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May 20, 2004

CONTACT: Jerry Flanagan, (415) 633-1320

Public Warning: "Covert Propaganda" From the Bush Administration Violates Federal Law; What Else They're Not Telling You About the New Medicare Rx Plan

The non-partisan general Accounting Office (GAO) announced that the Bush Administration had violated federal law by failing to disclose the source of recent advertising about the new Medicare prescription drug law. The GAO also raised serious concerns over "notable omissions and weakness" in the materials and failures to disclose limitations in the law, according to the Foundation for Taxpayer and Consumer Rights which is urging television and radio stations to counter the false advertising by disclosing three key facts about the law that could impact a senior's decision to enroll.

"President Bush shouldn't have too use covert propaganda to sell a program that is supposed to be good for seniors. The Bush Administration has resorted to misleading the public about the new Medicare law to cover-up dramatic give-aways to their drug company boosters," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights (FTCR). "Not only are they not telling the truth, the Bush Administration has launched a scare-tactics campaign funded by pharmacists to discourage reimporting cheaper drugs from Canada."

The advertisements consisted of written materials and video segments distributed to news networks throughout the country. The televisions segments featured actors posing as news anchors reporting on the benefits of the new Medicare prescription drug law. The GAO found that the Bush administration had violated federal law by not disclosing that the fake news segments were paid for by government agencies using taxpayer dollars.

According to the Center for Responsive Politics, pharmaceutical companies contributed $27 million in individual, PAC and soft money contributions to Congress in the 2002 election cycle -- 75% to republicans. In 2004, drug companies have contributed $7 million to national officeholders -- 66% to Republicans.

The GAO's decision is available at A GAO letter to congressional officials citing the misleading nature of the advertisements is available at:

To counter the Bush Administration's misleading advertisements, FTCR urged television and radio networks to publicize three major limitations of the law:

* Drug prices, availability and program enrollment fees are not guaranteed by the Medicare Prescription Drug Benefit Card program to begin in June. As a result, prices and drug availability can change every month while enrollees have to commit to enroll for a year.

* The Medicare prescription drug law specifically bans the federal government from negotiating bulk discounts on drugs even though the U.S. Department of Veterans Affairs saves 50% and more off the list price of drugs it purchases for veterans as a result of bulk purchasing. Therefore, a larger share of the $400 million earmarked over the next ten years for the Medicare drug program will pay for overpriced drugs and drug company profits.

* The Medicare prescription drug law continues the ban on reimporting cheaper U.S. made drugs from Canada. As a result, seniors will not be able to take advantage of U.S. made drugs sold to Canadian pharmacies at 30-60% bulk discounts.

Seniors choosing not to enroll in the Medicare Drug Benefit Card Program may have other options for low cost prescriptions if several California proposals are adopted as national models. The City and County of Los Angeles and San Francisco are considering proposals to allow residents and small business owners to join bulk purchasing pools in which prescription drugs would be available at pharmacies at bulk discounts. A state proposal, (AB 1958 - Frommer, Los Angeles) would allow the uninsured and business owners to join a bulk purchasing pool run by the California Public Employees Retirement System (CalPERS), the nation-s second largest public purchaser of health care.

The Bush Administration's Department of Health and Human Services (HHS) and Food and Drug Administration (FDA) have launched a national campaign with the Association of Boards of Pharmacy (NABP) to discourage the reimportation of drugs from Canada.

"The U.S. needs affordable drugs because seniors must often choose between buying their medications and paying for rent and food. It is absolutely absurd for the FDA and the Bush Administration to claim that it is categorically unsafe to reimport U.S. made drugs," said Jerry Flanagan of FTCR. "Instead of addressing the problem of high cost prescriptions and assuring the safety of imported drugs, the FDA and the Bush Administration are using scare tactics to deter seniors. Meanwhile, consumers are paying for the obscenely high profits and bloated administrative costs of the Bush Administration's top campaign contributors."

According to Fortune 500 Magazine, the pharmaceutical industry has consistently been the most profitable industry over the past eight years, with profits four to five times higher than those of the average Fortune 500 firm.

The pharmacists and Bush Administration officials say drug importation is unsafe despite the fact that more than 40% of prescription drugs on the world market are produced by FDA approved facilities.

Each of the FDA's and pharmacists concerns fail to hold up under scrutiny, according to FTCR:

* Quality Assurance

The FDA says that it cannot assure the quality of imported drugs even though it is currently in the process of approving pharmaceutical production facilities in 25 countries, including Canada, South America, Australia and Israel.

A recent Minnesota survey found four of eight surveyed pharmacies could easily meet or exceeded state safety standards.

Despite the promising results, Peter Pitts of the FDA said the survey, "calls to the public's attention that these are very dangerous gray zones and that you can't really trade some savings for safety."

Kevin Goodno, the Minnesota Human Services commissioner, called the FDA's comments "an overstatement, and a fair amount of rhetoric is involved."

"We have no evidence at this time, in the context of Internet pharmacies, that there are unsafe products going to the United States," said Diane Gorman, assistant deputy minister of Health Canada.

(Source: Associated Press, February 13, 2004 -- Frederic J. Frommer)

* Generics

The FDA says that consumers should buy generics instead of purchasing from Canadian pharmacies. However , a loophole in the federal Drug Price Competition and Patent Term Restoration Act (the Hatch-Waxman Act) allows pharmaceutical companies to delay approval of generic alternatives. Under the law, pharmaceutical companies can file a patent infringement lawsuit against a generic company for any reason and automatically receive a 30-month stay on generic production while the case is litigated.

These stays provide brand name manufactures an additional 2 years of market exclusivity which generate sales that far outweigh litigation costs.

* Research and Development (R&D;)

Pharmaceutical companies claim that if they sold drugs in the U.S. at the same prices they offer in Canada and other countries there would not be enough revenue to provide for research and development costs of new drugs.

However, a 2000 report found that pharmaceutical companies had overstated their R&D; costs by as much as 5 times actual costs. Data also shows that up to half of the R&D; costs for some of the most expensive drugs (cancer and AIDS treatments) are paid for with taxpayer dollars.

Though drug companies often blame high research and development (R&D;) costs as the driving force behind double-digit annual increases in drug expenditures, the fact is that pharmaceutical industry spends two to three times more on advertising and marketing the newest drugs than they do on research and development.

* Counterfeit drugs

Counterfeit drugs have been a problem in the U.S. for years. There is no indication that importing drugs from abroad or reimporting drugs from Canada with minimal safe guards in place would add significantly to this problem. In fact, lower cost drugs in the U.S. market would actually lower the incentive for counterfeiters to produce unsafe drugs.

Additional safety checks could easily be paid for with money saved by purchasing lower costs drugs.

* Untested Substances

U.S. and international drug companies commonly apply for approval for use in U.S. and Canadian markets simultaneously.

For example, Targeted Genetics Corporation (TGEN) was granted regulatory approval to begin its rheumatoid arthritis (RA) phase I clinical trial by the U.S. Food and Drug Administration and it's Canadian equivalent, Health Canada.

There is no evidence that the Health Canada approval process faces conflict of interest problems that could impact the fair and accurate approval of drugs at a greater incidence than the FDA in the U.S.


The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit and non-partisan consumer advocacy organization. For more information visit us on the web at