Pete Stark

Mr. STARK

Mr. STARK. Mr. Speaker, Medicare has delayed reducing the level of reimbursement for various chemotherapy drugs, because of lobbying by some oncologists and drug companies that the profits are essential to cover the cost of running an oncology medical practice. Hmmmmmmm. Not in one Florida practice, where a lawsuit between several partners who are gastroenterologists and oncologists reveals how the oncologists pocketed millions in profits from drugs, didn't put the money into the practice, and (apparently) the practice was successful in more than meeting its costs. I am happy that HCFA is going to review its reimbursement of the costs of administering chemotherapy drugs. I hope they will check out this court case, before they buy all the arguments of the industry. The following excerpts from the court case were provided by an attorney from Florida and I submit into the Congressional Record: July 24, 2000. Re Summary of Information that you may find Illuminating and Helpful in Understanding the False Drug Pricing Scheme that Generates Huge Kickbacks From Medicare and Medicaid to Oncologists; Medical Practice Partners' Litigation Between Gastroenterologists and Oncologists Over Profits from the Sale of Chemotherapy Drugs From Medicare, Medicaid and Private Insurance Being Kept Secretly by the Oncologist Partners and not shared with the Gastroenterologist Partners. Dear Representative Stark: The original complaint in the Chetan Desai, M.D., et al. v. Jayaprakash K. Kamath, M.D., et al. case charges that two (2) oncologists made 2.6 million dollars in profits from the sale of chemotherapy drugs between 1993 and 1997 (page 4 para.10). Additionally, the complaint charges that the two oncologists in 1997 overdrew their compensation by approximately $385,000 (page 4, para.11). By the time the Amended Complaint was filed, the feuding doctor partners and their lawyers had realized that a public fight in written documents over 2.6 million dollars in chemotherapy profits for two oncologists in four years' worth of practice may raise eyebrows of the court and law enforcement. Therefore, the Amended Complaint and the depositions were done with an agreement between the feuding parties not to mention the 2.6 million dollars worth of chemotherapy profits in four years for two oncologists gut to only discuss chemotherapy profits in general and the $385,000.00 1997 overdraw of compensation. Nevertheless, the accounting exhibits, Plaintiffs' Exhibit No. 33, Defendants' Exhibit No. 12 and Plaintiffs' Exhibit No. 34 show the tremendous profits in ``reimbursement'' for chemotherapy infusion and other infusion drugs from Medicare over the actual costs in obtaining the drugs from the manufacturers. The following are some excerpts from the depositions in the case: 1. Geetha Kamath, M.D. is one of the oncologist defendants, the wife of the gastroenterologist defendant who allegedly changed the accounting system so that the oncologists got all the benefit from the sales of oncology drugs. You will note that the oncologists testified that it was common knowledge among all the partners, administration and all physicians generally that huge profits were made from the sale of oncology drugs. However, the gastroenterologists and some administrators (and physicians that we have interviewed in other specialities that oncology) testified that they had no idea that huge profits were made by oncologists merely from the sale of the drugs from their reimbursement from Medicare and Medicaid. Excerpts of Testimony of the Deposition of Geetha Kamath, M.D. (A) Deposition of November 6, 1998 of Geetha Kamath, M.D. Page 156, Line 21.--I always thought that it was such a well known fact that drugs are profitable; it's a known fact in the medical community as far as I am concerned. Page 163-164.--Exhibit No. 34 is a history of gastro and onco collections which reflect the increase in collections by oncologists between 1987 and 1995. (B) Deposition of November 11, 1998 of Geetha Kamath, M.D. Page 8, line 25 through Page 9, line 5.--Profit from chemotherapy drugs went to the oncologists. Profits from the sale of chemotherapy drugs were not shared by the gastroenterologists. 2. Belur S. Sreenath, M.D. is a gastroenterologist plaintiff. He sued the defendant oncologists because of their failure to distribute money from chemotherapy profits. Excerpts of Testimony of the Deposition of Belur S. Sreenath, M.D. (C) Deposition of September 17, 1998 of Belur S. Sreenath,

Mr. STARK

Mr. STARK. Mr. Speaker, please submit the following report from the August 14, 2000 edition of Tax Notes into the Record. Tax Analysts Special Report: Foreign Sales Corporation Beneficiaries: A Profile (By Jose Oyola) A World Trade Organization (WTO) panel concluded in 1999 that the tax benefits of foreign sales corporations (FSC) constitute a prohibited export subsidy. According to the WTO panel, the United States cannot establish a regime of direct taxation and claim that it is entitled to provide an export subsidy because it is necessary to eliminate a disadvantage to exporters created by the U.S. tax system itself. In negotiations during the course of this year, U.S. Treasury representatives presented an alternative tax scheme to the European Union (EU), but it was promptly rejected by EU officials. Negotiations are continuing, and must result in legislative changes by the beginning of FY 2001 to avoid costly sanctions. In searching for export incentives that meet WTO standards, policymakers already have a wide range of government incentives that enhance the international competitiveness of U.S.-based companies. Some benefits are directly related to exports, like the Export-Import (Ex-Im) Bank loans and guarantees. Other incentives, like the research and experimentation tax credit, strengthen the overall competitiveness of U.S.-based corporations. This article provides a profile of 250 companies that reported $1.2 billion in FSC tax benefits in their 1998 filings with the Securities and Exchange Commission (SEC). The article shows, for the first time, how FSC beneficiaries combine several tax benefits and government programs that do not run afoul of WTO standards. The article also presents the contribution to corporate profits from several tax incentives, and the 1991-1998 accumulated FSC tax benefits for 18 large FSC beneficiaries. Profile Summary The profile of the 250 companies that reported $1.2 billion FSC tax benefits in 1998 is as follows: The top 20 percent of the U.S. companies in the sample claimed 87 percent of the FSC tax benefits. Almost 30 percent of the FSC recipients reported other tax benefits, such as Research & Experimentation (R&E) tax benefits. The cumulative 1991-1998 FSC benefits of the top 18 FSC beneficiaries were almost $3.7 billion. FSC benefits represented about 3.4 percent of the net income for this group. One of the top beneficiaries received FSC benefits equal to 10 percent of its net income. The U.S. government operated other export-promotion programs, mainly through the Department of Agriculture and the Ex-Im Bank. The aircraft industry had almost 45 percent of the Ex-Im Bank loan guarantees outstanding at the end of

Mr. STARK

Mr. STARK. Mr. Speaker, at the Department of Justice's prodding, Medicare and Medicaid are finally going to reimburse drugs at a more accurate rate. In the past, we have paid for drugs at 95% of the Average Wholesale Price (AWP)--a wholly artificial and often grossly inflated price. The action by HCFA should be welcome by taxpayers. But it should also be welcome by patients--and not just because patients will now face lower co-payment amounts. The worst aspect of the AWP pricing abuse has been that it distorts medical judgment, causing many--not all, but many--doctors to increase their utilization of drugs on which the doctors can make the most money on the ``spread'' between the listed AWP price, and what the actual cost to the provider is. The following data shows the phenomenon: there is absolutely no reason that the nation's utilization of ipratropium bromide has soared--other than doctors can now make over a 100% profit on the product. If you need ipratropium bromide, you should get it. You should not be getting it because your doctor makes a bigger and bigger profit on it. I think the evidence will show that there are better cancer drug fighting products available to people, which are not being used because the doctors make more profit on the poorer quality product. Reform of the AWP will not only save dollars--it will stop an insidious form of medical malpractice. How has Medicare Utilization for the Inhalation Drug Ipratropium Bromide (HCPCS codes K0518 and J7645) changed as the ``spread'' or profit that doctors can make on the use of the product has increased? In 1995, Medicare paid $3.11 for a unit, and that's what it cost the provider. There was no spread, and Medicare spent $14,426,108 on the product. In 1996, Medicare reimbursed $3.75 a unit, but the cost to doctors was only $3.26, giving a 49 cent profit or a 15% spread. Interest in the product picked up, with Medicare spending $47,388.622. In 1997, Medicare's reimbursement was $3.50 a unit, but the providers's true cost was only $2.15, giving a profit spread of $1.35 or 63%. Sales of the product really starting taking off, and Medicare spent $96,204,639 on the product. In 1998 and 1999, Medicare reimbursed $3.34 for a unit. In 1998, doctors could get it for about $1.70, giving them a profit of 96% or $1.64 per unit. Sales totaled $176,887,868! In 1999, the drug was available for $1.60, giving users a 108% profit. We don't have the data on total 1999 Medicare expenditures on this product yet, but I bet, Mr. Speaker, that it is higher than ever. This example is exhibit #1 why we need AWP reform.

Mr. STARK

Mr. STARK. Mr. Speaker, I join today with my colleague Representative Coyne to introduce a House Joint Resolution relating to the quality of care in assisted living facilities. As long-term care has emerged as a vital issue for the health and well-being of our nation's elderly, assisted living is emerging as a popular model. More and more consumers are drawn to the ideals of privacy and independence that are promoted by the assisted living industry. States have followed the trend by increasingly providing public funding via Medicaid's Home & Community-Based Services waiver for assisted living services. Despite assisted living's popularity; however, there remain many questions regarding the direction of this industry. Assisted living facilities are defined and arranged in a variety of ways. Some view assisted living as housing residences while others view them as medical service providers. Many facilities often do not allow ``aging in place'' despite pictures painted by their marketing brochures. States have responded with varying definitions, regulations, and oversight, resulting in unequal consumer protections throughout the country. Quality of care in assisted living facilities has been an issue of concern. A GAO study found that 25 percent of surveyed facilities were cited for five or more quality of care or consumer protection violations during 1996 and 1997, and 11 percent were cited for 10 or more problems. I understand that steps have been taken to address these concerns, but news reports of lawsuits filed on behalf of assisted living residents continue to illustrate the impact of poor quality on the health of elderly residents. Just a few weeks ago in my district, an elderly woman passed away in an assisted living facility due to hemorrhaging from her dialysis shunt. Two times, she pressed her call pendant for help, but both of these calls were cleared and reset 10 minutes later. The facility did not place a 911 call for assistance until 1 hour and 34 minutes later. There was no nurse on duty, and all four resident aides in the facility at the time have denied responding to the calls or clearing/resetting the call system. This situation is still under investigation, but it highlights the seriousness of inadequate quality of care in these facilities. A new Milbank Memorial Fund publication entitled, ``Long-Term Care for the Elderly with Disabilities: Current Policy, Emerging Trends, and Implications for the Twenty-First Century,'' by Robyn I. Stone is an excellent review of issues facing assisted living. As the article indicates there are many questions concerning the current and future state of the assisted living movement. Because of these questions, I am proposing a White House Conference to help advance our knowledge and awareness of these issues, and if appropriate, recommend public policy steps that are necessary to ensure the optimal development of this industry. Mr. Speaker, I urge my colleagues to join me in increasing our understanding of the assisted living industry. By focusing on consumer protections and quality of care, we will work to ensure the health and well-being for our country's elderly. I submit an excerpt from the Robyn Stone paper along with a May 8, 1999 New York Times editorial calling attention to problems in this sector: Assisted Living Another trend that is attracting attention from policymakers, private developers, and consumers is assisted living. One significant problem with this trend is the lack of a consistent definition used by providers, regulators, and policymakers. Some argue that ``assisted living'' is just a '90s label for a long-term care setting that has been around for centuries--another example of ``old wine in new bottles.'' Homes for the aged, frequently associated with nonprofit fraternal and religious organizations, proliferated in the nineteenth and early twentieth centuries to supply room and board for poor, infirm elderly people. Over the past three decades, sporadic attention has focused on scandalous mistreatment of residents in board and care homes, a version of homes for the aged that also became a refuge for the people with chronic mental illness in response to the deinstitutionalization frenzy of the 1960s. In the 1980s the term ``residential care facility'' became fashionable as a catch-all label for places providing room, board, and some level of protective oversight. Hawes et al. (1993) have estimated that about a half million people live in residential care facilities or board and care homes in the United States. Perhaps twice that number are living in unlicensed facilities (November et al., 1997). It is somewhat ironic that homes for the aged, board and care homes, and other types of residential care were replaced in the late 1960s and 1970s by nursing homes modeled after hospitals. ``Nursing homes'' have delivered far less nursing care than the name suggests. Today residential care is again in fashion. It is viewed as a desirable alternative to nursing homes because of its ostensibly less institutional character and its emphasis on a social, rather than a medical, model. A number of states, including Oregon, Washington, Florida, and Colorado, have aggressively tried to use residential care as a less costly substitute for institutions. One recent study estimates that anywhere between 15 and 70 percent of the nursing home population, nationwide, could live in residential care instead (Spector et al., 1996). Kane (1997) has questioned the judgment of hospital discharge planners who refer elders with disabilities to nursing homes, rather than alternative arrangements, because 24-hour care is supposedly available. She notes that remarkably little nursing care is provided in nursing homes. For example, a survey of nursing home residents in six states found that 39 percent of the residents received no care from a registered nurse in 24 hours; residents who did receive such care received an average of only 7.9 minutes; care by a nursing assistant averaged 76.9 minutes daily (Friedlob, 1993). Despite these arguments, empirical research has been equivocal on the issue of the ``substitutability'' and cost savings of residential care compared to nursing home placement (Kane et al., 1991; Newcomer et al., 1995b; Sherwood and Morris, 1983). In fact, residential care is more likely to be a substitute for living in one's own home than in a nursing home. What appears to distinguish assisted living from residential care in general and from the somewhat pejorative ``board and care'' is a matter of philosophy and emphasis on care, not just housing (Kane, 1997). Some have also suggested that assisted living is the rich person's residential care while board and care is for poor people who rely on federal Supplemental Security Income (SSI) and state supplements (SSP) to cover the costs. A recent survey of assisted living regulations in 50 states indicates that four states--Alabama, Rhode Island, South Dakota, and Wyoming--use the terms ``assisted living'' and ``board and care'' interchangeably (Mollica and Snow, 1996). For the other states, key characteristics differentiating assisted living from other types of residential care are: an explicit focus on privacy, autonomy, and independence, including the ability to lock doors and use a separate bathroom; an emphasis on apartment settings in which residents may choose to share living space; and the direct provision of, or arrangement for, personal care and some nursing services, depending on degrees of disability. As noted in an earlier section on care settings, Hawes et al. (1999) recently completed the first national survey of assisted living, using a national probability sample of facilities that met several criteria. These include having 11 or more beds, primarily serving an elderly population; and providing 24-hour staff oversight, housekeeping, at least two meals a day, and personal assistance with two or more activities of daily living (ADLs). According to preliminary findings from a telephone survey, most facilities offer consumers a range of privacy options. Single rooms were the most common residential unit (52 percent); the rest of the units were apartments. The most common type of single room was a private room with a full bathroom; the most common apartment was a one-bedroom for single occupancy. While most facilities reported a general willingness to serve residents with moderate physical limitations, fewer than half were willing to admit or retain residents who needed assistance with transfers from a bed or chair. Furthermore, fewer than half of participating facilities would admit (47 percent) or retain (45 percent) residents with moderate to severe cognitive impairment; only 28 percent would admit or retain residents with behavioral symptoms such as wandering. In assessing the extent to which these facilities' characteristics match the philosophy of assisted living, Hawes et al., (1999) concluded that only 11 percent offered high privacy and high service. Another 18 percent provided high privacy but low service. Twelve percent offered low privacy but high service. The researchers noted that residents of these assisted living facilities had considerably more privacy and choice than residents in most nursing homes and in the board and care homes they had investigated in a previous study. Nevertheless, facilities varied widely. A substantial segment of the industry provided environments that did not reflect the philosophy of assisted living. Furthermore, the many facilities whose admission or retention policies excluded people with the cognitive impairments or severe physical disabilities suggests that assisted living is not an environment where those who experience significant functional decline can ``age in place.'' While assisted living does warrant serious consideration by policymakers, providers, and consumers, a number of impediments to its development need attention. Today, the assisted living market is primarily composed of the well-off elderly, with little available to moderate- or low-income consumers, as the recent study by Hawes et al. (1999) confirms. This gap is due, in part, to the limited sources and inadequate amounts of public financing (primarily SSI and SSP), which could help subsidize room, board, and care for financially strapped individuals and their families. The most common monthly rate for facilities offering either high service or high privacy was approximately $1,800 in 1998. Other impediments to assisted living include concerns, expressed by state policy-makers and potential private providers, about balancing consumer choice and privacy on one hand with health, safety, and liability considerations on the other. One major issue reflecting this concern is the degree to which states are willing to moderate their nurse practice acts to allow the delegation of certain tasks, such as administering medication, caring for wounds, and changing catheters (Kane, 1997). A number of states, such as Oregon, Kansas, Texas, Minnesota, and New York, have included nurse delegation provisions, but the latitude and interpretations of the provisions vary tremendously. Not surprisingly, they have met serious resistance by many nurses' organizations, for whom professional turf is as significant as care issues. The motives of the assisted living industry have also been questioned. The industry includes more real estate developers and hotel managers than care providers. Furthermore, as nursing homes look for new markets and reimbursement strategies that circumvent government regulation, many skilled nursing facilities may simply lay carpet, install door locks, and hang out the ``assisted living'' shingle. Finally, there are questions about the amount of assistance that these facilities actually provide. According to the study by Hawes et al., 65 percent of the participating facilities supplied ``low service''; that is, they did not have an RN on staff or did not provide nursing care, although they did provide 24-hour staff oversight, housekeeping, two meals, and personal assistance. Another 5 percent, categorized as ``minimal service,'' supplied no personal assistance with ADLs. Given that many facilities do not admit or retain people with severe physical disabilities or cognitive impairment, the level of care is additional cause for concern. [From the New York Times, May 8, 1999] The Need for Care as Well as Profit Among other things, the 1990's will be remembered as the decade when developers and older, affluent, anxious Americans discovered each other with enthusiasm, with results both encouraging and worrisome. The concept that both they and Wall Street have embraced is called assisted living. There is no common definition of it. Each of the 50 states regulates it differently, and the Federal Government not at all. But to older retirees who can pay to live in the new and reconditioned spaces sprouting across the country, the assisted living communities offer something irresistible. It is the promise of Pleasantville, where they can live out their lives gracefully, with hotel services, assistance when they need it, and the chance to hold off or avoid what many of the aged most fear--the nursing home. For developers, some with no experience in caring for the aged, the attraction is clear. The number of old people of financial means is growing. Some 6.5 million now need some help with the chores of daily living. That figure is expected to double by 2020. Ten years ago there was not even an industry trade group. Today the Assisted Living Federation of American estimates there is a kaleidoscopic collection of about 30,000 such facilities in the United States, with a million old people living in them, almost all of whom pay their own way. Some facilities fall into state licensing categories and some do not. Their average national monthly rate per person is $1,500 but elegant two-bedroom units on Long Island may rent for $5,000 or more. The National Investment Conference, a group that specializes in the senior housing market, found in a survey of 73 assisted living developments released this year that the median profit margin was 29 percent. For a quarter of the properties, it was more than 35 percent. Those numbers warm Wall Street, but do not guarantee that the communities deliver high-quality services. Because the phenomenon has grown up around existing rules, many kinds of places can advertise ``assisted living.'' A Government Accounting Office survey, performed at the request of the U.S. Senate Special Committee on Aging, found that about half the residents sign up without being sure what services the facilities provide, how much they cost or what medical care the residents can count on. A quarter of the places surveyed were cited for five or more problems involving quality of care or resident protection within two years. When Albert Fleischmann, 85, a St. Petersburg Yacht Club member and retired owner of a hardware chain, moved into an assisted living facility in Pinellas County, Florida, in 1997, his daughter was reassured. Patricia Fleischmann Johnson heads a charity that serves as guardian for 134 people in such places. But when Mr. Fleischmann suffered a heart attack at his table in the dining room this year, he was ignored. He called his daughter. She took him to the hospital. She then called back to ask the facility how he was, and was told--as if he were there--that he was ``fine.'' Because Mr. Fleischmann likes the place, he is still there. But his daughter, who testified before the Senate committee, is more concerned now, and she is not alone. There are no pending bills in Congress, but 32 states are expected to consider legislation this year to increase regulation of the assisted living industry. They should do so. With so many frail lives and so much money involved, this issue is not going away.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today to acknowledge California's historic 150th birthday celebration. California officially entered the United States on September 9, 1850 but the foundations for the development of California were in place well before this important date. Under the Spanish Empire, the colonization and eventual settlement of California was greatly influenced by the mission system. The missions were founded to secure Spain's claim to land and to teach the native people Christianity and the Spanish way of life. The placement of the missions had a direct impact on the development of California, as the missions fostered agriculture, vintnering, livestock raising, and trade as well as religion. I am proud to recognize Mission San Jose, a historical mission in Fremont, California and part of the 13th Congressional District. Mission San Jose was founded on June 11, 1797, by Father Fermin Francisco de Lausen. The mission was the fourteenth of the twenty-one Spanish Missions in California and was one of the most prosperous of all the California missions. Mission San Jose was the center of industry and agriculture; its location was chosen for the abundance of natural resources in this region. In 1868, a giant earthquake shattered the walls and roof the Mission San Jose church. The site was cleared and a wood Gothic-style church was erected directly over the original red tiled mission floor. In 1956, the town of Mission San Jose incorporated with four others to become the City of Fremont. Plans to reconstruct the church of Mission San Jose were begun in 1973. Mission San Jose stands today as a testament to California's history and the influence of the Spanish as part of California's rich heritage. As we commemorate the Sesquicentennial anniversary of California, I am proud to recognize Mission San Jose and the part it has played in the history of California.

Mr. STARK

Mr. STARK. Mr. Speaker, I demand a recorded vote.

Mr. STARK

Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from Massachusetts (Mr. Tierney).

Mr. STARK. Mr. Speaker, I yield 5 minutes to the gentleman from Texas (Mr. Doggett) to discuss a bill which is not yet complete and which nobody in this room has read.

Mr. STARK. Mr. Speaker, on that I demand the yeas and nays.

Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from Oregon (Mr. DeFazio).

Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I include for the Record my dissenting views on the bill. Mr. Speaker, today, in an effort to comply--unsuccessfully, it appears--with a February ruling by the WTO, the majority is suspending its usual rules to expedite a vote on H.R. 4986, a bill that purports to repeal a corporate tax subsidy called the ``Foreign Sales Corporation'' (FSC). Wide ranging agreement exists that FSCs have long been a tax windfall to companies like Boeing, GM, Big Tobacco, many in the pharmaceutical industry, and other corporate giants, as exporting companies need only set up an offshore paper subsidiary to receive the tax benefit. And what a benefit it is: in the 1990's alone, this single loophole cost taxpayers more than $10 billion, with $8 billion of that flowing to the very largest corporations, all for simply funneling sales through an offshore office. In an effort to comply with the WTO ruling last February deeming FSCs to be an illegal export subsidy, H.R. 4986 would replace FSCs with an even worse tax boondoggle, this time without the paper subsidiary. Adding insult to injury, the publication ``Inside U.S. Trade'' recently reported that supporters of the bill have admitted that companies could qualify for the tax preference even if little or no physical production actually occurs in the U.S. For example, a blue- jean company could relocate its operations--and American jobs--abroad, produce a entirely foreign-manufactured product, and still receive this subsidy financed by American taxpayers, simply by slapping its American brand-name on the tag. Since this tax break was originally written with the express purpose of keeping jobs here in the United States, such an expansion of the provision would appear to be the product of corporate pandering at its very worst. Now Congress is proposing to expand it by another $1.5 billion over the next five years, on top of $15.6 billion the loophole already will cost taxpayers. As my colleague from Texas, Mr. Doggett has argued, this bill also amounts to a $100 million subsidy to the Tobacco Industry to market their products to children around the world, a practice they are rightfully forbidden to do here in the U.S. And, as my colleague from California, Mr. Stark correctly argues, this bill actually subsidizes pharmaceutical companies to charge less for prescription drugs overseas than they do here in the U.S., where such drugs prices have skyrocketed out of the range of what many Americans seniors can afford. As the EU rejected the terms of H.R. 4986 last month (with the WTO likely soon to follow), it sends the wrong message to WTO, implying that we do not wish to seriously negotiate terms of compliance. It subsidizes corporations that do not need subsidizing. It subsidizes corporations that should not be subsidized. And perhaps more importantly, were Congress to approve this bill, it would represent exactly the sort of behavior which so often leaves voters cynical with regard to political process, further giving evidence to the argument that it is corporations, not the people, whose interests Congress represents. Second, while exports are, indeed, increased, such a subsidy actually triggers international exchange-rate adjustments, which has the effect of increasing U.S. imports as well, leaving the impact on the trade deficit negligible at best, as witnessed by the recent news that the trade deficit had hit an all-time high. Lastly, the entire legislative process regarding H.R. 4986 has been the worst sort of backroom dealing with industry virtually writing the bill and many House Members of the committee of jurisdiction, Ways and Means, shut out of the process. Additionally, leadership in both parties, with the blessing of the Administration, hoped to expedite the process by shuttling the bill through Congress with limited debate and no amendments. While the U.S. should conform to WTO guidelines by the October 2000 date the organization has set, this corporate welfare bill is certainly not the right approach, substantively or tactically. Not only is the argument that FSCs are not a subsidy not credible, but the arguments that VATs are, verges on laughable. VATs are equivalent to an added sales tax that European countries rebate to companies when such goods are exported. Since the U.S. doesn't apply a sales tax to exports in the first place, the argument is effectively moot. The rationale behind tax policy such as FSC is that it encourages other countries to buy our exports by bringing prices down (for foreigners) and thus reduces the trade deficit. But here, too, its defenders' argument is not supported by the facts. In the first place, to the extent that export prices actually fall, this is a transfer of benefits from U.S. taxpayers to foreign consumers. Mr. Speaker, I yield such time as he may consume to the gentleman from Texas (Mr. Doggett). (Mr. DOGGETT asked and was given permission to revise and extend his remarks.)

Mr. STARK. Mr. Speaker, I oppose the bill, and I would like to claim the time in opposition.

Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, whether or not one agrees that tobacco, pharmaceutical, and military industries should be exempt from receiving this subsidy, which is referred to as the foreign sales credit, everyone should be opposed to the bill before us today. Whether or not one agrees that the new tax scheme is, in fact, an export subsidy, which most of us feel it is, as does the World Trade Organization, in a form of egregious corporate welfare, one should be opposed to the bill. This bill spends $5 billion of taxpayers' money every year in perpetuity, and our leadership is allowing a mere 40 minutes of debate and not allowing amendments. I can understand why the administration and my colleagues want to rush this legislation through, and I understand they want as little debate as possible to avoid public disclosure that will aid the European Union in their case before the World Trade Organization. However, our commitment first and foremost should be to our constituents. Our first commitment should be to the health and welfare of our seniors and children. Does not every taxpayer have a right to know how their hard-earned taxpayer dollars are being spent? Of course they do. The new FSC has a new name and a new face, but it is the same old subsidy. If it quacks like a subsidy and walks like a subsidy, it still is a subsidy. The new scheme essentially leaves the export benefit in place, but now the Treasury will forego an additional $300 million a year to subsidy our exporters. The Treasury will give more than $5 billion a year to help Boeing, R.J. Reynolds and Monsato peddle their products overseas. The exporters will receive lower tax rate on income from export sales than they do from domestic sales. Clearly this is prohibited under the WTO Agreement on Subsidies and Countervailing Measures. Proponents of the FSC claim that it is needed to compete with Europe's value-added tax. That is simply nonsense. International trade allows rebates on consumption taxes such as the VAP and U.S. excise and State sales tax. That is a level playing field. Europe's corporate income tax is comparable to ours and in fact investors often criticize Europe for imposing too high a corporate income tax. The FSC replacement is an export subsidy that will help industry such as the pharmaceutical, tobacco, and military weapons industries capitalize on the generosity of the Congress and on taxpayers. Let us start, for example, with the pharmaceutical industry. Is there anyone who says that we should encourage the U.S. pharmaceutical companies to sell cheaper drugs to foreigners while selling them at higher prices here at home to our uninsured and our seniors? That is exactly what we will be doing if we vote for H.R. 4986. The pharmaceutical company does not need another corporate subsidy at the expense of the American taxpayer. This offers incentives for the pharmaceutical companies to sell their products in other developed countries for less than they sell them here at home. Drug companies already reap huge tax benefits that lower their average effective rate 40 percent below other U.S. industries in America. The richest drug company had greater profits than the entire airline industry and more than twice the profits of the entire engineering and construction industry. Yet, studies show that American seniors without drug coverage often pay twice as much as people in Canada and Mexico. Last week, the Committee on Ways and Means rejected my amendment, which would have prohibited pharmaceutical companies from receiving this FSC subsidy if they charged American consumers 5 percent more than what they charge foreign consumers. That amendment made sense. Why should our seniors who go without their prescription drugs further have to subsidize the pharmaceutical companies who sell them abroad? It is an insult to American seniors and all taxpayers. I urge my colleagues to vote to help the seniors obtain affordable prescription drugs and to do away with this egregious corporate welfare. Without an option to offer or an amendment, no amendments are allowed under today's rules, the American public will be forced to help a pharmaceutical industry that cares nothing about the well-being of American citizens. The tobacco industry indeed will get subsidized exporting their poison to help kill and addict millions of children around the world. The weapons industry, who does nothing to encourage the sale of their weapons of destruction because those sales are made for them by the Department of Defense and by the U.S. State Department, why should they get a subsidy to sell nuclear materials or tanks or weapons of destruction when that is arranged for them? Why should we subsidize this arms race? The answer is we should not. We should not go through this, and when we want to promote world law, we should not be here with a second-rate subterfuge trying to call a subsidy something it is not. We should give up. We should recognize that the World Trade Organization is correct. We should allow our American industry to compete as they can on quality and on ingenuity and not have to subsidize these large manufacturers as a mere give-away just before election. Mr. Speaker, as the only member of the Ways and Means to vote against H.R. 4986, the FSC Repeal and Extraterritorial Income Exclusion Act of 2000, I must explain the reasons for my vote. I believe that this bill will not suffice under the scrutiny of the World Trade Organization. H.R. 4986 is as much of a subsidy as the current FSC. The entire process was undemocratic, constituting backroom consultations with private industry and select members of Congress. Finally, the bill is expanded and additional taxpayer dollars will be lost under the new scheme. It is not right that we ask U.S. taxpayers to pay for an export subsidy for large pharmaceutical corporations when the U.S. pharmaceutical industry is charging less in wealthy foreign markets for the same prescription drugs that our seniors are unable to afford here. process Select members of the House Ways and Means Committee and Senate Finance Committee were consulted on revising the Foreign Sales Corporation (FSC) prior to the World Trade Organization's October 2000 deadline. In addition, those who will benefit from the new subsidy were also consulted--private industry. However, there were many members of the Ways and Means Committee who were not consulted on the details of the new proposal. This hardly reflects the democratic process under which this legislative body is supposed to operate. I was one of the members who was not consulted on repealing and replacing the current FSC for a new plan, yet I was one of the members who was here to vote in 1984 to repeal the Domestic International Sales Corporation and replace it with the Foreign Sales Corporation. benefits to military weapons exporters In 1976, I led Congress in voting to decrease the benefit to weapons dealers. Therefore, I was dismayed to see that the new FSC benefit will actually be expanded to increase the benefit of the subsidy to military weapons exporters. The U.S. already spends about $8 billion annually to subsidize U.S. weapons manufacturers. These subsidies include taxpayer-backed loans, grants, and government promotional activities that assist U.S. weapons makers to sell their products to foreign customers. Under the current Foreign Sales Corporation scheme, weapons exporters may qualify for up to 50 percent of the FSC benefit. Under the new scheme, arms dealers will be able to reap the full benefit of the subsidy. It is incomprehensible that we would allow an industry that already receives more than its fair share of pork barrel spending to receive increased subsidies through the new FSC plan. benefits to pharmaceutical industry The pharmaceutical industry is another branch of corporate America that clearly does not need an export subsidy at the expense of the American taxpayer. H.R. 4986 offers export incentives to pharmaceutical companies who sell their products to other developed countries for less than the U.S. consumer can purchase the exact same drugs. Drug companies already reap huge benefits that lowered their average effective tax rates nearly 40 percent relative to the other major U.S. industries from 1990 to 1996. Fortune magazine again rated the pharmaceutical industry the most profitable industry in 1999. Merck, the richest drug company, had greater profits than the entire airline industry and more than twice the profits of the engineering- construction industry. Drug spending increased more than 15 percent in 1998, 18 percent in 1999 and is expected to continue to increase at phenomenal rates in the future. Yet, studies have shown that American seniors without drug coverage often pay about twice as much as people in Canada and Mexico. The Ways and Means Committee rejected my amendment which would have prohibited pharmaceutical companies from receiving the full FSC benefit if they discounted more than 5 percent to foreign consumers relative to U.S. consumers. This amendment simply makes sense. It is only fair to the millions of U.S. seniors who go without their much needed prescription drugs. Why subsidize an industry already receiving huge corporate tax credits? We should have exempted pharmaceutical companies. The members of the Ways and Means Committee chose otherwise. This is an insult not only to American seniors, but to all U.S. taxpayers. export subsidy Finally, H.R. 4986 does not address the concerns of the WTO dispute panel. The new scheme attempts to allay the European Unions' concerns by allowing some foreign operations to also receive the subsidy. The new scheme eliminates the requirement on a firm to sell its exports through a separately chartered foreign corporation in order to receive the benefit. The only portion that is eliminated is the paper subsidiary. Instead of creating a tax haven, U.S. exporters will be able to receive the benefit outright. The new scheme doesn't prevent arms exporters or any other industry from receiving the entire benefit of the subsidy. The new scheme essentially leaves the export benefit in place but now the U.S. Treasury will forego an additional $300 million per year to subsidize U.S. exporters. The U.S. Treasury will forego more than $3 billion per year to help companies like Boeing and R.J. Reynolds peddle their products. Exporters will continue to receive a lower tax rate on income from export sales than from domestic sales. This is clearly prohibited under the WTO Agreement on Subsidies and Countervailing Measures. It is a sad commentary on the Ways and Means Committee that is willing to fight a WTO ruling all in the name of corporate profits but ignores environmental, human rights and labor interests. Mr. Speaker, I reserve the balance of my time.

Mr. STARK. I am not prepared at this point, Mr. Speaker, to yield any time.

Mr. STARK. Mr. Speaker, I yield 1 minute to the gentleman from Texas (Mr. Doggett), noting that it is now the 1-hour anniversary since this bill was printed, at 4:09 this afternoon, to celebrate that momentous occasion to close debate on this in opposition.

Mr. STARK. Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr. Waxman).

Mr. STARK

Mr. STARK. Mr. Speaker, later today we will have an opportunity to vote on H.R. 4986, the FSC replacement bill. That is a foreign sales tax credit that was inaugurated by President Nixon in which the Washington Times recently, in an editorial, referred to it as one of the largest bipartisan and unanimous blunders passed by the House of Representatives. In the early seventies, I opposed the FSC bill, or the foreign sales tax credit, and was successful at least in denying that tax credit to weapons manufacturers, on the theory that all weapons sold to foreign countries had to be approved by the Defense Department and the Secretary of State and basically were sold by our government to other governments, and there was no reason to give a subsidy, which is what this FSC thing is, to weapons manufacturers in the United States. The Senate saw fit to reduce that to a 50 percent limitation and that has been the law for some 20 years. Recently, without any hearings and without any discussion, almost in the dead of night, the 50 percent limitation to defense contractors was removed. The World Trade Organization has filed a lawsuit against the United States saying that this foreign sales tax credit is a hidden subsidy, and they are right. It is a subsidy. It is being changed now in language in this bill that will come up under suspension, but the old saying, it is a duck if it quacks like a duck and it waddles like a duck. In this case, it quacks like a subsidy and it gives money back to companies out of the taxpayers' pocket to subsidize sales overseas. What is perhaps most egregious at this time is that we are now cutting taxes to and for U.S. pharmaceutical companies to get the U.S. pharmaceutical companies to sell cheaper drugs to foreigners while at the same time selling them at higher prices here at home to our seniors. That is what will be done if my colleagues vote for 4986, and they should vote no. The pharmaceutical industry does not need another corporate subsidy at the expense of the American taxpayer. Why give an incentive for the pharmaceutical companies when they sell their products to other developed nations for less than we can buy them here? I offered an amendment to say that pharmaceutical companies could not have this subsidy if they were selling their drugs for 5 percent more in this country than they sell in Canada and Mexico. That, unfortunately, was defeated. We have shown, or studies have shown, that the American seniors are without drug coverage, pay almost twice as much for their pharmaceutical drugs as do our neighbors in Canada and Mexico. Why on Earth we should be giving companies like Merck, already one of the most profitable drug companies in the world, with more than twice the profits of, say, engineering and the construction industry, why we should give them an additional subsidy to continue to sell drugs for less money in Canada and Mexico and Germany and Japan than they do to the seniors in my district in Fremont, California, escapes me. I hope that my colleagues will see the nonsense in this bill. It is being run through. We will not even see a report. They have held the report up so nobody can read that. There were a few of us on the committee who signed dissenting views. It is a bad bill. It does nothing but take money from the average senior, the average purchaser of pharmaceutical drugs, and give it to the richest companies in this country.

Mr. STARK. I yield to the gentleman from Texas.

Mr. STARK. Precisely. My Zucor, which got my cholesterol down from 220 to 160, great stuff, 1,200 bucks a year for Zucor. Fortunately, Blue Cross pays some of that for me. I could buy the same drug in Canada for $600. And I am giving this company a subsidy so they can sell it for less in Canada and I have to pay more for it here? I cannot figure that out.

Mr. STARK. That is what it seems to me, and that seems like a dumb idea, and I hope the gentleman and my colleagues will vote no.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today to introduce the Medicare Prescription Drug Internet Access Act of 2000. This bill will allow Medicare beneficiaries to purchase safe, FDA-approved medication through a Med ica re-ap proved internet site from US and international suppliers at the lowest possible prices. Prescription drug costs are the highest they have ever been. The cost of prescription medicine increased between 15 and 25 percent over the past year. As a result, many of our nation's seniors either resort to reducing their dosage to stretch their supply or simply go without their needed medication. Residents of other countries pay less for the same prescription medicine that our seniors get in the US. Much of the extra cost is related to marketing and advertising of drugs. Twenty to thirty cents of every dollar spent on a prescription drug goes to the advertising and marketing of the product. Why should Medicare beneficiaries in the United States have to pay more than residents of other countries for the same medication? Under the bill I am introducing today, Medicare beneficiaries would have access to those lower prices from a safe, certified-reliable source. All a beneficiary, doctor, or a pharmacy serving a beneficiary has to do is click on the Medicare home page, type in their prescription, and up pops the five lowest prices for their medicine, available from domestic and international suppliers. The beneficiary submits their prescription to the internet pharmacy, and gets their medicine at the price he or she selects, through the mail, by express delivery, or at their local retail pharmacy. There is no lag time in pricing because these prices will be available on a ``real time'' basis. Existing domestic internet pharmacies are eligible to compete for business on this official Medicare website. The only medicine that contracting internet pharmacies would be able to sell is FDA-approved medicine manufactured in FDA-approved facilities. We have the best drug approval process in the world. The federal Food and Drug Administration sends inspectors to other countries to examine the quality of the medicine, storage conditions and facilities, distribution of the medicine, and manufacturing facilities of foreign companies before they can import drugs into the United States. Internet pharmacies, under this bill, would only be able to import prescription medicine from approved companies that have been inspected by the FDA. There are problems that exist today with phony websites pawning counterfeit medicine to unsuspecting people. This bill addresses the issue of so-called ``rogue'' websites. It establishes a uniform set of criteria to which contracting internet pharmacies must adhere or face criminal and financial consequences. Among other criteria, internet pharmacies would have to be licensed in all 50 states as a pharmacy, fully comply with State and Federal laws, and only dispense medicine with a valid prescription through a licensed practitioner. As an added precaution, internet pharmacies would be required to display a Medicare Seal of Approval which serves to authenticate the website. The sea[ would directly link to a secure webpage operated by the Medicare contractor which verifies the internet pharmacy's legitimacy. I am proud to introduce the Medicare Prescription Drug Internet Access Act of 2000. It is unfair that seniors in the US are forced to shoulder a greater burden in higher drug costs. I urge your support of this bill which would allow Medicare beneficiaries access to safe, FDA- approved prescription medicines at lower prices.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today in vehement opposition to the GOP's attempt to override the President's veto of the repeal on estate taxes. President Clinton and my Democratic colleagues were right the first time on the estate tax and nothing has changed. This bill gives the wealthiest 5 percent of all Americans a $105 billion tax break. This is just one more fiscally irresponsible bill to consume the non- Social Security budget surplus revenues before we address the needs of working families. If Congress overrides the veto of H.R. 8, we will be well on our way to giving $649 billion over 10 years in tax breaks for the wealthy. None of these tax bills will help working families. But passing a feasible and affordable Medicare prescription drug benefit will help all working families--not just wealthy families. Governor Bush, and my Republican colleagues, prefer to spend more money on the dead through the estate tax repeal, than on those who are living and need a worthwhile prescription drug benefit. Governor Bush proposes a prescription drug benefit that would force seniors to pay high out-of- pocket-expenses that lacks the guarantee of comprehensive coverage. Seniors need a solid prescription drug plan that offers them guarantees and predictability. They don't need a repeal in the estate tax. The GOP needs to reassess its priorities. Offering a Medicare early buy-in plan to those who retire early but need health coverage will also help America's working families. The men and women in my district don't sit on estates worth $20 million. They are forced to work until they are physically unable. When that time comes for those working men and women, I want to give them something back. I don't want to have to tell them that the 106th Congress spent their Medicare prescription drug benefit, or early buy-in health insurance on a tax break for Bill Gates. All of the benefits from estate tax repeal will go to taxpayers in the top 5 percent income group. Those taxpayers earn at least $130,000 per year. Ninety percent of the tax cut benefits will go to those in the top 1 percent income group--those earning $319,000 per year. The GOP is attempting to mislead U.S. taxpayers through scare tactics. They have been throwing anecdotal ``evidence'' that family-owned businesses and farms face bankruptcy due to the evil estate tax. This is simply not true. For every dollar of farm estate tax cuts from H.R. 8, 99 dollars will go to other kinds of estates. For every dollar of small or family business estate tax cut benefits, 95 dollars or more will go to other estates. These other estates comprise the very wealthiest of all estates in the U.S.--those estates worth more than $20 million. The estate tax repeal--and the numerous other tax measures passed by the House--should be scrutinized with a measure of fairness. It hardly seems fair to come to the floor of the House week after week to provide hand over fist full of tax break dollars to the wealthiest U.S. taxpayers, when we haven't even addressed Medicare's solvency. In FY 2000, the federal estate tax, if left unchanged, is expected to raise $27 billion. That's more than double the total amount of federal income taxes paid by the bottom half of all taxpayers. Some leading estate tax repeal advocates, such as Steve Forbes and Dick Armey would suggest that we triple taxes on the bottom half of all taxpayers--with their flat tax proposals--to make up the lost revenue from the estate tax repeal. Our children will be hurt by the estate tax repeal. This bill costs over $105 billion over 10 years and $50 billion every year after 2011. We could rebuild of repair every one of our schools for a little over $105 billion. We could also provide health insurance to 7.7 million of the 11 million children currently without health insurance for $105 billion. We could also enroll an additional 836,000 children in Head Start with the $105 billion Republicans want to spend on the wealthiest 2 percent of Americans. Before any Member of the House votes to override this bill, I want you to consider the opportunities lost. This bill isn't about helping out family-owned businesses and small farms. It's about helping the wealthiest taxpayers in America and denying seniors a solid prescription drug benefit. I urge my colleagues to sustain the President's veto and vote no on this bill.

Mr. STARK

Mr. STARK. Mr. Speaker, I yield 3 minutes to the gentleman from California (Mr. Matsui), the ranking member of the Subcommittee on Social Security.

Mr. STARK. Mr. Speaker, I yield 4 minutes to the gentleman from Michigan (Mr. Bonior), our minority whip.

Mr. STARK. Mr. Speaker, I yield myself such time as I may consume. Mr. Speaker, I rise in opposition to this bill, not in support of taxes but in support of fairness and in support of the Medicare system which this bill gravely endangers for the seniors in our country. This bill confirms what we Democrats in Congress and the American people have long suspected, that Republicans do not govern with a budget but with a tax-cut-a-day plan. If it is a tax cut, it is in the Republican budget, no questions. But there is a danger in this bill. There is unfairness in this bill, and it is important that the public and my colleagues realize that. This bill, first of all, takes $10 billion a year or thereabouts out of the Medicare Trust Fund. It removes dedicated revenues. The Republicans say, oh, we are not taking the money out of Medicare; trust us. It is clear there will no longer be a dedicated tax revenue, but we can trust the Republicans to make sure that they protect Medicare, just as they asked us to trust them to make sure that HMOs did not pull out of Medicare and leave seniors without important coverage. These may be the same requests to trust the Republicans to lock away Medicare in a lockbox. Aha. Then with this very bill, we broke open the lockbox and we are spilling the contents of that lockbox into the pockets of a very few Social Security beneficiaries, the very richest ones. These are the same Republicans asking us to trust them with Medicare that have asked us to trust them to keep a budget and then invented gimmicks to get around their own budget. Many Republicans have never liked Medicare from the beginning. Former Leader Robert Dole admitted, I was there fighting the fight, 1 of 12 voting against Medicare in 1965 because we knew it would not work. Our former Speaker, Newt Gingrich, once pledged he would let Medicare wither on the vine, and our own majority leader once called Medicare a program I would have no part of in a free world. Those are not the leaders to which we should trust the medical care of our seniors. As a matter of fact, if indeed we do want to give $10 billion back to Social Security recipients, and we might very well like to do that, $10 billion would cut all of the seniors' part B premiums in half. $10 billion would give every senior in the country $250 a year in a refundable tax credit which they could use to perhaps pay for a prescription drug benefit, which the Republicans will not bring to the floor. It could be used for a whole host of things, instead of giving just 6 or 7 million seniors all of this generosity. What happens to the other 35 million Social Security beneficiaries? They get nothing, and they risk losing their immediate care benefits if the Republicans continue down the path of draining the Medicare Trust Fund in the name of tax cuts to the very wealthy. So, Mr. Speaker, I urge that my colleagues look carefully at this bill. It is not what it purports to be. It is a gift, an enticement to the very rich, who may very well be Republicans, but it cuts out 80 percent of the Social Security beneficiaries from any benefits and it puts at risk the viability of the Medicare system just one more way. We have watched the Republicans try and privatize Social Security. We have watched them try and privatize Medicare. We have seen them vote in our committee. The gentleman from Florida (Mr. Shaw) voted twice in our committee to deny his senior constituents a discount on pharmaceutical drugs at no cost to the Federal Government. How can we trust leaders like that to protect our Medicare system when they are on the record time and time again of trying to deny seniors access to pharmaceutical drugs? So this is a ploy. This is a ploy to ignore the President's outreach to say I would take some tax cuts if a pharmaceutical benefit would be agreed to; if a package is put together we can work together and we can talk about something that is reasonable in the light of the spending that will be necessary. But, no, it is all or nothing. It is another huge tax cut to a very few wealthy people and another attempt to destroy Medicare as we know it. I urge my colleagues to oppose the bill. Mr. Speaker, I reserve the balance of my time.