Controlled Substances Export Reform Act of 2004

Mr. President, I rise to introduce with my colleague, Senator Biden, the Controlled Substances Export Reform Act of 2004. This bill would make a minor, but long overdue, change to the Controlled Substances Act to reflect the reality of commerce in the 21st Century and to protect high-paying American jobs, while maintaining strong safeguards on exports.

Before I discuss this bill, I want to thank Senator Biden for working with me on this important legislation. Senator Biden has long been recognized as a national leader on drug-related measures, and we have a history of working together on a bipartisan basis to enact sensible reforms in this area, as evidenced by the recent enactment of our steroid precursor bill. I respect his thoughtful collaboration, and I thank him for his work on the proposal we are introducing today.

In sum, this proposed legislation will amend the Controlled Substances Act of 1970 providing greater parity for U.S. manufacturers, who wish to export their products while retaining full DEA authority over U.S. exports.

Current law places severe restrictions on exports of certain drug products from the United States. The Controlled Substances Export Reform Act proposes to amend that law to correct one small, but onerous provision that is unnecessarily threatening American jobs. This change is entirely consistent with the long-established regulatory scheme pursuant to the Federal Food, Drug and Cosmetic Act.

At present U.S. pharmaceutical manufacturers are permitted to export most controlled substances only to the immediate country where the products will be consumed. Shipments to centralized sites for further distribution across national boundaries are prohibited. This contrasts with the freedom of pharmaceutical manufacturers throughout the rest of the world to readily move approved medical products among and between international drug control treaty countries without limitation or restriction.

The unique prohibitions imposed on domestic manufacturers disadvantage U.S. businesses by requiring smaller, more frequent and costly shipments to each country of use without any demonstrable benefit to public health or safety. By imposing significant logistical challenges and financial burdens on U.S. companies, the law creates a strong incentive for domestic pharmaceutical manufacturers to move production operations overseas, threatening high-wage American jobs.

The Controlled Substances Act of 1970 permits U.S. manufacturers of Schedule I and II substances and

Schedule III and IV narcotics to export their products from U.S. manufacturing sites only to the receiving country where the drug will be used. The law prohibits export of these products if the drugs are to be distributed outside the country to which they are initially sent. The effect of this restriction is to prevent American businesses from using cost-effective, centralized foreign distribution facilities. In addition, under the current regime, unexpected cross-border demands or surges in patient needs cannot be met. Likewise, complex and time- sensitive export licensing procedures prevent the shipment of pharmaceuticals on a real time basis.

European drug manufacturers face no such constraints. They are able to freely move their exported products from one nation to another while complying with host country laws. This is entirely consistent with the scheme of regulation imposed by international drug control treaties. Only the United States imposes the additional limitation of prohibiting the further transfer of controlled substances.

Thus, while a French or British company can ship its products to a central warehouse in Germany for subsequent distribution across the European Union, an American company must incur the added costs of shipping its products separately to each individual country.

The Controlled Substances Export Reform Act would correct this imbalance and permit the highly regulated transshipment of exported pharmaceuticals placing American businesses on an equal footing with the rest of the world. Importantly, however, DEA's authority to control U.S. exports would not be diminished.

The legislation authorizes the Attorney General, or his designee, the DEA, to permit the re-export of Schedule I and II substances and Schedule III and IV narcotics to countries that are parties to the Single Convention on Narcotic Drugs and the Convention on Psychotropic Substances under tightly controlled circumstances: First, each country is required to have an established system of controls deemed adequate by the DEA. Next, only permit or license holders in those countries may receive regulated products. Third, re-exports are limited to one single cross-border transfer. Then the DEA must be satisfied by substantial evidence that the exported substance will be used to meet an actual medical, scientific or other legitimate need, and that the second country of receipt will hold or issue appropriate import licenses or permits. Fifth, in addition, the exporter must notify the DEA in writing within 30 days of a re-export. And finally, an export permit must have been issued by the DEA.

These safeguards are rigorous but fair, and represent a much-needed modernization of the law. The current restrictions on U.S. pharmaceutical exports have remained essentially unchanged for more than thirty years. In that time, the global economy has changed dramatically. For those among us who express concerns about the outsourcing of American jobs and the competitiveness of U.S. companies, this modest change represents an opportunity to address such problems head-on.

The Controlled Substance Act's limitation on U.S. pharmaceutical exports imposes unique, unnecessary, and significant logistical and financial burdens on American businesses. The effect of this outdated policy is to create a strong incentive for domestic pharmaceutical companies to move production overseas, threatening American jobs and eliminating DEA jurisdiction over the manufacture and shipment of their products. The Controlled Substances Export Reform Act removes this unwarranted barrier to U.S. manufacturers' use of cost-effective distribution techniques while retaining full DEA control of U.S. exports and re-exports. Accordingly, I urge my colleagues to join Senator Biden and myself in support of this bill.

section 1003

I appreciate the distinguished Senator from Delaware's work on this legislation and am pleased to join with him in correcting this small, but important provision of law.

Section 1003 of the Controlled Substances Import and Export Act currently permits U.S. pharmaceutical manufacturers to export schedule I and II drugs and schedule III and IV narcotics only to the exact country where the products will be used. While American companies are prohibited from using centralized foreign distribution facilities, our international competitors face no similar restrictions and can freely ship medicines for cross-border distribution between all international drug control treaty countries.

Yes.

Yes, the Senator is correct. In addition to the burden imposed on U.S. manufacturing exporters, the advent of the European Union has created a situation that places our foreign distributors in violation of European law. Member countries of the EU are considered borderless in terms of trade. Products introduced into the European Union are required to be available for transport and shipment among and between all member countries under their law. However, because we don't recognize the European Union as a single entity and cross-border transfers are prohibited, our distributors are placed in the position of violating European law in being forced to deny inter-country distribution of U.S. drugs.

That it is correct. The purpose and intent of this legislation is to place U.S. pharmaceutical companies on equal footing with their international competitors. Moreover, this change is entirely consistent with the long-established regulatory scheme pursuant to the Federal Food, Drug and Cosmetic Act. Eliminating the need for multiple, small shipments and the associated wasteful, small batch testing, will save U.S. companies nearly 80 percent over current export distribution costs, savings that will result in more American jobs and stronger international markets for U.S. products.

As the Senator noted, the bill has been crafted with the assistance of the Drug Enforcement Administration to ensure all necessary controls will remain in place while creating a level playing field for American business. It is simply a commonsense update to an outdated law, and I urge its passage.

Will the Senator yield for a question?

Isn't it true that the disadvantage to U.S. businesses of requiring smaller, more frequent shipments to each country of use is substantial? When a foreign entity seeks to import a schedule I or II drug, or a schedule III or IV narcotic from the United States, they must first secure an import permit that is shared with the U.S. manufacturer and DEA. Our companies then have 60 days in which to obtain independent safety and quality testing on each separate product batch to be shipped. Upon completion of that testing, the manufacturer submits a highly detailed export permit application for DEA's approval. If DEA fails to issue the permit within 60 days, the entire process must be restarted. Because independent testing is expensive and the export process is highly paper intensive, it is not unusual for companies to struggle against the 60-day deadline only to have to begin again. Unfortunately, while we engage in this burdensome process, patients suffer without their drugs and foreign physicians seek out substitutes to unreliable U.S. supplies.

This process was put in place long before the adoption of our international drug control treaties and the anti-diversion protections they provide. It is now outdated and unnecessary.

Will the Senator yield for another question?

While the Controlled Substances Act restrictions made sense when they were adopted over 30 years ago, would you agree that changes in the way international pharmaceutical markets work, and in the way controlled substances are tracked, and have since rendered the requirements unnecessary? Our legislation was developed in cooperation with the Drug Enforcement Administration to ensure that all necessary anti-diversion controls remain.

Under our bill, each country is required to have an established system of controls deemed adequate by the DEA. Only DEA permit or license holders in those countries may receive regulated products. Re- exports are limited to one single cross-border transfer. The DEA must be satisfied by substantial evidence that the exported substance will be used to meet an actual medical, scientific or other legitimate need and that the second country of receipt will hold or issue appropriate import licenses or permits. The exporter must notify the DEA in writing within 30 days of a re-export, and an export permit must have been issued by the DEA.

The legislation specifically retains the Drug Enforcement Administration's authority to deny a request to export or re-export a controlled substance. A company seeking to export a drug for subsequent transfer must provide the DEA with exhaustive information on both the country of initial export and the countries to which the controlled substances would ultimately be destined. In addition, DEA must be provided follow-up notification of any cross border shipment within 30 days of that transfer. The U.S. Government will know where all drugs are being shipped and for what purpose. Without that information, U.S. pharmaceuticals will never leave our soil.

Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of S. 3028, which was introduced earlier today.

Mr. President, I ask unanimous consent that the bill be read a third time and passed, the motion to reconsider be laid upon the table, and that any statements regarding this matter be printed in the Record.