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HATCH EXPORT BILL REQUIRES ANNUAL AGREEMENTS WITH IMPORTERS TO REFRAIN FROM RE-SHIPPING TO COUNTRIES UNAUTHORIZED UNDER ACT; KENNEDY, DODD SIGN ON

Executive Summary

Drug exporters must get annual agreements from importers indicating that shipments will not be re-exported to unauthorized countries under a new Pharmaceutical Export Bill introduced by Sen. Hatch (R-Utah) Nov. 13. According to the legislation (S 1848), the U.S. exporter must obtain annually "a written agreement from each importer to whom the drug is to be shipped" that the "importer will not ship the drug to a country to which the drug may not be shipped under" the act. The importer agreement is one of several safeguards incorporated into the bill following negotiations led by Senate Labor & Human Resources Cmte. Chairman Hatch and Ranking Minority Member Kennedy (D-Mass.). The issue of avoiding re-export, or "trans-shipment," to countries lacking adequate regulatory systems to assure the safe handling and use of drugs that are manufactured for export but not approved for use in the U.S. was a key Kennedy concern. Kennedy signed on as a cosponsor, as did Sens. Dodd (D-Conn.), Bradley (D-N.J.), Lautenberg (D-N.J.), Thurmond (R-S.C.), Hawkins (R-Fla.), and Quayle (R-Ind.). The cmte.'s ranking demo had withheld agreement to an earlier version of Hatch's bill (S 1770); markup was consequently postponed several times. The cmte. has now scheduled to mark up S 1848 Nov. 19. Kennedy's decision to sign on to the export bill represents the denouement of a long process of industry efforts to work with the Mass. Democrat to explain the value of U.S. pharmaceuticals in foreign markets. Kennedy was originally impressed with U.S. drug industry efforts overseas when he saw the drug industry contributions to help in the Africa famine relief in late 1984. Kennedy signed onto the bill against heavy pressure from a strong constituency of his represented by the Health Research Group. Other safeguards contained in the new legislation include a requirement for labeling on the shipping package that states, "This drug may be sold or offered for sale only in the following countries:" -- followed by a list of nations authorized to import the product. The bill also includes sanctions against the exporter and importer for sale of products in unauthorized countries. One provision permits HHS to prohibit exports to an importer that ships a drug to an unauthorized country. Under another provision, HHS has discretionary authority to revoke export rights if the dept. determines that a drug poses an imminent hazard. That provision, in effect, gives U.S. lobby groups the right to seek export bans through HHS. The dept may immediately prohibit shipments of a drug that poses an imminent hazard in any authorized or unauthorized country. Furthermore, HHS may prohibit exports, seize the drug involved, seek an injunction to halt any proscribed activity, and impose criminal penalties against any exporter that ships in violation of an imminent hazard order or continues shipping to an importer knowing that the importer is reshipping to an unauthorized country. Like the earlier bill, S 1848 permits HHS to seize a drug, block its export, and "seek an injunction to halt any proscribed activity, and to impose criminal penalties" if an exporter or its subsidiary violates any provision of the legislation. Another new labeling-related provision requires that a drug exported to countries on a second list (those to which permissible export depends on the drug's approval in a country on the first list) must be translated into the language of the importing country. In addition, exports to second-list countries are allowed only if approval has not been denied or withdrawn for reasons of safety by any first-list country. Generally, the legislation establishes conditions for export of drugs not approved by FDA to countries (on the first list) whose regulatory systems are adequate to approve them and to countries (on the second list) whose regulatory systems are adequate to assure the safe and effective handling and use of products approved by countries on the first list. The lists will be updated by HHS. Exports are not permitted to countries not included on either list unless the dept. determines on the basis of human testing and other scientific evidence that shipment of the drug is justified to treat a disease or condition in the importing country which does not exist to a significant extent in the U.S. That provision would permit export of products for conditions such as tropical diseases. The three-part categorization of countries was included in the earlier bill. However, S 1848 adds a stipulation that requires clinical or other scientific proof of a drug's value in treating a condition not prevalent in the U.S. population before exports will be allowed to countries not listed in the first or second group. In addition, the bill provides that compliance with the act will be monitored regularly by the General Accounting Office (GAO). The congressional watchdog agency is required to monitor compliance with the act and to report to Congress within three years of enactment and every two years thereafter. The legislation also requires HHS to contract the Natl. Academy of Sciences to study the act's economic impact on employment, capital investment, and trade and its effect on internatl. health. The academy will report to Congress on its findings within five years of enactment, the bill adds. Introducing the bill on the Senate floor, Hatch noted that provisions to prevent export of drugs to developing countries unable to regulate them were "argued most forcefully" by Kennedy. "Since the introduction of S 1770," Hatch continued, additional discussions with Kennedy resulted "in further accommodations," and, at the same time negotiations with the pharmaceutical industry ensured "that the bill not make future investment decisions so risky that the new shipment authority would not be used." Merrell Dow and Genentech were reportedly industry leaders throughout the negotiating process. "While the bill is perhaps more encumbered than I might think necessary, it is a good, rational bill which I believe will be workable," Hatch added. Kennedy told the Senate that "regular GAO reports will determine whether these re-export controls are effective or need to be strengthened. These reports will make it possible to evaluate whether the legislation is achieving its goal of promoting world health and maintaining America's longstanding leadership in supplying the world with safe and effective pharmaceuticals." The Mass. Democrat maintained the legislation "achieves a long overdue reform of America's drug export laws, in accord with a sound and responsible approach to the overwhelming needs of internatl. public health." Stating that the bill "will have major significance" for the biotechnology industry, Kennedy declared: "The American pharmaceutical industry has brought untold blessings to the American people, and it should not be denied the opportunity, under the best safeguards we can develop, to make these blessings more widely available to the sick and needy in other lands." Chart omitted.
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