Rick Santorum

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I rise in opposition to the Pryor amendment which I understand was debated just a few minutes ago. I do so in strongest terms. We had a debate last week on the issue of reimportation of drugs from Canada. The Senate spoke and said that if the Secretary of Health and Human Services would declare that such reimportation was safe, we could then bring these drugs across the border at a reimported price. Many on this side of the aisle, and I am sure a few on the other side of the aisle, voted for that amendment, as amended, by Senator Cochran for that safety measure basically concluding that the Health and Human Services Secretary would never determine that these drugs would be considered safe, since the Canadian Government itself said they could not guarantee they were safe. We have all sorts of problems today with counterfeit drugs, drugs getting shipped in from other countries, leading to a variety of health problems. There was a great amount of comfort. The Pryor amendment goes one step further, according to my understanding, saying if the Secretary does not say the drugs are safe within a period of time--I believe it is 2 years--then prices of drugs in this country will be set by the Canadian Government, which I find a startling concession of authority of this Government to a foreign country; that we are going to have a foreign country and a board in a foreign country set prices for drugs in the United States of America. It is a remarkable concession for the Senate. I know we have a great desire to control many things in the United States. We would like to set prices, I am sure, on lots of different items. We do it in the Agriculture bill all the time. Now we are going one step further. If you cannot win price controls by having the Senate pass a price control bill, delegate the Canadian Government to control the prices for you. Maybe we should choose different countries. Why Canada? Maybe there are other countries that set even lower prices than Canada. I suspect there are countries that would set lower prices than Canada. Why not choose them if we really want to save consumers money? If this amendment is adopted, I would probably offer amendments that we should have chicken prices set by the Canadian Government, wheat prices set by the Canadian Government, and lumber and timber prices set by the Canadian Government. Maybe it would just be good to have the Canadian Government set all our prices in this country for those items we think are important. Obviously, they are very thoughtful in Canada, and they know what is best for us here, and we should just go ahead and let them set our prices for us. We are not talking about the Canadian marketplace setting prices. We are talking about the Canadian Government. Let me explain how the Canadian Government operates. The Canadian Government operates as follows: You want to sell your drug in Canada? Fine, you have to get it approved, get it on the formulary. By the way, you have no other place to sell drugs other than drugs approved by the Canadian Government. Remember, they have a Government- run health care system up there. My understanding is that the Canadian Government actually sets their own drug prices. I do not think they go to another country to get drug prices set and use those. I think they set their own. Assuming they are setting their own drug prices, what they do is say to the drug company, take Pfizer: OK, you want to sell your drug here? Great. We will pay you $1 a pill. Pfizer says: This costs us $1 billion to research. It is a great drug. It solves all sorts of problems. We sell it in America for $10 because of the enormous cost of the research and testing to make sure it is safe and efficacious, and it cost us a lot of money, and we only have a short patent by which to recoup the investment dollars. We have a lot of drugs we tested along the way to find a cure for this problem, and we have to recoup those costs; otherwise, we cannot stay in business, we cannot continue to research. The Canadian Government says: That is nice; a dollar. Pfizer says: No, we can't sell it for a dollar. The Canadian Government says: Fine, you can't sell your drug here. So Pfizer loses out on a market of 16 million people--I do not know how many people are in Canada--16 million people, something like that. Pfizer says: No, we won't sell. Or what they say is: You know what. It only costs us 50 cents to make this pill. Yes, we are not going to make any money on it, but this is a drug that is an important drug so we will make it available in Canada for a dollar. The other alternative is they just say, no, we are not going to sell it in Canada. Under Canadian law, the Canadian Government has the right to steal Pfizer's patent, issue that patent, that formulary or formula, whatever the drug is, to a generic drug manufacturer in Canada for them to produce at the dollar price that Canada is willing to pay for it. So they can steal a patent that a company in this country spent millions of dollars, potentially a billion dollars, to come up with and set a price in Canada at the level they so choose. The Senator from Arkansas wants to condone that behavior and say we have to charge the same price in this country. I cannot imagine anything that would be more damaging to an industry that does more than any industry in America to solve our health problems. They spend more on research and development than any group of companies that exist, and they bring through drug after drug and therapy after therapy to extend lives, to increase the quality of life, and to cure diseases. So the reward in the Senate is that we are going to have a foreign government set prices for an industry that does not exist in Canada but it does exist in the United States. The majority of the new drugs in the world are researched and developed in the United States. Yes, we do pay more for drugs in this country. I will concede that to the Senator from Arkansas. We pay more for drugs here, and the reason we pay more for drugs here is that we do not regulate prices, as most other countries around the world do. I think the Senator from Arkansas is on to something. We need to do something about those prices around the world, but it is not to adopt them in this country; it is to get the trade administrator to start putting these issues on the table when it comes to negotiating free trade deals. They have to put on the table the pirating of our patents, with our free trade partners such as Canada and Mexico. They have to put on the table the prices they pay for drugs that are researched in this country that our people in this country subsidize. Yes, we do. In fact, we subsidize the world's research in pharmaceuticals, admitted. So the Senator from Arkansas says we are going to stop doing that. We are going to do what Canada does, which is not subsidize one nickel of the cost of researching these new drugs--what Germany does, what England does, what most of the developed world does. Yes, they piggyback on America, and so the Senator from Arkansas is saying let's just piggyback on Canada. Well, what are the consequences? I do not think it takes an expert in pharmaceuticals to figure out exactly what happens. We will squeeze the research dollars out of the drugmaking industry because we will be reimbursing them based on their cost of manufacturing. So the dollars for research to attract investment dollars to spend on research and development for that next generation of drugs will be gone. Maybe that is a good idea. Maybe it is more important to have people get their drugs inexpensively today than to find that cure for cancer, diabetes, or Parkinson's, or develop a new drug to ease symptoms of HIV. Maybe it is more important for someone to have their drugs a little cheaper today. But there are millions of Americans, and there are even more millions of people around the world, waiting for that little pill that is yet to be discovered that will extend their life so they can see their daughter or grandchild being born, waiting for someone to cure that disease they are saddled with today, to give them just a few more months or a few more years, and we will say to them, anyone who votes for this amendment, when that person walks in their office and says, I am here for NIH research dollars for diabetes, or, I am here for NIH research dollars for AIDS, Parkinson's, cancer, or heart disease, I want that Senator to say to them, I voted for this amendment and, yes, we are going to have lots of research dollars, but no one is going to take that research and do much with it because we have just squeezed every dollar we can for research and development out of the pharmaceutical industry, which would take that research and do something with it to put it to commercial practice and make that drug available. We will say to them that even though we are passing a prescription drug benefit that is going to extend pharmaceutical benefits to make drugs less expensive, that was not good enough. No, it was not good enough to cover people's drug benefits. We have to take a bite out of the hide of those nasty pharmaceutical companies that get beaten up with frequency, I understand. They get beaten up a lot, until they are needed, until they extend your wife's life or they save your child's life; then the rhetoric tones down quite a bit. We are shooting with real bullets. This is a Medicare pharmaceutical package that will pass and turn into law, and anybody who thinks this is a free vote, that we can go back home and campaign and say, gee, I am going to get you cheap drugs, understand what this vote means. When that 7-year-old diabetic walks in your office, understand what you have done. It is as real as denying them the cure that is sure to come. I know this is not a popular issue, to stand up for pharmaceutical companies. Maybe we should do to them what we have done to a lot of industries that have been successful in America: Beat them up, tax them, take their profits away, until they become dependent upon us, and then we will give them loan guarantees and bail them out. Then it will be a really popular thing because they will be losing money and we will have to help them. I think that is a very bad approach. The right approach is to provide coverage for those who are in need of insurance to help them with their prescription drug bills while at the same time allowing one of the most vibrant industries we have in this country to survive and thrive. That is the balanced approach. It is not attacking the very organizations, the companies, that are providing lifesaving drugs for millions of Americans and millions around the world.

Mr. SANTORUM. Mr. President, do I have time remaining?

Mr. SANTORUM. I am happy to yield for a question.

Mr. SANTORUM. What I said in several speeches is as follows: Where there is competition, there are like classes of drugs. They use the exclusion, they use a formulary to exclude or drive down prices. If you have 10 arthritis drugs, they pick two or three, which is what a formulary is all about, and they will pick those based on the cheapest price available and patent medicines. And they will exclude others so they do not have access to the market. I have never said in those cases the Canadian Government would use their authority to steal a patent. In fact, I have been very clear. I have said in the cases they would use it is where this is a unique drug. And if this is a unique drug, a breakthrough drug, or something that has no other competition, if you do not go along--we used the example of, I think, Cipro they were using as an example that is relevant to the case I made in the past--where there is a drug that does not have competition, that is, in fact, what they do. Leverage. In the other cases where there is competition, they have other leverage and they will not use the licensing of a patent or the stealing of a patent as a recourse. There are two different competitive or anticompetitive maneuvers by the Government of Canada: One having to do with drugs of which there are a variety in that class and a separate, the patent issue having to do where there is a drug with no real competitor. This is the case I have made repeatedly, not just last week but in years past. If I was not clear on that today, I may not have been in my explanation. I apologize but that is what I have said.

Mr. SANTORUM. Mr. President, I understand the point which the Senator from New Mexico is trying to accomplish. We do this in Pennsylvania. We do not have an asset test for our PACE Program. If you asked anybody up there now, Pennsylvanians dealing with this PACE Program, with the budget shortfall, one thing they would like to have put back in the box is this asset test. You could have, conceivably, somebody who has a $1 million house and has all their investments in a house or has other assets that are not income producing and they could qualify for a very rich drug benefit under this amendment. It really does encourage people to put their money into nonproducing assets to qualify, particularly those who are sick, to qualify for a drug benefit. I just think these asset tests are a way of recognizing that income is not the only measure of what you can afford to pay when it comes to drugs. We have to look at what people own and the assets they have. You can have someone who has very high asset value and very low income. We run into that all the time. That is the reason we have a variety of different taxes, to make sure we get at different ways in which people accumulate wealth and hold assets or live off income. So I just say while this is well intentioned, it opens up a Pandora's box to have people who have, frankly, lots of resources--potentially lots of resources to be able to provide for themselves and also would lead, I would argue, to unwise public policy to encourage people toward planning when they retire to put their assets in nonperforming or nonincome-producing assets at a time when they probably should do otherwise. While it is well intentioned, it could lead to a variety of problems. It is also a very expensive amendment and opens it up to millions more people, and this is already a bill that many believe is very generous to people who have a substantial amount of money. We should not be expanding this program in the subsidies to people who have a lot of assets that may not be income producing. I reserve the remainder of my time.

Mr. SANTORUM. I was not in any way suggesting you, individually, with respect to pharmaceutical companies. I was suggesting the amendment is very damaging to that research. The Senator mentioned we subsidized through NIH research, as we do a variety of other fields, not just pharmaceuticals, as well as providing research and development tax credit, which, of course, we do not just for pharmaceuticals but for a variety of different industries. What we also do is have the FDA process which is the most expensive and cumbersome existing in the world. It takes months, and in most cases years, longer to get a drug to market, and that cap starts from the time you file, not from the time of FDA approval. The fact we had a year or 2 or 3 or more, when drugs are available in other countries and not available here, it makes the time to recoup the investment shorter. That is one of the reasons our prices are high, because of the shorter time drug companies have as an opportunity to recoup their investment. They have a longer period of time in places such as Canada, which does not require the testing we do and the trials we do. The other reason is we also have a very expensive litigation system in this country. Pharmaceutical companies, not surprisingly, because they deal in the area of health care, are in court a lot for adverse reactions to their pharmaceutical products. Other countries do not have nearly the lucrative civil justice system, medical liability system, that we have in this country. Therefore, the costs associated with selling pharmaceuticals in this country because of our litigation system are disproportionately higher than they are in places such as Germany, Canada, and others that do not have the same kind of rewards we see in this country for harm done to people that ingest the drugs. It is not just what we do to subsidize. Canada would say they probably provide a percentage of money in there to help research, and I am sure the other countries would say they do the same; that they contribute a share toward research, too. As much as we subsidize, we probably cost them when it comes to the existing structure of the FDA and the legal system in this country. I argue that, yes, we may help, but we probably give with one hand and take with the other. The bottom line is, this amendment delegates to the country of Canada the authority to set drug prices in this country. I don't know whether the Senator from Arkansas has considered whether drugs that are not set by formulary in Canada, whether those prices would not be set in this country, or only those on the formulary are set. In the end, if this would pass, you would have a lot of drug companies probably not selling drugs in Canada because by doing that, they give up this market. My guess is the folks who are probably against this more than any other U.S. Senator, including myself, are probably the people in Canada who, if this were to pass, we probably would not find one pharmaceutical company willing to sell the drug in Canada if they would lose their market here. That may not be your intention, but I suspect that would be the consequence because it is a pretty small market up there compared to here. It is not profitable up there compared to here. My guess is you would have the undesirable effect of affecting the health care of millions of Canadians when it comes to the ability to get new drugs; or conversely you would be requiring the Canadian Government, and maybe this would be good, to raise the reimbursements for their drugs. That may be the desirable impact. That is not something I would be willing to take a chance with, as to whether the Canadian Government would respond in a favorable fashion, at least to my understanding, to this amendment by actually increasing drug prices over there so they could keep some level of new pharmaceuticals within their country. I understand we are not going to be voting on this immediately, this is going to be voted on tomorrow at some point. But I did want to come to the floor and just urge my colleagues, even if you are for reimportation, this is a fundamentally different thing. This is just completely changing the drug pricing structure of the United States of America and delegating it to a foreign entity. I strongly suggest if you want to do that, if you want to set drug prices, let's have an amendment to set drug prices. My goodness, let's not delegate it to the people of Canada to set our drug prices. Even if you are for reimportation, even if you are for cheaper drug prices, don't let the Canadian Government do it. Get the glory of setting it ourselves, if we want to do something. I yield the floor.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I love this idea that we are going to let markets work and have free trade. What the Senator doesn't tell you is the reason the price is $1 instead of $10 is that Canada sets the price. Canada says: If you want to sell drugs here, fine, here is what we will pay. If you don't agree, you cannot sell the drug. If we really want to sell your drug, we will steal your patent and we will make the drug up here and sell it for the price we want. That is the law in Canada. So if you want free trade, great, we will have them set the price for all the agricultural products up there and be able to set that and send it back here and call that free trade.

Mr. SANTORUM

Mr. SANTORUM. Will the Senator yield for a question?

Mr. SANTORUM. Mr. President, if a drug is shipped from outside of Canada to Canada for resale in the United States, does that go through the same handling that the Senator from North Dakota has discussed?

Mr. SANTORUM. If they are for the purposes of being resold in the United States, not in Canada, are they also certified by the Government?

Mr. SANTORUM. Mr. President, I rise in opposition to the Dorgan amendment, although as modified by Senator Cochran's amendment, I will not oppose it. Senator Cochran's amendment goes to the whole point here, which is that reimportation of drugs is unsafe. I am not the one saying that. I think most Members here are very concerned about the safety aspects of reimportation. We have three Secretaries of Health and Human Services, 10 former FDA commissioners, the U.S. Customs Service, the White House, DEA, CMS, Canadian Pharmacy Regulatory Agency, U.S. Pharmacy Regulatory Agencies, and 44 U.S. pharmacist groups, voicing safety concerns about the reimportation of drugs. I am satisfied Senator Cochran's amendment will sufficiently reflect the concern of Members of this body and of these organizations about the issue before us. So I am going to set that aside. I could argue until the cows come home how this is an unsafe and unwise practice to engage in. But with this amendment, we will leave it up to the Secretary to determine as to what he believes--and he was here a minute ago. We have a statement from him already saying he does not believe it is safe. I am comfortable leaving it in the hands of someone who will study this issue in depth with respect to safety. I want to dispel a couple of myths that have been created during this debate. One of the myths is that American pharmaceutical companies spend more money on advertising than they do on research. As most people who have followed the pharmaceutical industry and followed this debate know, the pharmaceutical industry is the most research-intensive industry in our country. I have always said I find it remarkable that we are here on the floor of the Senate all the time beating up on the pharmaceutical companies, saying they make too much money or they spend too much money on advertising or they don't spend enough money on research and development, and we need to whack them here and whack them there until they become like the steel industry, where they become--or other industries--less and less profitable, and then we pass loan guarantee programs to prop them up. That is sort of the way we do things here. If anybody is doing well, whack, we are going to take a shot at them and say they are doing too well for everybody's good. Let me just suggest the pharmaceutical industry is doing well because they are leading the world in curing disease and treating very serious health problems. They are doing it because of the enormous amount of research they are doing, not because of the money they are spending on advertising. General Motors spends more money on advertising--some $4 billion every year. That dwarfs almost all of the spending by the pharmaceutical industry with respect to advertising. Yet I don't hear the Senators from Missouri or Michigan or any others out here complaining we pay too much for cars. Cars are as much of a necessity for most people as pharmaceuticals. Why don't we hammer General Motors, Ford, and those other folks for wasting this money on advertising. Companies spend money on advertising because they have an obligation to sell their product. The way you sell your product is by promoting the value that product hopes to bring to an individual's life--the positive attributes of the product. Pharmaceutical companies have the right to do that through advertising to the general public, which may not be informed about new therapies that are available, as well as through direct advertising to physicians who prescribe the medicine. That is a proper role, I believe, in informing the public. We want them to be informed. I cannot imagine we would want a public that would not want to know what some of the more recent developments and potential improvements to their lives that are available to them. Some have suggested their spending on advertising is more than they are spending on research and development. That is not true. I know that was said in passing. Someone said: I think this is the case. Let me clarify for the record so we do not have this common misstatement that I think this may be the case. Let me tell you what the facts are. I have a chart. It is just a piece of paper. I do not have it blown up. The black line is the spending on research and development, and the light gray line is the total promotion. Total promotion means, yes, advertising, but it also means the free samples of drugs many receive when they go to the doctor's office. That goes in promotion. That is actually, in a sense, free drugs for the purposes of advertising and promoting the product. All that is included in here. You can see that research and development while, yes, advertising is going up, research and development is going up even further. In 2001, $30 billion was spent on research and development and a little over $10 billion on advertising--three to one. I daresay General Motors does not spend three to one on research and development versus their advertising. I daresay most companies and most industries do not come close to spending that amount of money. But you know what. They are the bad guys. They are the guys we have to hit upside the head. Why? Why do we have to hit them upside the head? Because they are increasing their prices too much. It is too costly, and we need these products. Let's look at why they are increasing their prices and why you can go to Canada, Germany, or other places, and receive these drugs for less money. There are a couple of reasons. No. 1, there was an excellent article in the ``Weekly Standard'' just the other day talking about the incredible cost of getting drugs approved by the FDA. For a company which starts out with thousands of compounds with which they are experimenting, researching, trying to work themselves through the process to determine what is a viable compound to experiment with and to move forward with, they start out with thousands, tens of thousands. They narrow it down to a few hundred. They do some more intensive research on those. They get to about four or five they do some trials on and some tests on and even further research. They come down to usually one drug where they go through the extensive process of clinical trials and testing. By the way, the reason Europe, Canada, and other countries around the world get drugs years before we do, in some cases, is because of the incredible costly process the very people who are complaining the drugs cost too much have supported, the extensive approval process that jacks up the price of those drugs in this country. It costs $1 billion on average for a drug to go from that basic research of compounds all the way through the process of determining whether it is effective, whether it is safe, what conflicts there are. All the issues they have to deal with, it costs about $1 billion in this country. It does not cost $1 billion in Canada. It does not cost $1 billion in Europe. It does not cost $1 billion in Mexico. It costs $1 billion here because of the extraordinary lengths to which we go to make sure the drugs here are, what? Let's hear that word again. Safe. That those drugs are safe. We put a premium value on, yes, efficacy. They have to be effective. They have to treat what they say they are treating, and do so effectively, but they also have to be safe. So we put a high value on safety, and we require these companies to go through enormous hoops to make sure, in this country, before a drug is sold, we know it is safe. We are suggesting two points: No. 1, safety is a highly valued commodity when it comes to drug use, and that reimportation is unsafe. No. 2, one of the reasons reimportation is so popular is because the cost of the drugs are cheaper. One of the reasons they are cheaper is because they do not have to go through the safety measures they are put through in this country. You require them to prove it is safer, and then you say: Gee, why are you charging us more money? Why don't we just get them from this other country, that, by the way, does not require you to go through those hoops. So they do not pass on the costs to these other countries. There is another reason. The other reason is because in Canada, Mexico, most of the world, they set prices. They set prices. They say: You want to sell drugs in our country? Fine. Pfizer, you want to sell a drug in our country? No problem. Here is what we will pay you. Pfizer says: Wait a minute, we have all these costs. I want to make a profit. Fine, if you want to make a profit, here is what we will pay you. We charge $3 for this drug in the United States. You are only offering to pay us $1. Well, we have looked at it and your manufacturing costs are 50 cents; $1 is a pretty good price. You will make 50 cents on every pill. Pfizer says: That is our manufacturing cost. We have hundreds of billions of dollars in research costs. We have litigation costs we have to be concerned about. We have advertising and other related costs that are built into the cost of this drug. You are only giving us the manufacturing cost. If you don't like the deal, you cannot sell your drug. So if you want to sell your drug and make your 50 cents, sell your drug. If you don't, see ya. The drug company has to make a decision: Do I agree to sell based on the price the Government wants to give me or am I shut completely out of that market? A lot of drug companies say: OK, I am not making the money I could in this country because we do not have those kinds of price caps on our drugs yet, and they say: At least I am making some margin. OK, I will agree to sell there. If they say no, they do not have any market share at all. That is a best case scenario. A worst case scenario in Canada is: I have a breakthrough drug, and there are no other drugs like it in the world. It is a new class. It is, in fact, one of these great discoveries that we hope for every day. They go up to Canada and say: We spent over $1 billion researching, coming up with this great breakthrough drug for a cure or for a treatment for this illness. Canada says: Great, we would love to sell that drug. There isn't any other drug out there that does this. Yes, you want to charge us $10 a pill, that is nice; we will pay you $5. The drug company says: Well, that is nice, 10. Canada says: No, you didn't hear me, 5. The drug company says: I am just not going to sell the drug. A lot of drug companies will sell it anyway. Why? Because they feel a social responsibility to have that drug available, as we see with the AIDS drugs in Africa that are being sold at well below the costs in any other country in the world. They may feel a social responsibility to sell it, and, in many cases, they do. Let's assume for some reason this company says: No, I do not feel any social responsibility here; I am going to play hard ball. What does the Canadian Government do? What do they by law have the right to do? They have the right to steal that patent, make the drug in Canada, and sell it for whatever price they want. That is a pretty strong bargaining position. It is wonderful to stand out here on the floor of the Senate and beat up on these companies for selling drugs for less money in Canada, for less money in Mexico, for less money in Germany. Why? No. 1, it is a one-sided bargaining situation. You either take the price we give you or you are out of the market. If we want your drug anyway, we will steal your patent. Not a lot of bargaining power. Plus, by the way, the United States costs so much more because of the FDA process, not to mention the litigation costs on top of the research and development costs. The litigation costs in this country, because of runaway malpractice suits and liability suits, product liability suits, class action suits, the costs associated with drugs are higher here on top of that. So what do we do? We blame the pharmaceutical company. We blame them because Canada sets prices. We blame them because we have an extensive and very costly FDA process. We blame them because we cannot put our tort liability system in place. It is their fault because they want to advertise their product. God forbid that someone knows what my product is. This is the bad work that is being done. Now what are we going to do? We are going to say that, yes, well, maybe you are right, Senator, maybe it does cost more to bring a market here. I think everybody would admit that, yes, our litigation system is more costly; yes, Canada sets prices and blackmails them if they do not go along. We agree with all of that, but you know what, it is still not fair, because our seniors--and not just seniors but anybody--our people in America deserve the same price they get in Canada. Okay. Let's make a decision. Let's make a decision that, in a sense, we are going to set prices in this country, that we are going to adopt the Canadian formula. Now, obviously not every drug is sold in Canada. So there are a lot of drugs that will not be affected by this reimportation because Canada does not pay for every drug. There are certain drugs that just are not sold up there. Why? Because the drug company decided they were not going to play ball and sell at a price that is well below what they believe is a profitable price for them to sell. So we are only talking about a certain group of drugs. We understand that. We saw an amendment earlier today that is going to make sure these research-oriented drug companies, the ones that are creating the new therapies for the future, now that their patents expire on time, they have no patent extensions, even though some may be worthy or not; we are going to tighten down on that so generics can get into the business. Generics, by the way, make no breakthrough drugs, do no research on new therapies to treat diseases that are heretofore untreated or not sufficiently treated, but we are going to squeeze down these drug companies that are making these research investments and doing these kinds of innovative therapies. We adopted that earlier. Now we are going to whack them again and we are going to basically take the Canadian prices that were set in Canada and have them apply in the United States, so there will be free trade. I heard people say free trade, free trade with a country that sets prices. Now, I would suspect the Senator from North Dakota would not be for free trade if they set the price of wheat in Canada at 50 percent below the price of wheat in the United States. I do not think the Senator from North Dakota would call that free trade--I could be wrong--or if we set the price of timber at half, by law, in Canada, of what the product was here. I do not think the Senator from Iowa would consider that free trade if they set the price of corn or the price of milk in Canada, by law, at half the price of the product in this country. I do not think we would be up here extolling the virtues of Canadian free trade. I know for a fact the Senator from North Dakota would not because he is on the floor with great frequency extolling the evils of free trade in Canada, particularly when it comes to wheat. They do not set the price of wheat in Canada, but he is for free trade on a product that is artificially priced below the market to come into this country. Interesting economic theory but certainly not consistent economic theory. So what happens? We now have this product coming into this country at below what arguably it could cost to get that product approved and researched, with the liability costs, all the other costs associated. Now what would be the result? If it is that pervasive, we may force the drug companies to lower their prices. It could happen. In either event, we are going to take a significant piece of the market share away from the pharmaceutical companies selling drugs in this country. What is the effect of that? Well, the effect of that is obviously lower profits for pharmaceutical companies. There are a lot of folks, I guess, who do not want people to be profitable, not at the expense of our consumers who want to buy pharmaceuticals. In the end, the result is this: We have to make a decision as to whether we want an industry that is going to spend 30-plus-billion dollars a year in finding the next cure, in doing the next level of research for that disease someone in our family may have or some neighbor may have, or whether we are more concerned with having cheap drugs today. Let's understand, with eyes wide open, what we are balancing. We subsidize the world's research. Admit it. I accept that. People say we pay more for drugs here than everybody else in the world. All we are doing is subsidizing the drug companies in this country and the rest of the world is riding along on the money we give drug companies by paying higher prices for drugs. They piggyback on us, and that is not fair. Okay. You are right. What do you want to do about it? Well, one thing we could do is talk to our trade officers and get them to pound away at these other countries so they do not set formularies and artificially low prices. We could do that. Do we tell Canada they cannot blackmail our companies by threatening to make the drug and steal the patent? We could do that. Short of that, which is not happening right now and this debate is happening right now, we have to make this decision, and the decision is this: Do we want to eliminate the research and development of new drugs and new therapies to solve new problems or problems that exist, diseases that exist, and, yes, subsidize the world in the research and development or in exchange for that next generation of drugs coming on line next year, are we willing to trade cheaper drugs today for no cure tomorrow or cheaper drugs today instead of the cure tomorrow, 3, 4, or 5 years from now? That is a legitimate debate. I say to the Senator from North Dakota if he wants to enter into that debate--and the Senator from Michigan who is going to speak next, if she wants to enter into that debate--I will accept that debate. I will truly accept the integrity of people who say it is worth it to have cheaper drugs today to get more drugs to people today who need them than to develop the next generation of drugs down the road for people who will need them then. That is a legitimate argument to make. I assume many Americans would agree with that argument, particularly if they are the people who do not have the money to afford the drugs they need today. There are probably a great number of Americans who would say that is a good tradeoff. I come down on the other side. I do not believe it is a good tradeoff. The reason I do not believe it is a good tradeoff is I think there is a better way to solve what seems to be an intractable problem: either research, innovation, new disease treatment, or cheaper drugs. Interestingly enough, the solution is what we are talking about in this Chamber this week and next week, and that is drug coverage. The solution is, let's provide drug coverage to lower the cost out of pocket to the consumer, particularly catastrophic drug coverage. In my mind, the most important thing we are doing, not some of what I consider very broad coverage that we have in this bill, but most important is including the catastrophic coverage. If we have a high drug user or the low-income subsidies in this bill for low-income individuals, those are the people I am most concerned about. They are the ones who, I argue, are the most compelling cases for saying we need cheaper drugs now as opposed to cures later. If we can solve those compelling cases of the low-income individual and the high user of pharmaceuticals, if we can solve those two problems, then we take a lot of pressure off this issue of cures tomorrow versus drugs now. This amendment does not belong. It is an anachronism. We get to the heart of the problem that this amendment attempts to solve. I believe it solves it in the wrong way. I also believe reimportation is unsafe. It is unfair to an industry in this country which is much maligned--until, of course, you get that diagnosis. Once you get that diagnosis and you find out within the last few years a little white pill that keeps you alive, that keeps you walking, keeps you breathing, keeps you eating, once you find out there is an industry out there that you never had a good word for up until that moment, who you thought were bad people because they were raking these people over the coals with all this money they were making, until you found out because of the research and development that went on, your life will continue and you will be able to see your children grow up or you will be able to see and play with your grandchildren, all of a sudden these companies are not so bad after all. I know this is not a popular view for Members of the Senate to hold. I have been told on numerous occasions defending drug companies is not a term extender for Senators. I understand that. This is not a populist issue. I accept it. But I have the gift in my State of having thousands of employees who go to work every day with the focus on creating the next little pill, the next little serum that will save somebody's life. They are proud of the work they do. They have a right to make money and do it. They have an absolute right to make money and do it. I will stand by their right to do that. It is an industry that not just makes money, but we are saving people's lives. We are changing people's lives. We are giving that grandson the opportunity to know his grandma. We should be willing to pay for it. We should not be blackmailed by other countries that want to use us for their research ground. We have some work to do. In my opinion, we have work to do in the international trade arena to go after these countries that do use us as the funding of their laboratories. But the mistake is not to adopt their policies. It is to get them to change their policies. What this does is adopt a flawed, fatal system for far too many people. I yield the floor.

Mr. SANTORUM

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

Mr. SANTORUM. Mr. President, I am going to make an opening statement on this legislation. I understand there are amendments being worked on. First, I commend the President for his leadership. But for his leadership on this issue, we would not be here today. The President a few months ago laid out a framework for the reform and improvement and strengthening of the Medicare system which we are using in this underlying bill today. The President said he would be willing to move forward with an expansion--a rather expensive expansion, $400 billion over the next 10 years of taxpayer dollars--to provide prescription drug benefits for our senior population, outpatient prescription drug benefits. Obviously inpatient prescription drugs are covered but outpatient prescription drugs are not. The President said he would be willing to move forward with that. He believes, as I believe everyone in this Chamber does, that this is a necessary part of the continuum of care with which seniors, as well as all Americans, should be provided. The question is how do you move forward with a huge dollar expansion of a program, Medicare, which is already $14 trillion short in revenues over the next 50-plus years? How do you move forward with a bill or an idea that is going to expand this program and create another unfunded liability of $3 to $4 trillion? What does that mean? That means the money coming into the Medicare system is going to be insufficient to cover the additional expenditures we are going to put on the system with this bill to the tune of $3 or $4 trillion over the next 50 years. How do you justify adding this expense to a program that is already $14 trillion short in revenues? The President said, I justify this because, No. 1, we need to do it. It makes no sense to have seniors receive care that is not the best quality or not necessarily recommended from the standpoint of what a physician would recommend but is done because the alternative pharmaceutical product is not covered under Medicare. They will do things that may not be the best quality care or may not be called for, just because it is covered, as opposed to something that is not covered. This is an important benefit that needs to be provided. But how do you justify that to the American public and future taxpayers? The President said we need to balance that future expenditure with an improvement to the system, an improvement in terms of efficiency in the system to make the system work better from two perspectives: No. 1, from the perspective of efficiency so the money we are putting in to the system is used more efficiently and, No. 2, that we provide better quality, that the quality of care improves under the changes we hope to make in the Medicare system. The President set out with those two goals, provide a prescription drug benefit but improve the efficiency and the quality of the Medicare system going forward. He had other goals, but I would argue those are the two big, overriding ones. So he put forward a model. He understood the way you improve efficiency in this country is not to have the Government run the operation. The way you improve the efficiency is to marry what Government does well with what the private sector does well. What Government does well is guarantee a stream of funding and provide oversight, regulation--or refereeing, if you will-- to the private sector. What the private sector does well is compete to drive down costs. Competition drives down costs. And it responds to the consumer in front of you, responds to the person with whom you have to deal. Because if you do not treat your patient well or your insured well, then you will lose their business. Under Medicare today, Medicare cannot lose the senior's business. You have one Medicare plan. It is what it is. If you don't like it, tough. That is it. People cannot walk, by and large. In a few communities they have Medicare+Choice but just in some urban areas in this country. By and large, Medicare has a monopoly and they treat beneficiaries just like all monopolies treat beneficiaries--not well. What we want is to have a system in place where we have private sector insurance plans that have to treat you well, have to design benefit packages you want; otherwise, they are not going to get your business. If they do not get your business, they do not survive. We believe that will improve the quality of the medicine that is going to be practiced. But it will also improve the efficiency of the health care system. The tradeoff, and an important one, to adding benefits to this already cash-starved program was to put some things in place that over the long term will result in more efficiency and better quality care for our seniors. So the President put up a model which is doing that right now. The model is the Federal Employees Health Benefits Plan that the Presiding Officer from South Carolina and myself are under--with the exception of the pages. I don't know for sure whether they have coverage under the Federal Employees Health Benefits Plan. I don't know. I don't think they do. Maybe they do. All the other people in this Chamber who are employees of the Senate have health coverage through their Federal Employees Health Benefits Plan. It is a system that marries what the Government does well, which is a steady stream of funding, and an oversight board to make sure the private sector is doing things properly--and with competition. They let each region in which the Federal employees health benefit system offers plans contract. People come and bid for business. The companies that participate in the Federal employees health benefit system go out and market to Federal employees in the region to get them to sign up to their plan. If they don't do a good job, people do not sign up for their plan. If they don't offer a good benefit package, if they don't service the beneficiaries well, then they lose business and move on. And someone else comes and picks up the slack. It is a good combination of public-private partnership to get quality benefits and efficiency of taxpayer dollars and a reliable benefit for Federal employees. The President saw this as a good model to move Medicare--which is right now a one-size-fits-all Government program run out of Baltimore, MD, and here in Washington, DC. Prices are set here for all of the country--what is going to be reimbursed, what is not going to be reimbursed, what technology is going to be available, what medical technology will not be available, what drugs will be available, and what drugs will not be available. Everything is run out of central planning here. The average time it takes for Medicare to have a new technology approved is roughly 18 months at the earliest and 3 or 5 years at the latest. The turnover rate for a change in medical technology is 18 months to 2 years. Just about the time Medicare has the approval of a new technology, it is replaced. We are always behind. Why? Because it is a bureaucracy. Guess what. They don't have to compete for your business. If you do not like it, tough. You have no choice. If you want health care coverage as a senior, this is what you get. It is not consumer friendly. It is not patient friendly because there is no incentive to be. We want to marry these two concepts--public and private, the good parts of both. When the President put this plan out, some complained that what we put out wasn't detailed enough. I know many of us in the Senate urged the President not to be very detailed. His job is to provide the vision and the overall goal and structure by which we can accomplish it in very broad-brush terms. What we have been doing for the last few weeks is figuring out how precisely we get that done. It is very complicated. It is very difficult. We are working through a lot of those issues right now. I think we took a very good step and a big step in the right direction in the Senate Finance Committee. That is the next group which I would like to congratulate--the chairman, Senator Grassley, and the ranking member, Senator Baucus--for working together in a bipartisan way. The President put forth a plan that he argued--and I think it has been proven out--is the basis for a bipartisan compromise. ``Mediscare'' has been used in this Chamber and across this country for far too long. It is time to get down to solving the problem. That means we have to try to put something together that brings the two parties together. The President put out a plan that lays the foundation. Now it is our job to continue that work. I think with the vote in the Senate Finance Committee of 16 to 5, you saw that there is a foundation which has now been flushed out considerably on the Senate floor as a solid one on which to build this service. There are still a lot of problems. I don't want to paint this as a rosy scenario and that we are going to walk arm in arm down the aisle for a bill signing in the next day or two. There are a lot of issues we have to go through. The ones that concern many on this side of the aisle and yet to be resolved are issues that go to the underlying premise of what the President is trying to accomplish. I talked about the President wanting to add this very expensive and needed benefit onto this program but at the same time providing some improvements to the system--marrying the private and public sector so we would have long-term stability in this program. There are concerns on this side of the aisle that while we have accomplished the first--that is, we have added $402 billion worth of new drug benefits--we may not have done enough to make sure this new system that mirrors the Federal Employees Health Benefits Plan, a combination of the public-private, as opposed to just the solely public. But this new system was written in a way for it to succeed. We are working through that process right now to make sure we don't go forward with a plan which simply adds a drug benefit to a monopolistic, publicly run, bureaucratically run health care system-- Medicare--and simply add more costs to it without the improvements in efficiency and quality that, frankly, beneficiaries deserve and that the public should demand. We have some work to do. A lot of Members on our side are very concerned about that balance because it is important. The big stumbling block on this side of the aisle has always been of adding a new benefit that has never existed. Universally, people here believe we need to extend outpatient prescription drug benefits to seniors. But the real question is, How do we deliver that benefit? Candidly, how do we improve the Medicare system that was designed in the mid-1960s? It was designed after a 1965 Blue Cross plan that exists nowhere in the ``wild,'' if you will--only in the zoo here in the U.S. Capitol--which is Medicare. But it does not exist in the ``wild'' anymore because it couldn't survive. It became extinct because it could not compete with all the other species out there that were offering better benefits at higher quality and at lower costs. This dinosaur--this 1965 Blue Cross plan--became extinct in the ``wild.'' But only in the laboratory of the Government here in Washington, DC, has this dinosaur been able to survive. Does it survive and thrive? No, it does not. Is it reproducing? No. It will be reproduced nowhere. The only place this will ever survive is in this environment of the Federal Government. What we need to do is understand that there are better species out there. There are better models out there. There are improvements as to how we deliver quality care and better responses that beneficiaries need through the insurance process. We need to implement those. I would argue that we need to implement them quickly. We need to get as many people as possible into those better models. I don't see too many people driving around in a 1965 Plymouth Fury. People do not drive them anymore. They are driving newer models and technologically innovative automobiles that have responded to consumer demands and they have improved as a result. That has not happened in Medicare. We need to get people into a much more efficient, quality-oriented model for them to ``drive'' through their senior years. That is what we are attempting to do. But if we do not do that--and in the past, when we looked at all these bills, whether it was in the last session of Congress or in previous sessions of Congress, we were never willing to get out of the 1965 ``car.'' We always wanted to keep more and more people, with more and more demands, and with there being more and more complexity, ``driving'' in this old vehicle that does not work well. It is on its last leg. As I said before, using the animal analogy, it does not survive in the ``wild.'' We want something that can survive in the ``wild.'' Why? Because the private sector has evolved to be responsive to the needs of our people. So as new technologies come into play--where it takes 2 or 3 or 4 or 5 years for Medicare to figure out it is a good idea--the private sector, because they have the pressure of knowing people can leave their plans, can look at it and say, yes, we will reimburse this right away because it is better quality, probably better value, and it may lead to lower costs somewhere else. Medicare does not do that. It is not that they can't do it; they don't do it. So we will have plans in place that change as medicine changes. And that quality is what seniors deserve. But we have to make sure the bill is structured to make sure these plans have the resources and don't have the regulatory ropes to constrain them to where they can't survive. So it is a major issue. It is one that is being debated as we speak in a lot of places around this Capitol as to how we structure this system. I know there are many people on the other side of the aisle who would not like to see this system exist. They have been very clear about that. They want a continuation of the ``extinct dinosaur'' that can survive nowhere in the ``wild'' as being a model by which we can model this plan after to deliver this benefit. Or the 1965 Plymouth, you don't see very many of them around. Why? The consumer wants something different, better, higher quality, more efficient. That is what we are trying to accomplish here. I understand there is opposition over there. I understand people want to stay with what they are comfortable with. Unfortunately, for lots of years, seniors have been scared into believing that any change is bad, that we are going to destroy Medicare or have Medicare go away. Candidly, models of cars change, animals evolve, we change based on technology, innovation, improvement, and Medicare needs to do the same. It needs to have the ability to do the same. That should not scare the American public. It should be that we give seniors the kind of quality health care system they deserve, that every other American has in the private sector who has private-sector insurance, which is available to them. So we are making a good start. We have a little ways to go. We have to make sure that what is the highest priority on this side of the aisle--which is to have a balance between a drug benefit and improvements to the system--is maintained in this bill. I know that isn't the highest priority for many on the other side of the aisle. Thank goodness there are more than a handful of Members on the other side of the aisle who understand the need to accomplish both these goals. That is what bipartisan consensus is formed on. I hope we can continue down that road and keep this bill centered, by accomplishing both missions, not just what one party really wants or what the other party is really seeking but both missions. If we can do that, if we can have a balanced bill, then we will pass this bill by an overwhelming margin. If we have a bill that ultimately is going to rely on a ``1965 Plymouth'' or a ``dinosaur'' to deliver benefits, then it is not going to be a bipartisan bill and there will not be any bill at all. We need to have both. Seniors deserve both. Taxpayers deserve both. Future generations, who are going to be dealing with this unfunded liability, deserve both. And we have a responsibility to deliver that. Mr. President, I yield the floor and suggest the absence of a quorum.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I rise today with my colleague Senator Specter to engage the distinguished chairman of the Commerce Committee in a colloquy regarding a proposal to allow airports increased flexibility with the use of the Passenger Facility Charge, PFC, revenues. Mr. President, as you know, many airports are impacted by the downturn in the aviation industry. In my State, the Commonwealth of Pennsylvania is working with US Airways to maintain its presence at both Pittsburgh and Philadelphia International Airports. Our activities in Pennsylvania include efforts to reduce costs in order to make our airports even more competitive. The amendment that I filed today would change current law to allow airports increased flexibility in the use of the Passenger Facility Charge revenues so that an airport may choose to use such funds to help retire outstanding debt. I believe that this change would be an important tool for airports, which could benefit from the option of using the funds they receive more effectively. According to information provided to me, this change, if implemented at Pittsburgh International Airport, would result in millions of dollars in immediate cost savings for both the airport and tenant airplanes operating there. It is my understanding that Chairman McCain is aware of this issue but has concerns about the approach taken by this amendment. I am also informed, however, that the Chairman indicated that he plans to examine issues related to airport financing and competitiveness in the current aviation industry environment. I would like to inquire of Chairman McCain if he would agree to examine this issue and continue discussions to identify solutions that can allow airports to be more competitive in this challenging aviation industry environment.

Mr. SANTORUM. I thank Chairman McCain for agreeing to work with us on this important issue.

Mr. SANTORUM

Mr. SANTORUM. I suggest the absence of a quorum.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I rise to join my colleague Mrs. Lincoln of Arkansas to reintroduce bipartisan legislation aimed at improving long-term care health and rehabilitation options for Medicare beneficiaries, and also assisting family caregivers. We all recognize that our Nation needs to address sooner rather than later the challenges of financing long-term care services for our growing aging population. The Congressional Budget Office has projected that national expenditures for long-term care services for the elderly will increase each year through 2040. But it is in just over a decade when we will see these challenges become even more pronounced, when the 76 million baby boomers begin to turn 65. Baby boomers are expected to live longer and greater numbers will reach 85 and older. Congress' attention in this area is critical, given the expected growing costs of long-term care services, and the fact that so many American families are already serving as caregivers for aging or ailing seniors and providing a large portion of long-term care services. It is more important than ever that we have in place quality options in how to best care for our senior population about to dramatically increase. This is why we are introducing the Medicare Adult Day Services Alternative Act. This legislation would offer home health beneficiaries more options for receiving care in a setting of their own choosing, rather than confining the provision of those benefits solely to the home. This legislation would give beneficiaries the option to receive some or all of their Medicare home health services in an adult day setting. This would be a substitution, not an expansion, of services. The bill would not make new people eligible for Medicare home health benefits or expand the list of services paid for. In fact, this legislation may be designed to produce net savings for the Medicare program. Permitting homebound patients to receive their home health care in a clinically-based senior day center, as an alternative to receiving it at home, could result in significant benefits to the Medicare program, such as reduced cost-per-episode, reduced numbers of episodes, as well as mental and physical stimulation for patients. Moreover, the Medicare Adult Day Services Alternative Act could well have a positive impact on our economy, as it would enable caregivers to attend to other facets in today's fast-paced family life, such as working a full- or part-time job and caring for children, knowing their loved ones are well cared for. It is unfortunate that today many caregivers have to choose between working or caring for a family member. It is estimated that the average loss of income to these caregivers is more than $600,000 in wages, pension, and Social Security benefits. And by extension, the loss in productivity in United States businesses is pegged at more than $10 billion annually. But it does not have to be an either-or proposition. The Medicare Adult Day Services Alternative Act is a creative solution to health care delivery, which would adequately reimburse providers in a fiscally responsible way. Located in every state in the United States and the District of Columbia, adult day centers generally offer transportation, meals, personal care, and counseling in addition to the medical services and socialization benefits offered. We can and should offer both our Medicare beneficiaries and family caregivers more and better options for health care delivery, and that is exactly what the Medicare Adult Day Services Alternative Act is designed to do. This legislation is bipartisan, and has been supported by more than 20 national non-profit organizations concerned with the well-being of America's older population and committed to representing their interests. I hope our colleagues will join us in this cause. I again thank Senator Lincoln for working with me in this effort, and ask unanimous consent that the text of the bill be printed in the Record.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I rise to join my colleague Mrs. Lincoln of Arkansas to reintroduce bipartisan legislation aimed at improving long-term care health and rehabilitation options for Medicare beneficiaries, and also assisting family caregivers. We all recognize that our Nation needs to address sooner rather than later the challenges of financing long-term care services for our growing aging population. The Congressional Budget Office has projected that national expenditures for long-term care services for the elderly will increase each year through 2040. But it is in just over a decade when we will see these challenges become even more pronounced, when the 76 million baby boomers begin to turn 65. Baby boomers are expected to live longer and greater numbers will reach 85 and older. Congress' attention in this area is critical, given the expected growing costs of long-term care services, and the fact that so many American families are already serving as caregivers for aging or ailing seniors and providing a large portion of long-term care services. It is more important than ever that we have in place quality options in how to best care for our senior population about to dramatically increase. This is why we are introducing the Medicare Adult Day Services Alternative Act. This legislation would offer home health beneficiaries more options for receiving care in a setting of their own choosing, rather than confining the provision of those benefits solely to the home. This legislation would give beneficiaries the option to receive some or all of their Medicare home health services in an adult day setting. This would be a substitution, not an expansion, of services. The bill would not make new people eligible for Medicare home health benefits or expand the list of services paid for. In fact, this legislation may be designed to produce net savings for the Medicare program. Permitting homebound patients to receive their home health care in a clinically-based senior day center, as an alternative to receiving it at home, could result in significant benefits to the Medicare program, such as reduced cost-per-episode, reduced numbers of episodes, as well as mental and physical stimulation for patients. Moreover, the Medicare Adult Day Services Alternative Act could well have a positive impact on our economy, as it would enable caregivers to attend to other facets in today's fast-paced family life, such as working a full- or part-time job and caring for children, knowing their loved ones are well cared for. It is unfortunate that today many caregivers have to choose between working or caring for a family member. It is estimated that the average loss of income to these caregivers is more than $600,000 in wages, pension, and Social Security benefits. And by extension, the loss in productivity in United States businesses is pegged at more than $10 billion annually. But it does not have to be an either-or proposition. The Medicare Adult Day Services Alternative Act is a creative solution to health care delivery, which would adequately reimburse providers in a fiscally responsible way. Located in every state in the United States and the District of Columbia, adult day centers generally offer transportation, meals, personal care, and counseling in addition to the medical services and socialization benefits offered. We can and should offer both our Medicare beneficiaries and family caregivers more and better options for health care delivery, and that is exactly what the Medicare Adult Day Services Alternative Act is designed to do. This legislation is bipartisan, and has been supported by more than 20 national non-profit organizations concerned with the well-being of America's older population and committed to representing their interests. I hope our colleagues will join us in this cause. I again thank Senator Lincoln for working with me in this effort, and ask unanimous consent that the text of the bill be printed in the Record.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I am pleased to join Senator Baucus in the introduction of the Encouraging Work Act of 2003. The Work Opportunity Tax Credit, WOTC, and Welfare-to-Work Tax Credit, W-t-W, are tax incentives that encouraging employers to hire public assistance recipients and other individuals with barriers to employment. The combination of Welfare Reform passed by Congress in 1996 and the assistance to employers found in the WOTC and W-t-W has enabled expanded opportunity for many Americans. Yet more can be done. Under present law, WOTC provides a 40 percent tax credit on the first $6,000 of wages for those working at least 400 hours, or a partial credit of 25 percent for those working 120-399 hours. W-t-W provides a 35 percent tax credit on the first $10,000 of wages for those working 400 hours in the first year. In the second year, the W-t-W credit is 50 percent of the first $10,000 of wages earned. WOTC and W-t-W are key elements of welfare reform. A growing number of employers use these programs in the retail, health care, hotel, financial services, food, and other industries. These programs have helped over 2,200,000 previously dependent persons to find jobs. Eligibility is limited to: 1. recipients of Temporary, Assistance to Needy Families, TANF, in 9 of the 18 months ending on the hiring date; 2. individuals receiving Supplemental Security Income, SSI, benefits; 3. disabled individuals with vocational rehabilitation referrals; 4. veterans on food stamps; 5. individuals aged 18-24 in households receiving food stamp benefits; 6. qualified summer youth employees: 7. low-income ex-felons; and 8. individuals ages 18-24 living in empowerment zones or renewal communities. Eligibility for W-t-W is limited to individuals receiving welfare benefits for 18 consecutive months ending on the hiring date. More than 80 percent of WOTC and W-t- W hires were previously dependent on public assistance programs. These credits are both a hiring incentive, offsetting some of the higher costs of recruiting, hiring, and retaining public assistance recipients and other low-skilled individuals, and a retention incentive, providing a higher reward for those who stay longer on the job. Without action by Congress WOTC and W-t-W will expire on December 31, 2003. After seven years of experience with these programs, their value has been well demonstrated. In 2001, the GAO issued a report that indicated that employers have significantly changed their hiring practices because of WOTC. With the resources provided by WOTC, employers have provided job mentors, lengthened training periods, engaged in recruiting outreach, and listed jobs or requested referrals from public agencies or partnerships. WOTC and W-t-W have become a true public-private partnership in which the Department of Labor, the Internal Revenue Service, the states, and employers have forged excellent working relationships. But the challenges for employers and those looking for better opportunities are real. The job skills of eligible persons leaving welfare are sometimes limited, and the costs of recruiting, training, and supervising low-skilled individuals cause many employers to look elsewhere for employees. The weak economy and rising unemployment give employers more hiring options. WOTC and W-t-W are proven incentives for encouraging employers to seek employees from the targeted groups. Despite the considerable success of WOTC and W-t-W, many vulnerable individuals still need a boost in finding employment. This is particularly true during periods of high unemployment. There are several legislative changes that would strengthen these programs, expand employment opportunities for needy individuals, and make the programs more attractive to employers. The Administration's FY 2004 budget proposes to simplify these important employment incentives by combining them into one credit and making the rules for computing the combined credits simpler. The credits would be combined by creating a new welfare-to-work target group under WOTC. The minimum employment periods and credit rates for the first year of employment under the present work opportunity tax credit would apply to W-t-W employees. The maximum amount of eligible wages would continue to be $10,000 for W-t-W employees and $6,000 for other target groups ($3,000 for summer youth). In addition, the second year 50-percent credit under W-t-W would continue to be available for W-t-W employees under the modified WOTC. Under current law, only those ex-felons whose annual family income is 70 percent or less than the Bureau of Labor Statistics lower living standard during the six months preceding the hiring date are eligible for WOTC. The Administration's FY 2004 budget proposes to eliminate the family income attribution rule. Permanent extension would provide these programs with greater stability, thereby encouraging more employers to participate, make investments in expanding outreach to identify potential workers from the targeted groups, and avoid the wasteful disruption of termination and renewal. A permanent extension would also encourage the state job services to invest the resources needed to make the certification process more efficient and employer-friendly. Current WOTC eligibility rules heavily favor the hiring of women because single mothers are much more likely to be on welfare or food stamps. Women constitute about 80 percent of those hired under the WOTC program, but men from welfare households face the same or even greater barriers to finding work. Increasing the age ceiling in the ``food stamp category'' would greatly improve the job prospects for many absentee fathers and other ``at risk'' males. This change would be completely consistent with program objectives because many food stamp households include adults who are not working, and more than 90 percent of those on food stamps live below the poverty line. The Work Opportunity Credit and Welfare-to-Work Credit have been successful in moving traditionally hard-to-employ persons off welfare and into the workforce, where they contribute to our economy. However, employer participation in these important programs can be increased, particularly among small and medium-sized employers. This is due to the complexity of the credits and the fact that they are both only temporary provisions of the tax code subject to renewal every year or two. Small, medium, and even some large employers find it difficult to justify developing the necessary infrastructure to administer and participate in these programs when their continued existence beyond one or two years is constantly in question. This legislation will remedy this problem by combining WOTC and W-t-W into one, more easily administered tax credit, and by making it a permanent part of the tax code. Many organizations including the National Council of Chain Restaurants, National Retail Federation, Food Marketing Institute, National Association of Convenience Stores, National Restaurant Association, American Hotel & Lodging Association, National Roofing Contractors Association, National Association of Chain Drug Stores, American Nursery and Landscape Association, and the American Health Care Association support this legislation. Representatives Amo Houghton, R-NY, and Charles Rangel, D-NY, have introduced identical legislation in the House of Representatives. I urge my colleagues to join us in supporting this legislation.

Mr. SANTORUM

Mr. SANTORUM. If the Senator from New York would yield, if he checks my vote on the last 2 amendments he would find I am a great defender of the free market principle and have joined the Senator from New York in support of those.

Mr. SANTORUM

Mr. SANTORUM. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. SANTORUM

Mr. SANTORUM. Mr. President, I send an amendment to the desk.

Mr. SANTORUM. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. SANTORUM. I send an amendment to the desk.

Mr. SANTORUM. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.