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Executive Summary

ZANTAC IMPORT DUTY SUSPENSION IS APPROPRIATE ISSUE FOR GATT, SmithKline Beecham suggests in June 12 comments to the House Ways & Means Committee. As part of its objection to a House bill (HR 1963) requesting a four-year suspension of the 3.7% ad valorem tax on Glaxo's anti-ulcer ingredient ranitidine, SmithKline Beecham proposes that "Congress should now defer the ranitidine matter to the GATT [General Agreement on Trade and Tariffs] Round." Deferring the issue to the GATT talks would allow U.S. negotiators to "ask for something in return" for the tariff concession, SmithKline Beecham recommended. As an example of one possible quid pro quo, SmithKline suggested "the elimination of the 4% tariff" the company pays on Tagamet (cimetidine) imports to Japan. SB's comments represent a continuation of the company's campaign to prevent the Glaxo tariff relief. SmithKline was successful in blocking a similar bill last year due to Congress' policy of approving only "noncontroversial" suspensions. The controversy is unusual within the pharmaceutical industry, which generally has supported the suspension of all duties. SB appears to be alone among anti-ulcer marketers in its quest: Lilly, Merck and Marion Merrell Dow all supported the Glaxo bill in 1990. The ranitidine import bill is one of 233 tariff bills submitted in the House this year; about one-third of the bills concern pharmaceutical products, according to a Ways & Means/Trade subcommittee staffer. The subcommittee expects that only a "half- dozen" of the bills may be subject to hearings in mid-September to assess the impact of the legislation on domestic competition. The dispute over the anti-ulcer drug is not likely to require a hearing this year given the thorough examination of the issue last year, the staffer noted. Both Glaxo and SmithKline Beecham testified last September at a hearing, which was held after the Zantac provision had been withdrawn from trade legislation in July ("The Pink Sheet" Oct. 1, T&G-4). In addition, the International Trade Commission conducted a review at the request of the Senate Finance Committee and submitted a report in February 1991 ("The Pink Sheet" Feb. 18, T&G-5). Glaxo hopes the ITC report will help disprove SmithKline Beecham's claims that the tariff suspension puts it at a competitive disadvantage and thereby remove the controversy now associated with the ranitidine duty suspension. In its most recent comments to the subcommittee, SmithKline Beecham references the ITC estimates that Tagamet sales would probably decline only $ 5 mil.-$ 8 mil. a year if the duty were lifted (1990 U.S. sales were $ 560 mil.) while Zantac, with 1990 domestic sales of $ 1.3 bil., might add an additional $ 24 mil.-$ 29 mil. Despite the relatively minor change, SmithKline Beecham continues to argue that "the U.S. government would be perversely interfering in the competitive marketplace by subsidizing the importing company whose high-priced medicine holds the dominant share."

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