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The Chill Pill: Would a Dem White House Take on Big Pharma?

On the trail, candidates fulminate about the drug companies, but money may still speak louder than words.

| Thu Dec. 20, 2007 1:00 AM PST

When it comes to showing contempt for the public good, it's hard to top the pharmaceutical industry. In the last two decades, Big Pharma has raked in profits that dwarf those of most other industries—19.6 percent of revenue in 2006, compared with an average of 6.3 percent for all Fortune 500 companies—while the amount spent on prescription drugs has increased fivefold, far outstripping inflation or even the jump in general health care costs. Rising medical expenses have burdened taxpayers, strained the resources of states, unions, and businesses, and forced some poor and elderly Americans to choose between medications and food.

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The industry says it needs high revenues and scant regulation in order to develop life-saving new treatments; but according to Families USA, Pfizer, Johnson & Johnson, Merck, and the rest of the top drug manufacturers spend more than twice as much on marketing, advertising, and administration than they do on research and development. Most of their latest offerings are just new versions of old drugs, designed to extend patents and preserve profits. Others are rushed to market, sometimes with deadly consequences—as was the case with Vioxx, which caused as many as 140,000 heart attacks and strokes.

While the pharmaceutical companies' rapacious conduct has proceeded apace for decades, they've enjoyed special privileges under George W. Bush, who appointed industry insiders to key regulatory positions and worked hard to protect business interests abroad and at home. Big Pharma's greatest triumph came with the 2003 passage of the Medicare prescription drug plan, or Part D, a bonanza for the drug companies that was backed by the president and rammed through Congress by Billy Tauzin, an influential Republican committee chair who left a year later to head the largest drug industry trade group.

Americans who've been grinding their teeth about all of this may feel soothed by the idea that if a Democrat wins the White House in 2008, they will finally see Big Pharma smacked down—or at least gently restrained. And they may well be encouraged by the campaign rhetoric they've heard from the leading Democratic contenders, as well as some of the details in their written health care plans. But of course, there's more to this story than meets the ear.

Any candidate who genuinely plans to confront Big Pharma must be prepared to give up a boatload of cash. According to the Center for Responsive Politics, the pharmaceutical industry ranked first in lobbying expenditures from 1998 to 2007, spending $1.3 billion over that period, and $191 million in 2006 alone. The Center for Public Integrity reports that there are more than 3,000 drug lobbyists in Washington, and over 1,000 of them are former public officials, including some 75 former members of Congress. Their ranks have included not only erectile dysfunction poster boy Bob Dole, but also such high-profile Democrats as Birch Bayh, Lloyd Bentsen, and Dennis Deconcini. Federal campaign contributions from drug manufacturers from 1990 through October 2007 totaled $149 million.

It's Republicans, however, who generally have been viewed as friends of the drug industry. (They've received 66 percent of campaign contributions since 1990.) So some people nursed hopes for change when the Democrats took Congress in 2006. The New York Times reported that the "Drug Industry Is on the Defensive as Power Shifts," with anxious companies meeting in Washington to plot strategy. But Tufts University political scientist Jeffrey Berry predicted that drug companies would simply begin providing more funding to Democratic campaigns. "Companies are not ideologues; they're pragmatists," he told Fortune magazine. "Democrats will shout loudly, and carry a small stick." Fortune's John Simons also pointed out that "the locales where Big Pharma and Big Biotech employ the most voters [are] California, Illinois, Massachusetts, New Jersey, New York, and Pennsylvania, all traditional Democratic strongholds—something elected officials and those running for higher office aren't likely to forget."

The drug industry's biggest fear was that new House Speaker Nancy Pelosi would make good on her campaign promise to revisit the Medicare prescription-drug law and reverse a provision that bans the government from negotiating lower drug prices or setting a list of preferred drugs. The federal government has negotiating power when it buys drugs for Medicaid and Veterans Affairs, and receives discounts of 25 to 50 percent. But in the Medicare prescription program, which is run through an assortment of private insurance companies, the average discount from drug manufacturers is just 8.1 percent. By one estimate, this ban raises the cost of the program by $30 billion a year—a huge rip-off of taxpayers, and of the old folks who pay part of their own drug expenses.

Pelosi made this change part of her agenda for the first 100 hours of Democratic control. She introduced the necessary bill and shepherded it quickly through the House—but the party lacked the votes it needed to bring the legislation to the Senate floor. And even Pelosi's proposal was weaker than it should have been, since it didn't give the government power to remove a drug from the preferred list, a vital negotiation tool.

More evidence of how far the Democratic Congress will—or won't—go to rein in Big Pharma came in May 2007, when the Senate debated a Food and Drug Administration reform bill. In the wake of the Vioxx scandal, the bill included some expanded safety measures; but it also expanded the Prescription Drug User Fee program, a system in which drug manufacturers actually pay the FDA to review their new pills. Still more significant was an amendment that killed the effort led by South Dakota Democrat Byron Dorgan to allow the importation of cheaper drugs from Canada and other countries. Thirteen Democrats joined Republicans in voting to hold off this threat to Big Pharma's monopoly; according to an analysis by USA Today, they included some of the top recipients of campaign donations from the drug industry, among them John Kerry, Max Baucus, Ted Kennedy, and Joe Lieberman.

The current pending legislation viewed as most threatening to drug-industry profits is one that seeks to ban settlements in which a brand-name drug company pays a generic manufacturer to delay the introduction of a generic drug. In the House, it is stalled in committee; in the Senate, its sponsors can't get it to a floor vote.

So much for the Democrats being bad news for Big Pharma. Certainly, there have been some tough congressional investigations of the industry since the midterm elections, most notably by the House Committee on Oversight and Government Reform under California's Henry Waxman. But Democrats in Congress haven't had the political will—or the vote margins—to translate the committee's findings into new legislation. The bottom line is that so far, George Bush has not once had to use the veto in order to protect the interests of drug companies.

So, would the missing political will emerge with the election of a Democratic president? The voting records of the three leading contenders only go so far in answering that question. Hillary Clinton and John Edwards voted against the flawed Medicare prescription-drug bill (as did Dennis Kucinich; Joe Biden and Chris Dodd voted for it). Barack Obama and Clinton voted to allow the government to negotiate lower Medicare drug prices. Clinton and Edwards voted yes on an earlier bill to permit the importation of drugs from Canada. All three have earned 100 percent ratings from the American Public Health Association. But none of the three has showed real leadership in Congress when it comes to challenging the overall dominance of Big Pharma.

The Clinton, Obama, and Edwards websites and written health care plans offer more detail than has been found in most presidential campaigns, but make scant reference to needed regulation of the pharmaceutical industry. None of the plans is, as the candidates would like to claim, a map for universal health care; instead, they are plans for universal (or nearly universal) health insurance, which preserves the role—and the profits—of private corporations. Nonetheless, there are a few differences in their plans that could impact the drug companies, perhaps influenced by the varying amounts of money the campaigns have received from the industry—with Edwards standing somewhat apart from the two leaders of the pack.

HILLARY CLINTON calls her health care proposal "American Health Choices Plan." On her website, a section called "Promote Shared Responsibility" spells out the responsibilities of individuals, providers, employers, and the government. Regarding the medical industry, it says, "insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information." What "fair prices" are is, of course, an open question, and no answers can be found at hillaryclinton.com.

In a May 2007 speech at D.C.'s George Washington University, Clinton offered some statistics: "If we want to get health care costs under control," she said, "we need to get prescription-drug costs under control. We know that Americans pay the highest prices in the world for prescription drugs that we have already in most instances funded the research on...Studies have shown that brand drug prices are 35 to 55 percent higher in the U.S., and top-selling medications a full 2.3 times more expensive compared to other industrialized countries." The solutions she proposed were nothing new, and quite tame: Negotiate for lower Medicare drug prices, allow drug importation, and remove "barriers to generic competition."

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