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Pharmaceutical Lobby Reigns Supreme in Washington

Health Letter, June 2014

Sammy Almashat, M.D., M.P.H.

The pharmaceutical industry[1] likes to tout its unique role in developing products that save lives and heal illness. But it is its peerless status as a buyer of influence in Washington, D.C., that most distinguishes the industry from its counterparts. Year after year, Big Pharma tops, or comes close to the top of, the list of industries that spend the most on lobbying in the nation’s capital.

Clearly, no industry, no matter how well-endowed financially, would continue to pay such enormous sums year in, year out unless its efforts were successful. This axiom is borne out in the drug industry’s myriad victories in recent years, in lobbying campaigns resulting in the elimination of competition from cheaper drug imports and guaranteed favorable (non-negotiable) pricing for Big Pharma within Medicare’s Part D prescription drug program, among others.

About the lobby

When people speak of the “pharmaceutical lobby,” they are usually referring to the collective efforts of brand-name drugmakers and their main trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA).[2] (See the box accompanying this article for information on the generic drug lobby.)

PhRMA was established in 1958 as the public face of the U.S. drug industry and now boasts a membership of 29 companies[3] and, as of 2011, an annual budget of $200 million.[4] Every year, the association releases a report seemingly with the sole purpose of trumpeting what it terms the industry’s innovative work and showcasing the claimed updated dollar amount of member companies’ expenditures on research and development.[5] (For an alternative analysis of the real costs of developing a new drug, see the text box accompanying the December 2013 Health Letter article “Prescription Drug Prices Spur Maine Law, San Francisco Referendum.”)

How the drug lobby works

Like all good lobbyists, those representing the drug industry rely on the two tried-and-true paths to the hearts of Washington’s policymaking elite: money and connections.

Riding the wave of the corporatization of the electoral process, drug companies make direct contributions to individual candidates or one of the two major party committees in an implicit quid pro quo arrangement. Individual brand-name drug companies — and, to a lesser extent, PhRMA — have deposited between $10 million and $20 million into the pockets of congressional and presidential candidates in each election cycle over the past two decades.[6] While the vast majority of donations used to flow to Republicans, since 2008, Democrats have become equivalent recipients of the industry’s largesse.[7]

Large as these sums are, the bulk of the industry’s financial muscle is devoted to lobbying officials already in power, and it is in this arena that Big Pharma consistently ranks among the top players in the country. Pharmaceutical manufacturers spent $140 million on lobbying activities in 2013, more than all but three other industries (insurance, oil and gas, and computer/Internet).[8] PhRMA led the way, spending over $17 million, with Eli Lilly ($9.8 million), Amgen ($9.1 million), Pfizer ($8.9 million), Novartis ($6.9 million) and Merck ($6.0 million) trailing close behind as the largest individual brand-name spenders.[9] These vast outlays fuel an army of several hundred lobbyists (794 in 2013[10]) who pay seemingly endless visits to members of Congress, regulators and their staffs.

However, it is the more subtle “revolving door” that is arguably the most far-reaching path to influence over the policymaking process. It is well recognized within the lobbying industry that one of the most effective methods of swaying a government official is by sending in former colleagues to make the client’s case. The pharmaceutical industry is a bastion for well-connected former policymakers who have gone through the revolving door after a stint in government. Of the 138 lobbyists deployed by PhRMA in 2013, 90 (65 percent) were former government employees.[11]

Billy Tauzin, quid pro quo personified

Perhaps the most glaring example of how pervasive the revolving door within the drug arena has become was the appointment, in 2004, of former Rep. Billy Tauzin, R-La., as the new head of PhRMA.[12] Just a few months earlier, Tauzin, as chairman of the House Energy and Commerce Committee, had co-authored and was instrumental in pushing through the bill creating Medicare’s Part D prescription drug program.[13]

How Medicare would pay for drugs under the program became the focal point of controversy over the bill. At the behest of the drug lobby, the enacted bill prohibited Medicare from negotiating directly with pharmaceutical companies over the prices of the medications it would cover under the new program,[14] resulting in an eventual windfall for the industry. The ban on negotiating was striking in its novelty, as other federal prescription drug programs — under the Veterans Health Administration, the U.S. Public Health Service, Medicaid and others — had negotiated prices with, or otherwise obtained statutory discounts from, drug companies for years.[15]

As president of PhRMA, Tauzin continued his push for ever-larger flows of taxpayer dollars into drug company coffers. In 2009, he leveraged PhRMA’s power in Congress to sway the pending health care reform bill to extract a commitment from the White House not to lift the prohibition on negotiating drug prices under Medicare Part D.[16] In exchange, PhRMA agreed to provide $80 billion in vague, nonbinding cost “savings” on national drug spending over a 10-year period. By contrast, an end to the negotiation ban starting around the time of the Affordable Care Act’s implementation (2013) would have saved the federal government alone between $230 billion and $541 billion over 10 years, according to an analysis by the Center for Economic Policy and Research (states and individual patients would have saved an additional $79 billion to $185 billion in this estimate).[17]

The drug lobby in action: A case study[18]

The anatomy of an archetypal lobbying effort was described in detail in a revealing Jan. 19, 2013, article (“Fiscal Footnote: Big Senate Gift to Drug Maker”) and a subsequent Jan. 22 editorial (“Amgen Gets a Gift From Congress”) in The New York Times. In late 2012 and early 2013, during urgent negotiations to avert a “fiscal cliff” of approaching tax hikes and spending cuts, the biopharmaceutical company Amgen secured a major victory through the efforts of what the Times dubbed its “small army” of 74 lobbyists.

Medicare has historically paid for dialysis treatments for patients with end-stage kidney disease. This has included covering the costs of medications administered during each dialysis session, including Amgen’s anti-anemia drugs Epogen and Sensipar. For years, Medicare would reimburse for the drugs through a separate payment from that proffered for the dialysis treatment, thus rewarding the overuse of the medications. Faced with ballooning dialysis costs, Congress required that, beginning in 2011, Medicare revert to a single, bundled payment for all treatments, including most medications, administered during the dialysis session, precipitating a nearly 25 percent decline in the use of dialysis drugs such as Epogen.

However, an exception was carved out for certain oral drugs, among them Amgen’s Sensipar, delaying their inclusion within the bundled payment system for two years. As The New York Times explained, “[t]hat meant demand for Sensipar would not decline and Amgen would maintain control over pricing.” As the two-year window was scheduled to end in 2014, Amgen sprang into action to secure a further two-year delay for Sensipar. Its efforts paid off, as the necessary provision was stealthily inserted into the final January 2013 fiscal-cliff bill, with many congressional staffers — and even lobbyists — unaware of its inclusion until hours before the final vote on the legislation.

The deal to extend Sensipar’s favorable pricing until 2016 came just a few weeks after Amgen pleaded guilty to illegally marketing Aranesp, another of its anti-anemia dialysis medications, for unapproved, off-label uses and at unapproved doses for several years.[19] The company paid $762 million in total criminal and civil penalties, a record settlement for a biotechnology company.

Free-market fantasies and nanny-state dependence

It makes sense that the drug industry is unusually active on the lobbying front. After all — empty invocations of its love for “private enterprise” and the free market aside[20] — its business model depends almost exclusively on government-granted monopolies and, more recently with the advent of Medicare Part D, on the government’s deference to its pricing diktat. The industry thus understandably deems the institutionalized corruption of elected and regulatory officials a top priority.

It is precisely this total dependence on public protections of its private profits that makes the drug industry’s lobbying so obscene. The industry insists on stifling not only free competition —– no matter how truly innovative or an advance in treatment a drug may be[21] — but also, through its prolific lobbying activities, the public’s voice on issues of life and death for thousands of sick and dying patients across the country.

Countering business as usual

The final numbers are not yet in for the 2014 election cycle, nor for the latest additions to the revolving door, but it can safely be assumed that the drug industry will continue playing an outsize role in drowning out the public’s voice in deciding how we provide for the nation’s sick and dying for years to come.

People can counter Big Pharma’s influence in Washington by naming and shaming their representatives and senators who have extensive ties to the industry. This information can be found at the Center for Responsive Politics’ website OpenSecrets.org, a comprehensive, updated database of all financial contributions, lobbying expenses and instances of revolving-door politics. Efforts to stem the tide of corporate money in politics more broadly can similarly limit the drug industry’s reach. Visit Public Citizen’s Democracy Is for People campaign to learn more.

The Generic Drug Lobby: Shorter Reach, Similar Tactics

The Generic Pharmaceutical Association (GPhA) is the major trade group for manufacturers of generic pharmaceuticals, with its member companies accounting for approximately 90 percent of all generics sold in the U.S. each year.[22] Although generics now make up 86 percent of all prescription drugs dispensed in the U.S., they represent just 29 percent of total sales due to their much lower prices when compared with brand-name counterparts.[23]

Predictably, given generic makers’ far lower profit margins and revenues (and less dependence on government-granted monopolies), their lobbying expenditures amount to a small fraction of PhRMA’s and those of its brand-name member companies. In 2013, GPhA spent $2.2 million on lobbying activities, or just 12 percent of PhRMA’s spending that year.[24] Teva Pharmaceutical Industries ($4.0 million) was the highest individual spender among generics manufacturers.

Despite these relatively smaller sums, generics makers have dramatically increased their footprint in Washington, D.C., in recent years. Total annual spending on lobbying by GPhA has more than doubled since 2007,[25] possibly in anticipation of the eventual passage of a “user fee” system for generic drugs in July 2012, whereby generic drug makers essentially pay the Food and Drug Administration (FDA) for quicker generics approvals,[26] which the lobby enthusiastically supported and pushed in Congress.[27] (Read here and here about Public Citizen’s long opposition to these myriad “user fee” acts that allow pharmaceutical corporations to fund the agency, the FDA, that regulates them.)

The generics industry has a revolving door of its own. In a highly prominent April 2013 case, Deborah Autor, deputy commissioner for global regulatory operations and policy at the FDA, stepped down from an 11-year stint at the agency to become a senior vice president at the generics giant Mylan Pharmaceuticals.[28]

However, although the generic drug industry has seen its revenues and influence grow substantially over the past decade, it is the brand-name industry that is still generally recognized as the major player in the halls of Congress and executive agencies. This is important, as, in many cases, the interests of the two industries collide, with brand-name makers’ overarching priority being to delay competition from generics for as long as possible in order to prolong the high brand-name drug prices made possible by government-granted monopolies. Therefore, it is often (though certainly not always[29]) the case that generic drugmakers’ fiduciary interests in opening up the market to cheaper generics happen to coincide with the interests of public health advocates.



References

[1] Unless otherwise noted, references in this article to the “drug industry”, “drug lobby”, etc. refer either collectively to both the brand-name and the generic drug industries, or to the brand-name industry alone, but never to the generic industry alone.

[2] Pharmaceutical Research and Manufacturers of America. About PhRMA. http://www.phrma.org/about. Accessed April 24, 2014.

[3] PhRMA 2014 Profile. PhRMA Member Companies, p. 65. http://www.phrma.org/sites/default/files/pdf/2014_PhRMA_PROFILE.pdf. Accessed April 24, 2014.

[4] Pharmaceutical Research and Manufacturers of America. 2011 tax filing. http://s3.documentcloud.org/documents/525103/1199-001.pdf. Accessed April 25, 2014.

[5] See, e.g., PhRMA. 2013 and 2014 Profiles: Biopharmaceutical Research Industry. http://www.phrma.org/sites/default/files/pdf/PhRMA%20Profile%202013.pdf; http://www.phrma.org/sites/default/files/pdf/2014_PhRMA_PROFILE.pdf. Accessed April 24, 2014.

[6] OpenSecrets. Pharmaceutical Manufacturing. Contribution Trends, 1990-2014. http://www.opensecrets.org/industries/indus.php?Ind=H4300. Accessed April 28, 2014.

[7] OpenSecrets. Pharmaceutical Manufacturing. Party Split, 1990-2014. http://www.opensecrets.org/industries/indus.php?Ind=H4300. Accessed April 28, 2014.

[8] OpenSecrets. Pharmaceutical Manufacturing: Lobbying, 2013. http://www.opensecrets.org/industries/lobbying.php?cycle=2014&ind=H4300. Accessed April 25, 2014; for other industry totals, see: Lobbying: Top Industries, 2013. http://www.opensecrets.org/lobby/top.php?indexType=i&showYear=2013. Accessed April 28, 2014.

[9] OpenSecrets. Pharmaceutical Manufacturing: Lobbying, 2013. http://www.opensecrets.org/industries/lobbying.php?cycle=2014&ind=H4300. Accessed April 25, 2014.

[10] Ibid.

[11] OpenSecrets. Lobbyists representing Pharmaceutical Rsrch & Mfrs of America, 2013. http://www.opensecrets.org/lobby/clientlbs.php?id=D000000504&year=2013. Accessed April 25, 2014.

[12] Kirkpatrick DD, Wilson D. One Grand Deal Too Many Costs Lobbyist His Job. New York Times. Feb. 12, 2010. http://www.nytimes.com/2010/02/13/health/policy/13pharm.html?_r=0. Accessed April 28, 2014.

[13] Slaughter LM. Medicare Part D — The Product of a Broken Process. N Engl J Med. 2006; 354:2314-2315.

[14] Ibid.

[15] Congressional Budget Office. Prices for Brand-Name Drugs Under Selected Federal Programs. June 2005. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/64xx/doc6481/06-16-prescriptdrug.pdf. Accessed April 28, 2014.

[16] Kirkpatrick D. White House Affirms Deal on Drug Cost. New York Times. Aug. 5, 2009. http://www.nytimes.com/2009/08/06/health/policy/06insure.html?hpw. Accessed April 28, 2014.

[17] Baker D. Center for Economic Policy and Research. Reducing Waste with an Efficient Medicare Prescription Drug Benefit. http://www.cepr.net/documents/publications/medicare-drug-2012-12.pdf. Accessed April 28, 2014.

[18] Lipton E, Sack K. Fiscal Footnote: Big Senate Gift to Drug Maker. New York Times. Jan. 19, 2013. http://www.nytimes.com/2013/01/20/us/medicare-pricing-delay-is-political-win-for-amgen-drug-maker.html?pagewanted=all. Accessed April 29, 2014.

[19] U.S. Department of Justice. Press Release, Amgen Settlement. Dec. 19, 2012. http://www.justice.gov/opa/pr/2012/December/12-civ-1523.html. Accessed April 29, 2014.

[20] See, e.g., PhRMA To Launch Ad Campaign Lauding Free-Market Health Care System; SEIU Pushes for Health Reform. Nov 14, 2008. http://www.kaiserhealthnews.org/Daily-Reports/2008/November/14/dr00055559.aspx; and Billy LOVES the Free Market. Clinical Psychology and Psychiatry: A Closer Look. Jan. 18, 2007. http://clinpsyc.blogspot.com/2007/01/billy-loves-free-market.html. Accessed April 28, 2014.

[21] Almost half of the new drugs approved over the past two decades are neither innovative nor represent a significant advance in treatment, while some of the rest have not been developed for serious or life-threatening conditions, according to a recent FDA analysis. See: Lanthier et al. An improved approach to measuring drug innovation finds steady rates of first-in-class pharmaceuticals, 1987-2011. Health Aff (Millwood). 2013 Aug;32(8):1433-9.

[22] Generic Pharmaceuticals Association. About: Membership. http://www.gphaonline.org/about/membership. Accessed April 25, 2014.

[23] IMS Institute for Healthcare Informatics. Medicine use and shifting costs of healthcare. April 2014. http://www.imshealth.com/portal/site/imshealth/menuitem.762a961826aad98f53c753c71ad8c22a/?vgnextoid=2684d47626745410VgnVCM10000076192ca2RCRD&vgnextchannel=a64de5fda6370410VgnVCM10000076192ca2RCRD&vgnextfmt=default. Accessed April 29, 2014.

[24] OpenSecrets. Pharmaceutical Manufacturing: Lobbying, 2013. http://www.opensecrets.org/industries/lobbying.php?cycle=2014&ind=H4300. Accessed April 25, 2014.

[25] OpenSecrets. Generic Pharmaceutical Association: Annual Lobbying. http://www.opensecrets.org/lobby/clientsum.php?id=D000026186&year=2012. Accessed May 1, 2014.

[26] Policy and Medicine. FDA: Recently Signed PDUFA 5 Provisions to Address Drug Shortages. Jul. 18, 2012. http://www.policymed.com/2012/07/fda-recently-signed-pdufa-5-provisions-to-address-drug-shortages.html. Accessed May 1, 2014.

[27] Generic Pharmaceutical Association. Press Release: GPhA: Generic User Fee Act Will Increase Accessibility of Generic Drugs; Urges Broad Congressional Support. Dec. 7, 2011. http://www.gphaonline.org/gpha-media/press/gpha-generic-drug-user-fee-act-will-increase-accessibility-of-generic-drugs-urges-broad-congressional-support. Accessed May 1, 2014.

[28] Clarke T. FDA's Deborah Autor to join drugmaker Mylan. Reuters. Apr. 30, 2013. http://www.reuters.com/article/2013/04/30/us-mylan-fda-idUSBRE93T12D20130430. Accessed April 29, 2014.

[29] Clarke T. FDA defends generic drug label proposal at U.S. House hearing. Reuters. Apr. 1, 2014. http://www.reuters.com/article/2014/04/01/genericdrugs-idUSL1N0MT1IV20140401. Accessed April 29, 2014.

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