Samuel Lowenberg - Independent Journalist biography articles articles

Prescription drug war looms

Legal Times  December 14, 1998, Monday

It already looks as if the 106th Congress is going to be a busy place for drug manufacturers.

With Congress due to reconvene in just a few weeks, pharmaceutical industry lobbyists are mapping strategies to combat a pile of measures that threaten the industry's pocketbook.

The likely legislative battles will be fought over extending Medicare coverage to prescription medicines, drug safety rules, genetic property rights, and cloning and biotech regulation. But lobbyists aren't yet sure just how they will shape up. As Jerry Klepner of Black, Kelly, Scruggs & Healey puts it, "It's all pretty much now in the ingredients stage as opposed to the soup stage."

Perhaps the most pressing issue facing the industry is a direct outgrowth of a major social problem, the prohibitive cost of medicine for the elderly. Except in a few cases, Medicare does not cover prescription drugs. According to the AARP, 80 percent of enrollees paid out of pocket for medicines in 1997. Elderly Americans paid more last year for prescription drugs than they spent on any other health care item besides insurance. In toto, $17.7 billion was spent in 1997 for prescription drugs for the elderly.

Nearly everyone, including drug manufacturers, agrees that the situation needs to be remedied. The question is how.

Under two current Democratic proposals, the industry would have to substantially cut what critics say are extravagantly high prices by selling medicines to Medicare at a discounted rate.

Pharmaceutical lobbyists are gearing up for a bloody fight. "It's a very important issue to us, and we are going to work it very, very hard, " says Barry Caldwell, chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA).

"Our challenge will be to make sure that everybody appreciates what this industry does for seniors and everybody else. . . . Our job is to educate people about the type of value that we add to health care, " says Caldwell, a former administrative assistant to Sen. Arlen Specter (R-Pa.), the chairman of the Labor, Health and Human Services and Education appropriations subcommittee.

Rep. Pete Stark (D-Calif.), a leading sponsor of one of the bills to control prices of Medicare drugs and the ranking minority member on the Ways and Means health subcommittee, sees the battle differently.

"The pharmaceutical industry's job is to maximize their return to their stockholders, " he says. "Our job is to protect the public from these people. These guys have no shame. They are duplicitous. They are covert. They have no interest in anything except their profits."

The pharmaceutical and health products industry spent $74.4 million on lobbying in 1997, more than any other industry, according to the Center for Responsive Politics. The next round promises more of the same.

PhRMA has lined up its usual team of high-powered hired guns for the upcoming fight. They include former Bush Office of Management and Budget official Deborah Steelman and former Ways and Means Committee staffer Shawn Coughlin of Steelman Health Strategies; Steve Hart and George Olsen of Williams & Jensen; Tony Podesta and former Bush administration official B. Reid Detchon of Podesta Associates; and former Reagan OMB official Randall Davis of Stuntz, Davis and Staffier.

Black, Kelly's Klepner, a former Clinton Health and Human Services (HHS) assistant secretary for legislation, is lobbying on behalf of several large pharmaceutical and biotech companies, including Genentech Inc. and SmithKline Beecham Corp.

But as candidates vie for the populist mantle in the 2000 election and as health issues come under increased scrutiny from news and activist organizations, drug manufacturers are likely to face stiff opposition.

"Medicare could afford to cover prescription drugs if it weren't for drug company price gouging, " says Dr. Sidney Wolfe, the director of Public Citizen's Health Research Group. Wolfe says that Americans pay twice as much for medicines as consumers in Europe and other countries, and that passing legislation to give Medicare beneficiaries lower-priced drugs is just common sense--"except for those whose agenda is to protect outrageously high drug company profits."

The two Democratic bills, both of which were first introduced at the end of last session, seek to rectify that. The bills both would require drug companies to sell medicines to Medicare at a discounted rate, as they now do for the Veterans Administration. The government would then pass the savings on by reselling them to Medicare beneficiaries.

A recent study by the HHS inspector general's office found Medicare could save $1 billion on 34 of the drugs it covers if it were charged the same price that the VA pays for them. The study also found that Medicare paid more than double the price the VA did for 14 of the drugs.

Proponents say price controls not only would save the elderly money, but would do so without increasing Medicare's price tag because the cost would be borne by drug manufacturers.

Caldwell, PhRMA's chief lobbyist, says that if the nation's 38 million Medicare beneficiaries were to get the same deal as veterans, more than 40 percent of the drug market would operate under government price controls. This, he says, would deal a significant blow to pharmaceutical research and development. Stark pooh-poohs that argument. "I put as much credibility in that as my threeyear- old son telling me he is going to hold his breath and die unless I give him a second helping of dessert."

Stark says the pharmaceutical industry is one of the most profitable in the world, receives massive R& D assistance from the U.S. government, and pays few if any taxes.

A bill Stark plans to introduce in the next session will seek to pay for Medicare pharmaceutical coverage not only by negotiating lower prices from the drug companies, but also by demanding $14 billion a year from tobacco companies-- that's the cost to Medicare, he says, of smoking-related illnesses, and it would pay for about 70 percent of a drug insurance program.

But even Stark admits that passing any far-reaching legislation affecting the powerful drug industry--let alone the tobacco companies--will be a tough fight and could take years.

Pharmaceutical lobbyists say a lot depends on the recommendations, due to be released March 1, of the 17-member National Bipartisan Commission on the Future of Medicare. The commission is sharply divided on whether--or how-- Medicare ought to provide a drug benefit.

One staunch opponent of government price controls on the pharmaceutical industry is Commissioner Steelman. Steelman is a longtime pharmaceutical industry lobbyist, a point that has not escaped Stark's notice.

"She basically is a talking head for the pharmaceutical industry, " says Stark. "She is a handmaiden of the people who are paying her."

Steelman did not return calls seeking comment. Caldwell denies that Steelman has a conflict of interest because she does not discuss commission business with clients. Other members of her firm do lobby on Medicare issues for PhRMA, however.

The chairman of the commission, Sen. John Breaux (D-La.), says Steelman's knowledge of the industry perspective is a bonus. He notes that several other commission members have health care connections, including Sen. Bill Frist (RTenn.), whose brother runs the Columbia/HCA hospital chain, and two health care company chairmen.

"It does not bother me. In fact it makes me feel better that they have experience on this issue in the real world, " says Breaux.

In addition to Medicare coverage, another headache for the industry promises to be the issue of safety. The approval process for pharmaceuticals, as well as the procedure by which dangerous drugs are recalled, will likely be addressed early in the next Congress, when the HHSinspector general issues a draft report in January. The General Accounting Office has also begun to review the issue at the request of Sen. Edward Kennedy (D-Mass.) and others in the House and Senate. Kennedy, the ranking minority member of the Committee on Labor and Human Resources, is concerned about the number of drug recalls in the last year. The senator wants to determine whether regulatory changes at the Food and Drug Administration in the last few years have allowed drug approvals without enough study.

PhRMA lobbyists concede that there have been more recalls than in the past, but argue that the number of recalls relative to the number of drugs on the market has not increased, because more drugs are being approved for sale. "It's the age-old question: What is our public policy on the degree of risk?" says an industry lobbyist. "If you work too hard on reducing risk, you will make it too expensive and time-consuming to bring products to the market. It's like any other manufacturing industry."

Also on the industry radar screen is the issue of genetic property rights-- that is, determining who owns the rights to an individual's DNA. Genetic material is a critical component in researching and developing many pharmaceutical products, and the industry is concerned that states will pass laws similar to one enacted in Oregon, which prohibits the use or sale of a person's DNA without the person's consent.

PhRMA is lobbying against similar legislation pending in more than 30 states, says spokesman Jeff Trewhitt. Drug makers also are keeping a close watch on Congress to make sure it does not follow Oregon's lead. Trewhitt insists that the argument for requiring permission to use someone's DNA is based on a false premise.

" DNA is something you have inherited for a finite period of time. It's not something that is uniquely yours, " he says. "It's not something that you created. It's not something that you innovated. It should not be a commercial property right."

Finally, there are the issues of biotechnology and cloning. There was much heated discussion last session about the need for federal regulation restricting the use of human embryonic tissue in biotech research and development. In light of recent events--human stem cells created using a cow embryo and eight cow clones in Japan--Congress will almost surely focus its attention on the contentious issue again.

The question for PhRMA lobbyists is whether Congress, too, will have a cow.

By Sam Loewenberg