[Pages S11473-S11475]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

PRESCRIPTION DRUG FAIRNESS FOR SENIORS ACT OF 1999

Mr. JOHNSON. Madam President, the second issue I want to talk about
this afternoon is the issue of prescription drug costs. I am going to
have to edit my remarks due to time constraints more than I really
prefer, but I do want to talk about the prescription drug costs we face
in this Nation.
American seniors 65 or older make up only 12 percent of our
population but consume, understandably, 35 percent of all prescription
drugs. Studies have

[[Page S11474]]

shown that the average senior citizen takes more than 4 prescription
drugs per day and fills an average of 18 per year. Costs have
skyrocketed in recent years, increasing an estimated 17 percent last
year alone.
What impact has this drug price increase had on senior citizens? It
has been catastrophic for all too many. A survey completed in 1993
reported that 13 percent of older Americans say they literally are
choosing between buying food or their prescription drugs.
Sadly, I hear the same story everywhere I go in my home State.
Thirty-five percent of the Medicare population, equivalent to 13
million people, have no prescription drug benefits of any kind under
any kind of insurance plan. Seniors sometimes fail to realize that the
Medicare program itself contains no prescription drug benefit.
I recently requested a South Dakota study of prescription drug prices
for seniors in our State, a study that I asked the Government Reform
and Oversight Committee of the other body to conduct, comparing the
prices our seniors pay compared to favored customers such as HMOs, the
Federal Government, and large insurance companies.
I ask unanimous consent that the detailed summary of the study be
printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Prescription Drug Pricing in South Dakota: Drug Companies Profit at the
Expense of Older Americans

(Minority Staff Report House Committee on Government Reform U.S. House
of Representatives, July 31, 1999)

executive summary

This staff report was prepared at the request of Senator
Tim Johnson of South Dakota. In South Dakota, as in many
other states around the country, older Americans are
increasingly concerned about the high prices that they pay
for prescription drugs. Mr. Johnson requested that the
minority staff of the Committee on Government Reform
investigate this issue. This report is the first report to
quantify the extent of prescription drug price discrimination
in South Dakota and its impact on seniors.
Numerous studies have concluded that many older Americans
pay high prices for prescription drugs and have a difficult
time paying for the drugs they need. This study presents
disturbing evidence about the cause of these high prices. The
findings indicate that older Americans and others who pay for
their own drugs are charged far more for their prescriptions
drugs than are the drug companies' most favored customers,
such as large insurance companies health maintenance
organizations, and the federal government. The findings show
that senior citizen in South Dakota paying for his or her own
prescription drugs must pay, on average, more than twice as
much for the drugs as the companies favored customers. The
study found that this is an unusually large price
differential--more than five times greater than the average
price differential for other consumer goods.
It appears that drug companies are engaged in a form of
``discriminatory'' pricing that victimizes those who are
least able to afford it. Large corporate, governmental, and
institutional customers with market power are able by buy
their drugs at discounted prices. Drug companies then raise
prices for sales to seniors and others who pay for drugs
themselves to compensate for these discounts to the favored
customers.
Older Americans are having an increasingly difficult time
affording prescription drugs. By one estimate, more than one
in eight older Americans has been forced to choose between
buying food and buying medicine. Preventing the
pharmaceutical industry's discriminatory pricing--and thereby
reducing the cost of prescription drugs for seniors and other
individuals--will improve the health and financial well-being
of millions of older Americans.
A. Methodology
This study investigates the pricing of the five brand name
prescription drugs with the highest sales to the elderly. It
estimates the differential between the price charged to the
drug companies' most favored customers, such as large
insurance companies, HMO's, and certain federal government
purchasers, and the price charged to seniors. The results are
based on a survey of retail prescription drug prices in chain
and independently owned drug stores throughout South Dakota.
These prices are compared to the prices paid by the drug
companies' most favored customers. For comparison purposes,
the study also estimates the differential between prices for
favored customers and retail prices for other consumer items.
B. Findings
The study finds that:
Older Americans pay inflated prices for commonly used
drugs. For the five drugs investigated in this study, the
average price differential was 121% (Table 1). This means
that senior citizens and other individuals who pay for their
own drugs pay more than twice as much for these drugs than do
the drug companies' most favored customers. In dollar terms,
senior citizens must pay $50.33 to $94.12 more per
prescription for these five drugs than favored customers.

TABLE 1.--AVERAGE RETAIL PRICES IN SOUTH DAKOTA FOR THE FIVE BEST-SELLING DRUGS FOR OLDER AMERICANS ARE MORE THAN TWICE AS HIGH AS THE PRICES THAT DRUG
COMPANIES CHARGE THEIR MOST FAVORED CUSTOMERS
--------------------------------------------------------------------------------------------------------------------------------------------------------
Retail Differential for S.
Prices for prices for Dakota senior citizens
Prescription drug Manufacturer Use favored S. Dakota -------------------------
customers seniors Percent Dollar
--------------------------------------------------------------------------------------------------------------------------------------------------------
Zocor................................... Merck....................... Cholesterol................. $27.00 $100.44 272 $73.44
Prilosec................................ Astra/Merck................. Ulcers...................... 59.10 110.82 88 51.72
Norvasc................................. Pfizer Inc.................. High Blood Pressure......... 59.71 110.04 84 50.33
Zoloft.................................. Pfizer, Inc................. Depression.................. 115.70 209.82 81 94.12
Procardiz XL............................ Pfizer Inc.................. Heart Problems.............. 68.35 121.88 78 53.53
---------------------------------------------------
Average price differential.......... ............................ ............................ ........... ........... ........... 121%
--------------------------------------------------------------------------------------------------------------------------------------------------------

For other popular drugs, the price differential is even
higher. This study also analyzed a number of other popular
drugs used by older Americans, and in some cases found even
higher price differentials (Table 2). The drug with the
highest price differential was Synthroid, a commonly used
hormone treatment manufactured by Knoll Pharmaceuticals. For
this drug, the price differential for senior citizens in
South Dakota was 1,469%. An equivalent quantity of this drug
would cost the manufacturers' favored customers only $1.75,
but would cost the average senior citizen in South Dakota
over $27.00. For Micronase, a diabetes treatment manufactured
by Upjohn, an equivalent dose would cost the favored
customers $10.05, while seniors in South Dakota are charged
an average of $47.24. The price differential was 370%.
Price differentials are far higher for drugs than they are
for other goods. This study compared drug prices at the
retail level to the prices that the pharmaceutical industry
gives its most favored customers, such as large insurance
companies, government buyers with negotiating power, and
HMOs. Because these customers typically buy in bulk, some
difference between retail prices and ``favored customer''
prices would be expected.

TABLE 2.--PRICE DIFFERENTIALS FOR SOME DRUGS ARE MORE THAN 1,450%
----------------------------------------------------------------------------------------------------------------
Price
Prices for Retail differential
Prescription drug Manufacturer Use favored prices for for S.
customers S. Dakota Dakota
seniors seniors
----------------------------------------------------------------------------------------------------------------
Synthroid................... Knoll Hormone Treatment... $1.75 $27.46 1,469%
Pharmaceuticals.
Micronase................... Upjohn.............. Diabetes............ 10.05 47.24 370%
----------------------------------------------------------------------------------------------------------------

The study found, however, that the differential was much
higher for prescription drugs than it was for other consumer
items. The study compared the price differential for
prescription drugs to the price differentials on a selection
of other consumer items. The average price differential for
the five prescription drugs was 121%, while the price
differential for other items was only 22%. Compared to
manufacturers of other retail items, pharmaceutical
manufacturers appear to be engaging in significant price
discrimination

[[Page S11475]]

against older Americans and other individual consumers.
Pharmaceutical manufacturers, not drug stores, appear to be
responsible for the discriminatory prices that older
Americans pay for prescription drugs. In order to determine
whether drug companies or retail pharmacies were responsible
for the high prescription drug prices paid by seniors in
South Dakota, the study compared average wholesale prices
that pharmacies pay for drugs to the prices at which the
drugs are sold to consumers. This comparison revealed that
the pharmacies in South Dakota appear to have relatively
small markups between the prices at which they buy
prescription drugs and the prices at which they sell them.
The retail prices in South Dakota are actually below the
published national Average Wholesale Price, which represents
the manufacturers' suggested price to pharmacies. The
differential between retail prices and a second indicator of
pharmacy costs, the Wholesale Acquisition Cost, which
represents the average price pharmacies actually pay for
drugs is only 13%. This indicates that it is drug company
pricing policies that appear to account for the inflated
prices charged to older Americans and other customers.

Mr. JOHNSON. Madam President, the results of the South Dakota study
are consistent with studies in other States finding that seniors in
South Dakota pay inflated prices for commonly used drugs. In fact,
seniors are paying twice the amount per prescription compared to the
price the pharmaceutical companies sell their drugs to their favored
customers. In fact, we found some individual prescriptions where the
price differential was as high as 1,469 percent for the same drug.
These price differentials are far higher for prescription drugs than
for any other consumer good.
The average price differential for the five top selling prescription
drugs for seniors is 121 percent, while the price differential for
other items considered daily essentials for the consumer is only 22
percent.
The study also indicates that pharmaceutical manufacturers--not the
drugstores, not the pharmacies--appear to be responsible for this huge
differential. South Dakota pharmacies have relatively small mark-ups,
between the prices at which they buy the drugs and the prices at which
they sell them.
The question is, Where do we go from here? There is talk about a
Medicare add-on for prescription drugs. I hope we can go down that
road. Quite frankly, a bipartisan agreement about how to pay for it and
administer it simply has not been reached. In the interim, there are
alternatives.
The Prescription Drug Fairness for Seniors Act of 1999, which I have
sponsored with Senator Kennedy, will provide a mandate--without the use
of tax dollars, or any new Federal bureaucracy--that the pharmaceutical
industry sell prescription drugs at the same price to Medicare
beneficiaries as they sell to their favored customers. No more
discrimination. If the Prescription Drug Fairness for Seniors Act was
enacted, we could reduce the cost of prescription drugs available to
seniors by approximately 40 percent. There would be no bureaucracy, no
tax dollars, and a huge benefit for seniors all over America. Our
pharmacists would use the existing pharmaceutical distribution system
and not create any new bureaucracy.
It is estimated that we will reduce drug prices for seniors by
approximately 40 percent. There will be no more devastating choices
among groceries, rent, and prescription drug costs.
I am pleased our bill is gaining endorsement and currently has the
support of 10 of our colleagues, including Senators Daschle, Dodd,
Dorgan, Feingold, Hollings, Inouye, Leahy, Kerry, Wellstone, and
Bingaman. Earlier this year, Representatives Tom Allen, Jim Turner,
Marion Berry, and Henry Waxman were joined by 61 of their colleagues
when they introduced the House version of this bill, H.R. 664. They
have now over 120 cosponsors.
Several organizations endorsed our legislation, some of which include
the National Committee to Preserve Social Security and Medicare, TREA
Senior Citizens League, Consumer Federation of America, and Families
USA Foundation. Many South Dakota groups have also endorsed our bill,
including the South Dakota Coalition of Citizens with Disabilities and
the North Central Chapter of the Paralyzed Veterans of America. We now
have well over 30 organizations actively supporting this legislation.
Currently, there are several prescription drug proposals in Congress.
We ought to have hearings on this issue, and we ought to go forward as
aggressively as we can.
Madam President, there is no need to wait. We can act on this now. We
can give seniors now the benefit of this 40 percent reduction in
prescription drug costs that they deserve and need.
What an irony it is that so many of our seniors wind up not taking
their prescription drugs in order to save money and then fall ill with
an acute illness and wind up in the emergency room, and then Medicare
picks up the tab. Wouldn't it be better if we can find a way to make
sure seniors can afford the prescription in the first place to avoid
that kind of acute illness, that emergency room visit? The taxpayers
will gain, the dignity of the seniors will gain, their physical health
will gain. All Americans would be better off with the immediate passage
in this Congress of the Prescription Drug Fairness for Seniors Act of
1999.
I yield back such time as may remain.
Mr. BYRD addressed the Chair.
The PRESIDING OFFICER. The Senator from West Virginia is recognized.
Mr. BYRD. What is the situation regarding time?

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