Drug industry banks on its Covid clout to halt Dems’ push on prices

·9 min read

As Democrats prepare a massive overhaul of prescription drug policy, major pharmaceutical companies are mounting a lobbying campaign against it, arguing that the effort could undermine a Covid fight likely to last far longer than originally expected.

In meetings with lawmakers, lobbyists for the pharmaceutical industry have issued warnings about the reconciliation package now moving through both chambers of Congress that is set to include language allowing Medicare to negotiate the price of some drugs, which could generate billions of dollars in savings.

In those conversations, K Street insiders say, lobbyists have explicitly mentioned that the fight against the coronavirus will almost certainly extend beyond the current surge of the Delta variant. And they’re arguing that now isn’t the time to hit the industry with new regulations or taxes, particularly in light of its successful efforts to swiftly develop vaccines for the virus.

“For years, politicians have been saying that the federal government can interfere in the price of medicines and patients won’t suffer any harm,” said Brian Newell, a spokesperson for the Pharmaceutical Research and Manufacturers of America, or PhRMA, in a statement. “But in countries where this already happens, people experience fewer choices and less access to prescription medicines. Patients know if something sounds too good to be true, then it usually is.”

The escalating warnings from the pharmaceutical industry are part of what is expected to be one of the more dramatic and expensive lobbying fights in recent memory, and a heightened repeat of the industry’s pushback to actions by former President Donald Trump to target drug prices.

The proposal now under consideration in Democrats’ reconciliation package could save the federal government hundreds of billions of dollars by leveraging its ability to purchase prescription drugs, according to a report from the Congressional Budget Office. Without those funds, Democrats won’t be able to pay for the rest of the health care agenda they’ve promised to voters, including expansions of Medicare, Medicaid and Obamacare. But the plan has political power as more than a revenue raiser. Party leaders — from President Joe Biden to Senate Budget Chair Bernie Sanders (I-Vt.) — are touting it as one of the most important components of the $3.5 trillion package, with the potential to lower out-of-pocket health spending for tens if not hundreds of millions of people. Outside advocates have also zeroed in on it as the most consequential policy fight on the horizon.

“This is the best chance that we have seen in a couple of decades to enact meaningful reforms to drug pricing policy in the United States that will lower the prices of prescription drugs, and it’s very clear that the drug companies are going all out to stop it,” said David Mitchell, founder of Patients for Affordable Drugs. “This is Armageddon for pharma.”

Progressive Democrats and their outside allies believe they’re closer than they’ve been in decades to imposing some price controls, and worry that failure to do so this year will delay progress indefinitely given the possibility of the party losing one or more chambers of Congress in the 2022 midterms. In April, the House passed a fairly aggressive version — H.R. 3 (117) — though a handful of moderate Democrats friendly to the industry have threatened to block it when it comes back to the floor for a vote later this fall. Leadership has largely shrugged off this threat, banking on the fact that the most vulnerable frontline Democrats are vocally in favor of the policy, while most of the dissenters sit in safe blue districts.

The Senate is designing its own version, outlined by Sen. Ron Wyden (D-Ore.) in June, as a middle ground between HR3 and the more narrow, bipartisan bill he and Sen. Chuck Grassley (R-Iowa) put forward last Congress.

A senior Senate Democratic aide confirmed to POLITICO that the bill is nearly complete and that they’re in the process of shopping it around to undecided senators to make sure it has enough support to move forward in the 50-50 upper chamber.

“It makes sense to get buy-in before releasing it rather than releasing it with fingers crossed and then tweaking it once members complain,” the aide said.

But the reform push is coming at a time when the pharmaceutical industry is working hand-in-hand with government officials to combat the pandemic and enjoying a boost in public opinion as a result, even as drug costs continue to rise. The companies claim that fundamental changes to their bottom line — in addition to the Medicare provision, the reconciliation bill will likely raise corporate tax rate significantly, as high as 28 percent (a jump of 7 percentage points) — will threaten its current investments in research and development at a historically critical juncture.

With the final draft of the bill expected in the coming weeks, the Pharmaceutical Research and Manufacturers of America, the lobbying arm of the pharmaceutical industry, is taking its case public. The group has recently spent at least seven figures on ads pressuring Congress not to change Medicare drug policy.

An analysis from Patients for Affordable Drugs found that PhRMA and other advocacy groups aligned on the issue, including the conservative group American Action Network partially funded by PhRMA, have spent upwards of $18 million on ads opposing the Medicare negotiation proposal since July.

PhRMA’s ads targeted D.C. and New Hampshire, where moderate Democrat Maggie Hassan faces tough reelection prospects in 2022. The Pharmaceutical Industry Labor-Management Association, a coalition of companies and labor unions in the biopharmaceutical industry, have launched ads appearing to target districts around Delaware and New Jersey. Sens. Tom Carper (D-Del.) and Bob Menendez (D-N.J.), both of whom sit on the committee now drafting the bill, have faced criticism from the left for their support of the industry, a major employer in both of their states.

And the Coalition Against Socialized Medicine — a project of the American Conservative Union, which has received substantial funding from PhRMA — spent about $600,000 on ads aired earlier this summer that warned Wyden’s forthcoming plan would tie the country’s hands during the next pandemic, creating “a world in chaos,” according to data from Ad Analytics analyzed by POLITICO.

PhRMA spent $6.43 million on lobbying during the second quarter of this year, which runs from April through June, a 19 percent increase over the same period in 2020.

Patients for Affordable Drugs, a nonprofit that also runs a political action committee, has its own hired guns. The organization, largely funded by a foundation operated by billionaires John and Laura Arnold, spends $80,000 annually to lobby the federal government, according to lobbying disclosures filed to the Senate. The organization has spent nearly $3.9 million on television advertisements so far this summer, with roughly 8,000 ads airing nationwide, in addition to targeted ads in eight states and Washington D.C, according to the Ad Analytics data analyzed by POLITICO.

The analysis shows that, as of Aug. 25, its ads have been aired over three times as much as PhRMA’s spots. And Mitchell says there are more in the arsenal.

The AARP is also mobilizing its millions of members and substantial war chest, spending what officials there say will be seven figures to run ads nationally and targeting the moderate House Democrats who previously threatened to block the drug pricing bill. The group is also asking its members to send them pictures of their pharmaceutical receipts, and next month plan to bombard members of Congress with them to amp up the pressure around the bill’s passage. So far they’ve collected nearly 2,000 receipts totaling more than 11 million in monthly costs.

The pro-Obamacare advocacy group Protect Our Care is also trying to drum up support for Democrats’ bill with ads and a national bus tour featuring guest appearances by top lawmakers and Biden administration officials.

“It’s a matter of life and death and it’s a matter of extreme financial pressure for families,” said Leslie Dach, a former top HHS official now leading the group’s work. “And if lawmakers forget that, we have polling to remind them.”

Fresh off relative success in scuttling President Trump’s attempts to tackle drug prices, the drug industry is working to squash any political momentum these pro-reform campaigns may build by touting the role its members played developing vaccines and other coronavirus treatments. When the Food and Drug Administration approved the Pfizer vaccine, the trade group released a statement brandishing the industry’s “vital role” in the nation’s public health while arguing against legislation that could “inhibit our industry's ability to find future groundbreaking treatments and cures.”

The Congressional Budget Office has projected that the drug price controls Democrats are pushing could have some effect on the development of new drugs. A CBO report on HR3 found that approximately eight fewer drugs may be introduced to the U.S. market between 2020 and 2029 and 30 fewer drugs over the next decade as a result of the policy. But reform supporters counter that the pricey new medications that come to market do little good if most people can’t access them.

“The main argument Pharma uses is that, well, these price cuts are going to reduce research and development and innovation and of course that's true,” said Paul Ginsburg, a non-resident senior fellow at the Brookings Institution and a professor of health policy at the University of Southern California. “If this is what it’s going to take to get additional innovation, maybe the country really can’t afford it.”

As the fight on and off Capitol Hill ramps up in the coming weeks, the White House is fully aware that tackling drug costs could be pivotal for Biden’s legacy and Democrats’ efforts to hold onto their House and Senate majorities. And it’s particularly salient after Trump’s pledges to take on the industry largely fell flat.

Though Biden originally didn’t include the policy in the budget he sent to Congress this spring, he has thrown himself into the effort more recently, giving public speeches on the need to reform drug prices and emphasizing the message in private talks with key lawmakers. The burst of support from the bully pulpit, aides and advocates say, could make the difference in getting done what the industry has successfully prevented for decades.

"With PhRMA ramping up its attacks, the President’s speeches have been especially welcome,” the Senate aide said. “They definitely give senators political cover on this and give us a lot of room to work with."

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