
be in to appear to oppose access to lower cost generic drugs
for senior citizens and low-income families.
The Congressional Budget Office (CBO) scored the 5-year
savings to Medicaid at $150 million. That is no small
potatoes to Republicans seeking savings. But that amount is
minuscule compared to the $2 billion cost to consumers
identified in a Muse & Associates economic impact analysis.
At that number the political pain becomes much deeper and the
potential for future constituent problems becomes very real.
The strategy for correcting the GATT legislation mistake is
to include a provision in the Budget Reconciliation Act as an
amendment in the Senate Finance Committee markup. Glaxo
supporters are trying to argue the amendment is not germane
under the ``Byrd Rule'' since the savings flow to the
Medicaid block grants and not to the Federal deficit. But
Glaxo critics argue the block grants are unique to the
Finance Committee review cycle this time around, and
virtually all of the provisions technically trample on the
Byrd rule in order to facilitate the block grants being
transferred from the Federal Government to the states.
The central substantive argument Glaxo has relied upon has
been that any change now would upset the delicate balance
with World Trade Organization (WTO) members who have a
history of poor enforcement of patent infringements in their
countries. Glaxo points to certain language in the GATT and
TRIPs they claim was in fact incorporated in the strategy of
the H.R. 5121 drafters. The thesis, then, is that there was
no error or mistake, but the language was clearly set forth
to express the specific intent of the U.S. Congress.
``They must have their fingers crossed behind their backs
when they sling that BS up here,'' commented on House Ways
and Means Committee staffer. ``It was a mistake, we know it,
and they know it.
Senator Chafee wanted to know the truth of the matter, so
he sought the advice of USTR Ambassador Micky Kantor. Kantor
was succinct in his view: ``This provision [Section 154(c)
(1) and (2) of the Patent Act] was intended to apply to all
types of patentable subject matter, including pharmaceutical
products. Conforming amendments should have been made to the
Federal Food Drug and Cosmetic Act and Section 271 of the
Patent Act, but were inadvertently overlooked.''
The key part of the Glaxo argument is directed at the
problems encountered around the world with poor enforcement
of patents, particularly with some members of WTO. They
advance the argument that any tinkering with the present
language would send a strong message to our trading partners
that they need not aggressively enforce patent rights. It is
an argument that seemingly was sufficient for Glaxo
supporters to hang their hats on.
But Ambassador Kantor punched big holes in that argument,
and has left Glaxo very vulnerable to the charge that they
are just trying to keep an unjustified windfall profit. It is
a message that Glaxo has tried to gussy up with an elite
lobbying corps. Former Senator Warren Rudman and former
Senator Bill Brock were both brought in to shore up an
eroding Glaxo position. That augments a term of virtually
every high-powered lobbyist in Washington available to work.
``The `alligator shoe' crowd is apparently out in force,''
commented one House Commerce Committee staff FDA Insider.
The generic drug industry, on the other hand, seems to have
placed its fate in the hands of a rag-tag band of consumer
advocates and senior citizen advocacy groups. It seems to be
working. Congressional staffers report a substantial interest
in the issue among talk show hosts around the country.
``Our phone lines are burning up with senior citizens who
are just hopping mad over the prospect we may add costs to
drugs. I don't think we want to be in that position,''
observed a Senate staff FDA Insider.
Whatever the Senate Finance Committee does on this issue in
the Budget Reconciliation markup, it promises to be a hot
issue over the next several weeks. For Marc Shapiro, he is
surely hoping his ``eureka moment'' doesn't turn into a
``Maalox minute.'' Certainly it is a comment he wished he
could take back and recast it in less flammatory language.
``This battle boils down to a simple issue. Is there any
justification for allowing Glaxo to keep the billions of
dollars they will get simply from an error in drafting a
piece of legislation.
``Did Glaxo earn these windfall profits? No.
``Did Glaxo expect or need these windfall profits to fund
R&D for the product? No.
``Did Glaxo project these windfall revenues into pricing to
recover a fair return on their investment? No.
``I have not yet heard one compelling argument to justify a
vote to let them keep money Glaxo will get on the backs of
senior citizens and poor families. Glaxo is getting access to
various members because they have been strong campaign
contributors. But they didn't buy votes with those
contributions, particularly when they have no credible
argument to justify themselves. It is only a lot of smoke and
mirrors. No substance. It is a no-brainer to me. Vote to
protect consumers.''--Senate Finance Committee Staff FDA
Insider.
``The Hatch-Waxman Act established a delicate balance in
the pharmaceutical industry between the interests of
research-based companies and the generic industry. Any
responsible look at the proposal by the generic companies
would upset that balance and result in a serious injury to
the innovator drug industry. We have no reason to apologize
for the revenues that result from the research and
development efforts of our company. We are responsible in our
pricing policies, and we recognize the needs of low-income
families in acquiring our products. Truly needy families can
get assistance from community organizations we support.''--
Glaxo Lobbyist FDA Insider.
``Finally, the extension of the Section 154(c) to
pharmaceutical products would not undermine ongoing U.S.
efforts to seek high levels of intellectual property
protection around the world. We are acting wholly within our
rights in establishing the transition
[[Page S 15429]]
period, as other countries would be if they did the same. Furthermore,
we have already established under our law the transition
period with respect to all types of patents other than
pharmaceutical patents; extending it to pharmaceutical
patents would be in no way increase the ability of our
trading partners to justify their failure to provide TRIPs-
consistent patent protection.''--Ambassador Michael Kantor,
the United States Trade Representative, Letter to Senator
John H. Chafee, September 25, 1995.
____
[From the Orlando Sentinel, Sept. 3, 1995]
GATT Puts Generic Drugs on Hold
(By Maya Bell)
Miami.--Interested in saving money, Phylis Tannen routinely
requests generic prescriptions for her ulcer.
So Tannen, 74, was surprised to learn recently that she
would have to wait much longer than expected to buy the less
expensive medicine. That's because the patent for Zantac,
slated to expire this December, had been extended until July
1997, preventing the release of a generic equivalent until
then.
The retired Dade County school principal was even more
surprised to learn the convoluted reason for the delay, which
could cost her roughly $430 over the life of the extended
patent. In implementing the worldwide trade agreement known
as GATT, the U.S. Congress inadvertently exempted at least 13
brand-name drugs from generic competition for up to three
years.
Among them: Zantac and the high blood-pressure medicine
Capoten, among the best-selling drugs in the world.
The oversight may have been unintentional but, outraged
consumer groups say, its impact is enormous: Brand-name drug
companies, primarily Glaxo Wellcome Inc. and Bristol-Myers
Squibb Co., the makers of Zantac and Capoten, will reap
nearly a $2 billion windfall at the expense of the public.
Last year, Glaxo sold $2.7 billion worth of Zantac and
Bristol-Myers $581 million of Capoten in the United States
alone. Together, they accounted for nearly 48 million
prescriptions.
Paying most for the delayed availability of the generic
drugs, advocates say, will be the elderly, who consume a
third of the $64 billion worth of prescriptions sold
annually. Because Medicare does not cover the cost of
prescriptions, seniors such as Tannen often pay for them out
of their own pockets.
``It was an unintended mistake by Congress, but the public
will pay dearly for it,'' said Dixie Horning, executive
director of the Gray Panthers, a lobbying group for the
elderly. ``Not only are the people who can least afford it--
senior citizens on fixed incomes--paying more for their drugs
than they ought to be, but taxpayers are too. The government,
and that means you, is a big buyer of these drugs.''
A study conducted for the Generic Drug Equity Coalition, a
consortium of 26 consumer groups and generic-drug companies
urging Congress to correct its mistake, estimated the cost of
delaying the 13 generic substitutes of $1.9 billion. Sen.
David Pryor, D-Ark., the ranking minority member and former
chairman of the Senate's Special Committee on Aging,
introduced a bill to clarify Congress' intent earlier this
month. The bill would not alter the GATT treaty, nor require
ratification from other countries.
Florida's U.S. senators, Republican Connie Mack and
Democrat Bob Graham, are not involved in the issue yet, but
their staffs said they will take a close look at the
legislation when they return from summer recess. In the
meantime, at least one generic-drug company is taking its
fight to enter the market to court.
Should the bill pass, senior citizens and the federal
Medicaid program stand to gain some of the biggest savings,
said Don Muse, a former analyst for the Congressional Budget
Office and author of the coalition study. He projected
seniors would save $517 million; the Medicaid program, which
covers prescriptions, would save another $205 million, and
the Department of Veterans Affairs $21 million. Other big
savers would include insurance companies, whose medical plans
often require members to elect generic drugs.
The estimated savings are very conservative, the coalition
says, because the study assumes the generic products would be
only 10 percent cheaper than their brand name equivalents.
However, generic drugs have historically debuted at a price
about one-fourth less than the brand, quickly falling to 75
percent of the brand cost.
How the General Agreement on Tariffs and Trade wound up
hurting consumers such as Tannen while helping companies such
as Glaxo is as complicated as the 8,000-page treaty itself.
The trouble began when Congress changed U.S. patent law to
match the global standard set by GATT. The change extended
the life of U.S. patents from 17 years to 20 years,
benefiting current patent-holders by up to three years.
But Congress recognized that the change would, as one
congressional staffer put it, ``move the goal posts back''
for companies that anticipated a patent expiring and already
had a generic product in the pipeline. So Congress devised a
mechanism allowing those companies to enter the market on the
day the original patent would have expired. The compromise:
The generic company would pay the brand-name company a
royalty until the extended patent expired.
Everything was fine until the generic-drug companies
realized that Congress overlooked the very law that launched
their industry in 1984. The law plainly states that a generic
drug cannot come to market before the brand's patent expires.
Hamstrung by the conflict, the Food and Drug Administration
forbade generic-drug companies from selling their products
until the extended patents expire.
As a rsult, the prescription drug industry is the only
industry in the nation that will benefit from longer patent
terms but be exempted from generic competition during the
compromise period.
The ruling felt like a kick in the teeth to Patrick
McEnany, president of Royce Laboratories Inc., a small but
rapidly growing generic drug company in Miami that nearly
doubled its sales last year to $6.6 million.
Soon after McEnany joined Royce in 1991, the company set
out to develop a generic form for Capoten, which was supposed
to lose its patent on Aug. 8. Spending more than $1 million
to develop a bio-equivalent, Royce hoped to put the first
Capoten substitute on the shelf, a key to capturing the
generic market.
``In this business, timing is everything,'' said Robert
Band, Royce's chief financial officer. ``Once the shelf space
is taken up, it's hard to wrestile it away.''
The FDA ruling, however, extended Capoten's patent for six
months, keeping Royce and five other companies from competing
with Bristol-Myers until February.
The company counted on attracting an enviable share of the
nearly 15 million Capoten prescriptions sold annually during
the next six months. Instead it was left with the prospect of
having even more generic competitors come February.
Not content to let that happen, Royce picked a fight with
Bristol-Myers in U.S. District Court in Miami, winning the
first round nine days ago when a judge ruled that the FDA was
free to approve Royce's Capoten product.
Bristol-Myers appealed, and the FDA said it would not act
on the court action until that appeal was exhausted.
``When we enbarked on this product, we relied on a set of
rules and the rules changed--not in the middle of the game,
but at the end of the game,'' McEnany said. ``It is an
injustice to us and to the consumer.''
Royce is not alone. Novopharm USA Inc., an Illinois-based
pharmaceutical company, has millions of dollars worth of its
generic form of Capoten sitting in inventory. Worse,
Novopharm has a $38-million plant under construction in North
Carolina, company president Bill Gunter said. It was where
Novopharm planned to begin manufacturing its generic
alternative for Zantac this December.
``Now we're scrambling to figure out what we can do to
justify that huge, white building,'' Gunter said. ``It's not
a simple thing.''
Royce and Novopharm are members of the coalition pushing
Congress to correct its oversight. They aren't, however,
getting much sympathy from brand-name manufacturers, who
argue that it is the generic competitors reaping the
windfall. After all, generic manufacturers capitalize on the
millions of dollars brand-name companies spend on research
and development, coming to market without doing the same
science.
Bristol-Myers spokesman Bob Laverty points out that, since
Capoten was first approved in 1981 to combat high blood
pressure, the company has discovered three other life-saving
uses for the drug. In his view, Bristol-Myers has more than
earned its patent extension.
``We don't feel this is a windfall because the company has
continued to invest in this product over the years,'' Laverty
said. ``We've continued to pour research dollars into the
product and it has helped consumers tremendously.''
Glaxo paints the GATT flap as a trade issue, not a consumer
issue. Company spokeswoman Nancy Pekarek warns that if
Congress amends the GATT law to appease the genertic drug
industry, it will send a message to other countries that
they, too, can tinker with their patent laws to protect a
favored industry.
``The law is clear and it should be followed,'' Pekarek
said ``Generic companies already have a shortcut and for that
shortcut they promised to honor the patent expiration date.
Yes, the rules changed, but everybody has to abide by the
rules.''
____
[From USA Today, Aug. 8, 1995]
GATT Delayed New Generic Drugs
(By Anita Manning)
The world trade agreement GATT extended patents on a dozen
drugs--including popular blood pressure and ulcer
medications--delaying generic manufacturing and costing
consumers millions of dollars, consumer advocates say.
The patents were to expire today on Capoten and Capozide
and on Zantac in December, but the General Agreement on
Tariffs and Trade extends them into 1996 and 1997.
Patents had run 17 years; GATT extended it to 20 years.
``GATT created a windfall for drug companies,'' says Jim
Firman of the National Council on the Aging.
In 1994, nearly 15 million prescriptions were written for
blood pressure medicine Capoten/Capozide, at $56.29 each
wholesale, and more than 33.4 million for the ulcer drug
Zantac, at $81.47, says the Generic Drug Equity Coalition.
Steve Berchem, of the trade group Pharmaceutical Research
and Manufacturers of
[[Page S 15430]]
America, says patents are the industry's ``lifeblood.'' ``Patents help
companies generate revenue to do further research.''
____
[From the Los Angeles Times, June 8, 1995]
Ruling Shortens Branded Drugs' Monopoly
Nearly 100 brand-name drugs lost their chance at an extra
few years' monopoly in the market Wednesday under a ruling by
the U.S. Patent and Trade Office.
At issue is whether the drugs could get two patent
extensions, one from a 1984 law and another under a global
trade agreement provision that takes effect today.
The General Agreement on Tariffs and Trade extends patent
protection to 20 years from the date drug makers file for a
patent. Until now, those patents have had a 17-year life from
the time they were granted. Current patent holders will get
whichever expiration date is later.
A 1984 law has already offered brand-name drugs up to an
extra five years' patent life to help offset the time it
takes those medicines to get Food and Drug Administration
approval for sale.
Makers of brand-name drugs said they were entitled to both
extensions, and in March the patent office tentatively
agreed. The proposal theoretically could have given some
drugs patent protection for a total of 25 years, although the
Pharmaceutical Research and Manufacturers Assn. insisted that
was highly unlikely.
But the patent office reversed itself Wednesday, ruling
that companies that took the 1984 extension can't also get
one from GATT. The ruling affects 94 brand-name drugs and
means that the longest a medicine will be able to monopolize
the market because of the extension is slightly under 22
years.
``American consumers should get a price break on many drugs
as a result of the patent office's reversal'' because it
opens the market to quicker generic competition, said Sen.
David Pryor (D-Ark.).
The brand-name industry was disappointed by the ruling.
``Their March tentative ruling was the correct one from a
legal standpoint,'' said Neil Mulcahy, an attorney for the
pharmaceutical association.
Another 15 drugs, including the billion-dollar ulcer drug,
Zantac, will get the GATT extension.
But Pryor renewed his pledge to fight those drugs' market
exclusivity. GATT had included a provision saying cheaper
generic versions of these drugs could proceed to the market
on the brand name's original expiration date if they paid the
competitor compensation. But the FDA last month said prior
law invalidated that provision, meaning GATT will postpone
generic competition for these 15 drugs.
____
Generic Drug Equity Coalition,
Washington, DC, September 20, 1995.
Hon. William Roth,
Chairman, Committee on Finance, 219 Senate Dirksen Office
Building, Washington, DC.
Dear Chairman Roth: As you prepare for action on the
reconciliation bill, the Generic Drug Equity Coalition urges
you to include language to correct an oversight in the GATT
Treaty implementing legislation as it affects the
availability of generic drugs.
The Congressional Budget Office has determined that, for
budget scoring purposes, Medicaid will save $150 million over
five years, if the correction is included in the
reconciliation bill.
The GATT treaty extends patents on U.S. products from 17 to
20 years. It also includes transition rules for generic
products that were ready to go to market based on the old 17-
year patent term. When Congress approved the treaty, however,
it failed to change U.S. law to allow the Food and Drug
Administration (FDA) to certify generic drugs for marketing
during the transition period.
Correcting this oversight will save American consumers
almost $2 billion, including $150 million for Medicaid.
Thank you.
Sincerely,
James Firman, Ed.D.
____
Citizen Action, Consumer Federation of America, Consumers
Union,
September 26, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, 219 Senate Dirksen Office
Building, Washington, DC.
Dear Senator Roth: We urge you to include provisions in the
budget reconciliation bill that would close the current
loophole in FDA law that is delaying American consumers'
access to low-cost generic drugs. The Congressional Budget
Office (CBO) has estimated that by closing this loophole, you
would save the Medicaid system $150 million over the next
five years, while consumers would save up to $2 billion.
The General Agreement on Tariffs and Trade (GATT), passed
by Congress in 1994, requires the United States to switch
from its present system of 17-year patents to 20-year
patents. Congress tried to balance the detrimental impact of
this provision on competitors by including a clause
permitting companies to introduce competing products at the
17-year patent expiration point if the company made
significant prior investments and if it paid a royalty to the
patent holder. When asked to interpret this clause in the
light of the 1984 generic drug law, the FDA found that a
loophole exists in the GATT that precludes the agency from
certifying generic versions of drugs for marketing until the
GATT-extended patents expire.
The extension of patents from 17 to 20 years to currently
marketed prescription drugs delays the introduction of low-
cost generic drugs into the marketplace. Generic drugs
typically enter the market at a much lower cost than the
patented brand, and the brand-name drugs which would benefit
from this extended patent are among the top-selling drugs
used. The result of the FDA's ruling could potentially cost
American consumers billions of dollars. The detrimental
effects of this patent extension go beyond the individual
health care consumer. Taxpayers will be forced to absorb the
additional costs for more expensive drugs under the Medicaid
program.
The FDA's interpretation of the GATT transition rules does
not appear to reflect the intent of Congress when it approved
the GATT, nor does it reflect the views of Ambassador Michael
Kantor, the U.S. Trade Representative who negotiated the
agreement. Mr. Kantor recently wrote to Congress that the
transition rule was ``intended by its drafters to be
generally applicable and to permit generic pharmaceutical
producers to market their products where they had made
substantial investments in anticipation of the expiration
of the unextended patent terms.'' The unintended effects
of the patent extension include diminished market
competition, an undeserved windfall to pre-GATT patent
holders, and further inflated costs to millions of
Americans.
At a time of federal, state and local budget-cutting,
health care savings are more important than ever for American
consumers. Therefore, we strongly urge you to use the budget
reconciliation process to redress this unintended, and
potentially costly, effect of the GATT.
Sincerely,
Mern Horan,
Consumer Federation of America.
Gene Kimmelman,
Consumers Union.
Cathy Hurwit,
Citizen Action.
____
The National Council
on the Aging, Inc.,
Washington, DC, September 26, 1995.
Hon. Robert Dole,
U.S. Senate, 141 Hart Senate Office Building, Washington, DC.
Dear Senator Dole: As you prepare for action on the
Medicaid reconciliation bill this week, the National Council
On the Aging urges you to support language to correct an
oversight in the GATT Treaty implementing legislation as it
affects the availability of generic drugs. This language will
be introduced by Senator Chafee.
The GATT treaty extends patents on U.S. products from 17 to
20 years. It also includes transition rules for generic
products that were ready to go to market based on the old 17-
year patent term. When Congress approved the treaty, however,
it failed to change U.S. law to allow the Food and Drug
Administration (FDA) to certify generic drugs for marketing
during the transition period.
The Congressional Budget Office has determined that this
correction will result in $150 million in Medicaid savings
over five years. The correction will save American consumers
almost $2 billion.
Lowering the cost of prescription drugs is particularly
important for older consumers. Older Americans spend more
than any other group on prescriptions. Over one third of the
$64 billion spent on prescription drugs come from seniors.
This correction will result in over $500 million in savings
to older Americans.
We strongly urge you to support the Chafee language in the
reconciliation bill allowing consumers faster access to many
generic drugs and creating savings for the U.S. budget and
for older Americans. Thank you.
Sincerely,
James Firman, Ed.D.,
Pesident.
____
National Women's Health Network,
Washington, DC, September 26, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, Dirksen Senate Office
Building, Washington, DC.
Dear Senator Roth: I am writing on behalf of the National
Women's Health Network to urge you to close the generic drug
loophole in the GATT during the budget reconciliation
process. The NWHN is the only national public interest
membership organization devoted solely to women and health.
The availability of low-cost generic drugs saves American
consumers billions of dollars every year. Under a recent
ruling by the FDA, the patent terms of over a dozen brand
name drugs will be extended, costing consumers and taxpayers
billions of dollars over the next few years. With the costs
of health care continuing to skyrocket while the numbers of
uninsured keep going up, consumers cannot afford to pay
unnecessarily high prices for medicine. Closing this loophole
will save the Medicaid system $150 million over the next five
years while it saves consumers close to $2 billion.
Women live longer than men, use more health care services
than men, and pay more for drugs out of their pockets than do
men. If important generic drugs are delayed, women will
suffer most.
[[Page S 15431]]
The generic drug loophole gives pharmaceutical companies a
windfall and hurts American health care consumers. This could
not have been what Congress intended when it passed the GATT
implementing legislation. Congress should fix the law so that
drug companies are not given special treatment while
consumers are left holding the bag. I urge you to make this
fix in the budget reconciliation bill.
Sincerely,
Cynthia Pearson,
Executive Director.
____
American College of
Nurse-Midwives,
Washington, DC, September 25, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, Dirksen Senate Office
Building, Washington, DC.
Dear Senator Roth: The American College of Nurse Midwives
urges you to support the Chafee generic drug amendment to the
Medicaid reconciliation bill.
If adopted, the Chafee amendment will result in $150
million in Medicaid savings according to the Congressional
Budget Office.
The amendment will correct an oversight in the GATT
implementing legislation that is delaying the availability of
generic substitutes for a dozen popular medications,
including the widely prescribed anti-ulcer medication Zantac.
United States Trade Representative Mickey Kantor has
indicated that this was not the intent of the drafters of the
GATT implementing legislation.
Left uncorrected, the GATT delay will cost consumers almost
$2 billion overall and create an unintended windfall for
major pharmaceutical companies.
Please vote to save American taxpayers $150 million by
supporting the Chafee amendment.
Thank you.
Sincerely,
Karen Fennell,
Senior Policy Analyst.
____
National Black Women's
Health Project,
Washington, DC, September 26, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, Dirksen Senate Office
Building, Washington, DC.
Dear Chairman Roth: The National Black Women's Health
Project (NBWHP), a national self-help and health advocacy
organization, would urge you to include a provision in the
budget reconciliation bill to close the generic drug loophole
in the General Agreement on Tariffs and Trade (GATT). By
closing this loophole, you would help to insure that low-
income women and their families have access to safe,
affordable prescription and over-the-counter medication.
GATT extends patent terms for U.S. products from 17 years
to a worldwide term of 20 years. Because many manufacturers
had already invested millions of dollars in competing
products in anticipation of patent expiration under the
original 17-year limit, Congress adopted rules that allow
those companies to introduce generic alternatives on the date
a 17-year patent would expire, provided they pay reasonable
royalties to the patent holder.
Through an error of omission, though, the pharmaceutical
industry wasn't included in these transition rules. As a
result, makers of lower-cost generic drugs are prohibited
from bringing their result to the market until the full 20-
year term of patent protection incorporated in the GATT
treaty is expired. This loophole will extend the patent terms
on more than a dozen drugs--including big-sellers Zantac and
Capoten--with a combined $5 billion share of the market.
As an organization dedicated to ensuring the health needs
of low-income women, who are disproportionately Black, we
believe that access to low-cost generic drugs is crucial.
Low-income women and children are more likely to be uninsured
and therefore the least likely to afford the high costs of
brand name drugs. In addition, low-income families often have
limited resources and are forced to delay treatment because
of high drug costs. Increasing access to generic drugs will
help to improve the quality of health care received by many
low-income families.
By closing the generic drug loophole, health care consumers
would save approximately $2 billion. Congress would save $150
million in Medicaid costs over the next five years. We urge
you to vote in favor of consumers by removing the loophole
afforded the pharmaceutical industry in the budget
reconciliation bill.
Sincerely,
Kim Youngblood.
____
National Committee to Preserve
Social Security and Medicare,
Washington, DC, September 27, 1995.
Hon. Larry Pressler,
Committee on Finance, U.S. Senate, Russell Senate Office
Building, Washington, DC.
Dear Senator Pressler: The National Committee to Preserve
Social Security and Medicare urges you to support language to
correct an oversight in the GATT Treaty implementing
legislation that affects the availability of generic drugs.
This language will be sponsored by Senators Chafee and Pryor
as an amendment to the Medicaid reconciliation legislation
this week. The Congressional Budget Office (CBO) has
determined that this correction will result in $150 million
in Medicaid savings over five years, and some $2 billion in
savings to all consumers.
The GATT treaty extends patents on U.S. products from 17 to
20 years. It also includes transition rules for generic
products that were ready to go to market based on the old 17-
year patent term. When Congress approved the treaty, however,
it failed to change U.S. law to allow the Food and Drug
Administration (FDA) to certify generic drugs for marketing
during the transition period.
In addition to savings for consumers of all ages, lowering
the cost of prescription drugs is particularly important for
older Americans. Older persons consume about one-third of the
$64 billion spent on prescription drugs in the United States.
On behalf of the nearly six million members and supporters
of the National Committee to Preserve Social Security and
Medicare, we urge you to support the Chafee/Pryor amendment
to the reconciliation bill.
Sincerely,
Martha A. McSteen,
President.
____
Public Citizen,
Washington, DC, September 25, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, Dirksen Senate Office
Building, Washington, DC.
Dear Senator Roth: Public Citizen, a national consumer
advocacy organization with over 120,000 members, urges you to
support efforts to fix the generic drug loophole in the
General Agreement on Tariffs and Trade with an amendment to
the budget reconciliation bill. This amendment will save the
Medicaid system $150 million over the next five years.
Consumers will save as much as $2 billion.
For nearly 25 years, Public Citizen and its Health Research
Group have been at the forefront of efforts to ensure that
safe, effective and affordable drugs are available to
American consumers. We were part of the citizens' coalition
that supported the Waxman-Hatch Act of 1984 to help consumers
save billions of dollars by making more low-cost generic
drugs available to the public.
Because of the recently-enacted GATT, which calls for
longer durations for monopoly drug patents worldwide,
consumers will be forced to pay billions of dollars more
instead of less. We urge Congress to restore the law to its
original intent so that drug firms do not receive a windfall
at the expense of health care consumers.
In this time of massive government budget-cutting and
soaring medical costs, health care savings are critically
important to the American public. The availability of low-
cost generic drugs is one way the marketplace can help bring
down the high cost of health care. By extending the duration
of monopoly patents on more than a dozen drugs, the GATT will
add billions of dollars to consumers' medical costs at a time
when they can least afford it.
We urge you to support efforts to protect consumers' health
and taxpayers' pocketbooks by fixing the generic drug
loophole in the budget reconciliation bill.
Sincerely,
Michael Calabrese,
Executive Director,
Congress Watch.
____
U.S. Public Interest Research Group, National Association
of State PIRGs,
Washington, DC, September 25, 1995.
Hon. William V. Roth, Jr.,
Chairman, Committee on Finance, Dirksen Senate Office
Building, Washington, DC.
Dear Senator Roth: I am writing on behalf of the U.S.
Public Interest Research Group to urge you to fix the generic
drug loophole in the General Agreement on Tariffs and Trade
as part of the budget reconciliation bill. U.S. PIRG is the
national lobbying office for state Public Interest Research
Groups. PIRGs are non-profit, nonpartisan consumer and
environmental advocacy groups with members around the
country.
Because of a loophole in the GATT that is being eagerly
exploited by profiteering drug companies, American consumers
face unnecessary higher costs for prescription drugs at the
same time as overall health care costs are skyrocketing.
Hundreds of millions of taxpayer dollars and billions of
consumer dollars are at stake in this critical fight; the
health of millions of Americans absolutely depends on
affordable access to low-cost generic drugs.
I urge you to restore the original intent of the GATT's
implementing language by closing the generic drug loophole in
the budget reconciliation bill. Now is the time to stop
rapacious drug companies from misusing GATT to gouge the sick
and elderly.
Sincerely,
Edmund Mierzwinski,
Consumer Program Director, U.S. PIRG.
____
United Seniors Health Cooperative,
Washington, DC, September 26, 1995.
Hon. William Roth,
Chairman, Committee on Finance, Senate Dirksen Office
Building, Washington, DC.
Dear Chairman Roth: The United Seniors Health Cooperative
urges you to support language to correct an oversight in the
GATT Treaty implementing legislation as it affects the
availability of generic drugs. This language will be
introduced by Senator Chafee as part of action on the
Medicaid reconciliation bill this week. The Congressional
Budget Office has determined that this correction will result
in $150 million in Medicaid savings over five years.
The GATT treaty extends patents on U.S. products from 17 to
20 years. It also includes
[[Page S 15432]]
transition rules for generic products that were ready to go
to market based on the old 17-year patent term. When Congress
approved the treaty, however, it failed to change U.S. law to
allow the Food and Drug Administration (FDA) to certify
generic drugs for marketing during the transition period.
Lowering the cost of prescription drugs is particularly
important for older consumers. Older Americans spend more
than any other group on prescriptions. Over one third of the
$64 billion spent on prescription drugs come from seniors.
This correction will result in $2 billion in savings to all
consumers and over $500 million in savings to older
Americans.
We strongly urge you to support the Chafee language in the
reconciliation bill allowing consumers faster access to many
generic drugs and creating savings for the U.S. budget and
for older Americans. Thank you.
Sincerely,
Esther Peterson,
Vice Chair.
Edmund H. Worthy, Jr.,
President and CEO.
____
United Homeowners Association,
Washington, DC, October 18, 1995.
Senator David Pryor,
U.S. Senate, Senate Office Building, Washington, DC.
Dear Senator Pryor: During Senate consideration of the
reconciliation bill, Senators Chafee and Pryor will offer an
amendment which will save Medicaid $150 million and consumers
about $2 billion. The savings can be realized if a prior
oversight by Congress is corrected. The oversight by Congress
occurred when the General Agreement on Tariffs and Trade
(GATT) implementing legislation was adopted,
GATT extends U.S. patents from 17 to 20 years. It also
includes ``grandfather'' rules for generic products,
including drugs, that were ready to go to market based on
pre-GATT patent expiration dates. Congress, however, failed
to change the law to allow the Food and Drug Administration
to apply to grandfather rules to generic drugs.
As a result, consumers will spend almost $2 billion more
for a dozen popular medications, such as Capoten and Zantac,
for which 63 million prescriptions were written in 1994.
Senators Chafee and Pryor will offer an amendment to the
reconciliation bill to close the GATT loophole.
Congress can save consumers almost $2 billion, including
$150 million in Medicaid savings (according to the CBO), by
allowing the FDA to apply the grandfather rules to generic
drugs.
Such a change would, according to U.S. Trade Representative
Mickey Kantor, be wholly consistent with the intent of the
drafters of the GATT Treaty.
The United Homeowners Association urges you to support the
Chafee/Pryor amendment to the reconciliation bill.
Thank you.
Sincerely,
Jordan Clark,
President.
____
National Coalition for
Homeless Veterans,
Washington, DC, September 27, 1995.
Hon. William Roth,
Senate Finance Committee, Senate Dirksen Office Building,
Washington, DC.
Dear Senator Roth: On behalf of the more than 200
community-based non-profit programs around the country who
provide services for homeless veterans, I am writing to urge
you to support the Chafee generic drug amendment to the
Medicaid reconciliation bill. The amendment will correct an
oversight in the GATT treaty implementing legislation thereby
saving consumers $2 billion, including $21 million in direct
savings for the Department of Veterans Affairs which could be
better used to provide support for local programs who assist
needy veterans--instead of being spent on high cost
pharmaceuticals.
The Food and Drug Administration has determined that it
cannot certify generic versions of popular drugs such as
Capoten and Zantac for marketing until the GATT-extended
patents expire, thereby delaying the availability of lower
priced generics. We do not believe that this is what Congress
intended when it approved the GATT treaty in 1994. Specific
transition rules were included in GATT implementing
legislation to allow generic products to be marketed based on
pre-GATT patent expiration dates. Congress, however,
inadvertently failed to include conforming amendments to the
Federal Food, Drug and Cosmetics Act to allow the FDA to
certify the generic drugs for marketing.
It is essential to bring generic drugs to the marketplace
as soon as possible to meet the medical needs of veterans and
to help the Veterans Health Administration save money.
Secretary of Veterans Affairs Jesse Brown estimates that
failure to pass this amendment could cost the VA's health
budget a significant amount of money. In these times of
continuing budget cuts, it is vital that the VA be able to
target its limited resources where the need is the greatest.
We urge you to support the Chaffee amendment which will
allow the FDA to use pre-GATT patent expiration dates to
determine when generic drugs can be certified for marketing
and made available to the Department of Veterans Affairs in a
manner consistent with the GATT transition rules.
Sincerely,
Richard Fitzpatrick,
Executive Director.
____
Paraquad Inc.,
St. Louis, MO, September 22, 1995.
Memo to: Members of the Senate Finance Committee.
Re: Medicaid Bill.
I write on behalf of members of the Paraquad community--
many of whom are users of prescription medication--to urge
you to support the Chafee amendment.
Senator Chafee is proposing a change to U.S. drug
legislation that would accelerate the development of generic
drugs that now are kept off the market by the GATT agreement.
We believe Congress never intended for the GATT to block
generic drugs from being made available quickly to American
consumers.
Accordingly, the Chafee amendment merely restores the
original intent of Congress.
For example, a generic substitute for the popular anti-
ulcer drug ``Zantac'' won't be available to American
consumers until July 1997--despite the fact that it
originally was to be available in December of this year.
Senator Chafee is asking the Finance Committee to make the
necessary change as part of the pending Medicaid savings
bill. That is because the American taxpayer will have to pay
an additional $150 million for Zantac and other drugs for
Medicaid recipients that would be required if the generic
substitutes were available.
Many members of the Paraquad community are persons of
limited income. Many depend on Medicaid. With cost pressures
rising, we join with responsible elected officials like
Senator Chafee in urging that where cost savings may be
realized at no less of quality, the should be.
Please vote ``Yea'' for the Chafee amendment.
Thank you.
Sincerely,
Max Starkloff,
President, Paraquad Inc.
____
Consumer Project on Technology,
Washington, DC, September 27, 1995.
Hon. William Roth,
Finance Committee, U.S. Senate, Washington, DC.
Dear Senator Roth: I am writing to express the Consumer
Project on Technology's support for the Chafee generic drug
amendment to the Medicaid reconciliation bill. This amendment
seeks to correct an error by the previous Congress, which
extended the patent terms for several widely used drugs. As
you know, investment incentives are forward looking, and
actions which award post hoc monopolies on pharmaceutical
drugs which are already on the market are economically
inefficient. This retroactive extension of monopoly marketing
rights is costing American consumers billions of dollars, and
should be immediately corrected.
The U.S. Congress and the Clinton Administration have
already given the pharmaceutical industry extremely favorable
treatment in a wide range of areas, such as the complete lack
of price controls on drugs, favorable tax treatment, billions
of dollars in direct research subsidies from the National
Institutes of Health (NIH) and other federal agencies, and
the recent decision by NIH to abandon the reasonable pricing
clause for drugs invented by government scientists. We hope
that on this issue Congress will demonstrate concern for the
problems faced by consumers in obtaining health care.
Sincerely,
James P. Love,
Director, Consumer Project on Technology.
Mr. PRYOR. Mr. President, I yield the floor.
Mr. DORGAN addressed the Chair.
The PRESIDING OFFICER. The Senator from North Dakota.
Mr. DORGAN. Mr. President, my understanding is that we are proceeding
under a 1-hour morning business allotment?
The PRESIDING OFFICER. We are in morning business.
Mr. DORGAN. Is there an hour reserved under my name or the minority
leader?
The PRESIDING OFFICER. There is time under the minority leader, 1
hour.
Mr. DORGAN. Mr. President, with the consent of the minority leader,
let me yield myself as much time as I may consume under that 1 hour.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________