On Oct. 17, Sen. Orrin G. Hatch (R-Utah), chairman of the Senate Labor and Human Resources Committee, introduced Senate bill S1770, a controversial measure that would permit U.S. drug manufacturers to export new medicines that have been approved in other countries but not by regulators here. Current law forbids such exports.

In the ensuing weeks, clusters of lobbyists and legislative aides have struggled to nail down changes to S1770 that would make it acceptable to Sen. Edward M. Kennedy (D-Mass.), the committee's top-ranking Democrat, without losing the backing of the pharmaceutical industry and Hatch, the industry's chief Senate advocate. As they broke for the weekend, negotiators said a tentative agreement had been reached and the proposal would be sent to Hatch, Kennedy and the industry for final approval.

Like a play within a play, the shaping of S1770 dramatizes broader political themes, according to the actors and their audiences on Capitol Hill and the corporate offices downtown.

*The bill's improving prospects owe a large debt to lobbying by a leading biotech company, which is asking Congress to demonstrate support for an emerging high-tech industry by backing S1770. The company, Genentech Inc., says that to prosper, it and other biotech firms must be permitted to export new biotech products that have not yet been approved by the Food and Drug Administration, but have been passed by regulators in other scientifically advanced nations. If the products can't be exported from here, Genentech says it will have to license the technology to foreign partners in order to get into foreign markets, leading to a loss of jobs and technology.

The multinational drug companies raise the employment issue. If S1770 isn't passed, they will be obliged to increase the manufacture of their new drugs in Europe, where the regulatory process is faster. "If we continue to expand our production facilities abroad, eventually they'd be no need for our facilities here," said Robert A. Ingram, vice president of Merrell Dow Pharmaceuticals Inc. His company faces decisions in the next year or two on whether to export drugs or jobs, Ingram said.

Thus, S1770 has become an important test of a new political force: Congress' perception of America's declining strength in international competition.

*On another level, the bill is the latest spasm in a conflict between U.S. drug companies and their critics dating back to the late 1950s, when the industry's pricing practices were under attack by the late Sen. Estes Kefauver.

Public Citizen, Ralph Nader's lobbying organization, says that, by permitting the export of drugs not approved by the FDA, S1770 would create "an unjustifiable double standard offering one level of protection to American consumers, while conceding a different, lesser level of protection to foreign consumers." Public Citizen calls Genentech's argument for S1770 an exaggerated, undocumented claim that doesn't hold true for the whole industry.

*The struggle over S1770 also shows Washington legislative lobbying at work, as the bill's critical phrases are hammered out by a closed circle of insiders -- congressional aides and lobbyists, some of whom recently have left Capitol staffs to work for the industry.

In his previous incarnation, Thomas Parry was administrative assistant and right-hand man for Hatch. Today, the lobbying firm he and his partner Romano Romani run represents the Pharmaceutical Manufacturers Association (PMA), the drug industry trade group, in the lobbying over S1770.

Parry and Romani were retained by PMA because of Parry's close ties to Hatch, which have continued after his departure from the senator's staff last year. It's the kind of close association typical of many senators and top assistants, said Romani, former legislative director for Sen. Dennis DeConcini (D-Ariz.). "You're his top guy. You've gotten him through a lot of things. You build a relationship. He does look to Tom for advice and counsel on a lot of things," Romani said.

The association includes political fund-raising -- Parry helped Hatch throw a fund-raising dinner for Sen. Paula Hawkins (R-Fla.), a member of Hatch's committee. Hatch's office even recommended that PMA hire Parry, industry officials say.

E. Geoffrey Littlehale, the PMA's vice president for government relations, said he can't confirm that, but added that the Parry-Romani firm is the ideal choice. "It's just a natural," he said.

Two other key negotiators for the industry are Washington attorneys Jonah Shacknai and John McLaughlin, who were hired by Merrell Dow to work on S1770. Shacknai was a former House Energy and Commerce Committee staff attorney, and McLaughlin worked for Rep. Henry A. Waxman (D-Calif.) as counsel for the Energy and Commerce subcommittee on health and the environment, which Waxman heads. The subcommittee is the key House panel on drug export legislation.

The biotech industry's interests are in the hands of lobbyist Stephan E. Lawton, a Washington attorney who worked for former representative Paul Rogers (D-Fla.), Waxman's predecessor on the health subcommittee.

Shacknai estimates that the negotiators have spent 150 hours over the past three weeks preparing 15 or 20 different drafts of S1770 in hopes of building a bridge between Kennedy and the pharmaceutical industry.

Kennedy and his staff are holding out for safeguards intended to minimize the risk that unapproved drugs made in this country could be diverted to Third World countries whose health regulatory capabilities are weak, at best, a diversion that could lead to misuse of the drugs and harm patients.

"Kennedy's concerns are safety concerns," said the senator's administrative assistant, Lawrence Horowitz. "Unless every one of our concerns is addressed, he would not co-sponsor it."

The drug export bill pulls Kennedy in several directions. He is sympathetic to the industry's warning that jobs will be lost if S1770 isn't enacted, aides say. And he wants to help to improve the position of American biotech firms -- an example of the kind of competitive, high-tech industry that should be receiving support from the federal government, in his view. But Kennedy doesn't want to be perceived as acting against the Third World's interests -- and the critics of S1770 say that is where any harmful fallout from the export of unapproved U.S. drugs will fall.

As introduced by Hatch, S1770 had been altered from last year's version to try to deal with the Third World export issue.

In the new version, a drug not approved by the Food and Drug Administration could be shipped to foreign countries by a U.S. manufacturing company if it had been approved by authorities in one of 14 industrialized nations with advanced drug regulatory processes.

The countries that could receive unapproved U.S. drugs would have to be certified by the secretary of Health and Human Services as having adequate regulatory procedures to assure proper labeling of the imported drugs. Most Third World nations wouldn't fall into that category, a Senate aide said when the bill was introduced.

The debate between Kennedy's staff and the drug industry lobbyists was over the responsibilities to be imposed on drug companies to prevent shipments to unauthorized countries in the Third World, and the penalties to be imposed on the companies if that happens.

Kennedy's staff wants U.S. companies that export drugs under S1770 to sign agreements with importers certifying that the drug won't be re-exported in an unauthorized way. If a drug shipment showed up in an unauthorized country, the American manufacturer would have to investigate how it happened and try to enforce its agreement. The manufacturer also would have to report to the FDA about its efforts to detect and correct the problem.

A second provision sought by Kennedy's staff says that, if a company knowingly violated the requirements of S1770 either by participating in an illegal diversion of a drug to an unauthorized country or by failing to deal adequately with diversion, the FDA could bar exports of that drug.

"The goal is a balance, not to handicap the industry with unnecessary regulation, while making it clear that there are protections in the system," one Senate aide said.

Just where that balance falls was the key to the negotiations.

Critics of the legislation say that diversion and misuse of exported American-made drugs is impossible to prevent, and they argue that the United States should continue to set an example for safety for the rest of the world. "Taking these risks is not merited by the supposed benefits of permitting such exports," says Public Citizen's Health Research Group.

If the safeguards are too thin, Kennedy wouldn't support the bill and, without his support, its chances in the House would not be good. If the proposed safeguards appeared too ill-defined and threatening to the major pharmaceutical companies, Hatch and the industry wouldn't accept them.

From its standpoint, the pharmaceutical industry apparently has moved closer to Kennedy's position than it would have gone in the past to meet the needs of Genentech and the biotech lobby.

"The big development is the willingness of the entire industry to accept controls on trans-shipment," said Lawton, Genentech's lobbyist.

But the PMA's Littlehale said there are limits on how far the industry will go. He said that the issue is how far down the merchandising chain the American company's liability should extend. They don't want to lose an exporting license because a doctor in Paris sends a shipment of drugs to Chad, beyond the control of the U.S. firm, he indicated.

"There is a point where the long arm of American law might not be able to reach," he said.

On Friday, the lobbyists and legislative aides believed they had reached a compromise that would satisfy the two key senators and the diverse interests of the drug industry -- but not its critics.