[Ip-health] New York Times: Drug Industry Is on Defensive as Power Shifts

[Thiru Balasubramaniam]

November 24, 2006
Drug Industry Is on Defensive as Power Shifts
By ROBERT PEAR

WASHINGTON, Nov. 23 =97 Alarmed at the prospect of Democratic control of
Congress, top executives from two dozen drug companies met here last
week to assess what appears to them to be a harsh new political
climate, and to draft a battle plan.

Hoping to prevent Congress from letting the government negotiate lower
drug prices for millions of older Americans on Medicare, the
pharmaceutical companies have been recruiting Democratic lobbyists,
lining up allies in the Bush administration and Congress, and renewing
ties with organizations of patients who depend on brand-name drugs.

Many drug company lobbyists concede that the House is likely to pass a
bill intended to drive down drug prices, but they are determined to
block such legislation in the Senate. If that strategy fails, they are
counting on President Bush to veto any bill that passes. With 49
Republicans in the Senate next year, the industry is confident that it
can round up the 34 votes normally needed to uphold a veto.

While that showdown is a long way off, the drug companies are not
wasting time. They began developing strategy last week at a meeting of
the board of the Pharmaceutical Research and Manufacturers of America.

Billy Tauzin, president of that group, a lobbying organization for
brand-name drug companies, recently urged Representative Edolphus
Towns, Democrat of New York, to seek a position as chairman of a
powerful House subcommittee, said Karen Johnson, a spokeswoman for Mr.
Towns. The subcommittee has authority over Medicare and the Food and
Drug Administration.

Democrats have yet to decide who will head the subcommittee.

Mr. Tauzin, a former congressman, also met with Senator Byron L.
Dorgan, a North Dakota Democrat who has been trying for six years to
allow drug imports from Canada. The industry vehemently opposes such
legislation.

James C. Greenwood, president of the Biotechnology Industry
Organization, another trade group, said, =93There is a lot of pent-up
animosity among Democrats against the pharmaceutical industry.=94

Mr. Greenwood, a former Republican congressman from Pennsylvania, said
he had a list of 37 Congressional Democrats whom he intended to call in
the next month.

Amgen, the biotechnology company, recently disclosed that it had
retained as a lobbyist George C. Crawford, a former chief of staff for
Representative Nancy Pelosi of California. Ms. Pelosi, the House
Democratic leader, is in line to become speaker in January and has said
that the House will immediately take up legislation authorizing
Medicare to negotiate prices with drug manufacturers.

The 2003 Medicare law prohibits the federal government from negotiating
drug prices or establishing a list of preferred drugs.

Amgen is also seeking strategic advice from the Glover Park Group, a
consulting firm whose founders include Joe Lockhart, a former press
secretary for President Bill Clinton.

Other major drug companies have been snatching up Democratic
former-aides-turned-lobbyists. Merck recently has hired Peter Rubin, a
former aide to Representative Jim McDermott of Washington, one of the
more liberal House Democrats. Cephalon has hired Kim Zimmerman, a
health policy aide to Senator Ben Nelson, a conservative Democrat of
Nebraska.

The Biotechnology Industry Organization has retained Paul T. Kim, a
former aide to two influential Democrats, Senator Edward M. Kennedy of
Massachusetts and Representative Henry A. Waxman of California.

A Medicare expert who works for House Democrats said he recently
received three job offers in one day from the drug industry, by
telephone and in person.

At a dinner last week at the Hotel Monaco here, as part of their board
meeting, pharmaceutical executives dissected the midterm election
results with experts including Ed Goeas, a Republican pollster, and
Stuart Rothenberg, the editor of a political newsletter.

Drug makers have not set a budget for their campaign. They and their
trade groups already spend some $100 million a year on lobbying in
Washington.

=93We have new political realities to attend to,=94 Mr. Tauzin said in an
interview after the board meeting. =93We and our allies will do
everything we can to defend the Medicare drug benefit, to get out the
message that it is working.=94

To reinforce that message, drug companies plan to mobilize
beneficiaries and urge them to contact Congress.

=93I=92m putting my trust in beneficiaries,=94 said Mr. Tauzin, who
represented Louisiana in the House for more than two decades, first as
a Democrat and then as a Republican. Several recent surveys suggest
that at least three-fourths of the people with Medicare drug coverage
are satisfied.

But Representative Frank Pallone Jr., Democrat of New Jersey, who hopes
to head the health subcommittee of the Energy and Commerce Committee,
said price negotiations for Medicare were his priority.

=93The 2003 Medicare law was essentially written by the drug industry,=94
Mr. Pallone said in an interview. =93That=92s why you don=92t have negotiat=
ed
prices. Republican policies have served special interests like the
pharmaceutical industry, and the American taxpayer is paying the
price.=94

Drug lobbyists believe that the Senate will be receptive to their
argument that price negotiations lead inevitably to price controls, and
to restrictions on access to drugs, likely to be unpopular with
beneficiaries.

Michael O. Leavitt, the secretary of health and human services, said
the White House opposed federal price negotiations because they would
unravel the whole structure of the Medicare drug benefit, which relies
on competing private plans.

Among leaders who attended the board meeting last week were Kevin
Sharer, chairman of Amgen; Jeffrey B. Kindler, chief executive of
Pfizer; Sidney Taurel, chairman of Eli Lilly; and Richard T. Clark,
chief executive of Merck.

Drug lobbyists say they want to work with the new Democratic majority,
but that will not be easy. In its campaign contributions, the
pharmaceutical industry has overwhelmingly favored Republicans over
Democrats. Drug companies infuriated many Democrats in 2003, when they
worked closely with Republicans to create the Medicare drug benefit, in
a process from which Democrats were largely excluded.

On other issues, Democrats are pushing for stricter regulation of drug
safety and for legislation to encourage development of low-cost generic
versions of expensive biotechnology drugs. They are determined to allow
imports of drugs from Canada, where brand-name products are often
cheaper.

They want to investigate drug pricing and profits, drug advertising
aimed at consumers and the marketing of drugs to doctors for purposes
not approved by the Food and Drug Administration. Democrats may try to
repeal some of the liability protections that have been given to
vaccine manufacturers.

Outspoken critics of the pharmaceutical industry will gain power as a
result of Senate committee assignments made last week. Senators Debbie
Stabenow, Democrat of Michigan, and Maria Cantwell, Democrat of
Washington, are joining the Finance Committee, which has sweeping
authority over Medicare and Medicaid. Three liberal senators =97 Sherrod
Brown of Ohio, Barack Obama of Illinois and Bernard Sanders of Vermont
=97 are joining the Committee on Health, Education, Labor and Pensions,
which oversees drug regulation and biomedical research.

The pharmaceutical industry lost one of its most effective defenders
when Senator Rick Santorum, Republican of Pennsylvania, was not
re-elected. The new Senate Republican whip, Trent Lott of Mississippi,
is no friend of the brand- name drug industry. He supports bills to
allow imports from Canada and to increase access to generic drugs.

Top pharmaceutical executives are hurriedly planning a response to the
Democratic agenda.

=93It=92s all hands on deck,=94 said Ken Johnson, a senior vice president a=
t
Pharmaceutical Research and Manufacturers of America. =93It=92s like a
hurricane warning flag. You don=92t know where it will hit. You don=92t
know who will be affected. But everybody has to be prepared.=94

Drug companies may be open to some changes in the Medicare drug
benefit, but they say they cannot accept any form of price negotiation.

=93The new Medicare program is clearly benefiting seniors and people with
disabilities and has exceeded initial expectations,=94 Mr. Tauzin said.
=93But we are open to new ideas that could make it even better. We will
propose at the same time we are opposing.=94

Specifically, Mr. Tauzin said, drug companies would like permission to
fill a gap in coverage that has angered many Medicare beneficiaries.

Many drug companies have programs to provide free drugs to people with
limited incomes. When such programs are used to fill the gap in the
Medicare drug benefit, they may run afoul of federal law =97 the
anti-kickback statute =97 because they steer patients to products made by
one particular company.

The drug industry is anxiously waiting to see details of the Democratic
proposal. Lawmakers are weighing several options. At a minimum,
Congress could simply repeal the ban on price negotiations, without
requiring Medicare officials to do anything. Many House Democrats want
to go further. They would direct Medicare officials to negotiate prices
for a government-run prescription drug plan, which would compete with
dozens of existing private plans.

The government could negotiate prices for all drugs or just for
brand-name drugs that have no competition. Alternatively, Congress
could require manufacturers to provide a specified discount, so
Medicare would get the =93best price=94 available to any private buyer.

Such details, defining the federal role, are immensely important and
could determine the outcome of any votes in Congress.

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Thiru Balasubramaniam
Geneva Representative
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