How Drug-Industry Lobbyists Won on Health-Care
.jpg)
By Karen Tumulty and Michael Scherer, courtesy TIME
In Congress, committee chairmen are known as the old bulls for a reason: it’s unwise to provoke them. So it isn’t often that you see one get rolled by his own committee — especially when the chairman in question is the formidable and canny Henry Waxman and the issue in question is one that matters a lot to him. But that was what happened on July 31 as the House Energy and Commerce Committee was putting the final touches on health-reform legislation. Waxman’s fellow California Democrat Anna Eshoo offered a last-minute amendment that Waxman opposed. Knowing he would lose, Waxman decided to save face with a quick voice vote. But Eshoo insisted on a roll call, which would put every member on record. Waxman snapped at her, "You promised you wouldn’t do that!" The final tally was 47-11 against the chairman.
Waxman’s loss that day was a big victory for drug companies, which have spent more than any other segment of the medical industry to make sure that they come out winners in the effort to overhaul the nation’s health-care system. It’s understandable the drugmakers would want a roll-call accounting of who their friends and enemies are, considering the size of the investment they are making on Capitol Hill: in the first six months of this year alone, drug and biotech companies and their trade associations spent more than $110 million — that’s about $609,000 a day — to influence lawmakers, according to figures compiled by the nonpartisan watchdog group Center for Responsive Politics. The drug industry’s legion of registered lobbyists numbers 1,228, or 2.3 for every member of Congress. And its campaign contributions to current members of Waxman’s committee have totaled $2.6 million over the past three years.
The return on that investment has been considerable, both in the House and in the Senate. "We’ve done very well," says lobbyist Jim Greenwood, a former Republican Congressman from Pennsylvania who was a member of the Energy and Commerce Committee and now heads the Biotechnology Industry Organization (BIO). "We carried a majority of the Democrats and a majority of the Republicans in each of the committees, and by very clear margins."
Whether the broader public is benefiting from the industry’s success is less clear. How Greenwood’s group has scored decisive early victories on an obscure but crucial health-care provision is a case study in how interest groups are shaping the contours of health-care reform — and why that’s not necessarily good news for consumers.
The Generic Nudge
The question before Waxman’s committee last summer was this: How many years of monopoly protection should be afforded to biotechnology drugs, known as biologics, before cheaper alternatives are allowed on the market? These miraculous drugs — which differ from traditional, chemical-based pharmaceuticals because they are derived from living matter — are widely regarded as the future of the pharmaceutical industry and, indeed, of medicine itself. While only 20% of drugs on the market today are biologics, it is expected that, with 633 biotechnology medicines in development last year for more than 100 diseases, half the new drugs approved in 2015 will be. Biologics average more than 20 times the cost of traditional drugs: treating breast cancer with a year’s worth of the biologic Herceptin can cost $48,000; Remicade, for rheumatoid arthritis, can cost $20,000 annually. For other, rarer diseases, the price of biologic treatments can be as high as $200,000 a year.
As policymakers look for ways to control health-care costs, the price of biologics is drawing more and more scrutiny. The obvious model for bringing in competition is a 1984 law that Waxman wrote with Republican Senator Orrin Hatch. It lowered the regulatory obstacles that prevented generic drugs from making their way to market. At the time, it was expected that fast-tracking the approval of "bioequivalent" drugs would bring down medical costs by $1 billion a year. But with generics now accounting for more than 70% of prescriptions dispensed in the U.S., "the actual savings have exceeded our wildest expectations," Waxman said in a Sept. 18 speech before the Generic Pharmaceutical Association. "In the last decade alone, generic drugs have saved consumers, businesses and state and federal governments $734 billion."
Can a similar approach work with biotechnology drugs, which were not dealt with in the 1984 law because the industry was then in its infancy? A 2008 analysis by former Clinton Administration official Robert Shapiro, who has consulted for both biologics companies and their would-be generic competitors, suggested that generic versions of the top 12 categories of biologics whose patents have expired or will expire soon could save Americans up to $108 billion in the first 10 years and as much as $378 billion over two decades. "It’s the low-hanging fruit," says Mark Merritt, head of the Pharmaceutical Care Management Association, the trade organization for prescription-drug-benefit managers. "If you can’t get this right on cost control, what can you get right?"
But there’s a dilemma: policymakers want to foster cost-saving competition without killing the financial incentives that have put the U.S. biotechnology industry at the vanguard of medical science and without stifling the development of even more drugs that could save lives and eliminate suffering. Finding that equilibrium goes to the question of how long biotech firms should be guaranteed exclusivity, outside the protection of their patents, before copycats can begin using the data they have developed.
Waxman had pushed to shield biologics for no more than five years — the same amount of time that traditional pharmaceuticals get under the Hatch-Waxman law. President Obama proposed seven years as a compromise.
Eshoo’s successful amendment to the Energy and Commerce Committee bill would extend that to 12 years of exclusivity, as would legislation passed a few weeks earlier by the Senate Health, Education, Labor and Pensions (HELP) Committee. Then-chairman Ted Kennedy, whose state of Massachusetts is home to many biotech firms, had long supported a 12-year exclusivity period. The industry showed its gratitude last year when Amgen, one of the biggest biotech firms, donated $5 million — twice the size of the next largest donation — to a nonprofit educational institute being built in Kennedy’s honor.
The Federal Trade Commission (FTC), though, argued in June that giving biologics makers any period of exclusivity at all could actually stifle innovation. Biologics are so much more complex and expensive to produce than traditional drugs that the barriers to would-be "biosimilar" competitors are already high, the FTC said. Giving biologics further protection — particularly the 12 years of exclusivity that the industry wants — would merely encourage firms to tinker with what they have rather than drive them toward "new inventions to address unmet medical needs."
Most small biologics companies are still years away from seeing their first profits in this high-risk, high-return business. Their trade association, BIO, says that in the past 11 months, at least 40 of them have cut back or eliminated drug-development programs. The venture capitalists who invest in them "aren’t looking to cure Parkinson’s disease as much as they are looking for a return on their investments," says Greenwood. "They’re just as happy to put their money into the next iPod." But increasingly, the big players in the pharmaceutical industry are moving into the biologics business themselves, either by investing in cutting-edge firms or by acquiring them.
Shifting Politics
That makes the politics — and the lines of political influence — a lot more difficult to sort out. Whereas the traditional pharmaceutical industry is concentrated in just a couple of states, biotech firms have sprung up just about anywhere you find a university with a research hospital, which gives them a broad political base. "I know that vote hurt me at home," says Ohio Senator Sherrod Brown, who led the unsuccessful fight against the 12-year exclusivity in the Senate HELP Committee.
Indeed, the biologics lobby has become one of K Street’s most powerful players. Working largely through BIO and the Pharmaceutical Research and Manufacturers of America (PhRMA), it has funded an extensive network that includes not only lobbyists but also think-tank experts and advocacy groups. "You can’t get on the phone with someone who isn’t getting paid," says an economist who has studied the biologics issue with funding from a drug company. "They give money to everyone and anyone."
That means it can be hard to find a truly independent viewpoint, though it often requires deep digging into the finances of advocacy groups to discover their ties. In July, one calling itself the National Health Council wrote letters to members of Congress "on behalf of 133 million Americans" asking for a minimum of 10 years of data exclusivity. The group boasts a membership that includes 50 of the nation’s largest patient-advocacy groups, including the American Cancer Society, Easter Seals and the National Kidney Foundation. But its board of directors reads like a Who’s Who of top pharmaceutical executives from Amgen, Pfizer, Novartis and Bristol Myers Squibb. Its 2007 tax filings show that almost half its $2.3 million budget came from PhRMA and drug companies.
Similarly, on Oct. 19, PhRMA put out a statement calling for a "fair period of data protection" of 12 years at a "bare minimum." To defend its position, the group cited Duke University economist Henry Grabowski, whose work it has funded, and two patient groups. One, called RetireSafe, receives regular infusions of "general operating support" from Pfizer and operates out of a small Washington law-firm office. It has been blitzing Capitol Hill with letters arguing that guaranteeing biologics makers fewer than 12 years of exclusivity in the use of their data could cost lives. The other group, the Alliance of Aging Research, is also run by the drug industry. Its chairman is the managing partner of Foxkiser, a drug-company consultant, and its vice chairman is with Novartis.
Among the biologics industry’s most high-profile advocates has been former Democratic National Committee chairman Howard Dean, who is consulting for a law firm that has a deep roster of biologics clients. In July he wrote an Op-Ed in the Hill newspaper arguing for a "commonsense and fair approach" to give biologics companies at least 12 years of exclusivity. ("I wouldn’t do this if I didn’t believe it," Dean, a physician, said in an interview.) His former campaign manager Joe Trippi echoed Dean’s views on a Huffington Post blog without disclosing that he had been paid by BIO to create two Web campaigns. (He also says his views predated his paycheck.)
The other side has resources of its own. The biggest generic-drug company, Teva Pharmaceuticals, has spent more than $2 million on lobbying and also sponsored academic work on the issue, aiming to disprove Duke’s Grabowski. Generic-drug manufacturers are allied with such powerful organizations as AARP, labor unions, insurance companies, health-maintenance organizations and health-reform advocacy groups. There will be fights on the House and Senate floors and ultimately a House-Senate conference committee, on which Waxman will be a key voice. "The war is not over," he has warned. "If you know me at all, you know that I don’t give up that easily."
How it is resolved — in favor of protecting the biotech industry or opening up the market to generics — may say a lot about which interest groups will ultimately reap the windfall of the big-stakes battle in Washington. What it means for consumers is somewhat murkier: Will a miracle cure be there when you need one? And if it is, will you be able to afford it? Those are questions that hinge on whether the rest of us can trust Congress to find proper balance between competition and innovation.
