[Ip-health] Public Citizen: PhRMA funneled millions to "stealth PACs"

[Mike Palmedo]

http://www.citizen.org/pressroom/release.cfm?ID=3D1789

PhRMA Appears to Have Funneled Up to $41 Million To =93Stealth PACs=94 to
Help Elect a Drug Industry-Friendly Congress

Sept. 20, 2004
Public Citizen

Four Seniors Groups Campaigned for Pro-PhRMA Candidates; Public Citizen
Requests IRS Review of Compliance with Tax Laws

WASHINGTON, D.C. =96 With its eyes on passage of an industry-friendly
Medicare prescription drug bill, the Pharmaceutical Research and
Manufacturers of America (PhRMA) appears to have quietly channeled as
much as $41 million to four stealth PACs in 2002 to help elect a
Congress sympathetic to the pharmaceutical industry=92s interests,
according to a new Public Citizen report.

Money that likely came from PhRMA, the drug industry=92s trade
association, enabled the United Seniors Association, 60 Plus
Association, the Seniors Coalition and America 21 to broadcast ads and
send direct mail in 39 U.S. Senate and House contests that year,
supporting candidates friendly to PhRMA=92s agenda and criticizing those
who weren=92t, the report reveals.

At least one of the groups, United Seniors Association (USA), is again
active in the 2004 elections, recently sponsoring TV ads in 17 or more
House races that praise incumbents who supported the PhRMA-backed
Medicare drug law pushed by President Bush and passed by Congress in 2003.

Released today, Big PhRMA=92s Stealth PACs: How the Drug Industry Uses
501(c) Non-profit Groups to Influence Elections report is available at
www.stealthpacs.org, a new Public Citizen Web site and comprehensive
database to track 501(c) non-profit groups active in elections, which
Public Citizen has dubbed the =93new stealth PACs.=94

=93The Medicare drug bill is a gold mine for the pharmaceutical companies
because it expands their base of paying customers for brand-name drugs
and protects them from lower-cost foreign imports and government
attempts to negotiate price discounts,=94 said Frank Clemente, director of
Public Citizen=92s Congress Watch. =93PhRMA=92s apparent bankrolling of the=
se
stealth PACs left voters with no way of knowing whether the campaign
messages aimed at them were bought with the drug industry=92s money or
whether PhRMA helped elect a Congress that will do its bidding and enact
industry-friendly bills like the Medicare drug law.=94

The four groups PhRMA apparently financed are registered within Section
501(c)(4) of the tax code as social welfare organizations. These and
other politically active groups also registered under Sections 501(c)(5)
and 501(c)(6) of the tax code are allowed to accept unlimited amounts of
money from any donor without ever having to publicly divulge the source
of the funds, according to Public Citizen.

Groups with these three tax statuses are permitted to make substantial
political expenditures, which the IRS defines as expenditures intended
to influence the outcomes of elections, but they are prohibited from
making electoral activities their primary purpose.

In a letter sent today to IRS Commissioner Mark Everson, Public Citizen
asked the agency to =93consider initiating a formal investigation into the
financial transactions and electioneering activities=94 of the four groups
that appear to have been funded by PhRMA. Public Citizen believes that
in 2002, the PhRMA stealth PACs may have engaged in enough activities
intended to influence elections to raise the question of whether they
violated the prohibition against allowing political work to be their
primary activity.

Further, each of the four PhRMA stealth PACs declared zero political
expenditures to the IRS, claims that do not seem plausible given the
content of the groups=92 television commercials and direct mailings, the
timing of their messages, and the groups=92 decisions to direct the
messages disproportionately to voters who lived in politically
competitive states and congressional districts.

Additionally, PhRMA failed to disclose its grants to USA and 60 Plus, to
which it is known to have given money in 2002. And if PhRMA is the
source of the other large contributions to the Seniors Coalition and
America 21 identified in the Public Citizen report, it again failed to
disclose these grants.

In its report, Public Citizen also documents that:

* In 2002, USA received $20.1 million from a single source, according to
its IRS filing =96 79 percent of its total revenue that year. PhRMA
acknowledged providing an =93unrestricted educational grant=94 to USA in
2002. USA also received $1.5 million from PhRMA in 2001, according to
its IRS filing. Public Citizen estimates that USA spent at least $13.6
million on political ads in 25 races in 2002.

* Almost $11 million of 60 Plus=92 $12 million in revenue came from a
single source in 2002. PhRMA also is reported to have provided an
=93unrestricted educational grant=94 to 60 Plus that year. The $11 million
allowed 60 Plus to increase its revenue more than sixfold from its $1.9
million in 2001 revenue. During the lead-up to the 2002 elections, 60
Plus distributed direct mail or other election-oriented communications
in at least 24 political contests, praising or criticizing candidates on
prescription drug issues.

* In 2002, the Seniors Coalition reported that it received a
contribution of $6 million =96 nearly 48 percent of that year=92s revenue =
=96
from a single person or organization. That year, the group disseminated
communications in at least 11 political contests, praising candidates
who favored the Medicare drug bill. Although the identity of the $6
million donor was not disclosed, the Seniors Coalition had received a
$2.1 million gift from PhRMA in 2000.

* America 21=92s funding increased dramatically in 2002 with a $3.65
million gift.After failing to raise even the $25,000 in revenue that
would have required an IRS disclosure for 2000 or 2001, America 21
reported $3.7 million in revenue in 2002 =96 including $3.65 million (98.3
percent) from a single donor, according to the only tax filing of the
group that has been made public. The group proceeded to distribute
direct mail in at least 20 political contests in 2002. Most, if not all,
of the mailings prominently mentioned a candidate=92s support for the
Medicare prescription drug bill.

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