As Trump Prepares Plan to Lower Drug Prices, Big Pharma Girds for a Fight
Posted May 6, 2018 6:20 p.m. EDT
WASHINGTON — In his State of the Union address in January and again in New Hampshire in March, President Donald Trump made a bold promise: “You’ll be seeing drug prices falling very substantially in the not-too-distant future,” he said, “and it’s going to be beautiful.”
Not if the pharmaceutical companies can stop it.
Big Pharma is pouring money into a lobbying campaign to thwart any serious efforts to rein in prescription drug prices before a presidential speech this month where Trump plans to lay out his drug pricing proposals.
“There is apprehension across the industry,” said Bruce Artim, who retired recently after 11 years as the director of federal affairs at Eli Lilly and Co. “Pharma folks are nervous.”
Drugmakers spent $171.5 million lobbying the federal government last year — more than insurance, electronics, oil and gas or any other industry, according to data compiled by the Center for Responsive Politics, an independent group that tracks money in politics.
Spending by the main lobby for the industry, the Pharmaceutical Research and Manufacturers of America, surged in the first quarter of this year, to $10 million, up from $8 million in the first quarter of last year and $6 million in the first quarter of 2016, the trade association said in reports filed with Congress. Its spending is on pace to top the annual totals it reported in recent years, $25.4 million in 2017 and $19.6 million in 2016.
Drug companies and their trade associations deployed 882 lobbyists last year, more than two-thirds of whom had previously worked for Congress or federal agencies, the center said.
And as Trump moves to flesh out one of his more popular campaign promises, drugmakers may have reason to mobilize. During the presidential campaign, Trump embraced positions on this issue long held by Democrats — and long opposed by his party and the pharmaceutical industry. He said, for example, that Medicare officials should negotiate prices with drug manufacturers, and that consumers should be allowed to import prescription drugs from Canada and certain other countries where brand-name drug prices are generally lower than in the United States.
The American people are likely to back him. A recent poll by the Kaiser Family Foundation found that 80 percent of Americans believe that drug costs are unreasonably high.
“The president’s concerns are born out of this populist impulse that we have to acknowledge: that patients are paying more for their health care, more for their medicine,” said Stephen J. Ubl, president and chief executive of the Pharmaceutical Research and Manufacturers of America.
Efforts to attack the problem, even by the president, face stiff headwinds. The numbers bear out Trump’s statement that “pharma has a lot of lobbies and a lot of lobbyists and a lot of power.”
With its deep pockets and sophisticated lobbying, the drug industry has beaten back many efforts to reduce the payments it receives from Medicare, Medicaid and other government programs.
“Big Pharma has made a huge investment in Congress, with extensive lobbying and massive campaign contributions,” said Rep. Lloyd Doggett, D-Texas.
Still, the industry is not immune. Drugmakers suffered a major setback in February when Congress required them to give deeper discounts to Medicare beneficiaries.
The action by Congress, which will cost drugmakers billions of dollars, “scared the bejesus out of them,” said Jayson S. Slotnik, a consultant to drug and medical device companies.
They are now worried about the proposals Trump may push to lower drug prices. Their anxiety is heightened by Trump’s unpredictability.
Drug company lobbyists say they are confident that Trump’s campaign ideas will not be endorsed by Alex M. Azar II, the secretary of health and human services, who used to work at Lilly, or Dr. Scott Gottlieb, the commissioner of the Food and Drug Administration, who was a frequent consultant to drug companies before he returned to government last year.
But the lobbyists worry that Trump could easily veer off script, either on Twitter or in extemporaneous remarks in the coming weeks.
The Trump administration, like the Obama administration, has made clear that it wants to slow the growth of spending on drugs under Part B of Medicare, which covers many cancer drugs and other expensive medicines administered in doctors’ offices.
The reimbursement formula used in this part of Medicare creates “perverse incentives for prescribing higher-priced drugs” and discourages drug companies from competing on price, the White House Council of Economic Advisers said in a recent report.
Some of the alternatives being considered by the Trump administration, to inject competition into Part B of Medicare, have caused concern among drugmakers.
Drugmakers that spent the most on lobbying last year included Amgen ($10.6 million), Pfizer ($10.5 million) and Novartis ($8.6 million).
Lobbying is just one way drugmakers and their employees can exert influence. They also make campaign contributions, spend large sums on advertising and donate to patient advocacy groups whose members depend on the drugs they make.
Campaign contributions since January 2015 total $31 million, according to the Center for Responsive Politics — compared, for example, with $58 million from the commercial banking industry. Kantar Media, an ad tracking company, says that drug companies spent $6.1 billion on advertising aimed at American consumers last year, more than twice as much as the nation’s largest corporate advertiser, Procter & Gamble. Every major industry lobbies for its interests, but congressional aides said that lobbyists for pharmaceutical companies were special: They outnumber the lobbyists for many other industries. Congressional aides said it was not unusual for the industry to dispatch 10 or 15 lobbyists to meet with two congressional aides.
In addition, they said, drugmakers are fierce opponents of proposals they dislike, and are often reluctant to suggest alternatives of their own when Congress is seeking ways to save money.
The pharmaceutical industry’s intransigence has begun to irk even staunch Republican allies. It contrasts with the industry’s support for adoption of the Affordable Care Act in 2009 and 2010 and its role in shaping the prescription drug benefit added to Medicare under a 2003 law.
Drug companies say their lobbying reflects the fact that they are concerned about myriad issues, including Medicare and Medicaid, trade and taxes, patent rights, drug regulation, opioids and the budget for biomedical research.
They have prepared an elaborate response to criticism of their pricing practices.
In an ad campaign, drugmakers boast that they are producing cures and treatments for cancer, hepatitis C and other diseases.
They blame “middlemen” — insurers and pharmacy benefit managers — for the high costs that consumers often incur. High-deductible health plans, which may require consumers to spend thousands of dollars out of pocket, are another culprit, they say. The industry has a bipartisan stable of lobbyists who worked on health legislation for influential members of Congress.
A longtime aide to former Rep. John D. Dingell, D-Mich., works for the Pharmaceutical Research and Manufacturers of America. An aide to former Sen. Tom Harkin, D-Iowa, who was the chairman of the Senate health committee, is now a top lobbyist for Merck.
The door swings in both directions. For six years, Gary Andres was the Republican staff director of the House Energy and Commerce Committee, which is responsible for legislation that affects prescription drugs and the FDA. In February 2017, he became a senior executive vice president of the Biotechnology Innovation Organization, a trade group that lobbies for biotech companies.
Then he returned last month to Capitol Hill to become the Republican staff director of the Ways and Means Committee, which has jurisdiction over Medicare, including its payments for prescription drugs.
Ryan Long, former chief health counsel at the Energy and Commerce Committee, joined BGR Government Affairs in February 2013. In lobbying disclosure reports filed by BGR, he was listed as a lobbyist for Amgen, Celgene, Gilead, Lilly and Merck, among other clients. He returned to the committee in March as the deputy staff director.
Retired lawmakers also show up as lobbyists.
Among those who are listed as having lobbied for the Pharmaceutical Research and Manufacturers of America in recent years are former Sen. Jon Kyl, R-Ariz., and former Rep. Bill Paxon, R-N.Y. Former Rep. Ed Whitfield, R-Ky., is listed as lobbying for AstraZeneca, Genentech and Johnson & Johnson, among other companies.
Whether that firepower will be effective is an open question.
“Nearly every major decision in this administration so far has favored the pharmaceutical industry,” said Ronny Gal, a securities analyst at Sanford C. Bernstein & Co. “But investors are apprehensive about the long-term horizon. Every other country has acted to control drug costs, and the view is that eventually the United States will have to do so.”