May 20,2004

Testimony Submitted to the HELP Committee on Drug Reimportation

Testimony of Senator Chuck Grassley
Chairman, Committee on Finance
Submitted for the Record to the Senate Committee on Health, Education, Labor and Pensions
Hearing on the Importation of Prescription Drugs
Thursday, May 20, 2004

Thank you for the opportunity to submit testimony today regarding the importation of prescription drugs from Canada. I commend Chairman Gregg and Senator Kennedy for bringing this important issue before the Committee, and I look forward to working with them to ensure the safe importation of prescription drugs from Canada and other industrialized nations.

Today U.S. citizens are paying from 30 percent to 300 percent more than their counterpartsin Canada and Europe for life-saving drugs such as Xeloda, which is an oral cancer drug for breastand colon cancer. In Canada, the price of Xeloda is $730. In the United States, the same drug with the same ingredients used by Canadian citizens is costing American cancer patients $1,500. This ishighway robbery of our most vulnerable citizens and it must be stopped.

Drug manufacturers are using American consumers to subsidize lower prescription drugsprices in countries such as Canada. They are forced to sell their products at lower prices in othercountries and try to re-coup their research and development costs by making Americans pay higherprices for the same products. If importation is legalized in the U.S. and lower cost pharmaceuticalsare made available to Americans, drug companies will be forced to re-think their pricing strategy.Legislation to legalize importation would not only help to lower the cost of prescription drugsfor all Americans, but also should shut down rogue Internet pharmacies selling unsafe drugs. We seenews accounts on a regular basis describing Americans who log on to the Internet to purchase drugsfrom Canada and elsewhere.

The Permanent Subcommittee on Investigations for the Senate Government AffairsCommittee conducted an investigation into current drug importation. They found that about 40,000parcels containing prescription drugs come through the JFK mail facility every single day of the year.

The JFK airport houses the largest International Mail Branch in the U.S. Each day of the year30,000 packages of drugs enter the U.S. through Miami, and 20,000 enter through Chicago. About28 percent of the drugs coming in are controlled substances. These are addictive drugs that requireclose physician supervision. While most people are ordering their prescriptions from Canada, I wassurprised to hear that drugs were also ordered from Brazil, India, Pakistan, the Netherlands, Spain,Portugal, Mexico and Romania.

Over the past few years there have been several amendments that I have supported legalizingthe importation of prescription drugs from Canada. In 2000, I voted for Senator Jeffords’ amendmentto H.R. 4461 that would have allowed pharmacists or wholesalers to import into the U.S.prescription drugs manufactured in Food and Drug Administration (FDA) approved facilities. Mostrecently during the Medicare debate, I voted for Senator Dorgan’s amendment which also wouldhave legalized importation. Unfortunately, each of my votes on these amendments has been renderedmeaningless by second degree amendments mandating certification by the Secretary of Health andHuman Services.

I believe that any legislation allowing the importation of prescription drugs from Canada andother developed nations should have three objectives. First, it should act without delay to assure U.S.citizens access to lower drug prices from Canada and other industrialized countries. Second, itshould put an end to the unregulated and unsafe situation with drug imports that exist today – mainlythrough unregulated rogue internet pharmacy operations. Third, it should provide the FDA with theresources and authority to ensure the safety of imported drugs.

On April 8, I introduced the Reliable Entry for Medicines at Everyday Discounts throughImportation with Effective Safeguards (REMEDIES) Act of 2004. My legislation would providelegalized access to lower drug prices from importation. At the same time, my bill addresses thesafety concerns associated with the importation of prescription drugs into the United States andwould provide the FDA with the necessary resources and authority to implement a safe and effectiveprogram. I would like to take this opportunity to tell you about the specifics of my legislation.

If enacted, the REMEDIES Act would halt unsafe importation by allowing individuals toimmediately obtain legal drugs from Canadian pharmacies during the 90 day interim period that theFDA would have to get the new drug importation system up and running. Under this new system,individuals, pharmacies, and drug wholesalers could purchase qualified drugs for import into theU.S. from foreign exporters that register with the FDA. To obtain registration, a foreign exporterwould have to demonstrate compliance with safety measures, submit to jurisdiction of U.S. courts,and take other steps to assure safety of imported drugs. A user fee charged to registered exporterswould provide the financing needed for FDA to register and oversee foreign drug exporters andensure the safety of imported drugs.

Filling a prescription overseas would employ the same process as mail order pharmacies inthe U.S. use today. Consumers that want to have their prescriptions filled at an overseas prescriptiondrug exporter would be able to go to the FDA website and find a list of companies that have passedFDA's requirements to become a registered exporter. The patient would have to have a validprescription written by a health care professional licensed in a state in the U.S. to prescribe drugs.The patient would then compare drug prices at the different registered exporters to find the best priceavailable. To get the prescription filled, the patient would have to contact that exporter and eithermail or fax the prescription to them. Alternatively, the registered exporter could call the patient'sprescriber and get the prescription over the phone.

The prescription could only be filled according to the prescriber’s instructions and withbrand-name drugs approved by the FDA and manufactured by the same company as approved by theFDA for sale in the U.S. Individuals could also have a prescription filled that is technically not anFDA-approved drug, but the drug would have to have the same active ingredients, dosage form,strength, and route of administration as the FDA-approved drug and be made by the samemanufacturer as the FDA-approved drug. These drugs would be manufactured by the same brandnamemanufacturer and are made for sale in the market of the approved country.

It would be the responsibility of the registered exporter to verify that the drug can be tracedback to the original manufacturer and the drug must have been stored and handled properly. TheFDA, through onsite inspectors, would also be verifying that the prescription drugs being dispensedto patients meet FDA’s criteria. Exporters would have to permit FDA inspectors to be present onsiteon a continuous day-to-day basis and the FDA would be required to have inspectors assigned to eachexporter.

My legislation also includes methods to ensure that only qualified drugs are entering theUnited States. Once a prescription was filled, the registered exporter would place a counterfeitresistantlabel or other markings on the package for shipping that identify the shipment as being incompliance with FDA's safety requirements and all registration conditions. These markings wouldbe designed by FDA and could include track-and-trace technologies. When the package enters theU.S., that marking would signify to Customs officials that the product was dispensed from aregistered exporter and can therefore be permitted to enter the country. Packages with drugs that lackthis marking would be automatically seized by Customs, which will ensure that products that havenot been subjected to FDA scrutiny do not slip into the country through the mail.

For the first two years, my legislation would only allow importation of prescription drugsfrom Canada. In the second year of the importation program, HHS would be required to submit areport to Congress on the safety of the program and its impact on trade and drug pricing. Theprogram would then be expanded in year three to include importation from the European Union, theEuropean Free Trade Association, Japan, Australia and New Zealand. Other countries that meetspecific statutory criteria may also be added to the list.

Finally, my legislation would offer both an incentive for drug makers to import prescriptiondrugs and a reprimand for them if they impede the importation of prescription drugs. Drugmanufacturers may not want to see their lower priced products from other countries coming into theU.S.

So under my bill, drug makers that take steps to prevent importation of their products fromthese registered drug importers would lose their tax deduction for their advertising costs. I am fullyin favor of free speech, but if some drug companies are not going to allow U.S. consumers to haveaccess to lower priced drugs from other countries, then they will lose the tax deduction for the costof those advertisements.

On the other hand, drug makers complain that these lower prices take money from researchand development. So, my bill also creates an incentive for the drug companies to allow importation.Companies that do not prevent importation from the registered exporters will get a 20 percentincrease in their R&D tax credit.

Now is the time for Congress to legalize the importation of prescription drugs from Canadaand other developed countries. American consumers are sick and tired of paying up to 300 percentmore for life saving drugs than their counterparts around the world. Free-trade principles argue infavor of permitting importation of prescription drugs as long as we can implement a system for safeimportation.

We cannot, however, assume that importing drugs from Canada and other developed nationsis safe. We need legislation that includes specific safety standards to protect American consumers,and I applaud the efforts by both Chairman Gregg and by Senator Kennedy to place an emphasis onsafety. I believe that with today’s sophisticated technology and proper oversight of registeredexporters, we can achieve a safe and effective system for legalizing the importation of prescriptiondrugs. Let’s not allow the partisan politics of an election year interrupt our goal of providing low costdrugs to American consumers.

Thank you again for the chance to submit testimony. I look forward to working withChairman Gregg and the entire Health, Education, Labor and Pensions Committee to get animportation bill passed in Congress and signed into law by President Bush.