The other drug war:
Drug companies use an army of
623 lobbyists to keep profits up
National spending on prescriptions in the US has soared, drug prices have climbed, and millions of elderly Americans have continued to pay for prescriptions out-of-pocket because they lack insurance that covers medicine. Meanwhile, the drug industry remained by far the most profitable industry in the US. In a year when overall profits of Fortune 500 companies fell 53 percent, the top 10 drug companies saw profits increase 33 percent from US$28 Billion in 2000 to US$37.2 Billion in 2001. Yet despite this formula for outrage and action, Congress did nothing last year to make pharmaceuticals cheaper and more accessible for Americans. How can this be? The answer is simple: It's a testament to the prowess of the drug industry's massive lobbying campaign. Last year the industry fended off pro-consumer efforts on a number of fronts. In 2001, the drug industry thwarted congressional efforts to create a prescription drug benefit under Medicare with cost-containment provisions; it beat back a push to require drug manufacturers to sell their products to Medicare recipients at the same low prices they're sold at in other industrialised nations; and it held off attempts to make generic drugs more accessible. Indeed, rather than giving any ground, the drug industry pushed Congress to pad the industry's bottom line with a multi-Billion dollar incentive program that awards drug companies with an additional six months of monopoly patent protections. To gain these monopoly patent extensions, drug companies need only test some of their products in children. That particular effort was indicative of the way drug companies work in Washington, DC. They employed dozens of well-connected lobbyists. They issued ultimatums to members of Congress, saying that the legislation had to be exactly what the industry wanted or else children would suffer. And they built support for their position by funding a "grassroots" coalition — run by a former drug company lobbyist — that claimed to represent sick children. Drug companies achieved this success and others thanks to an army of well- compensated lobbyists. The full Bill for this lobbying assault recently became public with the availability of all lobby disclosure reports for the year 2001. Lobbying by all industries in Washington, DC appeared to dip last year because of an overall slump in the American economy. But the biggest drug companies showed no signs of cutting back on their lobbying. Instead, they increased their lobbying expenditures and number of lobbyists in 2001. In fact, the 10 most active drug companies and industry groups spent 16 percent more on Washington, DC lobbying in 2001 than the previous year, as they boosted their lobbying Bills from US$43 million to US$49.8 million. These top 10 companies and industry groups accounted for two-thirds of all drug industry lobbying expenditure in 2001. The biggest increase in lobbying activity was by the drug industry's trade association, Pharmaceutical Research and Manufacturers of America (PhRMA), which hiked spending 51 percent from US$7.5 million in 2000 to US$11.3 million last year. Other companies that significantly hiked their lobbying expenditures in 2001 were GlaxoSmithKline (28 percent jump), Eli Lilly (23 percent) Hoffman-LaRoche (23 percent), Johnson & Johnson (17 percent) and Amgen (15 percent). The 10 most active companies and trade groups also increased the number of lobbyists they employed by 30 percent, as their lobbying ranks swelled from 417 to 541 paid advocates. (Public Citizen defines the drug industry as brand name and generic pharmaceutical companies and their trade associations. Several large biotechnology companies and their trade association are included because they share similar agendas as the brand-name pharmaceutical companies on intellectual property, Medicare drug benefit and pricing issues.) Overall, the industry employed 623 different lobbyists and spent US$78.1 million on lobbying in 2001. Watch the revolving door In the process of employing 623 hired guns, the drug industry acquired the services of the top firms in Washington, DC and some of the best lobbyists. For starters, the industry hired 23 former members of Congress — with 13 Republicans and 10 Democrats shilling for the industry The drug industry also made sure its operation was well-stocked with lobbyists who used to work in Congress or other branches of the federal government. In all, 340 drug industry lobbyists (54 percent of the total) came through the revolving door that spins between Capitol Hill and K Street. These revolving door lobbyists include well-connected veterans, such as Haley Barbour, who was a top political adviser in the Reagan White House, as well as chairman of the Republican National Committee (RNC), where he raised money from pharmaceutical companies. (Barbour is currently Finance Committee chairman of the National Republican Senatorial Committee.) The industry added some impressive revolving door lobbyists to its roster last year. For example, Ronna Freiberg, who was legislative director for former Vice President Al Gore, lobbied for five drug industry clients in 2001. Steve Ricchetti, who was deputy chief of staff for ex-President Bill Clinton, had three drug industry clients last year. Wallace Henderson, who was chief of staff to Rep. WJ "Billy" Tauzin (R- La.), chairman of the important House Energy and Commerce Committee, became a drug industry lobbyist last year; so did Cathy Abernathy, who was chief of staff for Rep. Bill Thomas (R-Calif.), the chairman of the House Ways and Means Committee. [Tauzin was also a good mate of Enron's — Ed] The key issues Drug industry lobbyists worked on a variety of issues, ranging from tax credits to stem cell research. But above all they focused on legislative issues directly connected to the industry's financial bottom line. In 2001, that meant a Medicare prescription drug benefit, intellectual property protection, patent extensions, and prices. One can get a good sense of the industry's legislative priorities by examining the disclosure reports for the 10 most active companies and industry associations — and looking at the number of lobbyists they brought to bear on these issues. Consider the issue of a Medicare prescription drug benefit. The 10 most active drug companies and industry groups employed 285 lobbyists who worked against a comprehensive prescription drug benefit administered by Medicare. The same 10 companies and groups employed 182 lobbyists who worked on patent and intellectual property protection issues. (Most lobbied against legislation, known as the Schumer-McCain Bill, S. 812, which would make it easier for consumers to gain access to lower-cost generic drugs.) Perhaps the best example of the drug industry's lobbying prowess was its work on a provision in federal law known by the mind-numbing name of "pediatric exclusivity". The provision amounts to a huge giveaway to the industry, in the form of a six-month monopoly patent extension. And with the help of industry lobbyists, pediatric exclusivity elbowed its way into Congress's busy post- September 11 agenda. Patently offensive The industry's goal was reauthorisation of a law first passed in 1997 that gives a financial windfall to drug companies for testing the safety and efficacy of some pharmaceuticals in children. The government does not pay companies to test the safety of drugs in other population groups, such as women and minorities. It requires such tests. But drug companies had historically refused to test their products in children because the children's market for prescription drug is not as big and rewarding as the adult market. Anxious to get drugs tested in kids, Congress in 1997 resorted to a bribe, creating a financial incentive for pediatric tests — six months of added monopoly patent protection. Unfortunately, the pediatric incentive turned out to be too onerous too consumers and too generous to drug companies. Pediatric tests cost only US$3.9 million per drug on average, while six-month patent extensions were worth more than US$1 Billion in added sales for some blockbuster drugs. In January 2001, the federal Food and Drug Administration (FDA) estimated that the pediatric incentive would cost consumers US$14 Billion in delayed access to cheaper generics over 20 years. Rep. Henry Waxman (D-Calif.), the leading Democratic sponsor of the original patent extension legislation, wanted to revise the law so it dangled in front of drug companies something more like a carrot than a carat. "We don't have to pay this much", lamented Waxman. "In fact, if we paid this price in any other [policy] we'd call it waste, fraud and abuse." Waxman and other Democrats offered several amendments aimed at curtailing the drug industry's windfall from the pediatric patent extension. But all of the amendments were defeated, thanks to Republicans, who voted almost unanimously against them, and some Democrats. Why? In part, because when drug industry lobbyists got face time with members of Congress and staffers, their message was clear: "They were pretty pointed in saying, in effect, 'We'll walk away [if Congress trims the pediatric incentive]. We want our Bill.'" That message was reinforced by children's health advocacy groups, such as the American Academy of Pediatricians (AAP), which felt it had no choice but to support the windfall incentive. Together, lobbying by the industry and children's groups such as the AAP and the Coalition for Children's Health — which received funding from PhRMA and was headed by a former drug company lobbyist — was potent. Children's advocates were "giving members of Congress who wanted to vote with PhRMA a fig leaf", said one key congressional staffer. The drug industry lobbied the House Energy and Commerce Committee, which had jurisdiction over the pediatric patent extension, in strategic fashion. Consider the efforts of Merck, the most successful drug company in America. To get the patent extension Bill passed, Merck knew it needed to win friends among Democrats in the House Energy and Commerce Committee. So Merck hired two former Democratic House staffers with close ties to the Committee to lobby on the Bill. One was Kay Holcombe, who worked on the Energy and Commerce Committee, which had jurisdiction over the Bill, from 1993 to 1997. The other was Stacey Rampy, a former health care aide to Rep. Anna Eshoo (D-Calif.). Suddenly, Rep. Eshoo emerged as the chief Democratic sponsor of the pediatric patent extension legislation. Then, Eshoo led a group of committee Democrats who opposed all of the amendments aimed at curtailing the windfall incentive. As the pediatric incentive Bill moved out of the House committee of jurisdiction, the message was clear: opponents couldn't muster the votes to make the legislation more consumer-friendly The dynamic was similar in the Senate. Once again, drug companies employed lobbyists with key connections to Democrats such as Steve Ricchetti, who was deputy chief of staff for President Clinton and former executive director of the Democratic Senatorial Campaign Committee. Ricchetti's firm (Ricchetti Inc.) lobbied for the pediatric Bill on behalf of Eli Lilly and Pharmacia in 2001 and was paid US$390,000 from the two drug companies in that period. The pediatric incentive Bill sailed through the full House and Senate and was signed into law. Most popular firms and lobbyists The drug industry was very good for Washington's "K Street" economy last year: 129 firms were paid to lobby for the industry, and 61 different lobbying firms earned at least US$100,000 from the drug industry in 2001 The leading firm, in terms of income, was Powell, Goldstein, Frazer & Murphy, LLP, which specialises in patent law and intellectual property protection. Its earnings — which were almost 50 percent more than the second-most popular firm, Washington Council Ernst & Young — show the importance of patent protection to PhRMA and the drug industry. Lobbyists blow away generics There are basically two kinds of companies in the pharmaceutical business: brand-name drug companies (which receive roughly 90 percent of the money that Americans spend annually on prescriptions) and smaller generic drug makers, who often compete with the brand-name companies for market share. In 2001, brand-name companies and their trade associations accounted for 97 percent of all pharmaceutical lobbying spending (US$75.7 million out of a US$78.1 million total). Brand-name companies employed nine lobbyists for every one employed by generic companies. In 2002, new lobbyist registrations show that the industry continues to stockpile strategic talent. For example, one of the Bills that brand-name drug companies oppose most is the Greater Access to Affordable Pharmaceuticals Act (S. 812), also known as the Schumer-McCain Bill after its chief sponsors, Senators Charles Schumer (D-N.Y.) and John McCain (R- Ariz.) The Bill would limit the ability of brand-name drugmakers to use legal tricks to extend the life of a monopoly patent when it is due to expire. Sonya D Sotak was McCain's legislative assistant for health care issues and worked on the Bill — that is, until she recently became a lobbyist for the PhRMA which opposes the McCain-Schumer Bill. The revolving door keeps spinning the drug industry's way: PhRMA has enlisted Joel Johnson, former Senior Adviser for Policy and Communications to President Bill Clinton. Pfizer has added Richard N Bond, Deputy Chief of Staff to Vice President George Bush. And Amgen has bagged JD Derderian, staff director for the House Commerce Committee from 1995-2001.
* * *For the full text of the report, visit Public Citizen's website: http://www.citizen.org