Orrin Hatch

Mr. HATCH

Mr. HATCH. If the car is necessary for daily use, if it is necessary for their job or if it is necessary for a medical purpose----

Mr. HATCH. Mr. President, today we are discussing the Medicare prescription drug bill, which is basically the two bills we will be voting on tomorrow. I rise this afternoon to take the opportunity to share my thoughts on Medicare drug coverage. Today and tomorrow, we will be debating two Medicare prescription drug bills--the Medicare Outpatient Prescription Drug Act of 2002, introduced by Senators Graham, Miller, Kennedy and Corzine, and the 21st Century Medicare Act introduced by the Senate tripartisan group which includes Senators Grassley, Jeffords, Breaux, Snowe, and myself. There is no question that all of us have the same goal in mind--to provide beneficiaries with Medicare prescription drug coverage, this year. But, unfortunately, we do not agree on how this coverage should be provided. Senators Graham and Miller believe it should be provided through the Federal Government. On the other hand, the Senate tripartisan members believe drug coverage should be provided through the private market. During the next day and a half, you will hear about the merits of both bills. You will also hear criticisms of both bills. While these matters certainly need to be debated by the Senate, both of these bills, which will impact the lives of millions of Americans, should have been considered by the Senate Finance Committee before being debated on the Senate floor. I have heard my colleagues on the other side of the aisle saying that the Senate Finance Committee has debated this issue for the last 5 years and the American people are tired of waiting for the Senate Finance Committee to act. I take issue with that argument. Actually, we have had 37 years to fix Medicare. We just celebrated its 37th birthday. And don't forget what happened when we passed a Medicare prescription drug benefit the last time. We repealed it the very next year. So we need to proceed with caution and consider any prescription drug bill very carefully before passing such a measure by the U.S. Senate. We do not want to make the same mistake twice. Let me just say that making any changes to the Medicare program is not an easy task. I have been in the Senate for over 26 years and I find the Medicare program to be one of the most complicated programs in the Federal Government. There was a recent quote by former Secretary of State Madeleine Albright in the Washington Post, July 20, 2002, where she said, ``being Secretary of State is the best job in the world. Better than being President, because you don't have to deal with Medicare.'' I think she may have hit the nail right on the head. The point I am trying to make is simple. We need to spend quality time drafting and debating a Medicare prescription drug benefit. We should not be considering such important legislation on the Senate floor without the Senate Finance Committee having a mark-up. That is just not right and it is downright irresponsible. We should have let the Finance Committee do its job. But as I said all last week, politics is dictating policy. So here we are, debating one of the most important issues of the 107th Congress without even a Finance Committee hearing on the legislation being considered by the Senate today and tomorrow. I am extremely disappointed in the way this has been handled by the Democratic leadership. I believe that the Finance Committee members could have approved a bill out in the Committee. It just wasn't the bill that the Democratic leadership wanted to have passed out of Committee. On that point, I truly believe that we could have reached a consensus in the Finance Committee if we had been given a chance. When Senator Kennedy and I authored the Children's Health Insurance Program in 1997, there were not more different Members of the Congress. But we did it, and we got the bill through the Congress and had our CHIP bill signed into law in 1997 as part of the Balanced Budget Act. In fact, it was the glue that held the first balanced budget act in over 40 years. It was the glue that got that CHIP bill signed into law as part of that particular act. Senator Kennedy and I reached consensus. Where there is a will, there is a way. The same thing could happen with the Medicare prescription drug legislation. But there must be a willingness to get something done this year. And I am sensing that there is a lot of political game playing on this issue which says to me that there is not a willingness to get something signed into law this year. Our tripartisan bill has the votes to pass both the Senate Finance Committee and the Senate. But we will not be given the opportunity to bring our bill before the Senate Finance Committee because, in my opinion, the majority leader does not want our bill to pass the Senate Finance Committee. Again, that is just a shame that we have to resort to such political game playing on an issue so important to our seniors and to our country. We finally have a bill that can be approved by the Committee and the majority leader refuses to have it go through the proper channels. Let me just say that I am extremely disappointed by his decision. I, for one, am still willing to do the work to get a Medicare prescription drug bill signed into law this year. I only hope that the majority leader is willing to work with us. We have talked a lot about both bills in the last week and, at this time, I would like to talk about the tripartisan Medicare prescription bill. It is the only bill with support of both Democrats and Republicans being considered in the Senate. It provides Medicare beneficiaries three key elements--affordable drug coverage, choice in health coverage, and quality health care. All three elements are important and all three elements are included in this bill. According to CBO, spending on drugs for seniors over the next decade will grow at an astronomical rate. CBO says that the only way to contain the cost of a drug benefit is to ensure that drugs are delivered efficiently. In turn, CBO says that the only way to have drugs delivered efficiently is to have true competition. True competition, according to CBO, requires two things: No. 1. Private plans that assume at least a limited degree of risk-- that is, if they are efficient, they will make money, and if not, they will lose money. No. 2. That those plans be able to compete by varying the premium they charge, and varying the benefits they offer. The tripartisan bill allows plans to vary both premiums and benefits. CBO says that if all plans offer the same premium and same benefits, as under the Democratic leadership bill, that is simply not true competition. Accordingly, the CBO score of any such approach will be extraordinarily high. Some have suggested a dual system, with competitive and non- competitive plans operating side-by-side. Unfortunately, CBO has made it clear that it would give such dual systems the same high score as a totally non-competitive system, because all plans would choose to be non-competitive. A dual system simply doesn't achieve cost containment and is also flawed because it is government run. Our tripartisan drug plan is a voluntary and permanent program. It does not sunset like the Graham bill. In addition, all Medicare beneficiaries may participate--those in traditional Medicare, Medicare+Choice or the new enhanced Medicare fee-for-service program. The monthly premiums are $24 per month, which is the lowest premium amount of any drug plan that has been introduced in the Congress, and one that I think would be more acceptable to our people out there rather than causing us to run into the difficulties we had when we had to repeal the catastrophic bill a number of years ago. The deductible will be $250 and the beneficiary coinsurance, except for the low-income seniors, is 50 percent once they reach the deductible and up to $3450 in drug expenditures. Our drug plans are based on actuarial equivalence, which means that we permit Medicare drug coverage to respond to consumers' demands. These actuarial equivalent plans will meet consumers' needs. The Government will determine which plans are actuarially equivalent, and, CBO has determined that the five standards that the plans must meet in order to be actuarial equivalent reduces a lot of variation between the standard benefit. The five standards for actuarial equivalence are: No. 1, the Medicare benefits administrator must approve any actuarially equivalent coverage, and may terminate or disapprove any benefit design intended to discourage enrollment of high risk individuals. No. 2, the actuarial coverage value of the total alternate coverage for the entire benefit must be equal to the standard benefit. No. 3, the unsubsidized value of alternate coverage must equal the unsubsidized value--that is, 35 percent which is subsidized--of the standard coverage. No. 4, the alternate coverage must be based on actuarially representative patterns of utilization to provide payment, with respect to costs incurred that are equal to the initial coverage limit under the standard benefit. No. 5, catastrophic protection must equal the precise dollar amount, which is $3,700, the same as the standard benefit package. So the arguments that our bill allows plans to raise the deductible to $500 or that our premium would be significantly higher than $24 per month are just wrong. In 2005, when the drug plan is first established, Medicare beneficiaries have a 7-month open enrollment period from April 1 through November 30. Every senior would have a choice between two prescription drug plans, and that includes rural areas across the country. This is required by the legislation, and the Congressional Budget Office agrees that there will be two plans in each coverage area. These coverage areas could be nationwide but they must be, at minimum, at least the size of a State. Before being offered to seniors, the drug plans must be certified by the Department of Health and Human Services. Seniors will receive information about the available prescription drug plans each year before selecting their coverage. The drug benefit begins in January 2005. CBO estimates that 93 percent of Medicare beneficiaries will participate in the Medicare prescription drug program, 6 percent will keep their current prescription drug coverage and 1 percent will not be eligible because they do not participate in Medicare Part A and/or Part B. An actuarially sound penalty would be imposed on seniors who decide to participate in the drug plan once the enrollment period is over. This is almost identical to Senator Bob Graham's late enrollment penalty. The Government will be covering 75 percent of the value of the Medicare drug benefit equaling $340 billion over the next 10 years, providing a tremendous incentive for plans to participate. The tripartisan bill allows private sources of drug coverage to supplement the new Government coverage by providing a strong base benefit--50 percent drug coverage after a $250 deductible up to $3,450 and price discounts on all drug purchases. The result is that 80 percent of beneficiaries in 2005 will not have drug spending beyond that basic benefit. We also include low-income protections in our legislation by providing low-income seniors with additional subsidies so they, too, can afford to pay for their drugs. The tripartisan group's goal was to put an end to people having to choose between buying food and buying their medicine by providing additional help to those seniors who need it. For example, the 10 million beneficiaries with incomes below 135 percent of poverty will have 80 to 95 percent of their prescription drug costs covered by this plan with no monthly premiums. These seniors are exempt from the deductible and will pay well under $5 for their brand name prescriptions and/or their generic prescriptions. And beneficiaries at this income level who reach the catastrophic coverage limit will have full protection against all drug costs with no coinsurance. The 11.7 million lower income beneficiaries with incomes below 150 percent of the poverty level are also exempt from the $3,450 benefit limit. Those beneficiaries between 135 percent and 150 percent of the Federal poverty level will also receive a more generous Federal subsidy that, on average, lowers their monthly premium to anywhere between zero and $24 a month on a sliding scale. This also reduces their annual drug expenses by more than half. All other Medicare beneficiaries will have access to discounted prescriptions after reaching the $3,450 benefit limit, and the critically important $3,700 catastrophic benefit, which protects seniors from high, out-of-pocket drug costs. I now want to take some time to discuss the Medicare coverage provisions in the tripartisan legislation. Under our bill, we offer two choices for Medicare coverage, traditional Medicare and a new, enhanced fee-for-service plan which offers benefits similar to those provided in private health insurance. Medicare beneficiaries may choose one or the other. If a beneficiary wishes to remain in traditional Medicare, he or she may do so. If a beneficiary opts for the enhanced fee-for-service plan, then changes his or her mind and wants to go back to traditional Medicare, that is fine, too. For the first year, beneficiaries may go back to traditional Medicare without a penalty. Afterward, an actuarially fair penalty will be imposed on them for switching back and forth. This is similar to the penalties for late enrollment into the Medicare Part B program under current law. But no one is stuck in one coverage plan. Beneficiaries may change their minds and switch back to traditional Medicare if they are not happy with the enhanced fee-for-service plan. Now, I would like to take just a few minutes to discuss the details of the new, enhanced fee-for-service option with my colleagues. As far as enrollment is concerned, the rules for the enhanced fee- for-service benefit, Medicare Part E, are modeled on current Medicare enrollment policies. Those who are already enrolled in Medicare Part A and Part B as of 2005 will stay in traditional Medicare unless they decide to enroll in the enhanced fee-for-service option. Those who become eligible for Medicare in 2005 or later will automatically be enrolled in the enhanced fee-for-service option unless they indicate that they want to be enrolled in the traditional Medicare program. All beneficiaries will have a 7-month period to make their initial coverage decision. This is similar to Medicare Part B. In addition, beneficiaries will be given information about the coverage options included under the enhanced fee-for-service option. This information will compare the benefits under the traditional Medicare program to the benefits provided under the enhanced fee-for- service option. That way, Medicare beneficiaries will be able to make a coverage decision that really is best for them. Benefits covered under the Medicare enhanced fee-for-service option include better hospital inpatient cost-sharing. Instead of the current extremely high Medicare Part A hospital deductible, which will be $920 in the year 2005, and high copayments for long hospital stays, the Medicare enhanced fee-for-service option offers a single hospital copayment of $400 per admission. This is similar to the benefits provided to individuals through private health insurance. In addition, it avoids penalizing those who are ill enough to have long hospital stays. It is also simpler and more rational than the current system and all other plans on the table, including the Graham plan. The enhanced fee-for-service option also replaces the current limits on hospital coverage with 365 days per year, lifetime coverage. I would like to give you an example of how this would work. Beneficiaries who are hospitalized have to pay an extraordinarily high Part A deductible of $812 in 2002, rising to $920 in 2005. Unlike private health plans, Medicare today imposes its Part A cost-sharing per spell of illness, not per year. As a result, beneficiaries could be exposed to the deductible, copayments and coverage limits repeatedly in a single year. I just don't think that is fair to the beneficiary who is a victim of frequent hospitalizations within a year. Under current law, after the Part A deductible, $812 in 2002 per spell of illness, is satisfied, there are copayments for those who have long hospital stays. In 2002, $0 for days 1 through 60; $203 per day for days 61-90; $406 per day for days 91-150 this specific coverage, for days 91 through 150, is available only once per lifetime. In other words, Medicare provides no coverage at all for inpatient care beyond 150 days per spell of illness. And, for additional hospitalizations after the first one per lifetime, inpatient hospital coverage ends after the 90th day. Our enhanced fee for service option would change that, once and for all. The $400 copayment per hospital admission would replace both the Part A per spell of illness deductible and the copayments imposed on beneficiaries after being hospitalized longer than 60 days. As far as preventive benefits are concerned, for those who choose the enhanced fee-for-service option, preventive benefits would not be subject to any deductibles or coinsurance. Currently, Medicare imposes deductibles and coinsurance, usually around 20 percent, on most preventive benefits. We in the tripartisan group believe that the current Medicare policy on preventive benefits makes beneficiaries reluctant to seek out preventive services that may identify health problems and prevent more expensive care later. Therefore, the enhanced fee-for-service option eliminates all copayments and deductibles on Medicare preventive benefits. The enhanced fee-for-service option also includes a unified deductible of $300 per year for all services. Today, in the current Medicare program, the Part A deductible in 2002 is $812 per spell of illness. In 2005, it will be much higher, $920 per spell of illness, while the Medicare Part B deductible will still be only $100 per year. The enhanced fee-for-service option offers seniors a choice: their current coverage that emphasizes protection against relatively predictable and routine Part B costs, or new coverage that emphasizes protection against unpredictable but potentially devastating Part A costs in the event of serious illness. Seniors would have a choice, which they do not have today. Medicare's irrational, two-deductible system is unheard of in private insurance. Beneficiaries are used to a single deductible from their prior employer-based plans. It is true that in a given year, relatively few beneficiaries use Part A hospital services. However, the picture changes if one looks across multiple years. A recent survey found that 17 percent of beneficiaries were hospitalized each year. Over a 6-year period, more than half, 56.4 percent, were hospitalized and 36 percent were hospitalized more than once. These hospitalizations may result in ruinously high out-of-pocket costs for seniors, and the enhanced fee-for-service option offers protection against such costs for those who choose this coverage plan. In addition, the enhanced fee-for-service option would protect seniors with serious illness. Today, Medicare has no limit on a beneficiary's out-of-pocket expenses in a year, creating the potential for crippling costs in the event of serious illness. Our tripartisan bill would limit beneficiaries' exposure to out-of-pocket costs for Medicare-covered services, other than prescription drugs, to $6000 per year. Beyond $6000, Medicare would pay 100 percent of any costs incurred by the beneficiary. In a given year, it is estimated that 2 to 3 percent of Medicare beneficiaries may have costs that reach $6000. If beneficiaries want peace of mind that would come from such catastrophic protections included in the enhanced fee-for-service option, they should have that choice. Contrary to popular belief, Medicare supplemental policies do not offer catastrophic protection. The standardized Medigap plans fill in the cost-sharing in the existing Medicare benefit package, but they do not offer serious illness protection. Since virtually all employer- sponsored health plans offer serious illness protection, it is something that many beneficiaries have come to expect. In addition to those with serious illnesses, this protection would also benefit those with severe, chronic conditions, which are inadequately covered by Medicare today. All spending by or on behalf of the beneficiary, including by third parties, such as Medicaid, employers, or Medigap plans would count toward the serious illness threshold of $6000. This differs from the drug benefit stop-loss because CBO indicated that counting only a beneficiary's own spending toward the Part E limit would reduce participation in the enhanced fee for service option a concern that CBO did not have about the drug benefit in the tripartisan bill. As far as home health benefits and skilled nursing facilities are concerned, those who choose the enhanced fee for service option would have to make home health copayments of $10 per visit, on only the first five visits of a 60-day episode. A Medicare beneficiary would only have to pay $300 in home health copayments per year. Home health care is one of the only Medicare benefits for which there is no beneficiary cost- sharing. Medicare's average payment per home health care episode is $2300, so a maximum total copayment of $50 per episode would cover only about 2 percent of the program costs, in contrast to the typical 20 percent cost-sharing on Medicare Part B benefits. Both CBO and Med PAC indicate that even a modest copayment is critical to making beneficiaries consider cost when deciding whether or not to use home health care. CMS projects a 12 percent growth in home health care spending in 2003, even if the 15 percent cut scheduled in current law takes place. Beneficiaries with serious enough conditions to need more than five visits per episode receive those additional visits without additional cost-sharing. Those who cannot afford these modest copayments are protected, because current law includes cost- sharing protections for the low-income beneficiaries, Medicaid eligible and QMBs are maintained. For skilled nursing facilities, the enhanced fee for service option would include a copayment of $60 per day for the first 100 days. Under Medicare today, beneficiaries currently pay copayments beginning on day 21 of a skilled nursing facility stay. Medicare imposes no cost-sharing for the early days of a skilled nursing facility stay, days 1 through 20, and then Medicare imposes very high beneficiary cost-sharing for longer stays. In 2005, when our bill goes into effect, those copayments will be $115 per day for days 21 through 100. As a result, Medicare's current skilled nursing facility cost-sharing unfairly penalizes those who are sick enough to need a longer stay, while allowing those who aren't as sick to have free days of care, with no incentive to consider costs. Influenced by the 20 days of free care, then prohibitive cost-sharing policy, the average length of stay in a skilled nursing facility is approximately 24 to 26 days, according to CMS. We believe that since skilled nursing facilities already collect copayments beginning on day 21 of the beneficiary's stay, these facilities will already have administrative structures for cost sharing in place. To be honest, I am not enthusiastic about imposing home health or skilled nursing facilities copayments on Medicare beneficiaries. But, as I said earlier, this legislation required a lot of give and take from all of us. If Medicare beneficiaries do not want to make home health or skilled nursing facility copayments, they may stay in the traditional Medicare program. If they go into the enhanced fee for service option and don't like the coverage because they end up having to make copayments for home health care or skilled nursing facilities, they may switch back to traditional Medicare. It is that simple. We are not imposing copayments on anyone who does not want them. The enhanced fee for service option is just that a coverage option. These are some of the key elements of the new, Medicare enhanced fee for service option that our bill will provide to Medicare beneficiaries. I hope that my explanation cleared up any questions that my colleagues may have had on this component of the tripartisan bill. Our tripartisan bill also includes provisions concerning the Medicare+Choice program. In 2005, our legislation takes modest steps to improve Medicare+Choice plan participation by introducing a competitive bidding system under which the plans will compete with each other, but not with the government-run, fee-for-service program, for beneficiaries. This competitive approach to Medicare+Choice payments, based on a bipartisan model supported by the Clinton administration, will result in fairer and more accurate payments to plans. Today's bureaucratic pricing system sets arbitrary and inaccurate rates that discourage plan participation. At this point, I would like to take a few minutes to rebut some of the arguments my friend and colleague Senator Kennedy made against our bill last week on the Senate floor. He obviously has not read our bill very carefully. I wish he had taken the time to read the tripartisan legislation before making statements that were not completely true on the Senate floor about our bill. Now, there is some confusion about our bill and I would like to set the record straight, once and for all. First, Senator Kennedy criticized our plan's assets test for low- income beneficiaries. Our tripartisan plan provides additional subsidies for low-income seniors which everyone agrees is only fair. I believe I am correct in saying that everyone, on both sides of the aisle, believes that additional subsides for our low-income seniors is completely justified. My good friend is trying to make it appear that we are picking and choosing which seniors would be eligible for this additional assistance. Nothing is further from the truth. I want to be clear that we have done nothing different on this issue than what has been the accepted practice and policy for many years when it comes to programs that provide assistance to those with lesser means. In fact, the tripartisan bill adopted an assets test similar to the Medicare bill proposed by President Clinton in 1999. Under current law, Medicaid includes an assets test. States have the flexibility to waive the assets test at their discretion. Our tripartisan proposal ensures that the flexibility found in current law is retained in the Medicare drug benefit program. The assets test ensures the seniors who need the most assistance are provided with the most protection. We want to provide the most generous assistance to those who truly need it. Also, let me clarify that current law specifically excludes from the assets test an individual's home and its land; household goods; personal effects, including automobiles; the value of any burial space; and other essential property. So I hope this clarifies any questions that Senators may have had on the tripartisan proposal's assets test. Hopefully, I have made it clear to my colleagues that the tripartisan bill adopted a widely accept and common practice for determining which lower income seniors are eligible for higher subsidy for their prescription drug benefits. Another issue raised by my good friend, Senator Kennedy, is the design of the tripartisan proposal's prescription drug benefit. He wanted to know how our prescription drug benefit design permits creation of competitive plans that would provide quality coverage to all Medicare beneficiaries. Let me explain why we took this approach. First, we believe that Medicare beneficiaries deserve a quality drug benefit that meets their individual needs. The Graham-Miller proposal does not allow any variation in cost-sharing or premiums and is a ``one-size-fits-all'' plan which, in my opinion, will fail to address the individual prescription drug needs of seniors. So, with that in mind, it is important that Medicare beneficiaries are provided a quality drug benefit at an affordable price. Our tripartisan plan strikes the right balance to give Medicare beneficiaries access to prescription drugs they need at the lowest possible price. Any plan that wants to offer a Medicare drug benefit will be required to receive the approval of HHS according to strict standards specified in law. This approval process will be an interaction between any prospective plan and the Federal Government to ensure that Medicare enrollees receive the best quality coverage possible at an affordable price. There are five strict standards of actuarial equivalence in our bill which the CMS Administrator is required to certify that a plan meets before the plan is offered to Medicare beneficiaries. The plans themselves will not be determining what is actuarially equivalent; only the Federal Government will make that determination. If the Government determines that a plan is not equivalent to the standard benefit, its proposal will be rejected and it will not be permitted to participate in the Medicare drug benefit. End of Story. In fact, CBO has told us that our standards of equivalence are strict enough that Medicare Drug Plans will have little room to vary premiums or cost-sharing. That little room to allow some variation, however, is critical to the success of a Medicare prescription drug benefit. Under the Graham-Miller bill, Medicare drug plans operating in the same area will be forced to charge the same monthly premium and the same cost-sharing. While Senator Graham claims that his proposal includes competition, I do not understand how Medicare plans will compete if they are required to offer identical premiums and identical cost-sharing across the country. If drug plans wanted to lower their cost-sharing or lower their premium in order to attract Medicare enrollees, Congress would have to pass legislation. On the other hand, the tripartisan bill ensures that the innovation of the private sector is not stifled by a micromanaged, ``one-size- fits-all'' drug benefit run by the Federal Government. Another issue raised by my friend Senator Kennedy is whether or not the prescription drug benefit under our proposal guarantees that seniors will have access to benefits. Let me assure you that if this were not true, I would not be standing here today, speaking in favor of this legislation. Let me clarify that the tripartisan bill guarantees two Medicare prescription drug plans to every Medicare beneficiary. If the beneficiary lives in an area where there are Medicare+Choice plans, then even more choice will be available as the presence of drug coverage under Medicare+Choice does not count as one of the two choices that would be guaranteed in law under our plan. The Medicare prescription drug plans are not determining their own service areas. The Federal Government will make that determination. And let me emphasize that the service areas must be--at a minimum--the size of a state. The government will be covering 75 percent of the value of the Medicare drug benefit equaling $340 billion over the next 10 years. The last issue that my good friend from Massachusetts raised is whether or not employers will be encouraged to continue to provide retiree health benefits with prescription drug coverage. I believe that we have worked hard to protect both employers and retirees on this issue. The tripartisan bill provides employers the same full subsidy to offer drug benefits to their retirees as any other qualified provider of prescription drug benefits. The Graham-Miller legislation provides a disincentive for employers to continue offering retiree health coverage for prescription drugs by giving employers only two-thirds of the value of the government drug benefit to retain their retiree coverage. So in other words, the Graham-Miller plan would encourage employers to end their coverage of prescription drugs in order to encourage their retirees to enroll in the Government plan and receive the full Government subsidy. I do not understand how my friend can make the argument that our plan is bad for employers. Currently, employers receive no assistance whatsoever in paying for drug costs for their retirees. Employers today are paying the full price and taking all of the risk for covering retiree prescription drug costs. The subsidy policy in the tripartisan proposal will allow employers who are offering a drug--benefit at least as generous as the standard benefit--to receive the full value of the standard benefit. Again, our policy targets dollars where they might do the most good, and our employer subsidies recognize the value of employer-sponsored retiree drug coverage. I would like to take some time to share my thoughts on the Graham- Miller Medicare outpatient prescription drug amendment which was offered at the end of last week. As I have said throughout this debate, Senator Graham deserves a lot of credit for his hard work and dedication to this issue. His staff, too, has worked long and hard on this issue. Senator Graham, like those of us in the Senate tripartisan group, has the same goal--to pass Medicare prescription drug legislation into law this year. I have had a chance to review Senator Graham's amendment over the weekend and I would like to raise some issues regarding his new legislation. I understand that the Congressional Budget Office has scored his legislation as costing close to $600 billion over 10 years. While Graham says that any potential saving from the underlying legislation should be counted against the cost of his amendment, I disagree. We do not know whether or not the underlying bill will be approved as proposed, amended or defeated altogether. Therefore, we obviously cannot assume any savings from that bill when discussing either Medicare prescription drug amendment--the Graham amendment or the tripartisan amendment. Quite honestly, I am still extremely worried about the expense of the Graham-Miller legislation. In fact, I believe that the true 10 year cost of the Graham-Miller drug benefit could be closer to $1 trillion. Another concern is that this bill is not a permanent program. It sunsets after 2010 and, quite frankly, I believe that having a sunset in such an important bill just to get a decent score from CBO is fiscally irresponsible. The way I read the Graham-Miller bill, it is a temporary benefit, which lasts for 6 years. On page 78 and 79 of the Graham-Miller amendment, it states that ``no obligations shall be incurred . . . and no amounts expended, for expenses incurred for providing coverage of covered outpatient drugs after December 31, 2010.'' That is a mouthful to read. But the translation from Government-speak is simple: no funding at all, zero, for the Medicare drug benefit after 2010. I also read in the Graham-Miller bill that there is an attempt to provide prescription drug coverage after the Medicare prescription drug program sunsets. On page 79, the amendment states that ``the Secretary shall make payments on or after January 1, 2001, for expenses incurred to the extent such expenses were incurred for providing coverage of covered outpatient drugs prior to such date.'' I think what the sponsor of this legislation is attempting to do, although I am really not sure, is say if there is additional, left-over money from the drug benefit, that money may be used to provide drug coverage after December 31, 2010. That language is very confusing to me. Like I said the other night, it seems more like window dressing to me than an actual extension of the sunset. I am interested in Senator Graham's comments on this specific provision and the broader issue of why he and his bill cosponsors believe that a sunset is necessary in the first place. I just think it is plain wrong to give Medicare beneficiaries a Medicare drug benefit and then take it away six years later. I cannot believe that the AARP would actually tell its members to call their members of Congress to express support for this bill. I cannot figure out how a temporary Medicare drug benefit helps seniors in the long run. Another serious concern I have about the Graham-Miller legislation is that the drug benefit is run by the Federal Government. I do not think it is a good idea to let the Government set the price for drugs which is exactly what will happen if the Graham-Miller bill becomes law. And that will be catastrophic, in my opinion. The Graham-Miller bill has a one-size-fits-all drug plan that is offered to Medicare beneficiaries. That approach will lead us down a dangerous path. I have said this more than once but I am going to say it again, before you know it, the Federal Government, not the private market, will be setting drug prices, mark my words. And I do not believe it is a good idea for the federal government to be making coverage decisions for seniors--I trust senior citizens to make their own decisions about their health coverage. Apparently, the authors of the Graham-Miller bill do not agree and that is why they put the Government in charge. If you do not believe me, read the language on page 41 of the bill. It states that if only one drug plan meets all the conditions set by the Secretary of Health and Human Services, and the Secretary can set any conditions he pleases, then the Secretary can simply decide that Medicare beneficiaries will get coverage through that one prescription drug plan. Period. And while there are laws to protect Medicare beneficiaries, and in fact all Americans, against the government doing something that arbitrary, the bill waives all of those laws. Let me summarize for my colleagues what is included in the Graham-Miller legislation on this topic. Page 42, line 18 through 21 reads as follows: In awarding contracts under this part, the Secretary may waive conflict of interest laws generally applicable to federal acquisitions * * * In other words, not only is there no judicial or administrative review of the Secretary's decisions allowed at all, but even the Government's conflict of interest laws are waived. The other primary difference between the Graham-Miller bill and our tripartisan bill is that we include reforms to the Medicare program and they do not. Keep in mind our bill is $370 billion in contrast to their proposed $600 billion bill. The current Medicare benefit package was established in 1965. While the benefits package has been modified occasionally, it now differs significantly from the benefits offered to those in private health plans. We need to give seniors choices concerning their health care coverage. It is extremely unfortunate that the Graham-Miller bill does not recognize that the Medicare program needs to be improved so seniors can have similar benefits offered by private health insurance. There is nothing in the Graham-Miller bill to improve the Medicare program. It just tacks on a prescription drug program and ignores the larger problem--the overall Medicare benefits package which is outdated and inefficient. Medicare beneficiaries, in my opinion, deserve better. We do not shove the larger issue under the rug in our bill. Another serious concern I have about the Graham-Miller legislation is that only two brand-name drugs are covered in each therapeutic drug class, and, plans are permitted to cover just one drug. For all other drugs, ``the beneficiary shall be responsible for the negotiated price of the treatment'' which means in plain English, no coverage at all. Let me give an example. Let's say Bob, a Medicare beneficiary in his early 70s, takes Mevacor to lower his cholesterol. His new Government prescription drug plan only covers Lipitor. Bob's wife, Bev, takes Celebrex for her arthritis. Her Government drug plan only covers prescription strength Advil. What happens to Bob and Bev? They are both out of luck because their Government drug plan does not cover the prescription drugs that they have been taking for their chronic health conditions. Even worse, according to CBO, the Graham bill does not lower drug prices for drugs that are not covered. Unless a beneficiary is awfully lucky to be on the one or at most two brand name drugs that the government plan decides to cover, he or she will get nothing. I think of people suffering from depression. There are a number of antidepressant drugs, and they all work in just a little bit different way. Where Prozac may not work, Zoloft might, or Paxil might work, or some other antidepressant drug. Why should they be limited to only two drugs when the two they are limited to might not be helpful to them? It just does not make sense to me. If a Medicare beneficiary believes that he or she needs a specific prescription drug, not the one or two drugs that the Government plan decides to cover, the beneficiary may be able to get coverage if the beneficiary and his or her physician go through a ``medical necessity'' certification process. This certification process is then followed by an internal and external appeals process--and guess what--all run by the Government. I simply do not believe that Medicare beneficiaries want the Government to make drug coverage decisions for them. Supporters of the Graham-Miller legislation say, ``Don't worry, trust the Government, you will have choices of drug coverage.'' Tell that to Bob and Bev who will not have their prescriptions covered through this Government-run plan or to somebody suffering from depressive illness where the two drugs that are in the Government plan are not the ones that help them. Or in any number of other illustrations where you have a whole variety of drugs but you are limited to two. When the Government says ``trust us,'' it is time to pay attention. In addition, the way I read the Graham-Miller legislation, the Secretary of HHS is given the authority not only to decide what constitutes therapeutic classes but also the ability to determine when such a drug fits into such a class. I do not understand why the sponsors of this legislation believe the Secretary of HHS should be making such important decisions. In addition, why should the Secretary of HHS, instead of physicians and pharmacists, be given authority to decide what constitutes preferred and non-preferred classes of drugs and, on top of that, determine when a particular brand name drug fits into such a class? It does not make any sense. Because the Graham-Miller amendment now does not cover non-preferred drugs, at all, I am deeply concerned about the impact this could have on Medicare beneficiaries with cancer or AIDS or other chronic illnesses that require many prescriptions. I have a feeling that people with chronic or terminal illnesses will be getting the short end of the stick if the Graham-Miller bill is signed into law. Furthermore, how are the doctors, who may know that one drug may be much more beneficial than another drug, protected? How are the doctors protected from medical liability under those circumstances? Already we are finding that obstetricians in Nevada can no longer get insurance coverage for medical malpractice, and that is going to happen all over the country if they do not watch it because litigation is driving these costs higher and higher. If a doctor cannot prescribe what is necessary for the patient, that doctor is subject to medical liability even though the Government is the one dictating what two drugs should be provided. By the way, that is under the Graham-Miller bill. These issues that I have raised about the Graham-Miller should have been debated by the Finance Committee. Who knows, maybe we could have come to the same resolution, but I doubt it. We could have come to some resolution and it would be better than what is in the Graham-Miller bill. Maybe the authors of the tripartisan bill and the Graham-Miller bill could have come to the same agreement through the committee markup process. Maybe not. Sadly, we will never know because politics, not policy, is more important. Last Thursday night, I asked what happened to the bipartisan spirit that we all talked about at the beginning of the Congress. This legislation is not being considered in a bipartisan manner and, in fact, the way this entire debate has been handled has really created some hard feelings, especially among members of the Senate Finance Committee. Why are we on the floor debating a bill that will affect the lives of millions of Medicare beneficiaries and millions of future beneficiaries without a Finance Committee markup? I do not understand why members of the Finance Committee were completely excluded from the process other than whatever little they can do on the Senate floor. I want to do everything I can to pass a Medicare prescription drug bill into law this year. But it appears that election year politics are more important than passing a well-thought out prescription drug bill. I stand ready to work with my colleagues, like Senator Bob Graham, so that we pass an affordable prescription drug benefit for our Medicare beneficiaries this year. I think he and Senator Miller are trying to the best they can, and I have respect for both of them, but I believe their bill falls far short of the tripartisan bill and has a lot less chance of bringing us together than the tripartisan bill does. I truly believe that we can work something out that will be approved by the Senate before we adjourn in the fall. This is an important issue, too important to politicize so we should stop playing politics, once and for all. Let the Finance Committee do its work so the Senate can pass a Medicare prescription drug bill which can be signed into law this year. I yield the floor. THE PRESIDING OFFICER (Mr. Johnson). The Senator from Hawaii is recognized.

Mr. HATCH. Let me----

Mr. HATCH. For personal property, we have----

Mr. HATCH. I have read it. And you are misrepresenting what is in our bill.

Mr. HATCH. Mr. President, it has everything to do with the Social Security Act, which none of us on the floor, except for Senator Kennedy, I guess, had anything to do with. Now, it is nice to moan and grown about these figures, but he is wrong.

Mr. HATCH. One minute.

Mr. HATCH

Mr. HATCH. Mr. President, I have been listening to the assistant majority leader. I was very interested in his remarks. This President has been in office less than a year and a half. It does seem to me that the problems we have in America are problems for everybody--not one party and not one President. They are problems for all of us. I have to say I think this President is doing everything he possibly can to try to stabilize this economy and get us through these difficulties. Certainly the economy is doing well. We have 3-percent productivity growth, which is better than the whole time between 1980 and 1995. There are a number of other things which show that we have a strong economy. But this underlying illness that afflicts the stock market is hurting everybody. I suspect part of that comes from what has gone on over the last 10 years or so and not just in the last year and a half. There has been a lack of confidence in our business community because of those who have been committing these heinous acts of misrepresentation and fraud in some of these major corporations in America. There have been relatively few. And I see that other corporations are scrupulously going over their books to make sure they are toeing the line in meeting the needs of the American stock market. I suspect we are going to come through this within the next couple of weeks, and when people start to realize that our economy is good and that we are going to come through this, we will be OK. But I think it may be a little unfair to suggest that it is basically all this President's fault or that it is all one party's fault. We all have things we could have done better. We all have some responsibility. I believe our current President is doing an excellent job. As everybody knows, I stood up for the prior President when I thought he was right.

Mr. HATCH

Mr. HATCH. If I may ask, how much longer does the Senator need?

Mr. HATCH. Madam President, I have one simple question.

Mr. HATCH. In the interest of accuracy, I must add a footnote. In the 1990 Supreme Court decision of Lilly v. Medtronic, the Court held in an opinion written by Justice Scalia that the Bolar amendment also applies to some other FDA-regulated industries such as medical devices. While you need to read the opinion for yourself to see how this not-so- obvious result was accomplished, as coauthor of the bill, I did take note of Justice Scalia's observation that: No interpretation we have been able to imagine can transform section 271(e)(1) into an elegant piece of statutory craftsmanship. Mr. President, ouch! But the Medtronic decision has only limited significance and it is still fair to say that the generic drug industry enjoys a head start that virtually no other type of generic manufacturers could even imagine--the ability to make and use on-patent products for commercial purposes. The head start granted to generic drug firms by the Bolar amendment was an integral part of the balance of the 1984 law and must be kept in mind when I next discuss the closely related patent challenge provisions of the bill. But before I discuss these provisions, I want to first emphasize that the central feature of the Hatch-Waxman law thankfully remains unscathed by the pending legislation. This is the policy tradeoff whereby part of the patent term lost by innovator drug firms during the extensive FDA review is restored while, at the same time, generic drug firms were permitted to rely upon the proprietary safety and efficacy data of innovator drug firms and enter the marketplace upon a showing that the generic copy of the drug is delivered to the patient in a bioequivalent manner. And from the summary I have just provided, I think you get the idea that the Drug Price Competition and Patent Term Restoration Act of 1984 law is a complex piece of legislation. It took us 2 solid weeks, 18 hours a day, in my office. I was there every minute of those negotiations to get this negotiated between the PhRMA companies and the generic companies. I will also concede, as Justice Scalia has noted, that the statute does not read like a novel. The 1984 law has been instrumental in delivering both new drugs and more affordable drugs, but this is not to say that such a complex piece of legislation cannot be improved to address unanticipated or unintended consequences as well as changes in the marketplace and science. Before I discuss my views on the pending legislation, the HELP Committee substitute to S. 812, I would like to complete my summary of the Drug Price Competition and Patent Term Restoration Act by describing the patent challenge features of the statute. Perhaps no feature of Waxman-Hatch has generated as much controversy as the provisions relating to patent challenges. These are the least understood and, indeed, least appreciated provisions of the law. The guts of the HELP Committee substitute focus on these provisions. I hope that everyone agrees that patents are critical to the drug development process because absent patent protection it would be relatively easy to copy virtually any drug. The challenge of drug development is not in the chemistry of manufacturing, but in conducting the extensive and expensive preclinical and clinical research that demonstrates safety and efficacy. While patents are integral to drug development, consumers can benefit greatly from earlier price competition if it were determined that, for whatever reason, the underlying patents on a drug were invalid or not infringed. At any rate, during the negotiations over the bill in 1984, a policy question arose regarding how best to guarantee that drug patents would be challenged and what to do in cases in which a challenge was successful. We ultimately decided that a generic firm which successfully attacked the patents on a new drug would receive a period of 180-days of marketing exclusivity during which no other generic competitor could be approved by FDA. The 1984 law contains an elaborate set of rules surrounding patent challenges. Here is how the system works. From my earlier discussion, you will recall that all new chemical entities--even and especially drugs without any patent protection-- receive a 5-year period of marketing exclusivity during which the generic drug firm may not rely upon the safety and efficacy data generated by pioneer drug firms. And keep in mind that there may be no other industry in which generic competitors can rely upon pioneer manufacturers' proprietary information submitted for Federal approval purposes. In any event, the law allows the generic drug firm to submit an abbreviated new drug application after 4 of the 5 year marketing exclusivity period has lapsed. When the generic drug application is submitted, the generic firm has to make one of four certifications with respect to each patent related to the drug listed in the official FDA records called the Orange Book. This chart sets out these choices. First, that such patent information has not been filed. Second, that such patent has expired. Third, the date on which such patent will expire. And fourth, and finally, that such patent is invalid or will not be infringed by the manufacturer's use or sale of the new drug for which the application is submitted. It is the last certification, the so-called paragraph IV certification, that is the chief cause of the major problems the bill pending on the floor seeks to address. As I have said many times over a number of years, by the way, and will say again here today, I acknowledge there are some problems with paragraph IV patent challenges. These need to be corrected. I would like to shape legislation to correct them. But it is also no secret that my preference was to address these problems in the course of a comprehensive review of the Drug Price Competition and Patent Term Restoration Act. In fact, in the good old days when I was still chairman of the Senate Judiciary Committee and my friend from Vermont, Senator Jeffords, was the chairman of the HELP Committee, we were working together to conduct such a review. But times have changed. What should not change is that this body should resist the pile-on mentality which villianizes an industry which is doing more to help millions and millions of Americans daily than any other industry we could imagine. Before I close my remarks today, I will outline the types of issues that ought to be considered a more thorough review of the 1984 law than the pending bill contemplates. In any event, to return to the paragraph IV litigation procedures, the filing of a generic drug application triggers a 45-day period during which the pioneer drug company or firm could initiate a lawsuit to determine whether its patents were valid or infringed. In order to give a court adequate time to familiarize itself with, and hopefully dispose of on the merits, the almost always complex issues attendant to patent litigation, the Waxman-Hatch law provides a statutory 30-month stay. During this 30-month period FDA may not approve the generic drug application in dispute unless a court resolves the matter. It is also true that this is a unique provision not available to other types of patent holders. However, this unique 30-month stay provision that benefits patent holders must be understood in context of the overall system of balances contained in the 1984 law, and, in particular, in connection with the operation of the Bolar amendment. The Bolar provision, you will recall, has the laudable public purpose of trying to get the generic drug product onto the market the very day the patent expires. As I explained earlier, in order to achieve this pro-consumer end, the patent code was amended to allow the generic firms to infringe patents. But we must recognize that the reality of the Bolar amendment is that it takes away the customary rights of a patent holder to bring a patent infringement action the moment a generic drug manufacturer makes or uses a patented product. In this case, the commercial purpose consists of seeking FDA approval and gearing up production. It cannot be disputed that section 271(e) of the patent code--the Bolar amendment-- places pharmaceutical patent holders in a disadvantageous position from which to defend themselves against challenges to its patents by generic drug challengers. This is so because a second prong of the Bolar amendment, codified at section 271(e)(2) of the patent code, treats the somewhat artificial act of filing a generic drug application as an act of patent infringement, and it is at that point, and not before that point, that the patent holders can assert their normal patent rights through the courts. It seems only fair to recognize the unique head start that the Bolar amendment allows to generic firms on the front end of the generic drug development by making available to pioneer firm patent holders the 30- month stay that allows the courts adequate time to delve into the merits of the challenged patents. Absent the Bolar amendment--and don't forget that this provision reversed the Federal Circuit Court of Appeals decision that decided against generic drug firms on the matter of patent infringement--the case for the 30-month stay would not be as strong. In any event, during the course of the 30-month stay, it is hoped that an adjudication on the merits of the patent challenge will be completed. If at the end of the litigation the pioneer firm prevails, the generic drug applicant must wait until the patents expire before the FDA can approve its application and the generic product can be marketed. On the other hand, if the courts determine that the patents are invalid or the generic drug firm has successfully invented a way around the patents, the 1984 law grants an award of 180-days of marketing exclusivity. As I said earlier, this is to encourage vigorous patent challenges so that consumers can benefit from earlier access to cost-saving generic drugs. I thought then, and think now, that it is sound public policy to contain an incentive to assure legal attacks on pioneer drug patents, and we all must recognize that such litigation is risky, complex, time- consuming, and costly. Now that I have laid a foundation by discussing the basic provisions and policies of the Drug Price Competition and Patent Term Restoration Act, I want to add to the debate that was initiated yesterday by briefly describing the key problems that have been observed in recent years with respect to the 1984 law. I first remind the Senate that in the next few weeks the Federal Trade Commission is expected to issue a comprehensive report that centers on what many believe are the two most important abuses of the current system: First, the manipulation of the patent system for the purpose of triggering multiple overlapping or late-in-the-process 30- month stays; and, second, collusive arrangements between pioneer and generic firms to game the Paragraph IV litigation in order to preclude the triggering of the 180-day marketing exclusivity clock so that no generic can reach the market in a timely fashion. I am frustrated by the fact that the tactical choices of my colleagues across the aisle preclude us from debating this important legislation without the benefit of the FTC report. I await with great interest the final version of the forthcoming comprehensive FTC report on the drug industry so we may get a more accurate picture of the number of instances in which drug firms have tried to game the system by listing a late-issued patents into the FDA Orange Book. While my staff and the staffs of a few other Members have been briefed on the general findings of the FTC study, it was under the condition of confidentiality and with the understanding that the commissioners had not evaluated the data and given us their interpretations, conclusions, and recommendations. Along the same lines, I would like to add that the FDA Chief Counsel, Dan Troy, convened a meeting in February of representatives of both the generic and pioneer drug firms. Mr. Troy elicited information and debate on several maters, including a full and frank discussion of both the 30-month stay and the 180-day marketing exclusivity provisions of the 1984 law. One of the many down sides of rushing this bill to the floor in this fashion was that it precluded members of several committees, including the Judiciary Committee, Commerce Committee, as well as HELP Committee, from first reviewing the comprehensive FTC study on the very issues that the pending legislation seeks to address. We may have also missed out on a meaningful opportunity to have the usual give and take of a public hearing with the FTC and the FDA on these issues. We could have--and should have--taken the more routine and orderly path to legislation by holding a hearing to solicit the administration's detailed advice in crafting language, including soliciting their views on the language that arose just last Tuesday in the HELP Committee. Yesterday, Senator Gregg read from the first, but no doubt not the last, missive from the administration commenting on this new language. In any event, let me turn to the 30-month stay provision. It is my understanding that the FTC report will reveal that there have been several--perhaps about 10--cases of either multiple, consecutive 30- month stays or later-issued patents that resulted in surprise 30-month stays. The facts matter. We need to learn about these cases. We also have to keep matters in perspective. Although some in this debate suggest that there has been, and will continue to be, an epidemic of unjustified triggering of the 30-month stay, I am not sure that the evidence will support this charge. We must take care not to overcorrect any problems based on anecdotal information. But I will say this: the now famous case of the drug Buspar convinces me and many others that Congress should take action to address the problems associated with late-issued patents triggering new 30-month stays. This was the case in which a patent on the metabolite of a drug was listed in the Orange Book just as the original patents on the drug were set to expire and generic were literally on the loading dock ready to be shipped. I do, however, want to note for the record that in the case of Buspar the courts stepped in and the stay lasted only 4 months, not 30-months. The HELP Committee bill would freeze those patents eligible for the 30-month stay to those patents filed with FDA within 30-days of approval of the New Drug Application. All other subsequently issued patents would be eligible for injunctive relief but would not be entitled to the longstanding protection afforded by the 30-month stay. First, I commend Senators Edwards and Collins for overturning the McCain-Schumer language that completely--and unjustifiably--eliminated the 30-month stay. The Edwards-Collins amendment also is a great improvement over the language that Chairman Kennedy circulated in the days before the markup. The Kennedy language would have arbitrarily limited the types of patents eligible for the 30-month stay to drug substance patents and method of use patents. By treating some patents as inferior to others, the Kennedy draft would have reversed a longstanding principle of Hatch-Waxman not to discriminate among types of patents. The very purpose of the 30-month stay is to give the courts an adequate period of time to make an informed analysis of the complete patent portfolio surrounding a drug product. The 30-month stay allows the time necessary to make fact-based determinations of the validity of the challenged patents as well as to determine if the generic challenger has successfully navigated the field of valid patents and produced a non-infringing version of the drug. I know that Senator Gregg was working on a language that would have retained the 30-month stay for each patent recorded in the Orange Book prior to a generic drug challenger filed a marketing application with the FDA. I think that there is great merit in this approach. The Hatch-Waxman law does not even allow generic drug applicants to file a generic drug application until four full years have elapsed after the NDA has been approved for a new chemical entity. That is because, as I stated earlier, under the 1984 law, drugs consisting of new chemical entities--and these are likely to be the breakthrough products--automatically receive five years of marketing exclusivity before FDA can approve a generic copy of the drug. It seems reasonable to conclude that, at a minimum, all patents filed before a generic can first challenge a pioneer drug, that is, after four years have elapsed, should be accorded the protection of the 30-month rule. For example, consider the hypothetical but not unrealistic case of an approved intravenous drug covered by pre-NDA issued patents on the compound and the method of use. In addition, assume the drug sponsor has applied for, but does not receive, a patent on the intravenous formulation until two years after the NDA is approved. While the Edwards-Collins language is barely one week old and I am still studying its implications, upon first consideration, I find it difficult to justify treating the post-NDA-issued formulation patent differently than the earlier two patents. After all, a generic challenger--although free to infringe the patent under the Bolar amendment for the purpose of providing bioequivalence data and to prepare for full-scale production--cannot even contest any of the three patents for 2 years after the third patent issues. That is because the filing of the generic drug application creates the artificial act of patent infringement required by the Bolar amendment that allows the Paragraph IV litigation to commence. I emphasize the fact that the lawsuit may not begin at least until the four year statutory bar on submitting a generic drug application expires. And if it makes sense to include all patents issued within the first four years during which no ANDA application and Paragraph IV challenge can be made, one can argue, as Senator Gregg has, and I suggested in my testimony before the HELP Committee in May, that it makes sense to freeze the patents listed in the Orange Book for the purpose of the 30- month stay on the day that any particular ANDA is submitted, whether or not it is filed on the first day of ANDA filing eligibility, or years later. The McCain-Schumer proposal to do away with the 30-month stay altogether is dead. The Kennedy proposal to allow only some types of patents to qualify for the 30-month stay is dead. Perhaps the governing principle should be one bite, and one bite only, of the 30-month apple and all we are debating is when, not whether, to cut off the availability of the stay. As I said last night, in some respects the Edwards-Collins language is a step in the right direction and this is one of those improvements. We know that it currently takes, on average, about 18 months for FDA to complete its review of generic drug applications. I understand that it takes, on average, about two years to reach a district court decision in Paragraph IV patent challenge case. We also know that the generic have argued--and the Edwards-Collins amendment embraces--that it would be unfair to start the 180-marketing exclusivity clock--a matter that I will discuss latter in my remarks--until a final decision has been reached by an appellate court. This appellate review takes about another year, so the total litigation period of Paragraph IV cases is about 36 months. I can understand why generic Paragraph IV challengers want to wait-- the prospects of treble damages seems to me like a good reason for them to exercise caution--until an appellate court decides the merits of the patent challenge. Given the risk adverse behavior engendered by the threat of treble damages, I don't see why it is so absolutely critical in the first place to bifurcate the application of the 30-month rule at the time a new drug application is approved. Perhaps the FTC study will unveil a pattern of cases in which courts have ultimately determined that frivolous, or at least invalid, patents were filed between the approval of the NDA and the first ANDA submissions. Perhaps not, only time will tell. But frankly, this is an area where the actual data that presumably will be forthcoming in the FTC study will be extremely helpful. I will be greatly interested to know how the patent challenge cases would have broken down if the Edwards-Collins NDA-plus 30 day rule were applied retroactively. Stated another way, are there any significant differences in the outcome Paragraph IV challenge litigation between Orange Book patents listed before, and those patents listed after, 30- days after the NDA has been issued? It will be beneficial to get a sense on whether there is a pattern with respect to when invalid patents and patents that have been circumnavigated tend to be listed. And as I said earlier, I think we would have all been better served if the Committees of jurisdiction had been afforded the opportunity to conduct hearings with the purpose of analyzing the actual language of the Edwards-Collins Substitute and with the hindsight provided by the FTC report, together with the expert advice and analysis of the FTC, other federal agencies, and other experts and interested parties. We should all recognize that patent litigation is often, as in the case of pharmaceutical patents, inherently technical and complex. For example, The Legal Times recently reported that the Federal Circuit has a reversal rate of 40 percent in certain patent cases. I am concerned that to the extent we adopt a policy that relies too heavily on simply throwing the matter of injunctive relief to federal district courts absent a period to allow the court to sufficiently familiarize itself with the issues at hand not only disrupts a justified internal check and balance of Waxman-Hatch, but also may have the effect of creating uncertainty as the district courts wrestle with arcane matters of patent law. While I can see how some enterprising generic firms and their attorneys might be able to turn this new and potentially unpredictable environment into leverage for settling patent challenges, I am not sure that this instability is either fair to pioneer drug firms or in the long run interests of the American public. For now, I will listen carefully to the debate on this matter but, from what I now know, I am inclined to conclude that the Gregg proposal is preferable to the NDA-plus 30-day standard contained in the HELP- reported version of S. 812. Moreover, as I stated earlier, I think a case can be made for making the 30-month stay available to all patents listed within four years after the NDA has been approved since no patent litigation can commence under the 1984 law until that time. In short, while I am open to further debate and discussion on the matter, at this point I question whether the Edwards-Collins language unnecessarily cuts off the 30-month stay too early in the process? I welcome the understandable and justified attempt to address the problem of late or even multiple 30-month stays that can occur when later-issued patents are entered into the Orange Book. As I said in my testimony in May, if there is a compelling case to keep the current policy of universal availability of the 30-month stay for all patent whenever listed, let's hear the arguments. Once again, let me commend Senators Edwards and Collins for moving the Committee away from the these negative aspects of the McCain- Schumer and Kennedy proposals. I am pleased that there appears to be something of a consensus on the importance of retaining the 30-month stay even though, for the reasons I have just described, I think we need further discussion of when the stay should be available and when it should not be operative. Having addressed the general issue of the wisdom of retaining the 30- month stay, I would be remiss if I did not comment upon some aspects of the Edwards-Collins substitute that would also drastically affect patent litigation under the 1984 Waxman-Hatch law. Mr. President, I speak now of the what I will call the file-it-or- lose-it and sue-on-it-or-lose-it provisions of the HELP Committee Substitute. Mr. President this is a case of the HELP Committee trying to rewrite patent law and doing an absolutely horrible job at it to boot. There are three very similar and very disturbing provisions that essentially say a pharmaceutical patent holder can effectively forfeit their rights by not filing patent information or a patent infringement action at a certain time. The first of these provisions is found in Section 3 (a)(1) ``(2)(F)'' of the bill. This provision requires manufacturers of innovative new drugs to file certain patent-related information in the FDA Orange Book upon penalty of--and here's the rub--forfeiture of their patent enforcement rights. A second provision of the bill, contained in Section 3(a)(2)(B) of the bill makes this filing requirement applicable to drugs approved prior to enactment of S. 812. This provision says, in effect, that upon enactment of S. 812, every holder of a pre-enactment approved new drug application has 30 days to file all specified patent-related information in the FDA Orange Book or lose forever their rights to sue for patent infringement. Talk about Draconian remedies for failing to file information with the government. This takes the cake! I should also point out that section (a)(1) ``(2)(C)'' of the bill significantly expands the type of patent information that must be filed, including requiring very precise claim by claim certifications of what each particular patent covers. I am concerned about the policy and potential effects of this language. Given that forfeiture of patent rights is the penalty for the two file-it-or-lose-it provisions I just described, you should not be surprised to learn that the patent right forfeiture trifecta is completed in section 4(a)(2)(C) which contains a sue-on-it-or lose-it provision that appears to say that failure to defend against any Paragraph IV challenge waives your patent rights against all challengers for all time. I was relieved to hear Senator Kennedy state on the floor yesterday that this last provision was not intended to require forfeiture of patent rights as against all potential infringers. I take him at his word that this language will be clarified. But, once again, I must ask why we find ourselves on the floor with a poorly drafted patent provision that has not been vetted by the Judiciary Committee, the PTO, the White House or the patent bar or any number of other experts? Nevertheless, I find these three provisions so troubling I hardly know where to start my criticism. Under the current law, failure to defend against a Paragraph IV challenge does not result in automatic forfeiture of patent rights. Mr. President, my colleagues should know that under current law the penalty for not promptly defending against a Paragraph IV litigation challenge is waiver of the 30-month stay, not forfeiture of any patent rights. It seems to me that the current law waiver of the 30-month stay against the particular litigant bringing a particular paragraph IV challenge is a proportionate response to the failure to defend against a particular lawsuit. I think that both of the two file-it-or-lose-it provisions and the sue-on-it-or-lose provision simply go too far. I am not aware of any analogous provision in title 35, or in case law, but I am the first to admit that because this language is only a week old my study is not complete. I must question embracing the principle that if a patent holder, for whatever reason, fails to file information with the FDA that those rights should be automatically surrendered against any would-be patent infringers. It seems to me that these provisions should be subjected to careful scrutiny under the takings clause before they are adopted. As well, the disadvantageous treatment accorded pharmaceutical patents under these three positions should be examined from the perspective of the TRIPS provisions of the GATT Treaty. That involves the Finance Committee as well. We must not lose sight of the fact that patents are presumptively valid. We must not lose sight of the fact that the reason we have laws to protect intellectual property is because society benefits from advances in the arts and sciences, as the Constitution asserts. If we expect to have breakthrough medicines, we better protect patents. Why would we ever support a system in which the failure of a mail room clerk, even if underpaid and overworked, or the U.S. Postal Service could result in the forfeiture of rights stemming from literally hundreds of millions of dollars and precious human capital invested in cutting edge biomedical research? Just this week, because of the anthrax problem, I received some Christmas presents. One can imagine what can happen on some of these patent cases. Why shouldn't pharmaceutical product patent owners retain the same time-honored rights exercised by all other patent owners to decide how and when to respond to patent challenge litigation? Mr. President, I must tell my friends on the HELP Committee that this member of the Judiciary Committee--the committee charged with overseeing the patent law, antitrust law, and the administration of civil justice--that I do not support the manner in which they have resolved significant matters of patent law, civil justice and antitrust policy. In fact, when Judiciary Committee Chairman Leahy and I were negotiating over the provisions of his bill, S. 754, the Drug Competition Act, at one point a Leahy staff draft contained a provision in some ways similar to the pending bill's file-it-or-lose-it and sue- on-it-or-lose-it provisions. Ultimately, that approach was rejected. And for good reason. As many of my colleagues know, S. 754 requires the prompt reporting of any potentially anticompetitive agreements between brand name and generic drug firms to DOJ and FTC. Basically, the Leahy staff proposal--I cannot say whether Chairman Leahy was aware of all of the details of this particular provision--was that a drug company would surrender its patent rights if it did not promptly report to FTC and DOJ any potentially anticompetitive agreement with a generic drug firm. Let me read the Leahy staff draft that was circulated to my staff last July. It was contained in the enforcement section of the bill, and it said: Contract and Patent Enforceability--if any person, or any officer, director, partner, agent, or employee thereof, fails to comply with the notification requirement under section 5 of this Act, such failure shall render permanently unenforceable any agree which was not filed with the Commission--[referring to the FTC] and the Attorney General, and [here comes the relevant language] shall also render permanently unenforceable any patent of the generic drug manufacturer or the brand name drug manufacturer that is the subject of the agreement. I must give Senator Leahy's staff a great deal of credit. One of them is Ed Barron, the deputy chief counsel of the Judiciary Committee Democratic staff. Ed is a level-headed, gifted lawyer and has been an asset to the Senate and the Judiciary Committee for many years. As well, Susan Davies, a former Supreme Court clerk, is an extremely talented lawyer. When they consulted with experts in the field and further studied the matter, they properly concluded that patent forfeiture was an improper response for a mere reporting failure--even if that unreported agreement was ultimately found to be violative of the Federal antitrust laws. How does a patent law provision with civil justice reform implications aimed at an antitrust problem find its way in three places in a HELP Committee-reported bill, one year after the chairman and ranking Republican member of the Judiciary Committee considered and rejected the same basic policy in a bill that covers the same concerns as the pending legislation? Mr. President, I am afraid that yet another casualty of the truncated process observed by the HELP Committee in its consideration of S. 812 can be seen in the last minute inclusion of the ``file-it-or-lose-it'' and ``sue-on-it-or-lose-it'' provisions of the pending bill. But this is exactly the kind of negative outcome that can occur when there is a markup on a Wednesday and untested language appears the day before. The truth of the matter is that is exactly what took place last week in the HELP Committee. While I have commended Senators Edwards and Collins for rejecting the key provisions of the McCain-Schumer bill, in the case of the ``file- it-or-lose-it'' and the ``sue-on-it-or lose-it'' provisions, I must commend Senator McCain and Senator Schumer for not including such troublesome language in the first place. I urge all of my colleagues to think carefully about the precedent this body would be setting for patent and copyright owners if we follow the lead of the HELP Committee and retain this language. At a minimum, I hope the Judiciary Committee will have a chance to hold a hearing on this novel language. If the press of election year politics precludes the Senate Judiciary Committee from holding such a hearing, I would hope that the House Judiciary Committee will step up to the plate and fully vet this issue. We need to hear from PTO and the patent bar on this issue. We need to hear from the American Intellectual Property Law Association and the intellectual property groups on this issue. This matter is far too important to be brushed aside in the rush of the HELP Committee to report a virtually complete substitute to S. 812--a substitute that suddenly springs forward last Tuesday, a day before the markup--a substitute that is then hastily plucked off the Senate calendar before, I believe, a committee report is even filed, and then rockets its way onto the floor as a straw man for the Medicare prescription drug debate. I am dubious of the language in the bill that creates, I am told, perhaps for the first time in the Federal Food, Drug, and Cosmetic Act, a private right of action. I am speaking of the provision in the Section 3(a) ``(2)(E)'' of the bill that creates what appears to be a new cause of action to attack patent listings. Aside from setting an unwelcome foothold for trial lawyers to reach into the FDC Act, one must wonder how a provision that seems to create a parallel course of litigation to the well-established Paragraph IV patent contests simplifies or adds any measure of certainty to the patent challenge system? As the debate unfolds, I may have more to say on this matter and urge my colleagues to act to strike this language. The last major area on which I wish to comment with respect to the pending legislation relates to the collusive agreements that have occurred in connection with the 180-day marketing exclusivity incentive of the 1984 law. Mr. President, in closing, I have just discussed why I believe the pending bill's treatment of the 30-month stay is an improvement over the McCain-Schumer bill. For the reasons I have just discussed, I think the NDA plus 30-day rule goes too far. I come here today to give you my views on the 30-month stay issue and to see how the sponsors of the pending legislation respond to my arguments. If they say this is a nonnegotiable matter, that is one thing. If they are willing to modify the language, I will be willing to work with them on this. I would like to hear from them on this issue. I have a number of other issues I will raise, but I want first to see whether there is a willingness to work with me in correcting what I consider to be inflexible language and to work with me in providing the flexibility to work on the 30-month stay, the file-it-or-lose-it or the sue-on-it-or-lose-it provisions, and the private right of action. I have worked on many occasions with the Senator from Massachusetts. I have worked against him. I have worked with him. I know sometimes he adopts the no amendment strategy. The minute we yield the floor, I am raising the question of whether the sponsors are totally locked in on the language, and then I would like to hear what they have to say about the arguments I have made. This is too important an issue to play politics. We are talking about the health of the American public. I am willing to work to improve the bill. The language has improved as it has moved further away from the original Schumer-McCain language, but for the reasons I have described I think the language still needs some work. I have a lot more to say, but I will end by rereading first an administration policy from the Executive Office of the President and then rereading a paragraph from this book. In the Statement of Administration Policy, it says: However, the administration opposes S. 812 in its current form because it will not provide lower drug prices. S. 812 would unnecessarily encourage litigation around the initial approval of new drugs and would complicate the process of filing and protecting patents on new drugs. The resulting higher costs and delays in making new drugs available will reduce access to new breakthrough drugs. Moreover, this new cause of action is not necessary to address patent process abuses. Clearly, the bill would benefit from consideration by the Senate's experts on Hatch-Waxman law on the Judiciary Committee, the proper committee of jurisdiction for this bill. Let me finally conclude where I began, and that was the book written by Haynes Johnson and David Broder, highly respected journalists, certainly not conservative journalists but journalists I respect, and they said this on page 90: In the campaign period, Fried recalled, Clinton's political advisers focused mainly on the message that for ``the plain folks, it's greed--greedy hospitals, greedy doctors, greedy insurance companies. It was an us-versus-them issue, which Clinton was extremely good at exploiting.'' Clinton's political consultants--Carville, Begala, Grunwald, Greenberg--all thought ``there had to be villains.'' Anne Wexler remembered-- Who is one of the leading Democrats in this town, one of the leading lobbyists in this town. I respect her greatly. She said-- It was a very alarming prospect for those of us looking long term at how to deal with this issue. But at that point, the insurance companies and the pharmaceutical companies became the enemy. All I ask in this debate is that we get rid of some of this rhetoric that the large pharmaceutical companies are a bunch of criminals and bad people who have run up the costs of drugs and who really do not play much of an important role in our society, and who literally are the reason we cannot get low-cost, affordable drugs to the American people. During those 18 days or so, whatever it was, that we debated in my office and came up with the Hatch-Waxman Act, we had almost fist fights between the PhRMA companies, the pioneering companies, and the generic companies, but in the end we were able to bring them together. Neither side was totally happy, but I believe both sides have been totally happy with the Hatch-Waxman results over the last 18 years. To be honest, before we change something that has been so doggone effective and efficacious, I might add, to use an FDA term, it seems to me we ought to at least make sure we are doing it the right way. I have a lot more to say, but I have spoken for a long time. I understand that. I apologize to my colleagues, but I will be back to discuss other issues such as the 180-day rule which is at the center of what are considered to be collusive deals between the generics and the pharmaceutical firms. To me, these issues are important. I want to apologize to my colleagues for going on so long, but this is a very complex bill. There is no way it can be explained in a matter of a few minutes. I have only covered a small part of it, but I have covered some very important parts, and I think, and I hope, my colleagues will realize I have made a case that they really ought to give consideration to. I do not have any political axes to grind. I like both sides of this business. I like the pharmaceutical companies that have done so much to come up with lifesaving drugs, and I love the generic firms that have done so much to duplicate those drugs at an almost nonexistent cost, compared to the $800 million to create those products, but that have gotten them out there in bioequivalent ways for the benefit of the American people. They both deserve a great deal of credit. Neither one of them deserves to be torn down in the Senate. I think we can fix Hatch-Waxman in ways that will continue to give both of them the incentives to continue to provide a pipeline of very wonderful drugs, lifesaving drugs, for us, and at affordable prices ultimately. I hope my colleagues will listen to what I have to say. I do not have any desire to malign anybody, but I really believe what I have had to say today is important and that Hatch-Waxman is an important bill. I do not want to see it fouled up because we are unwilling to pay the price to do it right. I yield the floor.

Mr. HATCH. Madam President, I rise to speak on the pending legislation, S. 812, the Greater Access to Pharmaceuticals Act. I did not realize the pioneer companies that have been referred to as PhRMA are as satanic as they have been represented to be on the floor today. One would think they are everything that is bad in this world and that they are the cause of all the high costs of drugs in our society; that they are not being fair to the generic companies that help bring drug prices down; that HMOs are the reason drug prices come down and that the States do not have the same type of market power. I heard all these things. I heard how terrible the research-based companies are. My goodness, I have never known that before. I am so happy to get this information. I would like to cite a book called ``The System.'' This book was written by Haynes Johnson and David S. Broder, hardly a conservative set of authors, but very intelligent, and highly respected journalists and authors. The book is an excellent account of the infamous and failed Clinton health care plan. History has a way of repeating itself. You can hear a theme on the floor over the last several days that comes right out of the Clinton play book. On page 90 of that book, it says, in speaking about the political tactics to garner public support, a group of the President's political advisers have the following discussion, which sounds familiar to the way the debate is going on the floor of the Senate and elsewhere: In the campaign period, Fried recalled, Clinton's political advisers focused mainly on the message that for ``the plain folks, it's greed--greedy hospitals, greedy doctors, greedy insurance companies. It was an us-versus-them issue, which Clinton was extremely good at exploiting. That was Fried. Then they go on further, and I quote from the Broder and Johnson book: Clinton's political consultants--Carville, Begala, Grunwald, Greenberg--all thought ``there had to be villains.'' Anne Wexler---- Who, of course, is not known for her Republican politics---- remembered, It was a very alarming prospect for those of us looking long term at how to deal with this issue. But at that point, the insurance companies and the pharmaceutical companies became the enemy. All this sounds familiar. That is what has been going on here on the floor. Frankly, I do not think it is right. My experience has been there is no one single group who should be blamed for the high costs of pharmaceuticals. I do not want to blame the FDA because it takes up to 15 years and 5,000 different compound experimentations to get an approval of a drug and at a cost, according to some of the top authorities, of up to $800 million. That is 15 years out of the patent life. Frankly, one wonders why, with the few remaining years they have on patent life, drugs cost so much. I am not going to blame the FDA because their job is to protect Americans, but on the other hand, that is a long time, and I may talk a little bit about that today. I am not going to blame the generic companies. They provide a tremendous amount of support for American people who need help. I believe in the generic industry. By and large, those companies are doing a great service, as we intended in the Hatch-Waxman bill. By the way, without the pharmaceutical companies, the pioneer companies, there would not be any drugs for the generic companies to copy and reduce prices. So there has to be a delicate balance between the two, and that is what Hatch-Waxman is all about. This underlying bill, of course, which for some reason is being debated before the Federal Trade Commission comes out with its comprehensive study and recommendations on the very issues addressed in the pending bill, which should occur before the end of next month--will change one of the most important consumer bills in history. I am not concerned just because it is my bill and Congressman Waxman's bill, but because without waiting for the FTC to give its recommendations, this underlying bill will change the Hatch-Waxman law before we have had a chance to hear from the FTC, FDA, other experts and interested parties. I do not think it is right to change the law until we have all the facts and understand better what this bill will do. Hatch-Waxman, according to almost all authorities, has saved consumers $8 billion to $10 billion every year since 1984. It created the modern generic drug industry, but it also strengthened the PhRMA companies, the pioneer companies. Back then, they were spending about $3 billion a year on research and development. Today, it is over $30 billion a year. I think almost as satanic as they are portrayed on the floor by our friends on the other side, it seems to me they ought to be given a little bit of credit for some of the major therapeutical pharmaceuticals we have today. Without them, we would not be where we are. We would not be the leaders in the world with pharmaceuticals, nor would we have the balance of trade surplus we get from the sale of American pharmaceuticals. Let me comment on three aspects of the underlying legislation: Politics surrounding floor consideration; the process by which the bill moved to the floor; and finally, the substance of this bill. At the outset of this debate, I congratulate and commend the original cosponsors of this legislation, our colleague from New York, my friend, Senator Schumer, and my colleague from Arizona, my friend, Senator McCain. Even though I disagree with them on the way they resolved the key issues addressed in S. 812, and although the bill that emerged from the HELP Committee does not adhere to the original Schumer-McCain language in virtually every key policy area, they deserve recognition for their effort in highlighting issues, issues that are of concern to each of us to in this body: Access to prescription drug coverage and affordable prescription drug coverage. As most of my colleagues know, I have a special interest in today's pending legislation. Throughout my career in the Senate, I have helped fashion a portfolio of legislation that facilitates our Nation's pharmaceutical research and development capacity. I am proud to have played a leadership role in crafting the law that the bill we are considering seeks to amend, the Drug Price Competition and Patent Term Restoration Act of 1984, known as the Hatch-Waxman bill. A key partner in this effort was my good friend from the House, Henry Waxman. That a liberal member like Mr. Waxman and a conservative like Orrin Hatch got together to write this law is but one sign of the bipartisan consensus that developed with respect to the 1984 law and that should be developed today. Incidentally, on the House side of the Capitol, this law is often referred to as Waxman-Hatch and in the Senate the names are often reversed. This shorthand is only used because it is so time consuming to keep repeating the Drug Price Competition and Patent Term Restoration Act of 1984. I have a lot of complaints about the process we followed to bring S. 812 to the floor, and despite my grave dissatisfaction over the process, I do want to recognize the efforts of Senators Edwards, Collins, Kennedy, Gregg, and Frist to make improvements to the substance of the bill. To be fair, there have been improvements in some critical areas of the legislation. As a general matter, in moving away from some key provisions of McCain-Schumer, the HELP Committee substitute is headed in the right direction. Now, I hasten to add, though, that some new provisions were added to the bill during the markup process to make it impossible for me to support a bill that is so important to me--a bill that amends the law carrying my name, a law that has been shown to benefit millions of Americans every day. Let me talk about the politics and process. Before I discuss the merits of the committee substitute for S. 812, I want to make a few comments concerning the politics and process whereby we find ourselves discussing these issues at this time. One of the things about which I am most apprehensive in the current debate is the way the Drug Price Competition and Patent Term Restoration Act of 1984, a painstakingly crafted bill that passed with overwhelming bipartisan support in both the Senate and the House, now finds itself at ground zero in one of the most controversial and potentially divisive issues of this year, that is the debate over the Medicare drug benefit. The Medicare drug benefit is certainly an issue that deserves the Senate's attention, and I am in one of the original tripartisan groups that I believe has come up with a nonpartisan bill that would solve the drug benefit problems for the American people, especially the poor. I commend our colleagues in the House for successfully passing a prescription drug bill that promises to make a major expansion of Medicare benefits by providing an outpatient drug benefit. I think it is now time for the Senate to debate this issue, pass a bill, conference with the House, and present a bill for the President to sign into law. I am also, like I say, proud to be the cosponsor of the so- called tripartisan Medicare prescription drug benefit bill. I think Senators Breaux, Jeffords, Grassley, Snowe, and I have put together a strong bill that our colleagues should, and I think will in the end, support. I had hoped the tripartisan bill could have been the subject of a Finance Committee markup, as it deserved. I think it would be approved by the Finance Committee, which more than likely explains why we are on the floor today with S. 812. So as we enter this debate, let us be clear that the way the Senate Democratic leadership has chosen to structure the floor vehicle, it is very possible the partisan fervor that often accompanies Medicare legislation will spill over into the heretofore bipartisan consensus surrounding the 1984 Waxman-Hatch law. I hope not. One of the things we did back in the 98th Congress in 1983 and 1984 was to take the time and effort to build a broad, bipartisan coalition for the Hatch-Waxman law. I hate to see us lose support as this body becomes caught up in the unavoidable election year politics of Medicare. Frankly, it is almost amusing how the Democratic leadership has structured the debate on the Medicare drug benefit. A bill that involves hundreds of billions of dollars and over a trillion dollars in some of the proposals will be debated as an amendment to the more modestly sized S. 812. Talk about the tail wagging the dog. I hope if, as is well possible, we cannot achieve consensus on the Medicare drug debate, the inevitable ill feelings and political posturing do not create a poisonous atmosphere in which the broken tail of Medicare crushes the dog of Hatch-Waxman. Conventional wisdom has it that a large part of what is at stake in the legislation we will debate over the next number of days has to do with jockeying for political positioning over who is left holding the bag with the voters in the fall if we fail to enact a Medicare drug benefit before the November elections. That is why I hasten to add that I hope my colleagues will look at the tripartisan bill, which is nonpartisan, which basically can solve these problems for especially the poor in our society with regard to drug benefits and the cost of drugs. I firmly believe the best thing the Senate can do for the American public is to lay aside, as best we can, the political infighting and genuinely try to strike an acceptable compromise on the Medicare drug bill. Make no mistake about the fact that although S. 812 may be nominally the pending business before the Senate, the real matter we will be debating is the Medicare drug benefit. I would have greatly preferred to debate Hatch-Waxman amendments as a stand-alone bill in a less charged atmosphere. If we had to debate amending Hatch-Waxman with other legislation, probably my last choice would have been to lump it together with the politically volatile Medicare drug bill. Then we have the ill-advised drug reimportation bill, which has been added as an amendment to S. 812. This would have been my second to last choice to add to Hatch-Waxman. I laid out yesterday my concerns with that proposal. Suffice it to say, the reimportation language was a bad idea in the year 2000, and it is an even worse idea today, given the threats of our post-September 11 world. While the regrettable encore appearance of this feel-good but ultimately downright dangerous drug reimportation legislation is deeply troubling to me, it is doubly troubling to me that it will now be linked to the 1984 Hatch-Waxman law because of the way the majority has chosen to proceed. I recognize part of the reality of being on the minority side of the aisle is that we have to go with the flow as the majority leader calls up legislation that he desires or his side desires, and I understand that. As a coauthor of the legislation that S. 812 seeks to amend, I take exception to calling up a bill that opens up Hatch-Waxman in order to create a legislative vehicle that promises to throw into play every conceivable way to punish one of the great American success stories in innovation and in the pharmaceutical industry. This, ``everything but the kitchen sink,'' mentality, may be satisfying to some politically. But mark my words, it starts this body down a path that ultimately can only punish the American health care system. In my experience, delicate provisions and nuances of patent law, antitrust law, and FDA regulatory law are generally not best crafted in the elbows-flying, raw meat atmosphere of high-stakes election year politics such as we will have during the course of this debate, in addition to what I consider to be an unfavorable environment that will be created by the likely flood of major amendments not relevant to S. 812 or the underlying Waxman-Hatch law. I must also raise objection to the manner in which the bill so hastily was reported from the HELP Committee. Frankly, I am deeply disappointed in the way the HELP Committee has acted, although I guess we should not be altogether surprised given the perceived political advantages my friends across the aisle believe they have and that they have gained by calling up S. 812 as the backdrop--or should I say backstop--to debate pharmaceutical issues. It is true that S. 812 was referred to the HELP Committee. It is true that the committee held a hearing on this bill on May 8. I testified at that hearing. I stated my reservations about the way the McCain-Schumer legislation acts to distort the original premise of the Drug Price Competition and Patent Term Restoration Act of 1984. While I am heartened by the fact that the HELP Committee version of S. 812 that is pending before the Senate today resembles more closely the perspective of my testimony than the original Schumer-McCain language, I am troubled by the fact that we basically have a bill emanating from the HELP Committee that centers on patent law, civil justice reform, and antitrust policy. I object to this outcome, and I want to take a few moments to comment that the way the Judiciary Committee was effectively cut out of the process is a matter of great concern to me. Even if three members of the Judiciary Committee serve on the HELP Committee and are highly involved in this effort, I am concerned that the recent actions of the HELP Committee with respect to this bill will come at the expense of the jurisdiction of the Judiciary Committee both today and into the future. This is wrong. The Judiciary Committee has a role to play in overseeing and legislating with respect to pharmaceutical patents and competition in the pharmaceutical marketplace. The process and timing that are being pursued can only undermine the appropriate role of the Judiciary Committee, a balanced committee. The fact is, last year we held a hearing on competition in the pharmaceutical marketplace and reported Chairman Leahy's bill, S. 754, the Drug Competition Act, which I support. I cooperated with Senator Leahy in the development and refinement of his bill, S. 754, the Drug Competition Act. I voted to report the bill out of committee even though I had some reservations about some of the language, and I remain prepared to work on those concerns. The fact is, the HELP Committee bill contains patent forfeiture provisions, similar in many respects to the concept once under discussion as Chairman Leahy and I worked to refine S. 754. I ask why the HELP Committee adopts a policy of patent forfeiture not on the outside of its jurisdiction but already rejected by members of the Judiciary Committee. I emphasize that this is not a matter of public health policy but a patent law and civil justice reform, and so is within the province of the Judiciary Committee, not the HELP Committee. I am mindful of the fact it was referred to the HELP Committee, but this body has a history of committees working in tandem on issues of mutual interest. In 1998, although the tobacco bill was referred to the Commerce Committee, the Judiciary Committee held 10 hearings on aspects of the legislation that touched upon our jurisdiction. We all know the long-awaited FTC study of the pharmaceutical industry that focuses precisely on the provisions of the law that the HELP Committee seeks to change today will be completed in a few short weeks. Why not wait for that? Why not get the best advice of the Federal Trade Commission? They have done an extensive review. Whether we agree or disagree with the final outcome of that, we at least ought to get it before we try to wholesale change the law that has been called the best consumer piece of legislation in the last 50 years. It is clear, to me, that consideration of this legislation would be more informed if we had the information that is about to be presented by the FTC to Congress and the public. We should ask the experts at FTC, DOJ, the Patent and Trademark Office, and Health and Human Services if their perspectives on the changes in the law are advisable. It would have been preferable to hear what the experts think of the HELP Committee language before it was brought to the floor. Whatever happened to holding a hearing on the actual language of an important bill? The reality is, in the course of the markup, the HELP Committee virtually rewrote the major components of S. 812. Unfortunately, this sprint to the floor cannot foster the careful type of review and analysis that the Senate conducted in 1983 and 1984 when we passed the Drug Price Competition and Patent Term Restoration Act. Despite my disappointment about the committee process on consideration of the Medicare drug benefit in the Finance Committee and the way the Judiciary Committee was bypassed from playing a role in shaping S. 812 before it reached the floor, I want to take some time to make a few remarks about the spending bill, the underlying bill, and how it might affect the law it would amend; that is, the Drug Price Competition and Patent Term Restoration Act of 1984. It is useful to think about the words in the title of the law because they remind us that we had two distinct goals in writing the law-- goals, by the way, which have been met. Attempts to change the law must also reach the critical test of these two goals: First, to provide incentives for the development of innovative pharmaceuticals--if we don't have that, we don't have anything; second, to promote widespread distribution of generic drugs by permitting a shortcut to regulatory approval, which Hatch-Waxman did. There is evidence to conclude that the 1984 law has met with success in accomplishing both of these ends, much to the benefit of the American public. The 1984 law contains the incentives with respect to the intellectual market that have brought hundreds of therapeutic new drugs to the American public. To mention a few of the drugs, these include products such as Vioxx to treat arthritis; the cholesterol drug, Lipitor; new medications that help millions of diabetics; and as recorded from Barcelona last week, a family of drugs to treat HIV infection and the complications of AIDS, two areas in which both the distinguished Senator from Massachusetts and I have spent a lot of time working together. Private sector investment by research-based pharmaceutical firms increased from $3.6 billion in 1984 to over $30 billion this year. This substantial level of private sector applied research funding, coupled with the $27 billion invested by the taxpayers in the National Institutes of Health budget next year, helps explain why the unique public-private partnership that forms the U.S. Biomedical Research Enterprise has American scientists positioned to usher in a revolutionary new age of discovery in the biological sciences. We all should take pride in the fact that the United States leads the world in developing innovative medicines. Part of the reason for this leadership is the intellectual property protections contained in the 1984 statute. The debate on the pending legislation centers on the price competition that occurs between generic and name brand drugs. But as we consider legislation that alters protection of the innovator firms' intellectual property, it is important not to lose sight of the importance of the fierce competition between the generic companies and the brand name companies. It is the competition for new drugs that creates advances in medicine and improves public health and ultimately provides blockbuster drugs for generics to copy and to put out at, hopefully, less cost. As we debate how to see that the American public, particularly senior citizens, gains access to today's pharmaceutical products, during the golden eggs of our biomedical research establishment we must be mindful of the long-term health of the goose that produces these innovative drug products. Not only does the American public enjoy the benefits of the latest breakthrough medicines, but consumers also reap the savings associated with the use of generic drugs. Since the 1984 Drug Price Competition and Patent Restoration Act, the share of the prescriptions written for generic drugs has more than doubled and has increased from somewhere less than 20 percent to almost 50 percent of all prescriptions written. And as we will hear in the debate that will take place over the next several days, everyone in Congress knows that senior citizens, particularly senior citizens, have a great interest in programs, such as the 1984 law that resulted in cutting the costs of drugs. One undeniable bottom line measure of success of the Drug Price Competition and Patent Restoration Act of 1984 is the fact that according to the Congressional Budget Office, this law has contributed to annual consumer savings of $8 billion to $10 billion every year since 1984. I wish all our legislation would be as effective and as successful as this one. It might prove useful to summarize briefly how the Drug Price Competition and Patent Term Restoration Act works. When you hear how the statute operates, you will understand that a central principle of this legislation is balance among the incentives of both the research- based firms, the pioneer firms, and the generic firms. This balance is not on only a simple matter of fairness to both of these sectors of the pharmaceutical industry. Achieving a balance was critical to help ensure that both of these sectors would succeed because the bottom line of Hatch-Waxman is to help the American public receive both the latest in medical breakthroughs, and the more affordable generic drugs. As we consider changes to Hatch-Waxman, we must be careful not to upset the balance because if we do, it is the American people who will suffer. Here is how the law works. In order for a drug to be marketed in the United States, a manufacturer must prove to the Food and Drug Administration that the drug is both safe and efficacious, effective. Drug discovery and development is an extremely time-consuming, expensive, and risky process. As I have mentioned before, experts at the Tufts University Center for the Study of Drug Development have placed the costs of developing a major new drug at $800 million, when the opportunity costs of capital and the cost of failed drugs are factored into the rare, successful product. During this debate, some will no doubt be tempted to characterize the drug industry as nothing more than a bunch of greedy, money-grubbing companies. In fact, for much of the last decade, it has been the most profitable sector of the U.S. Economy. Nevertheless, as many analysts have noted, and was discussed by Senator Wyden at the Commerce Committee hearing this past March, drug discovery is a highly speculative venture and there is currently an industry-wide slow down in the pipeline of products close to final FDA approval. For every drug that succeeds in gaining FDA approval, more than 5000 compounds are screened and fall by the wayside during testing. Some of these compounds fall out in the lab; only about 250 of the original 5000 compounds will proceed to full-scale animal testing; and, of those 250 that enter animal testing, only 5 will make it to human clinical trials; and, finally, the great majority--4 out of the remaining 5 of drug product candidates--will fall out during the required 3 phases of human clinical testing. The first phase of clinical testing usually entails about 30 patients. The goal of this phase is to assure that the compound under study is safe for human use. This is a very difficult hurdle as, for example, it can be expected that a compound that can eradicate cancerous cells will also likely be toxic to the surrounding healthy cells. It is no wonder that the pharmaceutical industry invests a higher percentage of its revenues into research than other industrial sectors. Are they given any credit for that on the floor over the last number of days? Give me a break. They certainly have not. In fact, they have been condemned in talk after talk as though they are the sole cause of the high cost of drugs. In the second phase of clinical trials, efficacy is examined. This may involve several hundred patients and it may take several years to design, conduct, and analyze the trial. If success is sustained through Phase II--and remember that experience teaches us that most of these costly trials will result in failure--an investigator may proceed to the third and final phase of human clinical testing in which the drug is administered to several hundred and sometimes several thousands of patients. Phase III trials attempt to further evaluate safety and efficacy, fine tune dosing regimens, and uncover any propensity for adverse reactions among subgroups of the broad patient population taking the medicine. Because they involve more patients and seek more precise information, Phase III trials are generally even more expensive and time consuming than the earlier phases of drug development. In order to gain FDA approval, the agency prefers to see two successful Phase III studies. In addition to costing hundreds of millions of dollars to screen and test drug candidates, it also takes a great deal of time. It has been estimated by experts that it takes, on average, about 14 years to bring a drug from the lab through clinical testing and FDA review. And all during this time the clock is ticking on the patents held on these drug candidates. For example, in the case of the anti- inflammatory drug, Daypro, the patent lapsed during the 21-year FDA review of the product. While this case was clearly an outlier and FDA review time has improved somewhat over the last decade due to the user fee legislation, it remains true that the U.S. pharmaceutical industry is one of the most highly regulated sectors of the economy. It is an expensive process, mainly an expensive regulatory process. If we could somehow find a way of cutting that down, then the cost of drugs would come down, too. We passed a bill--it was another Hatch bill--called the FDA Revitalization Savings Act, in the early 1990s, that said we should create a central campus with state-of-the-art buildings and equipment and scientific facilities instead of the almost 40 different locations, some of them converted chicken coops, where they are conducting research today. The FDA has hardly hired a research scientist in the last 30 years. The reason is there is not the prestige in their eyes to work for the FDA for less money than they would get in the private sector. NIH doesn't seem to have that problem because it is so prestigious to work there, even at the lesser salaries, that scientists flock to NIH. It is exciting, plus they have state-of-the-art buildings and equipment with which to work. We need to do that. We need to stop blaming the pharmaceutical companies, the pioneer companies for all the problems here. In recognition of the exacting and time-consuming nature of FDA review of safety and efficacy testing, the Drug Price Competition and Patent Term Restoration Act provided a number of incentives designed to help research based pharmaceutical companies. The statute provides for partial restoration of pharmaceutical patents, but only under limited rules: First, the law allows one day of patent term restoration for each two days spent in the human clinical trial phase. This is known as the IND Phase. IND stands for the investigational new drug and refers to the exemption that FDA grants to allow the human clinical trials to proceed. The law also allows day-for-day patent term restoration when the drug is in the final stage of FDA review. This is called the NDA phase. The NDA, or new drug application, is the formal application that contains the data demonstrating safety and efficacy. I should point out that given that each NDA contains data and records on thousands of patients, the NDA literally contains hundreds of thousands of pages of information. In some cases those millions of pages of information would fill this whole Chamber--that's how complicated it is. Yet, we hear badmouthing of the pioneer companies every day here on the floor. There are fair criticisms, but I don't think all the criticism has been fair. There are two further limitations on the partial patent term restoration. First, when the one-for-two rule in the IND Phase is applied with the day-for-day rule during the final review of the new drug application, no patent may be restored more than 5 years. You should keep in mind that, as I said earlier, it takes about 14-years to bring a drug through pre-clinical studies through FDA approval. Finally, even after this 5-year limitation kicks in there is another rule that prevents any patent from being restored such that it will have an effective patent life beyond 14 years. The 5-year and 14-year limitation rules are sometimes referred to as the Hatch-Waxman caps. So I just want to point out that you will hear a lot of talk during this debate about patent extensions, but what we are talking about is partial patent term restoration to offset part, and a relatively small part at that, of the time lost during the rigorous FDA review of safety and efficacy. You don't hear many comments about that from the critics the fact of the matter is, this is a long, arduous expensive time consuming, costly process. To blame the pharmaceutical companies for everything that is wrong is just not fair. It is worth noting that the 14-year cap on effective patent life contained in the Waxman-Hatch Act stands in contrast to how other types of patents are treated with respect to administrative delays at the Patent and Trademark Office. This is a somewhat complicated story but I think it bears discussion in order to place the Hatch-Waxman policies into context with subsequently enacted changes to the patent code. Basically the GATT trade treaty required implementing legislation that mandated the United States to change its patent system from 17- years, measured from the date of approval to a new system of 20-years, measured from the of date of application with the Patent and Trademark Office. There was concern by many intellectual property owners that this change in the law could actually decrease effective patent life due to administrative delays at PTO. As a result, a provision was included in the 1999 American Inventors Protection Act--a bill that passed with broad bipartisan support--that allowed patent term to be restored up to 17 years in cases where there was undue delay at the PTO. The 17-year patent term floor in the American Inventors Protection Act extends to all types of patents and should be contrasted with the 14-year patent term ceiling contained in the Waxman-Hatch for pharmaceutical patents. Moreover, most patent applications are reviewed by PTO in one and one-half to two years, so that the effective patent life for most products is actually 18 to 18.5 years. When all is said and done, most patents run appreciably longer than patents related to drugs due to the 14-year Waxman-Hatch cap. In addition to the partial patent term restoration provisions of the 1984 law, the statute provides that each FDA-approved new drug that consists of a new chemical entity receives 5 years of marketing exclusivity--not 18 years, which other manufacturers get, but 5 years of marketing exclusivity. In other words, we want to treat them at least somewhat fairly. This 5-year marketing exclusivity provision means that FDA may not approve any generic drug for that time 5-year period regardless of whether the drug is protected by any patent. The last major incentive on the R&D side of the ledger that I will discuss is the provision that entitles a pioneer drug firm that successfully undertakes a clinical trial yielding data that significantly improves, or modifies the use of an existing drug compound, to 3 years of marketing exclusivity. As you can see, this is complex. But it works, and it has worked amazingly well. Our country has benefited from it. And it was bipartisan. Actually, you would have to say it was nonpartisan. That is what I would like to see in a full Medicare prescription drug bill. This 3-year incentive helps encourage incremental, but often vitally important improvements, to existing drugs and does not bar generic competition from the original approved uses of the drug once any patent or marketing exclusivity has expired. I hope my colleagues can see that the 1984 law contains a powerful set of intellectual property incentives that help foster the necessary private sector investment in pharmaceutical R&D. That is one reason our pharmaceutical companies have done so well. That is why we have such a good balance of trade. They have been among the most successful companies in our society up until now, and they are about to be stratified where they won't have the money to go through this $800 million and 5,000 misses to get one single drug, if they are lucky and then have just a few years of patent life. You wonder why drugs cost so much through that market exclusivity. In parallel with the incentives I have just described for innovator firms, the Drug Price Competition and Patent Term Restoration Act provided the necessary regulatory regime that created the modern generic drug industry. Rather than unnecessarily squander societal resources by requiring the duplication of the expensive and time consuming process by which safety and efficacy is established for pioneer products, the law provided a shortcut through the FDA regulatory process. That was one of the generic aspects of the law. The 1984 law, in essence, allows generic competitors to rely upon the proprietary safety and efficacy data generated by the pioneer firm and requires that the generic drug merely be shown to contain the same active ingredient and be absorbed by the human body in a bioequivalent fashion. This simple provision of law allowed generic firm to bring on high quality copies of the pioneer drugs for a fraction of the cost and, most importantly, to pass these savings onto consumers. Their cost is less than 1 percent to put the drugs in the marketplace. I want it that way. We wanted it that way when we did the Hatch-Waxman bill. Another key feature of the law is a unique change in the patent code designed to allow generic product to enter the market literally the day after the patents on a pioneer drug expire. Upon first consideration this may not sound like a dramatic development in the law but it is. Here's why. Let us start with the Constitutional basis for patent protection. Article I, Section 8 of the United States Constitution provides: ``Congress shall have the power . . . to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.'' It is said that Thomas Jefferson had his hand in the drafting of the first patent statute enacted by Congress back in 1790 and that in his capacity of Secretary of State actually issued and signed some of the first patents issued by the United States federal government. In areas such as pharmaceuticals, where it is relatively easy to copy pioneer products that require enormous R&D expenditures--I mentioned $800 million to find one drug--it is critical to have strong laws prohibiting the infringement of patents. I should also like to add that a patent right is a negative right and does not automatically confer monopoly power; a patent only allows the patent owner the right to exclude others from utilizing the patented invention or process. Section 271(a) of title 35 of the United States code contains the general rule against patent infringement. It says: `` . . . whoever without authority makes, uses, offers to sell, or sells any patented invention . . . during the term of the patent . . . infringes the patent.'' This is a tough provision and a good provision because it protects the rights of inventors, inventors of all products used, manufactured or sold in each of our states, who have made substantial investment in research and development. In order to allow generic drug firms to enter the market the day the patent expired, the general rule of section 271(a) had to be modified. This is so because in order to get the drug through the truncated FDA review process and gear up production the generic firm has to make and use the patented drug, and this is important, while the pioneer drug is under patent protection. I should also add that under the common law there is a research exception to the general rule against patent infringement so that academic researchers could be free to explore new areas of scientific inquiry. During the course of the negotiations over the Waxman-Hatch law, a question arose in the courts with respect to whether this research exemption might carry over to the type of research activities necessary to develop a generic drug. And right in the middle of these negotiations we got the answer when the precursor court to the Federal Circuit Court of Appeals issued its opinion in the case of Roche v. Bolar. The court held that the research exception did not extend to commercialization activities such as those necessary to prove bioequivalence. The result was that the Drug Price Competition and Patent Term Restoration Act contains a legislative override of the court case. This provision, the so-called Bolar Amendment, creates a unique provision in patent law. Section 271(e) of title 35 contains the Bolar Amendment. Section 271(e)(1) says: ``It shall not be an act of infringement to make [or] use . . . a patented invention . . . solely for uses reasonably related to the development and submission of information under a federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products.'' When considering the pending legislation, it is important to understand that in preparing an abbreviated new drug application, or an ANDA as they are called, the generic firm gets a head start over virtually all other types of generic manufacturers in that they are permitted to make and use--and thus violate--pioneer firms drug patents while these patents are still in effect. That is a major change in patent law that we put into Hatch-Waxman to get the generic industry really going. And it helped to create the modern generic drug industry. (Mr. EDWARDS assumed the Chair.)

Mr. HATCH

Mr. HATCH. Madam President, I rise to support the nomination of Richard R. Clifton to be U.S. Circuit Court Judge for the Court of Appeals for the Ninth Circuit. Before I speak directly about him and his nomination, however, I would like to take just a moment to make a few comments about the Ninth Circuit. I think it's safe to say that everyone in the Senate agrees that the Ninth Circuit decision in Newdow v. U.S. Congress, striking down the Pledge of Allegiance as unconstitutional because it contains the phrase under God, was out of the mainstream of American jurisprudence. After all, the Senate voted 99 to 0 to reaffirm the reference to One Nation Under God in the pledge of allegiance--right after the decision was announced. But to me, the decision was more than wrong. It was an outrageous example of judicial activism and overreaching--of inappropriate, results-oriented policymaking from the bench. And it is a clear example of how the Ninth Circuit is failing to serve the best interests of the western states of California, Arizona, Nevada, Idaho, Montana, Washington, Oregon, Alaska, and Hawaii. The Ninth Circuit has 28 authorized judgeships. There are 23 active judges, and thus 5 vacancies. Seventeen of those 23 were appointed by Democrat Presidents--14 by President Clinton alone--and only 6 were appointed by Republicans. The Administrative Office of United States Courts has labeled all five vacancies on the Ninth Circuit as ``judicial emergencies'' given the enormous per-judge caseload on the Ninth Circuit. The Ninth Circuit takes several months longer than other circuits to dispose of cases. The average time from filing to disposition is approximately 14 months. In addition, as is well known and has been widely observed, including by several Supreme Court Justices, the Ninth Circuit has often decided cases in a manner that is well outside the mainstream of American law and entirely inconsistent with binding Supreme Court precedent. In 1999-2000, the Supreme Court considered 10 Ninth Circuit cases and reversed 9 of them. In 1998-99, the Supreme Court considered 18 Ninth Circuit cases and reversed 14 of them. In 1997-98, the Supreme Court considered 17 Ninth Circuit cases and reversed 13 of them. And in 1996- 97, in an extraordinary Term, the Supreme Court considered 28 cases from the Ninth Circuit and reversed 27 of them. All of this makes clear why it is so important for the Senate to consider--and confirm--President Bush's nominees to the Ninth Circuit. We have two excellent candidates pending in the Judiciary Committee right now. Judge Carolyn Kuhl has extensive experience in federal and state government, in the Executive and Judicial Branches, in public service and private legal practice. She has a superb legal background and broad experience that makes her ideally suited to be an excellent circuit judge. And the same goes for Jay Bybee, who currently serves as Assistant Attorney General for the Office of Legal Counsel at the U.S. Department of Justice. I urge the Judiciary Committee to hold hearings on these nominees without further delay. Now, I would like to turn to the matter directly at hand, the confirmation of Richard R. Clifton to the Ninth Circuit Court of Appeals. Shortly following graduation from Yale Law School, Mr. Clifton moved to Hawaii to clerk for the Honorable Herbert Y.C. Choy of the U.S. Circuit of Appeals for the Ninth Circuit, the first and only Hawaiian to serve on that court. Notably, Mr. Clifton will be the second. After his clerkship, Mr. Clifton joined the Honolulu law firm of Cades Schuttle Fleming & Wright, one of the oldest and largest firms in Hawaii. He has remained with that firm since then, becoming a partner in 1982. His practice has focused on business and commercial litigation, with an emphasis on complex litigation and appellate practice. Mr. Clifton has ably handled cases in the areas of condemnation, tax law, securities transactions, class actions, debtor/creditor law, and trademarks. Mr. Clifton is the sold male director with the Hawaii Women's Legal Foundation, a member of the Hawaii Women Lawyers, a member of the Hawaii Chapter of the American Judicature Society, and director of the Ninth Judicial Circuit Historical Society. For approximately ten years, Mr. Clifton was an adjunct professor at the University of Hawaii William S. Richardson School of Law, where he taught appellate advocacy. He served as Chairman of Hawaii Public Radio for five years and remains a director and member of its executive committee. He has served as pro bono general counsel to the Hawaii Republican Party since 1991. Mr. Clifton has a reputation for excellence. Among other honors, Mr. Clifton was named as one of the 18 finest lawyers in Hawaii for business litigation in 2001. He is widely respected by the legal community in Hawaii. I proudly join my distinguished colleagues from Hawaii, Senators Inouye and Akaka, in supporting Mr. Clifton's nomination to the Ninth Circuit Court of Appeals, and I urge my colleagues to do the same. Richard Clifton will serve well on the federal bench in Hawaii.

Mr. HATCH

Mr. HATCH. I ask unanimous consent that further reading of the amendment be dispensed with.

Mr. HATCH. Madam President, I send an amendment to the desk.

Mr. HATCH. I want to express my appreciation to my colleague from Florida. He is an eminent member of the Senate Finance Committee. He is a very serious, reflective Member. He has worked hard to come up with his bill. I respect him for it, and I wish him well with it. However, I will say a few things about Senator Graham's bill before I finish. Tonight, I introduced an amendment that is called the tripartisan bill. I introduced it on behalf of Senator Grassley for himself, Senators Snowe, Jeffords, Breaux, Collins, Landrieu, Hutchinson, Domenici, and myself. We believe this tripartisan bill is the only nonpartisan bill being considered by the Senate at this time. It is a very important effort by people of goodwill on both sides and, of course, the only Independent in the Senate. I want to take this opportunity to talk a little bit about the tripartisan bill. Many of these points were raised two nights ago, when I spoke on the Senate floor about our tripartisan proposal. Tonight, I will raise them again because I believe that all of them are extremely important and worth listening to again. While drafting this legislation, we tried to reach out to everyone who has an interest in this issue. We have taken this very seriously, and we have worked on it for well over a year. This has required many hours of meetings, among all of the sponsors of the bill and our staffs along with other interested parties. Let me assure everyone that this has been a unified effort, one which has required some give and take from all of us. We have worked with CBO to come up with a cost-efficient solution. The Congressional Budget Office has told us that our bill will cost $370 billion over 10 years. As far as I know, the Daschle-Graham-Miller bill, S. 2625, does not have a CBO score, but I suspect that it is extremely expensive. The distinguished Senator may have some idea of what that score is because he has indicated that the amendment that he just introduced will cost around $600 billion, if I understand it, over 10 years. The prescription drug program in the Graham legislation would include a sunset at the end of 2010, which is one of the problems with this legislation. On the other hand, there are no sunsets within our bill. Our tripartisan bill is a permanent solution, not a temporary solution. CBO informs us that once our bill is implemented, 99 percent of all seniors will have drug coverage. That would be truly remarkable. And that is CBO, not us. Again, this is a nonpartisan approach to providing prescription drugs to Medicare beneficiaries. On the other hand, the Daschle-Graham-Miller bill sunsets after 2010. So in my opinion, that bill is only a temporary solution. Does a temporary solution truly help seniors in the long run? I do not think it does. Our tripartisan bill provides all Medicare beneficiaries with affordable prescription drug coverage because we let competition determine the prices, not Government bureaucrats. That is how we keep prices of drugs down. It is not a good idea to let the Government set the price, which is what I predict will happen if the Daschle-Graham bill becomes law. We also provide additional subsidies to low-income seniors so they, too, can afford to pay for their drugs. I find it absolutely appalling that there are people in our country who have to choose between buying food and eating, and having prescription drugs. The tripartisan group's goal is to put an end to that. Through our bill, we will provide additional assistance to those seniors who need it. For example, the 10 million beneficiaries with incomes below 135 percent of poverty will have 95 percent of their prescription drug costs covered by this plan with no monthly premium. They will not have to pay a monthly premium. In addition, these seniors are exempt from the deductible and will pay well under $5 for their brand name and generic prescriptions. Finally, these beneficiaries who reach the catastrophic coverage limit will have full protection against all drug costs, with no coinsurance. The 11.7 million lower income beneficiaries with incomes below 150 percent of the poverty level are also exempt from the $3,450 benefit limit. Enrollees between 135 percent and the 150 percent of the Federal poverty level will also receive a generous Federal subsidy that on average lowers their monthly premium to anywhere between 0 and $24 a month. The beneficiary's monthly premium will be based on a sliding scale, according to his or her level of income. It also cuts in half their annual drug bills. All other enrollees will have access to discounted prescriptions after reaching the $3,450 benefit limit and a critically important $3,700 catastrophic limit which protects seniors from high out-of-pocket costs. It is also important to note that 80 percent of Medicare beneficiaries will never experience a gap in coverage. Let me take a few minutes before we finish this evening to talk about my views on S. 2625, the Daschle-Graham-Miller Medicare Outpatient Prescription Drug Act of 2002. I understand that a new Graham bill has been filed and we are currently reviewing the details. We have not been able to review it very thoroughly, but we have a quick preview of it, and perhaps I can express my thoughts this evening just so people will have something to consider over the weekend. Again, I commend my good friend, a person I admire greatly, Senator Bob Graham, for his bill. I know he has worked hard. I know he has tried his best. I know he is representing his people in Florida very well and he has worked long and hard on this issue. I respect him for that. I respect him personally. He knows that. He, like those in the Senate in the tripartisan group, has the same goal: To provide Medicare beneficiaries with prescription drug benefits. But that is where the similarities end. My biggest concern with the new version of the Daschle-Graham bill is still the cost. My understanding is that this bill costs close to $600 billion, over a 10-year period. We all agree a Medicare drug proposal will cost a lot of money, but the Daschle-Graham-Miller bill is, in my opinion, too expensive to both current and future generations because of the magnitude of its costs. And bear in mind, this bill is still not a permanent program. It sunsets. It sunsets after 2010, which makes it a less than 10 year benefit for approximately $600 billion. That is if I am right on the scoring. I believe having the sunset on such an important bill just to get a decent score from CBO is not being as fiscally responsible as I would like to be. I understand there is some window-dressing language that attempts to address the sunset, but to me that is all it is-- window dressing. Having said that, I am absolutely astounded that the AARP has come out and ask its members to support a bill that does not have a permanent benefit. That is just irresponsible on the part of the AARP. They are, in my opinion, not looking out for the best interests of seniors by asking their members to support this type of a bill. I am very disappointed in the AARP for making what I believe is a poor judgment call. Again, one of my top concerns with the both versions of the Graham bill is the cost. It is not going to get better as drugs become more expensive and more and more baby boomers retire. I remind my colleagues, our Government is in a Federal deficit. Figures from last week reveal that the Federal deficit could be as high as $150 billion for fiscal year 2002. Passing a bill that I believe could cost well over $600 billion over 10 years is going to increase our deficit. That is, in my opinion, a step in the wrong direction. The new Graham bill is still a one-size-fits-all bill that very well could lead to having the Federal Government set drug prices, although I know that is not the intention of my dear friend and colleague from Florida. That is, in my opinion, the wrong direction, as well. And why on earth should the Federal Government be making coverage decisions for seniors? I trust senior citizens to make their own decisions about their health coverage. Apparently, the authors of the Daschle-Graham- Miller bill do not agree and that is why they continue to put the Government in charge. I look forward to the debate on Monday where we can discuss these issues more fully. If I am wrong on some of these suggested interpretations of my friend's bill, I would like him to set me straight on Monday when we debate this bill even further. I would like to know why anybody believes a sunset is necessary. That means the drug benefit ends. I hope we will have a CBO cost estimate we may review regarding the Graham legislation. Again, I wish to point out that I continue to be concerned that under both versions of the Daschle-Graham legislation, the drug benefit is run by the Federal Government. I don't think that is a good idea, to let the Government run a drug benefit because the Government will end up setting prices for drugs. Keep in mind, Canada sets prices for drugs, and where is their pharmaceutical industry today? They have to look to us because we do not set prices for drugs and we have a competitive system. Yes, some say it has flaws, but it is the best in the world, bar none. Frankly, with whatever flaws there are, we should be very proud of the system we have in our country. In the tripartisan Medicare drug bill, we allow Medicare beneficiaries to make choices for themselves. They decide whether or not they want drug coverage. As I mentioned earlier, we allow Medicare beneficiaries to choose from at least two drug plans, and it maybe more, but at least two, competing plans, allowing them to select a plan that best suits their own personal needs. Another difference between the Daschle-Graham bill and our Tripartisan bill is that we include reforms to the Medicare program and they do not. The current Medicare benefit package was established in 1965. While the benefits package has been modified occasionally, it now differs significantly from the benefits offered to those in private health plans. Our plan gives seniors a choice in their Medicare coverage seniors may remain in traditional Medicare or they may opt for the enhanced Medicare fee for service option which is similar to private health insurance. We do not force seniors to enter into the new enhanced fee for service plan. It is just an option. If beneficiaries want to stay in traditional Medicare that is fine. We need to give seniors choices concerning their health care coverage. Seniors must be given improved health care choices through the Medicare program. It is extremely unfortunate that the Daschle- Graham-Miller bill does not recognize that the Medicare program needs to be improved so seniors can take advantage of the benefits that are offered by private health insurance. Keep in mind, our bill only costs $370 billion as scored by the Congressional Budget Office. Yet we still reform Medicare in addition to providing high quality prescription drugs to our people. There is nothing in the Daschle-Graham-Miller bill to improve the Medicare program. It just tacks on a prescription drug program and ignores the larger problem. Medicare beneficiaries deserve better. Senator Breaux deserves an awful lot of credit for our bill in this area. He has wanted to reform Medicare for a long time and has come close from time to time. This is the best opportunity to do it. I think he sees the value of what we have tried to do. He not only sees it, he helped implement it. The larger problem is the overall Medicare benefits package which is outdated, inefficient and it does not provide seniors with decent health care options. Let me give you an example. Today, Medicare beneficiaries do not have any serious illness protection. Beneficiaries who are seriously ill end up paying a lot of money out of pocket for their health care coverage each year. In our Tripartisan legislation, if a beneficiary is covered under the new enhanced fee for service program, once that beneficiary reaches a catastrophic limit of $6000, the Medicare program pays 100 percent of any costs incurred by the Medicare beneficiary. I feel that is only fair. Those Medicare beneficiaries with serious health conditions should be offered a choice in benefit coverage so if they want serious, illness protection, they may have it. The Graham-Daschle-Miller bill does nothing to assist Medicare beneficiaries in these types of situations. The Daschle- Graham-Miller bill's answer is to provide seniors with a government-run prescription drug benefit that is extremely expensive, and, isn't even permanent. That just is not enough. These issues that I have raised about the Daschle-Graham-Miller should have been debated by the Finance Committee. I admit the issues we have raised by the Tripartisan bill should have been debated by the Finance Committee. Who knows, maybe we could have come to some resolution. Maybe the authors of the Tripartisan bill and the Daschle- Graham-Miller bill could have come to some agreement through the Committee mark-up process. Maybe not. Sadly, we will never know because the majority leader wouldn't even give us an opportunity to mark-up a prescription drug bill in the Finance Committee. I have been here for 26 years and, trust me, it is rare for the full Senate to be considering such an important bill before it is even considered by the Committee of jurisdiction. I am bitterly disappointed at how much the Senate has changed. At the beginning of the 107th Congress, we all talked about working together in a bipartisan spirit because that is truly what the American people want from us. What happened to that bipartisan spirit? Why are we on the floor debating a bill that will affect the lives of over 33 million Medicare beneficiaries and millions of future beneficiaries without a Finance Committee mark-up? I just do not understand why members of the Finance Committee were not even given that opportunity and, in fact, completely excluded from the process, other than that we can file whatever bill we want to, which we have done. I want to do everything I can to pass a Medicare prescription drug bill into law this year. But it appears that election year politics are more important than passing a well-thought out prescription drug bill which is extremely unfortunate. I stand ready to work with my colleagues so that we can provide affordable prescription drug coverage to our Medicare beneficiaries this year. We need to have Medicare available for today's seniors, our children and our grandchildren. So let's stop playing politics and start working on getting a Medicare prescription drug bill signed into law this year. I have no doubt if the distinguished Senator from Florida and I could sit down together we could just work it out--I have no doubt about that. Unfortunately, it has gotten embroiled in some political aspects. Again, I call attention to the tripartisan bill which has Democrats, Republicans, and the sole Independent. I believe that bill literally could provide an affordable drug benefit for Medicare beneficiaries, although it is still expensive. It could do what we really need to have done--not only on the prescription drug benefit aspect of this matter but also on the Medicare reform as well--and Medicare+Choice as well. To me, that is very important. I look forward to working with my colleague from Florida and others on the floor and hope we can come to a resolution this year, so the millions of American citizens will have the benefits that we really should be delivering to them and which they need and which are right and just. Mr. President, I yield the floor.

Mr. HATCH

Mr. HATCH. Mr. President, the issue of the death penalty in our country continues to spark significant debate. The recent Supreme Court decisions addressing capital punishment underscore the importance of this issue to the American people. It is an issue that engenders great passion, both among its supporters and among its opponents. The American people believe in the death penalty, especially for terrorists who have killed thousands of Americans. And all of us agree that the death penalty must be imposed fairly and accurately. I have stated on numerous occasions my views on the death penalty. It is the ultimate punishment and it should be reserved only for those defendants who commit the most heinous of crimes. I am firmly convinced that we must be vigilant in ensuring that capital punishment is meted out fairly against those truly guilty criminals. We cannot and should not tolerate defects in the capital punishment system. No one can disagree with this ultimate and solemn responsibility. In the last decade, DNA testing has evolved as the most reliable forensic technique for identifying criminals when biological evidence is recovered. While DNA testing is now standard in pre-trial investigations today, the issue of post-conviction DNA testing has emerged in recent years as the technology for such testing has improved. The integrity of our criminal justice system and in particular, our death penalty system, can be enhanced with the appropriate use of DNA testing. No one disagrees with the fact that post-conviction DNA testing should be made available to defendants when it serves the ends of justice. In addition to post-conviction DNA testing, every defendant in our criminal justice system is afforded the guarantee by the 6th Amendment of our Constitution of competent and effective counsel. The Supreme Court has enforced this right in numerous decisions in order to ensure that all defendants are afforded the constitutional protections guaranteed to them. Death penalty opponents argue that the system is broken and blame ineffective assistance of counsel. Their own evidence, however, indicates that the system is not broken. To the contrary, a recent Justice Department study concluded that ``[i]n both Federal and large State courts, conviction rates were the same for defendants represented by publicly financed and private attorneys.'' (Caroline Wolf Harlow, Defense Counsel in Criminal Cases, Bureau of Justice Statistics, November 2000). Further, 34 out of 38 States with capital punishment have adopted standards or have existing practices to ensure assignment of competent counsel. In my view, the appellate system and our habeas system, which was reformed in 1996, remain robust and entirely capable of identifying and rectifying instances of deficient representation or substantial error at the trial level. We have all heard the horror stories of the attorney who fell asleep during his client's trial and the attorney who showed up for trial intoxicated. Some opponents of the death penalty seek to portray these stories as ``par for the course.'' This view ignores the hundreds of capital cases in which no flaw was found in the quality of legal representation. It also ignores the hundreds of capital cases in which defendants were either acquitted, or sentenced to a penalty less than death, many times the result of outstanding representation by defense counsel. The truth is that in many cases prosecutors handling a capital case are out-manned and outgunned by defense teams funded by a combination of public and private sources. The legislation I introduce today will ensure the integrity of our death penalty system. The Act addresses post-conviction DNA testing for defendants, provides grants to States to fund state post-conviction DNA testing programs, and creates new grant programs to train State prosecutors, defense counsel and judges to ensure that defendants receive a fair capital trial. First, the Act authorizes post-conviction DNA testing where a federal defendant can show that the DNA test will establish his or her ``actual innocence.'' There has been considerable debate about when a convicted defendant should be entitled to post-conviction DNA testing. Under my proposal, when a defendant demonstrates that a favorable result would show that he or she is actually innocent of the crime, the defendant will be given access to DNA testing. Thus, DNA testing will not be permitted where such a test would only muddy the waters and be used by the defendant to fuel a new and frivolous series of appeals. When a DNA test shows that the defendant is actually innocent, then the Act authorizes the defendant to file a motion for a new trial. Under the Act, DNA testing in capital cases will be prioritized and conducted on a ``fast track,'' so that these important cases are handled quickly. Second, in order to discourage a flood of baseless claims, the Act authorizes the prosecution of defendants who make false claims of innocence in support of a DNA testing request. Each defendant will be required to assert under penalty of perjury that they are, in fact, innocent of the crime. When DNA testing reveals that the defendant's claim of innocence was actually false, the defendant can then be prosecuted for perjury, contempt or false statements. Further, the Act allows DNA test results to be entered into the CODIS database and compared against unsolved crimes. If the test result shows that the defendant committed another crime, the defendant may then be prosecuted for the other crime. Third, with respect to State defendants, the Act encourages States to create similar DNA testing procedures, and provides funding assistance to those States that implement DNA testing programs. Twenty-five of 38 States which have capital punishment already have enacted post- conviction DNA testing programs, and 6 States have pending legislation to create such a program. With the new source of funding, more States will enact DNA testing programs, and will provide such testing on an expedited basis. Fourth, in order to improve the fairness and accuracy of state capital trials, the Act creates grant programs to train defense counsel, prosecutors and trial judges to ensure fair capital trials. While I do not believe that the system is broken, I do believe that our justice system can always be improved. The grants proposed under the Act will enable States to send prosecutors, defense counsel and trial judges to training programs to ensure that capital cases are handled more efficiently and effectively, and that every capital defendant will receive a fair trial under our justice system. Starting in 2001 and continuing through this year, the Judiciary Committee, has conducted a number of hearings to examine these difficult issues relating to the death penalty system in our country. A competing proposal, S. 486, is now pending before the Committee. The alternative proposal would open the floodgates to frivolous litigation by allowing convicted Federal and State defendants to obtain post- conviction DNA testing even when they have never previously claimed they were innocent of the crime. Second, the alternative proposal tramples on the concept of federalism by stretching the 14th Amendment to mandate DNA testing and evidence preservation requirements on the States. Third, the alternative proposal would strip state courts of their traditional power to appoint counsel to represent indigent defendants; require states to comply with federally-mandated requirements for assignment of competent counsel; and fund new private capital resource litigation centers. Fourth, the alternative bill threatens to reduce valuable Byrne grants to State law enforcement agencies which are needed to fight crime in our local communities. Finally, the alternative bill would authorize a flood of private suits to enforce a set of new federal mandates on each of the states. My bill will further our nation's commitment to justice, ensure that our country has a fair death penalty system, and protect the sovereignty of states from burdensome and unnecessary federal assertions of power. I strongly urge my colleagues to join with me in promptly passing this important legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. I thank my colleague. Almost 2 years ago today, we visited the issue of whether to allow importation of prescription drugs from other countries. The Senate has before it today The Prescription Drug Price Parity for Americans Act, designed to permit the commercial importation of prescription drugs from Canada and to permit personal importation of prescription drugs from any country. S. 2244 is intended to modify the Medicine Equity and Drug Safety Act of 2000, MEDSA, attempts both to address the safety concerns voiced by FDA, DEA, U.S. Customs, Secretary of HHS, and others and also expand the personal importation exemption contained in current law. As I will explain, reimportation was not a good idea then, and it is an absolutely terrible idea today, especially after 9/11. The high cost of pharmaceuticals in indeed one of the most difficult matters facing our society today. We face a harsh reality: At a time when scientists are able to offer an unbelievable new array of medication, diagnostics, and vaccines, many Americans are encountering difficulties in affording these state-of-the-art and often cost therapeutics. We have all heard stories of Americans going across the borders to Mexico and Canada to purchase cheaper drugs. This type of activity is also increasing over the Internet. It may appear that the solution is simply to allow the importation of prescription drugs into our country. While I do not question the good intentions of those who believe this is the correct solution, we all must be aware of the disturbing, lasting unintended and negative consequences this proposal would have. It have not possible to assure safety of reimported pharmaceuticals 2 years ago. Sadly, it is even more difficult to do so today. We are facing an unprecedented time in history. I need not point out to my colleagues the challenges this country is already facing in our war on terrorism. Allowing drug reimportation is only going to further threaten our safety and inundate our law enforcement and regulatory agencies. As always, there are many issues at play in this debate. But, the number one fundamental issue at stake here is the safety of the American people. Assuring the American public that these imported drugs are safe and effective and unadulterated is next to impossible, especially now, in the midst of a war on terror. I worry that a day will come when either an under-potent or over-potent or adulterated, either intentionally or unintentionally, batch of imported drugs will cause injury and even death. Yes, we can have certifications and regulations and foreign inspections and every other policing mechanism you can think of, but the fact remains we cannot police everyone around the world. With this bill, we are opening a door that Congress prudently closed in 1988 when it enacted the Prescription Drug Marketing Act. Let me give you a little background regarding the history of drug importation law. During the 1980s, the House Energy and Commerce Committee conducted a lengthy investigation into the foreign drug market that ultimately led to enactment of the Prescription Drug Marketing Act legislation--PDMA. This bill was enacted after our nation experienced a series of serious adverse events due to improperly stored, handled, and transported imported drugs. There were serious threats to public health and safety. That investigation discovered, among other things, that permitting reimportation of American drugs ``prevents effective control or even routine knowledge of the true sources of merchandise in a significant number of cases.'' As a result, the House Committee found that ``pharmaceuticals whic have been mislabeled, misbranded, improperly stored or shipped, have exceeded their expiration dates, or are bald counterfeits, are injected into the national distribution system for ultimate sale to consumers''. It was determined that we could not prevent the introduction of substandard, ineffective, or even counterfeit pharmaceuticals. The PDMA was necessary to eliminate health and safety problems before serious injury to consumers could occur. the Committee report was clear on why the PDMA was needed: ``[R]eimported pharmaceuticals threaten the public health in two ways. First, foreign counterfeits, falsely described as reimported U.S. produced drugs, have entered the distribution system. Second, proper storage and handling of legitimate pharmaceuticals cannot be guaranteed by U.S. law once the drugs have left the boundaries of the United States.'' Now we place a high premium on our citizens receiving safe and effective products, free from adulteration and misbranding. The Dorgan bill, could unravel the protection that the PDMA provides us. Dating from the 1906 Pure Food and Drugs Act, through the 1938 Federal Food, Drug and Cosmetic Act, the 1962 efficacy amendments written by the Senate Judiciary committee, and the 1988 Prescription Drug Marketing Act, our Nation has devised a regulatory system that painstakingly ensures drug products will be carefully controlled and monitored all the way from the manufacturer to the patient's bedside. Under the current Federal Food, Drug, and Cosmetic Act, FDCA, it is unlawful for anyone to introduce into interstate commerce a new drug that is not covered by an approved New Drug Application, NDA, or Abbreviated New Drug Application, ANDA. When a product is introduced into interstate commerce that does not comply with an approved application, it is considered an unapproved new drug in violation of section 505 of the FDCA. It is also misbranded under section 502. These basic rules cover importations, since importing is a form of introducing a drug into interstate commerce. Under FDCA, a drug that is manufactured in the US pursuant to an approved NDA and shipped to another country may not be reimported into the US by anyone other than the original manufacturer. The provision restricting the right to reimport US drugs to the original manufacturer was designed to ensure that only the party that can truly vouch for the purity of the drug is allowed to bring that medicine back into the country. The prohibition on reimportation of products previously manufactured in the US and exported abroad was added to the law in 1988 to guard against the entry of counterfeit and adulterated products into this country. On the issue of importing drugs for personal use, FDA has had a ``personal importation'' policy since the mid 1980s, which permits the importation of an unapproved new drug for personal use, meaning the individual may import no more than a 90 day supply, in certain situations. It was intended solely to allow unapproved medications into the US for compassionate use. But over the years, there has been a tremendous increase in volume and FDA has recently taken the position that the personal importation policy has outgrown its usefulness and now presents a threat to public health. In a letter to Congress, FDA reported that the personal importation policy ``is difficult to implement . . . due in part to the enormous volume of drugs being imported for personal use and the difficulty faced by FDA inspectors, or even health practitioners, in identifying a medicine by its appearance''. FDA lacks the ability to adequately monitory the enormous volume of mail-order pharmaceuticals. The FDA has therefore proposed to the Department of Health and Human Services that it eliminate its personal use policy for mail imports. The Dorgan bill proposes to expand personal importation at a time when the FDA is telling us that it can't handle this and wants us to stop this policy. In 2002, Medicine Equity and Drug Safety Act--MEDSA--included a provision that allowed an importer or wholesaler--in addition to the original manufacturer--to reimport US-manufactured drugs into the United States. But this provision would become effective only if the Secretary of HHS demonstrated to Congress that its implementation would impose no additional risk to the public's health and safety and that it would result in a significant reduction to the cost of covered products to the American consumer. In December 2000, HHS Secretary Donna Shalala said she could not make this determination, citing flaws in the legislation that could ``undermine the potential for cost savings associate with'' prescription drug reimportation and that prescription drug reimportation ``could pose unnecessary public health risks''. In July 2001, HHS Secretary Tommy Thompson also declined to make this demonstration on the premise that the safety of prescription drugs could not be adequately guaranteed if reimportation were permitted under its provisions. So we have certifications by the top health officials of both the Clinton and Bush administrations that reimportation is inherently unsafe. Are we willing to say, that it is safer today to import drugs by mail and other avenues and that we can do a better job ensuring the safety of these imported drugs? Especially after the tragic events we have been through? The Dorgan bill, S. 2244, is a modified version of MEDSA. A review of S. 2244 will show that the new language is not significantly different from the MEDSA provisions that Secretary Shalala and Secretary Thompson rejected. Senator Dorgan, the sponsor of the bill, has stated that it is very similar to MEDSA. Although the modifications in S. 2244 are intended to address original concerns inherent in MEDSA, they fall short of providing these safeguards--safeguards which are nearly impossible to implement. The new bill suffers from the same flaws as did MEDSA. For example, S. 2244 is limited ostensibly to drugs imported from Canada. In fact, however, a drug could be imported from anywhere in the world under this bill, as long as it entered the U.S. through Canada. There is no effective way under this bill to prevent the transshipment of drugs--legitimate or not--from other countries into Canada and then into the U.S. This would permit the entry of drugs that have been manufactured, stored, shipped, and handled anywhere in the world--in unsanitary conditions, unregulated conditions--and drugs that have become adulterated and even toxic. At a September 2001 hearing before the Senate Consumer Affairs, Foreign Commerce, and Tourism Subcommittee, FDA's Senior Associate Commissioner for Policy, Planning, and Legislation, Bill Hubbard, warned of this very risk. Mr. Hubbard stated, ``Even if the Canadian system is every bit as good as ours, and I don't know whether it is or not . . . the Canadian system is open to vulnerabilities by people who will try to enter the U.S. market again because that's where the money is.'' To give another example, S. 2244 differs from MEDSA insofar as it would require manufacturers to allow importers to use their FDA- approved U.S. labeling free of charge. This could lead to an influx of misbranded products into the U.S., as importers paste FDA-approved labeling onto products from other parts of the world. These drugs would be seen as an FDA-approved product manufactured and sold by a U.S. manufacturer--but could easily be a different product--a drug that could have deteriorated, or been contained, subpotent, or toxic. The products would be indistinguishable to a consumer in a local pharmacy, to a health professional, and even to the FDA. Consumers would be deceived by this practice, thinking the U.S. manufacturer had vouched for the purity, safety, and effectiveness of the product when in fact the manufacturer could not and had not. Our top health care financing official has concerns as well. In March 2002, the Administrator of the Centers for Medicare and Medicaid Services--CMS--told the Senate Finance Committee that CMS opposes the reimportation of prescription drugs into the U.S. ``We have opposed it,'' he stated. ``There is no way for FDA to monitor and regulate drugs coming in from Canada, Mexico, or other countries.'' The Dorgan bill also permits a significantly lower standard for personally imported drugs than applies to domestic drugs. The Dorgan bill could also open up a loophole in the FDCA for unscrupulous commercial importers. It permits FDA to issue regulations permitting individuals to reimport prescriptions not only in their personal luggage but also through the mail or other delivery services. We all know there is no way for FDA to limit mail order shipments to personal use. A commercial importer could simply divide its shipments into 90-day quantities and mail them separately, taking advantage of the personal use policy to introduce counterfeit products into the stream of U.S. commerce. This would overwhelm the ability of FDA and Customs to process the millions of incoming packages. Many of the criticisms of MEDSA--voiced by FDA, DEA, and others--apply equally to the new Dorgan Bill. Many senior officials in various agencies, including FDA, U.S. Customs Service, the DEA, the Secretary of HHS warned of the difficulty in ensuring the purity and safety of reimported drugs. Let's hear again what the experts have to say about reimportation. William Hubbard, FDA Senior Associate Commissioner for Policy, Planning and Legislation, June 7, 2001: We are very concerned that a system, if designed to be a different system than the current system, poses risks and we cannot be assured that we could successfully implement such a system and bring in safe drugs because we do not have the same level of confidence about where it was manufactured, and how it was manufactured, and by whom it was manufactured, that we have under the current system. Elizabeth Durant, Executive Director, Trade Programs, U.S. Customs Service, June 7, 2001: You can see the kinds of drugs that come through the mail. They are not even in bottles many times, just loose in paper. We have counterfeit drugs. We have gray-market drugs. We have prohibited drugs and we have unapproved drugs. And this is a situation that is pretty much replicated around the country. We live in a very different world now after 9/11--a more dangerous, less certain world. We must question the safety of reimportation of prescription drugs even more than ever. As Secretary Thompson cautioned on June 9, 2002: Opening our borders to reimported drugs potentially could increase the flow of counterfeit drugs, cheap foreign copies of FDA-approved drugs, expired and contaminated drugs, and drugs stored under inappropriate and unsafe conditions. In light of the anthrax attacks of last fall, that's a risk we simply cannot take. That's the Secretary of Health and Human Services warning us. Here's another quote from William Hubbard, FDA Senior Associate Commissioner for Policy, Planning and Legislation, July 9, 2002: The cheaper drugs are there. We just have no way to say to a given consumer, ``You have gotten a product that will help--will save your life,'' and we fear that many people will get a bad product that will hurt them. We invest lots of money and resources in the United States to ensure that medications and other therapeutics are made and distributed at the highest quality and standards. Our agencies, while not perfect, have a remarkable record of protecting the public from contaminated, ineffective, and unsafe drugs. We cannot guarantee an acceptable level of quality and safety with re-imported drugs. We can't sacrifice quality and safety in the hopes of getting cheaper medications. What's the use of cheap drugs if they can potentially do a great deal of harm and threaten the public's safety? Reestablishing a system where wholesalers and pharmacists may import prescription pharmaceuticals through Canada to the U.S. would recreate the public health risk of counterfeit, unsafe, and adulterated drugs that Congress sought to eliminate in the late 1980s with the Prescription Drug Marketing Act. Even if we put aside these very real safety concerns, the idea that the Dorgan bill can achieve the goal of bringing cheaper drug products to US consumers is unlikely. This bill requires drug manufacturers to disseminate their drug formulations to potentially thousands of pharmacies and wholesalers. This information, currently protected under patent laws, could be worth millions of dollars per drug, on the black market. Unscrupulous individuals could obtain drug formulations and learn how to make their fake drugs look real and survive chemical analysis. Allowing individuals to pirate the hard work and innovation of American drug companies to produce so called ``gray market'' products, counterfeit products, is no way to ensure that Americans have access to the latest pharmaceuticals in the long-run because they simply will not exist if we do not protect the work of our private sector companies. While there is a clear and obvious health danger in a contaminated, pirated product, there is also great detriment to the American public if the unscrupulous are allowed to reimport America's inventions back into America without compensating the inventor. Few will be willing to invest the upfront capital--hundreds of millions of dollars--to develop a drug if another party can make and sell the drug while it is under patent protection. It takes an average of 15 years and a half a billion dollars to create one of the blockbuster drugs. So we have to be careful. We must be able to continue to attract the private sector investment into committing to the research and development that has made the American drug development pipeline so successful. We jeopardize this with reimportation of drugs. We can't just do what appears on the surface to be good but, in essence, could kill people and undermine our fundamental system of encouraging innovation and rewarding hard work. How successful is pharmaceutical innovation in Canada? They have price controls, and nobody is going to invest the money into developing these lifesaving and cost-saving drugs over the long run in those countries with price controls. This is another step toward price controls that will weaken one of the most important industries in America at a time when we just mapped the human genome, and we are at the point where we can actually create more lifesaving medicines. When the value of American inventions is stolen, it is American inventors and American consumers who suffer. The United States cannot and should not allow free riders around the world essentially to force the American public to underwrite a disproportionate amount of the research and development that results in the next breakthrough product. On the surface it seems there's no harm if drugs obtained from outside the United States at prices lower than U.S. prices can be resold in the U.S.; presumably this could lower prevailing U.S. prices. But great harm can come from this. I can say that where nations impose price controls, the research and development we count on to bring us miracle cures is jeopardized. How can we guarantee that foreign government price controllers will not set an artificially low price on some new badly-needed Alzheimer's or Parkinson's or Lupus drug? We can be sure that this will have the unintended, but real, effect of convincing company officials to forgo research on this new class of drugs for fear that, in conjunction with the new liberal re-import policy, they will not be able to recoup their investment? Let's stop the free riders and cheap riders overseas while American citizens are paying the full freight of R&D. Look, I understand the appeal of bringing goods sold cheaper abroad back to the United States at presumable savings to U.S. citizens. Yet, the amendment provides no guarantee that those wholesalers and pharmacists importing the products would pass their savings on to the consumer. And so, at best, with this bill we could be trading public safety for middleman profits. We would also incur far more costs policing this endeavor. The cost of implementing the Dorgan bill would require very substantial resources at a time when we are stretching our funding to HHS and other federal departments to prevent future terrorist incidents. We have to find a way around this drug access problem in this country without creating a public health hazard and ``gray market''. We will be importing not just drugs but some other government's questionable safety standards and price controls into U.S. market dynamics. In our valid and justified quest to help make drugs more affordable to the American public, we would be mindful not to unwittingly impede innovation. Even the Dean of the House, Representative John Dingell of Michigan did not support similar legislation in the past when the House Energy and Commerce Committee issued a report that concluded that ``the very existence of a market for reimported goods provides the perfect cover for foreign counterfeits.'' The concerns are relevant to the Dorgan bill that we are considering today. In our haste to bring cheaper drugs to seniors and other needy Americans--an important and laudable goal--we risk making changes to key health and safety laws and changes in our innovative pharmaceutical industry that no one can afford. We must bring safe, effective drugs to Americans, and particularly seniors, through avenues such as the Tripartisan Medicare Bill. We need to focus our efforts on passing a Medicare prescription drug benefit bill. We should not pass another feel-good drug reimportation bill before the election that we already know today will not and cannot be implemented after the election.

Mr. HATCH

Mr. HATCH. Mr. President, the issue of the death penalty in our country continues to spark significant debate. The recent Supreme Court decisions addressing capital punishment underscore the importance of this issue to the American people. It is an issue that engenders great passion, both among its supporters and among its opponents. The American people believe in the death penalty, especially for terrorists who have killed thousands of Americans. And all of us agree that the death penalty must be imposed fairly and accurately. I have stated on numerous occasions my views on the death penalty. It is the ultimate punishment and it should be reserved only for those defendants who commit the most heinous of crimes. I am firmly convinced that we must be vigilant in ensuring that capital punishment is meted out fairly against those truly guilty criminals. We cannot and should not tolerate defects in the capital punishment system. No one can disagree with this ultimate and solemn responsibility. In the last decade, DNA testing has evolved as the most reliable forensic technique for identifying criminals when biological evidence is recovered. While DNA testing is now standard in pre-trial investigations today, the issue of post-conviction DNA testing has emerged in recent years as the technology for such testing has improved. The integrity of our criminal justice system and in particular, our death penalty system, can be enhanced with the appropriate use of DNA testing. No one disagrees with the fact that post-conviction DNA testing should be made available to defendants when it serves the ends of justice. In addition to post-conviction DNA testing, every defendant in our criminal justice system is afforded the guarantee by the 6th Amendment of our Constitution of competent and effective counsel. The Supreme Court has enforced this right in numerous decisions in order to ensure that all defendants are afforded the constitutional protections guaranteed to them. Death penalty opponents argue that the system is broken and blame ineffective assistance of counsel. Their own evidence, however, indicates that the system is not broken. To the contrary, a recent Justice Department study concluded that ``[i]n both Federal and large State courts, conviction rates were the same for defendants represented by publicly financed and private attorneys.'' (Caroline Wolf Harlow, Defense Counsel in Criminal Cases, Bureau of Justice Statistics, November 2000). Further, 34 out of 38 States with capital punishment have adopted standards or have existing practices to ensure assignment of competent counsel. In my view, the appellate system and our habeas system, which was reformed in 1996, remain robust and entirely capable of identifying and rectifying instances of deficient representation or substantial error at the trial level. We have all heard the horror stories of the attorney who fell asleep during his client's trial and the attorney who showed up for trial intoxicated. Some opponents of the death penalty seek to portray these stories as ``par for the course.'' This view ignores the hundreds of capital cases in which no flaw was found in the quality of legal representation. It also ignores the hundreds of capital cases in which defendants were either acquitted, or sentenced to a penalty less than death, many times the result of outstanding representation by defense counsel. The truth is that in many cases prosecutors handling a capital case are out-manned and outgunned by defense teams funded by a combination of public and private sources. The legislation I introduce today will ensure the integrity of our death penalty system. The Act addresses post-conviction DNA testing for defendants, provides grants to States to fund state post-conviction DNA testing programs, and creates new grant programs to train State prosecutors, defense counsel and judges to ensure that defendants receive a fair capital trial. First, the Act authorizes post-conviction DNA testing where a federal defendant can show that the DNA test will establish his or her ``actual innocence.'' There has been considerable debate about when a convicted defendant should be entitled to post-conviction DNA testing. Under my proposal, when a defendant demonstrates that a favorable result would show that he or she is actually innocent of the crime, the defendant will be given access to DNA testing. Thus, DNA testing will not be permitted where such a test would only muddy the waters and be used by the defendant to fuel a new and frivolous series of appeals. When a DNA test shows that the defendant is actually innocent, then the Act authorizes the defendant to file a motion for a new trial. Under the Act, DNA testing in capital cases will be prioritized and conducted on a ``fast track,'' so that these important cases are handled quickly. Second, in order to discourage a flood of baseless claims, the Act authorizes the prosecution of defendants who make false claims of innocence in support of a DNA testing request. Each defendant will be required to assert under penalty of perjury that they are, in fact, innocent of the crime. When DNA testing reveals that the defendant's claim of innocence was actually false, the defendant can then be prosecuted for perjury, contempt or false statements. Further, the Act allows DNA test results to be entered into the CODIS database and compared against unsolved crimes. If the test result shows that the defendant committed another crime, the defendant may then be prosecuted for the other crime. Third, with respect to State defendants, the Act encourages States to create similar DNA testing procedures, and provides funding assistance to those States that implement DNA testing programs. Twenty-five of 38 States which have capital punishment already have enacted post- conviction DNA testing programs, and 6 States have pending legislation to create such a program. With the new source of funding, more States will enact DNA testing programs, and will provide such testing on an expedited basis. Fourth, in order to improve the fairness and accuracy of state capital trials, the Act creates grant programs to train defense counsel, prosecutors and trial judges to ensure fair capital trials. While I do not believe that the system is broken, I do believe that our justice system can always be improved. The grants proposed under the Act will enable States to send prosecutors, defense counsel and trial judges to training programs to ensure that capital cases are handled more efficiently and effectively, and that every capital defendant will receive a fair trial under our justice system. Starting in 2001 and continuing through this year, the Judiciary Committee, has conducted a number of hearings to examine these difficult issues relating to the death penalty system in our country. A competing proposal, S. 486, is now pending before the Committee. The alternative proposal would open the floodgates to frivolous litigation by allowing convicted Federal and State defendants to obtain post- conviction DNA testing even when they have never previously claimed they were innocent of the crime. Second, the alternative proposal tramples on the concept of federalism by stretching the 14th Amendment to mandate DNA testing and evidence preservation requirements on the States. Third, the alternative proposal would strip state courts of their traditional power to appoint counsel to represent indigent defendants; require states to comply with federally-mandated requirements for assignment of competent counsel; and fund new private capital resource litigation centers. Fourth, the alternative bill threatens to reduce valuable Byrne grants to State law enforcement agencies which are needed to fight crime in our local communities. Finally, the alternative bill would authorize a flood of private suits to enforce a set of new federal mandates on each of the states. My bill will further our nation's commitment to justice, ensure that our country has a fair death penalty system, and protect the sovereignty of states from burdensome and unnecessary federal assertions of power. I strongly urge my colleagues to join with me in promptly passing this important legislation. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, I have heard my name being used a lot in this Chamber this afternoon, and I plan to make a comprehensive statement tomorrow that outlines my views on the Hatch-Waxman amendments contained in S. 812. I might mention, I am very concerned about those amendments. I believe that the original Schumer-McCain bill was a bill that did not improve the Hatch-Waxman Act which was enacted in 1984. Of course, over the course of the last 18 years, it has been recognized as a very highly respected consumer protection law. The reason is because that law has saved consumers between $8 billion and $10 billion every year since 1984--over the last 18 years. The reason it has saved them so much money is that it is a delicately balanced bill between the pioneer companies, that is, the large pharmaceutical companies, and the generic drug industry. When we passed Hatch-Waxman, the generic industry had about 15 percent of the total drug business in this country. Today it has close to 50 percent. That is because of that delicate balance achieved through the Hatch-Waxman law . And I see that this underlying bill may very well disturb that delicate balance and disrupt a law that has worked well for consumers for many years. I want to make sure that the bill approved by the Senate is a good bill, if, in the end if we are going to be amending the Hatch-Waxman Act. I put a lot of effort into that bill before it was passed in 1984. It is an important law. It is a law that has really helped America. I have to say, if we disrupt that balance and we all of the sudden take away the incentives to put that $30 billion a year into research and development costs to develop these lifesaving drugs, we will not have the drugs to put into generic form later. And, we could lose these businesses--they could all go offshore if we do not handle this exactly right. So what has been in some measure demagogued today on the floor--if we do not watch that, we will wind up making questionable changes to a law that now saves the lives of millions of Americans and does so at affordable costs. I will spend some time on that tomorrow because I think it needs a comprehensive discussion. I will say this: The underlying bill, what used to be Schumer-McCain to Kennedy-Edwards, has moved to a degree in the right direction but certainly not nearly enough. Frankly, I would like to make sure that the law bill that I put so much blood, sweat, and tears into over the years leading up to 1984 when it was passed, will not be disrupted because of politics on this floor, especially since that bill has worked so well for the American people. My purpose this afternoon, however, is to discuss the Medicare prescription drug issue which we will be debating in the very near future. I have been working with four of my Senate colleagues--Senators Grassley, Jeffords, Breaux, and Snowe--for the last year on a Medicare reform and prescription drug bill. It is called the Tripartisan bill because it has Republicans, Democrats, and the sole Independent in the Senate. This legislation, the 21st Century Medicare Act, better known as the Senate Tripartisan Medicare prescription drug proposal, was introduced yesterday after months and months of hard work. This bill was introduced because the five of us crossed party lines and worked together. It was introduced because all five of us want a Medicare prescription drug benefit to be signed into law this year. We are tired of waiting for legislation that we could have passed 2\1/2\, 3 years ago, but every time it is brought up, politics is played with this legislation rather than doing what is right for our senior citizens and others in dire need of this legislation. Medicare beneficiaries deserve nothing less than to get it done this year, but others in this body, in my opinion, feel differently. Here we are on the verge of considering Medicare prescription drug legislation on the Senate floor without the Finance Committee ever being even a small part of it. Now I heard comments made that the Finance Committee has gone back and forth with this for years. That is not true. This is the first time we have really had a chance of passing a bill through the Senate that I think could very easily be accepted by the House, or in a conference certainly basically accepted by the House and the Senate. The Finance Committee members, under the leadership of Chairman Max Baucus, have been meeting for weeks to try and draft a consensus Medicare prescription drug bill. But due to artificial deadlines imposed upon us by the powers that be, we are not going to be given an opportunity to even consider a Medicare prescription drug bill in the Finance Committee itself before the full Senate considers the Medicare drug legislation. Why even have a Finance Committee--which everybody would acknowledge is one of the great committees in the United States Congress-- when bills that are under its jurisdiction are brought up on the floor without even a hearing or a markup? There were no delays. We could have had this markup and we could have passed this bill out today. We could have done it last week if we had had a markup. Sadly, politics is dictating policy, and I find that completely unacceptable, especially when it involves an issue as important as Medicare prescription drug coverage. By putting politics before policy, we are not doing what is in the best interest of our senior citizens and our citizens as a whole. I have also heard comments today that this is being filibustered. Nobody wants to filibuster this bill. That is always an old wives' tale that comes up when you do not have good arguments on your side. I would like to take this opportunity, though, to talk about the tripartisan bill. When drafting this legislation, we tried to reach out to everyone who has a stake in this issue. It has required many hours of meetings, meetings among ourselves, with our staffs, CBO, CMS, seniors groups, insurance providers, PBM representatives, technical experts, and other interested parties. Let me assure you this has been a unified effort, one which has required some give and some take from all of us. I truly believe this tripartisan bill is, in fact, the only bill capable of passing not only the Senate but the Congress in 2002. We have worked with CBO constantly in order to come up with an affordable solution, and CBO has told us that our bill will cost $370 billion over 10 years. As far as I know, the Daschle-Graham-Miller bill does not have a CBO score, but I expect it to be extremely expensive. As a matter of fact, the Daschle-Graham-Miller bill, as I know it today, would be well over $800 billion over 10 years, and it has a sunset provision. So this isn't even a permanent benefit. I know my seniors in Utah will be surprised to hear that we're even considering such a bill. In addition, there are no sunsets within our bill. Our Tripartisan bill is a permanent solution, not a temporary one, and CBO informs us that once our bill is implemented fully, 99 percent of all seniors will have drug coverage, which is truly remarkable. So, the question is, how does a temporary solution truly help seniors in the long run? I do not think it does. Our Tripartisan bill provides all Medicare beneficiaries with affordable prescription drug coverage because we let innovation and competition determine the prices, not of Government bureaucrats. That is how we keep prices for drugs competitive. I do not think it is a good idea to let the Government set the price, which is what will happen if the Daschle-Graham bill becomes law, and I do not think it has a chance of becoming law. I do not think it will get the necessary votes to become law. But our bill could, with honest decent work by all of us. We also provide additional subsidies to low-income seniors so that they, too, can afford to pay for their drugs. I find it absolutely appalling that there are people in our country who have to choose between buying food and buying prescription drugs. The Tripartisan group's goal is to put an end to that and provide additional help to those seniors who really need it. In fact, all seniors need it. For example, the 10 million beneficiaries with incomes below 135 percent of poverty will have 80 to 95 percent of the prescription drug costs covered by this plan, with absolutely no monthly premium. These seniors are exempt from the deductible and will pay well under $5 for their brand name prescriptions and their generic prescriptions. Enrollees at this income level who reach the catastrophic coverage limit will have full protection against all drug costs, with no coinsurance. We also take care of the 11.7 million lower income beneficiaries with incomes below 150 percent of the poverty level. Enrollees between 135 percent and 150 percent of the Federal poverty level will also receive a more generous Federal subsidy that on average lowers their monthly premiums to anywhere between 0 and $24 a month on a sliding scale. It also more than halves the cost of their annual drug bills. All other enrollees will have access to discounted prescriptions after reaching the $3,450 benefit limit and a critically important $3,700 catastrophic benefit, which protects seniors from high, out-of- pocket drug costs. This is hardly a doughnut hole. My friend and colleague Senator Snowe refers to it as more of a bagel hole. It is also important to note that 80 percent of Medicare beneficiaries will never experience a gap in coverage. As far as drug coverage is concerned, we let Medicare beneficiaries choose from at least two drug plans, allowing them to select a plan that suits their individual needs. Seniors are in charge, not the Federal Government. The Daschle-Graham bill, on the other hand, has a one-size-fits-all drug plan that is offered to Medicare beneficiaries. That is the type of solution that will lead us down a dangerous path, and before you know it the Federal Government, not the private marketplace, will be setting drug prices. We need to avoid that scenario at all costs. Finally, our plan gives seniors a choice of Medicare coverage. Seniors may remain in traditional Medicare or they may opt for the new, enhanced Medicare fee-for-service program which is designed to look more like private health insurance and less like a program that is stuck in the mid-1960s. We all believe that Medicare needs to be improved. Medicare has hardly changed since it was first created in 1965 and Medicare needs to become a 21st century program. So our bill provides seniors with a choice in Medicare coverage. Beneficiaries may stay in traditional Medicare or they may opt for the new, enhanced fee-for-service Medicare plan. I want to emphasize that we do not force seniors to enter into the new, enhanced fee-for-service plan. We just offer it to beneficiaries as an option. If Medicare beneficiaries want to stay in traditional Medicare, that is fine. Our bill allows them to do so. If they decide they do not like the new enhanced Medicare plan, they can switch back to traditional Medicare. We need to give seniors choices concerning their health care coverage. They need to be able to keep the Medicare benefits seniors have today, but seniors must also be given improved health care choices. I emphasize, once again, that CBO tells us that should our bill become law, 99 percent of all Medicare beneficiaries will have drug coverage. That would be tremendous for this country. We ought to do it this year. We should not be playing politics with it. We should not be setting up the Senate so this bill fails, so one side or the other can claim the other side refused to pass a bill this year. I believe providing Medicare beneficiaries with their choice of coverage is key, and the Tripartisan group worked together for months to ensure that seniors get quality drug coverage for an affordable price. I will conclude by saying we must make 2002 the year that Medicare is brought into the 21st century. This is the year that Medicare reform and prescription drug legislation should be passed by the Congress and signed into law. Our bill does more than just provide drug coverage. It includes Medicare reforms. It provides assistance to Medicare Choice. We can start this process by allowing the Senate Finance Committee to do its job and consider Medicare prescription drug legislation before it is debated on the Senate floor. Bypassing the Senate Finance Committee and going directly to the Senate floor sends a message to the American people that we are more interested in playing political games than letting the legislative process work. We need to have a markup in the Senate Finance Committee as soon as possible. We have Medicare bills to consider, both the Graham-Miller bill and the Tripartisan bill. We should have our Senate floor debate after the Finance Committee has approved legislation. It should not be the other way around. I believe Senators Graham and Miller are very sincere, fine people. They are good Senators. They believe in what they are doing. But if they do, we ought to have it come up in committee and vote. We are willing to have the Tripartisan bill voted upon. We have at least 12 votes out of 21 on the committee. That is probably the reason why the majority leader is determined not to bring up these matters in the Finance Committee. I am hopeful we will be able to work this out and provide affordable prescription drug coverage for seniors through legislation considered by the Senate Finance Committee. This is a top priority of mine and many of my colleagues in the Senate. We have been hearing from seniors for years about their need for Medicare prescription drug benefits. Why are we playing political games with such an important issue? I encourage my colleagues to work with us, to work with the Tripartisan group and others. I believe there is a majority, a significant majority, if we were allowed to do what is right, who would vote for the Tripartisan bill so seniors would finally get what they truly deserve, prescription drug coverage for the Medicare Program and bring Medicare into the 21st century once and for all. Medicare beneficiaries deserve that opportunity. We owe it to them. This bill would allow that to happen. I have been told this debate will take 2 weeks. I don't know why it has to take 2 weeks. We have three, four, or five different plans. We can vote on them. I personally hope we can vote on them. I believe if we are allowed to vote on them and people will get rid of the political aspects, we will pass a bill that will work this year for the benefit of seniors in the years to come. The Tripartisan bill does not have a sunset. The Tripartisan bill would continue on forever as far as we are concerned, to the benefit of all seniors in this country. I yield the floor.

Mr. HATCH

Mr. HATCH. Mr. President, I wish today to express my support for S. 2673, the Public Company Accounting Reform and Investor Protection Act of 2002. I am pleased that the Senate is acting decisively to impose harsh, swift punishment on those corporate executives who exploit the trust of their shareholders and employees while enriching themselves. The recent corporate scandals demonstrate just how important it is to hold corporate executives accountable. I believe it is equally important for prosecutors to be provided with the tools necessary to aid in the investigation of these forms of fraud. During this debate, our colleagues on both sides have consistently called for increased penalties for corporate fraud offenses. This week, as the Dow Jones index plummeted nearly 300 points--representing the biggest single day point drop since the week following the attacks of September 11 we voted unanimously to adopt a series of amendments that will strengthen criminal fraud penalties and create new criminal fraud offenses. I cosponsored an amendment with Senator Biden to enhance white collar penalties. And I supported an amendment offered by Senator Lott, which incorporated the President's proposal by enhancing white collar penalties, supplementing existing criminal laws, and increasing the Security and Exchange Commission's administrative powers to enforce this nation's securities laws. I also supported Senator Leahy's amendment, a measure I worked to improve in committee. This amendment includes new criminal and civil provisions that I believe will also assist in deterring and punishing future corporate wrongdoing. Further, I am glad to see the Senate finally considering legislation that will overhaul government regulation of the accounting industry. I agree with my distinguished colleague from Maryland that there is an inherent conflict of interest between internal and external auditing. The same people should not be installing the internal control system, performing the internal audits, and then reporting on the financial statements. The external auditor sometimes has to be tough as nails, and willing to disagree with its client's top executives. It is hard to be the bad cop when you are also the personal trainer. However, Congress cannot always second-guess the desires of investors. In some cases, stockholders, bondholders, and other stakeholders will be worse off if Congress imposes too strict a barrier between consulting and auditing. This is especially true for small businesses that may not be able to afford to hire both a consulting firm and a separate accounting firm. And, as the President has noted, in our fast-changing economy, Congressionally-imposed barriers between different business practices can end up becoming Congressionally- imposed barriers to productivity growth. I think the bill before us represents an effort to strike a good balance between these two competing goals of auditor independence and business innovation. It prevents internal and external audit work from being done by the same firm, and it establishes clear lines of responsibility and accountability. At the same time, the corporation's independent audit committee will be permitted to authorize certain consulting services if they are convinced it is in the shareholders' best interest. This audit committee, consisting of members of the client's board of directors, will be required by law to be completely independent of the corporation itself. This will mean that if the CEO and other top corporate officials believe it is in their company's best interests to have their accounting firm help with, for example, tax consulting and preparation, the corporate officials will have to argue the merits of their case before the independent audit committee. That kind of independence makes good sense, and it makes good law. The Federal Government needs to help investors whether banks, pension funds, or individual investors in their quest for accurate information about the financial condition of America's businesses. Doing so is crucial for our economic long-term health. While Enron's and WorldCom's financial shenanigans contain many differences, the similarities are far more important. These were both firms that borrowed too much money during the expansion years of the late 1990s. And when it started getting tough to make the debt payments, both firms tried to hide their financial difficulties through creative bookkeeping, cooked up at company headquarters. They succeeded for a time, but the combination of investor vigilance, media investigations, and government scrutiny are eventually bringing the facts to light. If there had been real financial transparency, both current stockholders and potential investors could pierce the veil of bookkeeping to immediately see these companies' true financial situation. This may not have prevented the painful layoffs and tragic loss of retirement assets by thousands of employees. However, with more accurate and timely information, investors, directors, analysts, financial institutions, and others could have intervened earlier and helped to restructure these firms before all-out catastrophe threatened. When it comes to business information, knowing sooner is always better than knowing later. And even more importantly, if corporate officials had faced the threat of serious jail time and the certain knowledge that their financial and accounting capers would be exposed to the world, they would have been much less likely to have overborrowed and underdisclosed in the first place. Mr. President, the bill on which we will vote today, on which Senator Sarbanes and many of our colleagues have worked so hard, contains solid provisions that I believe will put real fear of serious consequences into the minds of corporate wrongdoers. Does this bill represent a perfect solution to the corporate accountability issues presently facing our country? Of course not. I would have written a different bill in several respects. However, I believe that the bill is a good attempt to balance competing interests and different political philosophies. As the bill goes to conference with a House-passed bill that has some significant differences, I expect the balance to improve even further. Strengthening corporate accountability is crucial to our nation's long-term welfare. If Congress and the President can act together to help increase corporate transparency and restore investor confidence, then businesses will be better able to raise investment capital. Greater access to capital will enable U.S. businesses to fund the groundbreaking research and to purchase the high-tech equipment that is the foundation of America's long-term prosperity. And Americans from all walks of life will reap the rewards.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today in support of Justice Lavenski Smith to the Eighth Circuit Court of Appeals. Before I speak directly about him and his nomination, however, I would like to take just a moment to explain where the Senate stands on its job of considering and confirming President Bush's judicial nominees during this Congress. The Senate has not confirmed a single judge since May 13, exactly 9 weeks ago today. This is nothing short of irresponsible considering the vacancy rates and backlogs around the country. There were 31 vacancies in the Federal courts of appeals when President Bush sent us his first 11 circuit nominees on May 9, 2001, and there are 31 today. We are barely keeping pace with the rate of attrition. The Sixth Circuit is half-staffed with 8 of its 16 seats vacant. The DC. Circuit is two-thirds staffed, with 4 of its 12 seats sitting vacant. Meanwhile, seven of President Bush's first 11 nominees have not even been scheduled for hearings--despite having been pending for 432 days as of today. A total of 23 circuit court nominations now sit pending for those 31 vacancies. But we have confirmed only 3 circuit judges this year, and only 9 since President Bush took office. It is bad enough that the Judiciary Committee has been slow to even begin the process of consideration by scheduling hearings. It is even worse that the Democrat leadership can't do what is necessary to move the 17 judges that are still pending for a floor vote. Of course, I applaud the leadership for bringing Lavenski Smith to a vote, but I think everyone has to admit that 1 out of 17 is, at most, a low start. Many of my colleagues have noted with displeasure the Judiciary Committee's wholesale slow-walking of President Bush's nominees, but now I must bring some attention to the Senate leadership's role as well. It is high time for them to demonstrate their leadership, and their control of the floor, by setting votes on the rest of the 16 judicial nominees who are awaiting a final vote. Mr. President, let me put the current situation into context. Historically, a President can count on seeing all of his first 11 circuit court nominees confirmed. Presidents Reagan, Bush, and Clinton all enjoyed a 100 percent confirmation rate on their first 11 circuit court nominees. In stark contrast, 7 of President Bush's first 11 nominations are still pending without a hearing for over 1 whole year. History also shows that Presidents can expect almost all of their first 100 nominees to be confirmed swiftly. Presidents Reagan, Bush and Clinton got 97, 95 and 97, respectively, of their first 100 judicial nominations confirmed. But the Senate has confirmed only 57 of President Bush's first 100 nominees. Some try to blame Republicans for the current vacancy crisis. That is bunk. In fact, the number of judicial vacancies decreased by 3 during the 6 years of Republican leadership. There were 70 vacancies when I became chairman of the Judiciary Committee in January 1995, and there were 67 at the close of the 106th Congress in December 2000. Now I know that some try to justify the current wholesale delay as payback for the past. That is just a sleight of hand. Look at the facts: During President Clinton's 8 years in office, the Senate confirmed 377 judges--essentially the same, 5 fewer as for Reagan, 382. This is an unassailable record of non-partisan fairness, especially when you consider that President Reagan had 6 years of a Senate controlled by his own party, while President Clinton had only 2. Furthermore, almost 50 percent of all Federal judges currently serving are Clinton judges. Finally, some suggest that the Republicans left an undue number of nominees pending in committee without hearings at the end of the Clinton administration. Well, we left 41, which is 13 less that the Democrats left without hearings in 1992 at the end of the Bush administration. Mr. President, the President's nominees deserve better; President Bush deserves better; and most importantly, the American people--the people who own this Government and who rely on the judicial branch for their rights and freedoms--deserve much better. Now, Mr. President, I would like to turn to the matter directly at hand, the confirmation of Lavenski Smith to the Eighth Circuit Court of Appeals. Justice Smith is a highly qualified jurist who has distinguished himself through his service to the poor, his service in the public sector, and his service on the State bench. His experience includes working for legal services, running his own law firm, serving with distinction on the Arkansas Supreme Court, and holding his current position on the Arkansas Public Service Commission. Justice Smith began his legal career at Ozark Legal Services in Fayetteville, AR, specializing in consumer defense and the representation of juveniles as a guardian ad litem. He worked with those who are traditionally underrepresented: low-income individuals, families, and children. After 4 years, he opened his own law firm in the Arkansas town of Springdale, where he handled all sorts of cases, including business law, real estate, domestic relations, worker's compensation, public benefits, and estates. Notably, his firm was the first minority-owned firm in the history of the town. Justice Smith's excellence as a lawyer and his commitment to public service did not go unnoticed: in 1999 Governor Huckabee appointed Justice Smith to the Arkansas Supreme Court. During his tenure on the bench, Justice Smith wrote opinions on a range of legal issues, including criminal, tort, worker's compensation, insurance, contract, civil procedure, oil and gas, tax, probate and attorney discipline matters. Currently, Justice Smith serves on the Arkansas Public Service Commission, which is responsible for regulating the State's electric, gas, and telecommunications industries. In this position, Justice Smith has become an expert in understanding and interpreting a wide variety of complex Federal regulations, including the Federal Power Act and the Federal Telecommunications Act of 1996. Chief Justice Arnold of the Arkansas Supreme Court, Justice Smith's former colleague, praises his intelligence and the quality of his service on the court, saying, ``I think he'll make a great Federal judge.'' Justice Smith has wide, bipartisan support in his home State, but I think the Arkansas Democrat-Gazette summed it up well: It said that Justice Smith possesses ``integrity, intelligence, and compassion.'' I agree, and I urge my colleagues to join me in supporting this qualified candidate for the Eighth Circuit. I think that each of us can be proud about voting for the first African- American Arkansan to serve on a circuit court of appeals. Thank you, Mr. President. I yield the floor.

Mr. HATCH

Mr. HATCH. I ask for the yeas and nays.

Mr. HATCH. Mr. President, I want to applaud President Bush and Senator Lott for offering a comprehensive legislative proposal that calls for harsh, swift punishment of corporate executives who exploit the trust of their shareholders and employees, while enriching themselves. This bill, which tracks the President's recent proposal, increases the criminal penalties that apply to fraud statutes that are frequently used to prosecute corporate wrongdoers. It also strengthens an existing obstruction of justice statute, and calls for an aggravated sentencing enhancement for frauds perpetrated by corporate officers and directors. Finally, it increases the Security and Exchange Commission's administrative enforcement tools by strengthening the SEC's ability to freeze improper payments to corporate executives while the company is under investigation, and by enabling the SEC to bar corporate officers and directors from continued service where they engage in serious misconduct. I support these provisions because I strongly believe that it is critical that we hold corporate executives accountable for acts of wrongdoing. We can do so by supplying the SEC and federal prosecutors with the civil and criminal tools they need to investigate and prosecute acts of corporate misconduct. Let me briefly elaborate on some of the specific provisions contained in this bill. First, as I mentioned, the bill doubles the maximum prison term for mail and wire fraud offenses, from 5 years to 10 years. This is identical to a provision Senator Biden and I have included in our amendment. This is a necessary sentencing enhancement, and one that is long overdue. Because prosecutors frequently use the mail and wire statutes to charge acts of corporate misconduct, it is important that we ensure that the penalties that apply to such offenses are sufficiently severe to deter and punish corporate wrongdoers. Second, like the suggested enhancement contained in the bill Senator Biden and I have proposed, this amendment directs the U.S. Sentencing Commission to review the sentencing guidelines that apply to acts of corporate misconduct and to enhance the prison time that would apply to criminal frauds committed by corporate officers and directors. As I have stated, I strongly support such an enhancement because corporate leaders who hold high offices and breach their duties of trust should face stiff penalties. Third, the amendment strengthens an existing federal offense that is often used to prosecute document shredding and other forms of obstruction of justice. Section 1520 of Title 18 of the United States code currently prohibits individuals from persuading others to engage in obstructive conduct. However, it does not prohibit an act of destruction committed by a defendant acting alone. While other existing obstruction of justice statutes cover acts of destruction that are committed by and individual acting alone, such statutes have been interpreted as applying only where a proceeding is pending, and a subpoena has been issued for the evidence that is destroyed. This amendment closes this loophole by broadening the scope of the Section 1512. Like the new document destruction provision contained in S. 2010, this amendment would permit the government to prosecute an individual who acts alone in destroying evidence, even where the evidence is destroyed prior to the issuance of a grand jury subpoena. Prosecutors in the Andersen case succeeded in convicting the corporation. However, in order to so, they had to prove that a person in the corporation corruptly persuaded another to destroy or alter documents, and acted with the intent to obstruct an investigation. Certainly, one who acts with the intent to obstruct an investigation should be criminally liable even if he or she acts alone in destroying or altering documents. This amendment will ensure that individuals acting alone would be liable for such criminal acts. This amendment also includes new statutory provision that will strengthen the SEC's ability to freeze improper payments to corporate executives while a company is under investigation. These provision would prevent corporate executives from enriching themselves while a company is subject to an SEC investigation, but before the SEC has gathered sufficient evidence to file formal charges. In particular, these provisions would enable to SEC to freeze improper payments by obtaining a federal court order. The order, which could last for 45 days and be extended upon a showing of good cause, would freeze extraordinary payments to corporate executives and require that such payments be escrowed. And where an executive is charged with a securities law violation prior to the expiration of the court order, the escrow would continue, with court approval, until the conclusion of legal proceedings. Finally, the amendment grants the SEC the authority to bar individuals who have engaged in serious misconduct from serving as officers and directors of nay public company. Under current law, only a court may order an officer and director bar. In an SEC enforcement action, a court may issue an order that bars a person from acting as an officer or director of a public company where the person has committed a securities fraud violation, and his or her conduct demonstrates ``substantial unfitness'' to serve as an officer or director. However, under current law, the SEC cannot order this remedy in an administrative cease-and-desist proceedings, even where the person's conduct would otherwise meet the standards for the bar. This amendment would enable the SEC to issue such a bar where the officer or director has committed a securities law violation and his or her conduct demonstrates ``unfitness'' to serve as an officer or director. This will give the SEC the ability to punish an officer or director who has committed an unlawful act, where it has not yet instituted an enforcement action. I strongly believe that if Congress and the President act together to increase corporate transparency and to enact tough civil and criminal provision, we will succeed in restoring confidence in our market economy. The Federal government plays an important role in upholding and enforcing standards of corporate conduct. I look forward to working with my colleagues and with the President to enact needed legislation to strengthen corporate accountability.

Mr. HATCH. Mr. President, I am proud to stand here with my colleague from Delaware, who is one of the truly remarkable Senators who knows as much about criminal law as anybody in this body or in the Congress itself. I also rise today and applaud President Bush and Senator Lott, as well as Senator Biden, for offering what really, combined, will be a comprehensive legislative proposal that calls for harsh, swift punishment of corporate executives who exploited the trust of their shareholders and employees while enriching themselves. Senator Biden and I have worked together for years now on many important pieces of legislation. This is not new for us. I always feel good when I can work with my colleagues on the other side. It is always a pleasure to work with him. I commend him for the care and attention he has given to the subject of white-collar penalties, as well as for his leadership in this area. Just in the past 4 weeks, Senator Biden scheduled two hearings to review the adequacy of current penalties for white-collar criminal offenses. I am thankful that he did so for I think this is a critically important area for us to focus on, especially in today's unprecedented climate of market turmoil and corporate responsibility--or should I say irresponsibility. All of us well know that the past few months have been painful ones for our Nation's financial markets. At least some of the blame can be laid at the doors of some multibillion-dollar corporations, their highly paid executives, and the accounting firms that were supposed to assure the public's trust. We learn--each week it seems--of more and more accounting and corporate fraud and irregularities that have caused billions of dollars of losses to innocent investors. I am personally outraged by these scandals. The amendment I cosponsor today is a product of much thoughtful attention and scrutiny. No Member feels more strongly than I do about the importance of our criminal laws. They must be fair, and they must be just. If our criminal laws are to bear credibility and provide deterrence, they must adequately reflect the severity of the offenses. But right now they do not do so in the context of so-called white collar crimes. They are, to put it bluntly, out of whack. A person who steals, defrauds, or otherwise deprives unsuspecting Americans of their life savings--no less than any other criminal-- should be held accountable under our system of justice for the full weight of the harm he or she has caused. Innocent lives have been devastated by the crook who cooks the books of a publicly traded company, the charlatan who sells phony bonds, and the confidence man who runs a Ponzi scheme out there. These sorts of white-collar criminals should find no soft spots in our laws or in their ultimate sentences, but all too often they have done so. It is time for us to get tough with these offenders. We need to make crystal clear that we will not tolerate this sort of outrageous criminal conduct, conduct that not only devastates the savings of citizens, but also has lasting effects on the entire world's confidence in our American financial markets. This amendment will take away the soft landings these criminals have expected and obtained for far too long. The amendment Senator Biden and I propose--with the acceptance of the additional language of the President and Senator Lott--makes several notable improvements to current law. As Senator Biden said, and I will reiterate, first, our amendment increases the maximum penalties for those who commit mail fraud, wire fraud, and ERISA offenses, as well as those who conspire to violate Federal criminal laws. These changes are long overdue. The maximum penalty under current law for most of these offenses is 5 years, which is the same as the maximum penalty that could be handed down for mutilating a coin produced by the U.S. Mint. The current maximum penalty for ERISA fraud violations is just 1 year. In other words, a fraud committed in connection with employment retirement plans, no matter how severe or wide, is punishable now only as a misdemeanor. Under current law, one could get 5 years for scratching George Washington's face off a quarter but only 1 year for defrauding an entire company's pension plan. It goes without saying that we need to fix this problem. Think about it. Pension plans go down the drain because of dishonest business people, which is sometimes hundreds of millions of dollars. Think of all the people who lose as a result of that. Second, our amendment would make corporate officials criminally responsible for their public filings with the SEC. Make no mistake, these filings are critically important to investors who rely upon them to make decisions affecting how they should invest billions and billions of dollars. They need to be accurate. Our amendment makes it possible to hold somebody criminally accountable if they are not accurate. Third, our amendment directs the U.S. Sentencing Commission to review the adequacy of current guidelines for white-collar offenders. We heard just a few weeks ago from the Department of Justice that these types of criminals often get off with a slap on the wrist and that judges too often do contortions to avoid handing down terms of imprisonment. This simply is not good and will not do. It undermines the deterrent effect of our criminal laws, makes a mockery of our system of fair and evenhanded justice, and ultimately sends the wrong message to all Americans. Our amendment will ensure that the Sentencing Commission will take steps designed to ensure that our system of justice no longer coddles criminals simply because they ``just'' steal. It is time for the Senate to act on this important matter of fraud and responsibility. I think these amendments are a big step in the right direction. I compliment the President, Senator Lott, and, of course, my dear friend and colleague from Delaware, Senator Biden, for the work they have all done on these two amendments. I agree with Senator Biden that we are willing to accept that part of the preference package. With that, I yield the floor.